Articles on Wealth Management Topics

If you rely on the media, and particularly the local media, for your coverage of the stock market, you will find that the Dow Jones Industrial Average (DJIA) is the most oft-quoted measure of how the stock market performed on a given day. And yet most stock market professionals - portfolio managers, analysts, strategists and the like - will refer to the S&P 500 Index instead of the DJIA as their preferred yardstick of market performance. Why is this?

The decision as to whether or not to rollover a retirement plan account to an IRA should be based on more factors than just the associated mutual fund management expenses. On its website, the Dept. of Labor provides guidance to retirement plan participants, i.e. employees, on how to evaluate the fees and expenses associated with their plan: "... don’t consider fees in a vacuum. They are only one part of the bigger picture including investment risks and returns and the extent and quality of services provided. Keep in mind the importance of diversifying your investments."

A few years ago, the Treasury Dept. issued a ruling that may give rise to some interesting retirement planning strategies. Owners of IRA and 401k accounts are now permitted to use as much as 25% of their account balances up to $125,000 to purchase so-called "longevity annuities".

One of the investment universes that Five Seasons Financial Planning monitors in an ongoing search for value to exploit for the benefit of client portfolios is that of closed-end mutual funds. At this time of year, when tax-loss selling is prevalent, there are often compelling values to be found, and this year is no different. Since you may be somewhat less familiar with the concept of closed-end mutual funds than with other types of mutual funds, here's a quick primer:

With the bond universe ranging from " ... obscenely overpriced to somewhere on the expensive side of fair value", and with most major U.S. stock indices within shouting distance of all-time highs, the current market environment is presenting a quandary not just to financial advisors but to investors as well. The investing public with cash on the sidelines seem torn between the fear of missing out on a further rally in stocks and the fear of committing capital at valuations that have often presaged middling returns, if not nasty bear markets. Consequently, a question clients have been posing recently is: Is it better to commit new money to the markets as fast as possible, or is it better to dollar-cost average our way into the markets over time?

As different asset classes, and different investments within those asset classes, generate disparate returns through time, you will find that your portfolio asset allocation will stray from its target. "Portfolio rebalancing" is the process of correcting this, of bringing your investment portfolio back into alignment with your target asset allocation.

With summer in full swing, I've been reflecting on what I learned from one of my experiences from a summer past - being hired to serve as an expert witness in a case against another "financial advisor". This was a new and somewhat revelatory experience for me. But what I really took away from this experience was:

Are we whistling past the graveyard? Regardless of opinion, these relatively quiet days in the markets seem opportune for preparing for the inevitable next bout of market turbulence, no matter its cause or timing. So how do you maintain your investing composure when all around seem to be losing theirs?

If recent conversations with clients are any indication, a primary worry out there is how to plan for, or guard against, the "inevitability" of higher interest rates, a.k.a. falling bond prices. Most of these discussions arise from genuine concerns about the future performance of fixed-income investments given this backdrop. Some arise from a touch of performance-chasing, i.e. "Stocks have done so well in the last few years, so why not allocate more of our portfolio to them at the expense of our bond allocation, which has been languishing?".

Almost half of retirees take Social Security at age 62, the earliest possible age you can sign up for these benefits. And the vast majority of retirees request benefits before their full retirement age. While the decision of when to file for Social Security benefits must be based on individual circumstances, I would argue that many retirees would be better served to wait longer to access this lifetime, inflation-adjusted stream of income.