Helping you Invest

The nightly news almost always includes a mention of what the S&P 500® and Dow Jones Indexes did. While those broad benchmarks have a role to play in evaluating investment returns, the truth is that most investors fall far short of “market” performance. Independent research firm DALBAR estimates that the average stock investor trails the stock market by nearly four percentage points annually. One key reason: bad timing.

Investors as a whole tend to buy investments that have been rising and sell those that have been falling, as fear and greed get the better of them. That amounts to buying high and selling low, a sure-fire recipe for underperformance.

The antidote: a disciplined investment process to avoid the harmful effects of emotional decisions. Research has shown that asset allocation is a key driver of portfolio returns. But only about half of do-it-yourself investors have an asset allocation that is roughly on track for their age, according to data from 401(k)s and other workplace savings plans.

That’s where a financial professional can add so much value by helping you identify the right asset mix to help you reach your goals in light of your timeframe, financial situation, and stomach for risk. But setting an asset allocation goal is not enough; you need to stick with it through good times and bad. That discipline helps you buy low and sell high.

“Most of us experience similar feelings when the market is falling, but acting on our emotions may not always produce the best financial results,” says Joe Steeves, senior vice president in Fidelity’s Private Client Group. “An experienced professional can offer a steady hand during stressful times and help you stick to a plan that’s right for your situation.”

Source:  Fidelity Investments

Financial Moves That Can Ruin Everything

Your financial success sometimes depends on making the right moves at the right time.

But even more often, it’s avoiding the wrong moves that will advance your financial happiness. Big mistakes can destroy your chances of achieving your goals.

Here are some moves to make sure you avoid. 

1. Borrow against your 401(k) plan. 

Unless you have a medical emergency and no other possible source of relief, leave your 401(k) plan alone. Not only do you have to pay the plan back with interest and take growth assets out of play, but you run the risk of having to recognize income if you leave your job without paying it all back. Add in the tax and penalty cost and you’ve got a huge uphill climb. Just say NO!

2. Neglect to insure against your biggest risk. 

If you have financial responsibility for others and you fail to insure your future earnings, you are rolling the dice. Your biggest risk is not a dented bumper, it’s your human capital (what you expect to earn in your lifetime). And don’t think enough life insurance to pay off the mortgage is all you need. Just add up your cost of living and see if the elimination of principal and interest would leave your family solvent. And don’t forget to take a look at disability coverage to protect your earnings.

3. Ignore your budget. 

If you don’t know what’s coming in and what’s going out on a monthly basis, you are navigating in the dark above a sinkhole. Chances are, it’s only dumb luck that hasn’t sent you headlong into financial disaster.

4. Pay the minimum on your credit cards. 

Let’s face it, even at zero percent interest, unless you make real progress in eliminating consumer credit, your […]

Rising interest rates & your savings

The Federal Reserve may be poised to raise interest rates this month—nearly one year after the first interest rate increase following the Great Recession. But if the central bankers at the Fed do decide to raise interest rates at the meeting on December 13 and 14, it probably won’t be by very much. Federal funds rate futures are forecasting a hike of about one-quarter of one percent.

The federal funds rate is the short-term interest rate controlled by the Fed and is currently aimed at a rate from 0.25% to 0.50%. A rate increase could put the new target rate from 0.50% to 0.75%, still low by historic standards.

Though the Federal Reserve controls only very short-term interest rates used by financial institutions, the move has implications across the economy—and may directly affect the interest rate your savings and investments earn and the price you pay to borrow money. Here’s how it works and what you can do.

If you have a savings account or a money market account at a bank, you’ve probably despaired over the incredibly low interest rate your savings have earned since 2008. That’s when the Federal Reserve took drastic steps to try to pull the economy out of a recession by slashing interest rates. With rates at historic lows, the interest paid on deposits fell to record-breaking lows and stayed there.

When the Federal Reserve raises interest rates, however, banks typically follow that by also raising the interest rates paid on customer accounts. That means you will likely see slightly higher rates of interest on certificates of deposit and savings accounts. After many years with interest rates essentially at zero, many savers will be happy with any increase.

What you can do: In general, a […]

Smart money is making dumb stock picks

Let’s say that a bank such as Goldman Sachs publishes a recommendation to “Buy Stock X”.

It’s hard to ignore a bet by a powerful investment bank such as Goldman. We are mere mortals in the pecking order, and they are supposed to be the all-knowing smart money from Wall Street.

Do we buy the stock, or is it simply wiser to pass?

The folks at InterTrader have done considerable legwork to dive deep into the data on investment bank recommendations made in 2015. They looked at every bet made by the 16 top banks throughout the year to assess both potential returns and accuracy.

The results are pretty underwhelming.

Overall, when holding the stock picks for the year, banks were only 43% accurate with their predictions.

That’s right – flipping a coin would have been potentially more effective than buying bank stock picks, which ended up down -4.79% on the year. The S&P 500 finished down only -0.69%, but simply just making any interest in a savings account would have been more effective as well.

Source:  Business Insider