Author: production

If you die without a will, the court will decide how to distribute your assets among your heirs.

This process will take place in one or more state probate courts, depending on where your assets are located, and it will be based on state laws.

This can be expensive, and your estate may have to shoulder court costs and pay for any legal advice your heirs may require. Is this what you want?

Probably not. Your estate represents a significant amount of work, and it is natural for you to want to leave as much as you can to your heirs, as efficiently as possible.

One way to do so is to avoid probate court altogether. How? To avoid probate, increase the number of items in your estate that are transferred without a probate procedure. Here are three ways to achieve that.

1. Register assets as “joint tenants with rights of survivorship” or “transfer on death.” You can specify that many of your assets, such as securities and brokerage accounts, be set up as “transfer on death”. Similarly, other assets (such as properties) can be titled as “joint tenants with rights of survivorship.” Upon your death, these assets will bypass probate court and go directly to whomever you specify.

2. Ensure retirement accounts have a designated beneficiary. Many retirement accounts (such as IRAs and 401(k) plans) and insurance products allow you to name who should receive the assets when you die. These assets are excluded from your probate estate and transferred directly to your heirs.

3. Place assets in a revocable living trust. A revocable living trust is a legal entity that has the power to hold legal title to assets. Assets in revocable trusts provide for a direct transfer of assets to your beneficiaries.

Feel free to reach out to us if you need guidance with this process.

The concept of indexing is simple: Instead of trying to beat the market, you try to meet the market. But is indexing the right approach for you?

The 1976 launch of the Vanguard 500 Index Fund created an entirely new philosophy of investing: holding all the stocks in the market instead of trying to pick potential winners.

Index funds, as they are called, are thus considered passive investments, and they often have lower turnover and lower fees than actively managed mutual funds.

Today, index funds track all kinds of market indices. There are more than 1,000 index funds and exchange-traded funds (which are similar to index funds) available. Many of them target specific countries (such as China), industries (such as technology), and even strategies (such as long-short investing).

The strategy has often worked. Many studies have shown that the bulk of traditional mutual funds have not been able to keep pace with index funds over time. But it is hard to determine if an index fund is right for you, and if so, which one.

If you think index funds are right for you, you may want to stick with the basics, such as choosing one U.S. stock fund, one international stock fund, and one bond fund.

Or you might use index funds for certain allocations (such as large-cap stocks) and use actively managed mutual funds where manager expertise and research may be more beneficial (such as small-cap stocks).

We can help you determine whether indexing is suitable for you based on your individual financial situation and goals.

As of fall 2019, the bull market was officially the longest on record, but this doesn’t stop skeptics from asking when it will end. And this leads to the question: How long will any market stay strong?

Most financial analysts use 20 percent thresholds to label bull or bear markets. A bear market begins, for example, when an index falls 20 percent from its peak.

So, as of this writing, we are in a bull market. The S&P 500 index is up more than 300 percent since its closing low on March 9, 2009.

But is it a bubble that will burst?

Market bubbles, such as the housing-market bubble that burst in 2008 and the dot-com bubble that burst in 1999, are fairly regular occurrences. They occur when an economy or market has become unbalanced due to a flawed outlook. And bursting bubbles typically hurt all investors, even those who do not own the inflating asset, because they can affect more than just the inflating asset. Recall that the housing-market bubble that burst in 2008 affected the broad stock market.

Although there are no clear asset-class bubbles today (equities are up broadly), there is concern that at some point the market will have to recalibrate and take a downturn. But we cannot know when that will happen.

How do you prepare, then? One option is de-risking with diversification. It cannot protect you from a decline in all markets, but stock and bond markets often perform differently, so diversifying into stocks, bonds, cash, and possibly even real estate and commodities may help protect you in a down market.

Remember, de-risking does not mean removing all equity risk from your portfolio, because equities play an important role in any portfolio by facilitating growth. The idea, if you are concerned, is to allocate more assets to less volatile asset classes, such as fixed income. Bonds tend to be much less risky than stocks.

For assistance with this diversification process, please contact my office. I’m here to help.

As December approaches, many of us give thought to getting our houses in order, and that includes our financial houses. Here are some things to look at as you “clean house.”

Review your financial accounts. Look at your bank accounts, retirement accounts, credit cards, and other financial accounts. Gather statements, performance reports, and any other documents that will provide information about the accounts.

