Investment Planning: fear vs. greed

Doing well with investments over time means avoiding emotional input in your decisions – fear, greed, emotional attachment to or aversion to certain investments and so on

Right now, fear may seem the prominent emotion: “I can’t afford to be in stocks, look what happened in the last few years!” (The same person might have wanted to be 100% stocks 4 years ago ….)

However, if you listen to this fear, and buy only bonds, CDs, fixed annuities, REITS, etc., you risk the greed reaction down the line: “How come my returns are the same as my pal’s? Why didn’t you have me investing for growth?”

Obviously, stripping the emotions out of the decision making is critical. Doing so would allow for balanced allocation to stocks, bonds and other appropriate investments. This way, the volatility now is dampened some, yet the return in the future has the requisite growth for the risks taken.

Where are you on the fear/greed balance? Do you have stocks you refuse to sell (or will never buy)?

Let us know if you have questions or comments. Thanks,

Steven

Financial planning: Time still to refinance

Investors looking for returns from “risk free” investments are frustrated with low interest rates. However, the flip side is that borrowing is cheap. The place to start reviewing your debt structure is with your mortgage. If the rate is high, refinancing, even after closing costs, can make for big savings over time.

Rates are at lows not seen in many decades and are not likely to go lower: 30 year fixed mortgages are as low as 4.75% in Massachusetts.

However, if you have not dealt with banks in a few years, be prepared for a very different experience. The lenders that were willing to do “no-doc loans” a few years ago want more documentation that you can believe, much of which may not even seem reasonable.

And even if you do qualify for a loan, recent home buyers may not have enough equity as their homes will appraise for much less than what they paid, which may not leave enough equity for the bank loan to value ratios.

What type of loan is best? This depends on what you do with any cash saved by using a mortgage with a lower monthly payment. If you invest well, then that may be best. If you will just spend the money, then a 15 year mortgage may be better for you than a 30 year, as the rate will be lower and the higher payment will pay off the mortgage much faster (look for our iPod app on this and other mortgage issues).

Let us know if you have questions or comments. Thanks,

Steven

Investment planning: health care reform and opportunities

Any change will hurt some and benefit others. For investing, selecting the former to sell and the latter to buy will be crucial as the health care reform become implemented.

It is not typical for me to reference self-serving statements from managers, but the following links are well written and make you consider options for investing (in or outside of the Artio fund):

Artio Sector, Spotlight-Healthcare And see also Forbes on healthcare, personal finance, investing ideas and small-caps

The white paper published by Artio Smallcap Fund concludes with this summary:

All four of these investment themes have particular relevance in the smallcap arena. We believe each represents compelling investment potential over the long-term, given the growing need for cost reduction in the healthcare sector. We continue to explore these and other investment ideas related to healthcare trends in the Artio US Smallcap Fund.

What do you think? Let me know.

Let us know if you have questions or comments. Thanks,

Steven

Finance Health Day (you own financial planning focus)

Taking a financial health day (like a mental health day, but for your finances)

A recent New York Times article spoke of taking a day that used to be “a mental health day” to work on financial planning matters, or a “financial health day”

With work and other matters demanding attention, many financial matters get put off. One that the author singled out was estate planning – one I often see people put off.

The list he created, as paraphrased and augmented by me, included:

1. Cash back credit cards – switching to or using mileage on existing cards

2. Insurance riders – updating or adding new items for coverage, which may entail appraisals

3. Phone service review – seeing if you have the best phone set up at home (bundling phone, internet and cable to save for example or even dropping the phone for your cell phone)

4. Cell phone service review – seeing if you have the best plan for your usage

5. Nanny tax service setup – setting up payroll for any household employees. The services are inexpensive and save you time.

6. Establishing an estate plan – putting in place a will

7. Insurance benefits – applying for reimbursements

8. In case of emergencies lists – this list tells people were all crucial papers and other items are stored (I have a list on my computer as well as in my safe deposit box)

9. Auto pilot charitable giving – setting up an automatic deduction from a checking account (or doing United Way via payroll)

10. Shopping spree – using the balances on gift cards or, as noted above, using your mileage. The balances do not earn you interest so might as well buy something, as a reward for all the work done on the other items.

These are obviously all worthwhile endeavors. Some take more than one day, such as getting appraisals or executing and estate plan.

I would add to the list the following items:

11. Updating the estate plan you have for changes you want to make in selected fiduciaries or changes in tax laws

12. Checking asset ownership and beneficiary designations for your estate plan so that the plan works as you intend

13. Putting assets in your revocable trusts to avoid probate (this is more important in sates other than Massachusetts)

14. Making sure you have proper liability insurance and an umbrella policy and replacement cost on your home

15. Using your flex plan before year end

16. Tax planning – one we always check with our clients – so that changes during the year are covered by changes in estimates or AMT strategies

17. Cash planning to be sure you have funds for the big purchases….. like cars, with now being possibly a good time to buy

18. Education funding – using 529 plans and any available tax strategies

19. Homestead filing, to protect the equity in your home

20. Reviewing your disability insurance to see if you can add to it

As you know from our work, we can help with many of these items so let me know if you or any of your friends and associates want to improve your Financial Health ….

Let us know if you have questions or comments. Thanks,

Steven