Ask if your accounts still meet your needs. With this information in hand, ask if your accounts are still valuable. If not, should you consolidate some, or close them? Should you open others?

Update your account information. Ensure that your accounts have accurate contact and beneficiary information. If you haven’t changed your beneficiaries in some time, you may want to review them (and make all possible accounts transfer on death, or TOD, so they avoid probate in the event of your death).

Review your budget. How is your spending? If it is not on budget, determine why. Are you spending too much money on luxury items?

Review your debts. Are you overwhelmed with debt? If so, develop a strategy for keeping your spending on track and eliminating debt (perhaps by consolidating loans).

Consider estate planning. Estate planning isn’t just for the wealthy; everyone should have a will. If you don’t, get one. If you have an existing will, review it to ensure it still protects your loved ones in the manner you intended.

Contact a financial planner. For assistance with any of these items, please contact me. I can help you put a solid financial plan in place to head into 2020 with confidence.

With the stock market soaring this summer, you likely read a lot about a number of mega-cap companies: the largest companies in the investment universe as measured by market capitalization. But when it comes to investing, bigger may not always be better.

While the exact thresholds change with market conditions, mega-cap companies generally have market capitalizations above $200 billion. The so-called FAAMG stocks (Facebook, Apple, Amazon, Microsoft, and Google) are good examples, but there are many others.

The total number of mega-cap stocks varies with market conditions, but there are generally 25 to 30 in the United States. Bank of America, Berkshire Hathaway, The Walt Disney CO., and Johnson & Johnson have also made the list. The massive value of these companies can attract investors who think the businesses are too big to fail. Mega-cap companies tend to have recognizable brands as well as steady revenue, earnings, and dividend streams. These qualities appeal to investors who are seeking less volatility than smaller stocks generally offer.

But are mega-caps necessarily good investments because of their size? To answer that question, you may have to look deeper.

While each of the FAAMG companies was initially a single business, for example, they are now much more.

Amazon began as an online retailer of books, but is now in the business of cloud-based web hosting and even owns brick-and-mortar grocery stores. Google started as an internet search engine, but now has a mobile phone operating system and even a self-driving car enterprise.

Diversification in a business model is good, but it can present challenges. No company can succeed at everything. So, it takes an experienced analyst to determine if size is good or bad.

The moral of the story: Bigger may or may not be better. When analyzing mega-cap stocks like these, an investor should look beyond size and consider many other factors.

We can help you navigate these factors to determine what investments are best for your current and future financial goals.

Are you looking for referrals for the right financial planner? Are you wondering which financial adviser will meet your needs? To determine if a financial advisor is right for you, use the following four-step process.

1. Check your advisor’s background. Make sure you check the background of your advisor using BrokerCheck, a free service provided by the Financial Industry Regulatory Authority. The service is private (your advisor won’t know you checked), and any violation you find is worth thinking about. Depending on the results of this search, you may want to find another financial advisor.

2. Ask what he or she charges (and how). Ask what your advisor charges, and how the fee is structured (a fee based on assets under management, commission, etc.). Your advisor will not be offended. In fact, he or she likely expects this question and is used to discussing it.

3. Find out what services you will be receiving. Once you understand what you are paying and how the fee is charged, it’s time to find out what you’re buying. In addition to providing continual portfolio monitoring services, your financial advisor may conduct in-person reviews with clients each year.

4. Get references. Ask the advisor for professional references. Established professionals can point you to others who have used their services and can provide feedback on their experience. A personal referral is worth a lot.

Have questions about our services? I’d be happy to review our offerings, provide answers, and discuss your options. Just give me a call.

Will your savings be enough to see you through retirement? This is a key question in planning, but many people still don’t know how to determine the appropriate amount they need to accumulate for a retirement-worthy nest egg.

Financial planners often recommend that you save between 10% and 15% of your income for retirement, beginning when you are in your 20s. But what if you are older? How do you know how much you will need then?

Saving between 10% and 15% is just a general guideline. When talking about your specific retirement, it pays to consider more personalized numbers. Another guideline, promoted by J.P. Morgan Asset Management, involves looking at your age and income together.

For example, if you are age 55, and your annual income is $50,000, J.P. Morgan recommends you have 4.7 times your income saved ($235,000); if your annual income is $100,000, have 6.9 times your income saved ($690,000); and if your annual income is $150,000, have 8.1 times your income saved ($1,215,000).

The main concept is to factor age and income into your retirement planning because they are the significant factors that will determine how much you need to live comfortably at your current lifestyle when you retire. In other words, when you start saving and how much you make are just as important (if not more so) than tucking away a flat percentage each month.

Of course, how you will achieve and grow your savings is another topic. Depending on your situation, we might recommend diversification or other strategies.

And remember, these are just broad guidelines. We can help you decide if your current savings numbers are on point based on your circumstances and goals.

When you are looking to save money on insurance, you may be tempted to reduce your coverage; but focusing on the numbers instead of your goals could leave you dangerously underinsured. This could lead to much bigger bills in the event of a disaster.

Here are three mistakes to avoid when it comes to insurance coverage.

Insuring a home for its value instead of the cost of rebuilding

Real estate prices fluctuate, and when they do, some people think they can reduce the amount of homeowners’ insurance they maintain. But that ignores a fundamental principle of homeowners’ insurance: it is designed to cover the cost of rebuilding your home, not the sale price of your home. As a result, your homeowners’ policy should be robust enough to ensure you can completely rebuild your home and replace your belongings. If you need to save money on your homeowners’ policy, consider raising your deductible instead.

Purchasing only the legally required amount of automotive liability insurance

Different states require different amounts of automotive liability insurance coverage. But the requirements are minimums. Buying only the minimum could mean you pay more out of pocket later, especially if you are sued, in which case the costs could be significant enough to jeopardize your financial well-being. Consumer groups generally recommend at least $100,000 in bodily injury protection per person and $300,000 per accident.

If you need to save money on your automotive policy, consider dropping collision and/or comprehensive coverage on older cars.

Choosing an insurance company by price alone

We all want to choose an insurance policy with competitive prices. But we also want to be paid in an efficient manner when a claim is filed. So we recommend you make sure that the carrier you choose is on stable financial footing and provides good customer service.

Today’s economy may be booming and the markets rising (with some bumps here and there), but that doesn’t mean investors do not face challenges. Balancing growth with risk is always a concern, especially as you near retirement. Where can you turn for help?

According to traditional investing wisdom, the solution is diversification. Holding investments from different asset classes, including equities, bonds, and cash, allows you to increase your chances of obtaining a compelling total return.

Some diversification strategies are passive, meaning they buy and hold securities for the long term regardless of market fluctuations. A mutual fund, for example, may have a prescribed allocation mix of 60 percent equity, 30 percent bonds, and 10 percent alternatives. This would not change, even as the equity market rallies and the fixed-income market flounders.

Other diversification strategies are active, meaning they adjust to evolving market conditions by moving assets as the markets change. Portfolio managers using strategies such as these may have the flexibility to shift entire asset classes in response to market fluctuations, for example. If alternatives perform badly, the portfolio manager may exit alternatives altogether. These are also called tactical allocation strategies.

Advocates of tactical allocation strategies believe these strategies may benefit investors in volatile markets. When market risk is low, a portfolio manager can increase exposure to growth by allocating assets to the market’s top-performing sectors and countries; when market risk is high, the portfolio manager can preserve capital by shifting to bonds and cash.

Does it work? No investing strategy is appropriate for every investor. You have to find the one that balances your desire for growth with your tolerance for risk.

We can provide you with more information about what might be suitable for you given your individual financial circumstances, goals, and risk tolerance; please reach out to us for more information.

Equity market volatility drives some investors out of stocks and into bonds, which are often perceived to be less risky. Certainly, bonds do not have the same kind of risk equities have. But bonds also have risks, and perhaps the greatest such risk is interest rate risk. This risk can be managed by looking at something called duration. First, it is important to understand how bond prices work. Typically, bond prices move in the opposite direction of interest rates. Higher interest rates drive bond prices down, and lower interest rates drive bond prices up. The risk that your bond price will fall because interest rates rise is called interest rate risk. And when purchasing shares of a bond fund, you can help manage this interest rate risk by paying attention to the fund’s duration. Duration may sound complicated, but it is just a number that indicates the percentage change in the price of a bond fund for each 1 percent change in interest rates. So, if the bonds in a particular fund have an average duration of five years, for each 1 percent change in interest rates, the bond fund’s price should move 5 percent in the opposite direction. The lower the average duration of a bond fund, the less price sensitivity the bond should experience. So, if you are a risk-averse investor, you may want to consider bond funds with shorter durations. It is typically easy to obtain this information from a bond fund’s website or prospectus. You can also ask us. Feel free to contact our office with any questions about bond investing.