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Value Creation Blog

Financial Planning Is About Direction - Retirement Planning

I’m always amused at financial planning meetings when the subject turns to financial planning software. More often than not, the more complicated software gets higher grades from planners than simple software. Many planners actually believe the plans they product are accurate. After all, isn’t that what you pay us for?

Think about working with your doctor.

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Topics: retirement planning, asset management, financial planning, wealth management, Change


What Is Your Most Important Asset And Why Should You Care?

earning and savingOur firm is a financial planning firm.  I know this is an obvious statement.  All you have to do is look at our homepage and you’ll figure that one out pretty quickly.  The reason I stated the obvious is because I want you to think about your most important asset.

I think you need to answer this question:  “What is my most important asset?”  At first, you might find the answer not really obvious, but on further thought I bet you just smack yourself in the head and say, “Duh.”

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Topics: asset management, value creation, financial planning


Should You Concentrate On What, Why Or How? - Wealth

magnifying glassIt depends on where you are in your process.  I was recently talking with someone about doing an acquisition in their business.  Initially the conversation was around how she should go about buying the business she was looking at.

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Topics: asset management, mission vision values and goals, Strategic Thought


Investment Behavior and Alternative Investments

Alternative InvestmentsOn January 15, 2011, my partner, Josh Patrick posted a blog here entitled “Why I think Alternative Investments Make Sense”.  I whole heartedly concur with his observations; however, in implementing the strategy, I have found investor behavior can get in the way of allowing the strategy to work.

Here’s what I mean.  Most of my clients started investing in the 1980’s and 1990’s, somewhat concurrent with the proliferation of 401k plans.  Most were successful, accumulating account values at a steady pace.  The financial pundits were espousing a “new normal”.  Index funds were the new hot topic – making money was perceived as “easy”.

Well, it should have been.  From 1982 to 2000, we were in a secular (long term) bull market averaging almost 17% per year.   This is the experience of most investors, and it is the experience that framed their investing expectations going forward.

But what most fail to recognize is that in the prior 16 years from 1966 – 1982, we had a secular bear market, losing almost 22% over those years.   Sure, there were 6 cyclical (short term) bull markets within this period, but in the end the market was down.  If you had invested in an S & P index, you would have been negative after 16 years.

This experience of 1982 – 2000 blinded many investors to the risks of the market.  Then, in 2000, the Tech Bubble bursts, 9/11/01 occurs and before you know it the market lost almost half of its value from 2000 – 2002.  But the market rebounded and most of the losses were recovered from 2003 – 2007.  We’re back to the “new normal”, right?  Well 2008 shook us to our core, the market declining almost 38%.  Based on the analysis of Crestmont Research, we are in the midst of another secular bear market, similar to 1966 – 1982.

So, back to the alternative investments, i.e. absolute return managers.  After the rollercoaster ride of the past 10 years, many of my clients embraced the absolute return methodology for a portion of their portfolio.  The philosophy of reducing volatility and potentially making money by not losing money resonated with them.  But wait, we just experienced a 2 year cyclical bull, gaining back most of 2008’s loss.  Clients responded – “why isn’t my absolute return manager getting me the same return?”  Investor behavior is still shaped by the expectations of 1982 – 2000.  What they forget is that their absolute return manager didn’t lose 38% in 2008.  We are all learning.  Ten years of a secular bear market is still not enough to erase the expectation that the market “generally goes up”.

Volatility is the enemy of long term investment success.  That’s why you see most endowment funds with a significant portion of their assets in Absolute Return strategies.  Hopefully, we can learn from them.

This is a registered website, which means that we cannot have a response box on this blog.  However, I am interested in hearing your thoughts.  If you would like to give me a call or send an email, I would be glad to hear from you.

Rick Harris
(518) 608-8939 ext. 21
rharris@stage2planning.com

Alternative investments involve a high degree of risk, often engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be highly illiquid, are not required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual funds, often charge high fees  Alternative investments can be volatile. Often managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently higher risk. There is often no secondary market for an investor’s interest in and none is expected to develop. There may be restrictions on transferring interests. These products often execute a substantial portion of their trades on non-U.S. exchanges. Investing in foreign markets may entail risks that differ from those associated with investments in U.S. markets. Additionally they often entail commodity trading, which involves substantial risk of loss.

Past Performance does not guarantee future results.  

Securities and Investment Advisory Services offered through NFP Securities, Inc. (NFPSI), Member FINRA/SIPC.

Stage 2 Planning Partners and NFPSI are not affiliated.

This article is published for residents of the United States only.  Registered Representatives and Investment Adviser Representatives of NFP Securities, Inc. may only conduct business with residents of the states and jurisdictions in which they are properly registered.  Therefore, a response to a request for information may be delayed.  Not all of the products and services referenced on this site are available in every state and through every representative or advisor listed.


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Topics: asset management, financial planning, wealth management, alternative investments


6 things an alternative investment manager can do

Burlington Investment ManagerOne of the good things that investment managers do for their Clients is provide individual security selection and management.  What this means is they take into account individual needs and wants when they build an investment portfolio.

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Topics: asset management, financial planning, wealth management, alternative investments


8 things that can impact your relationship to your finances

financial thoughtIn the business world I often talk with our clients about managing the relationship they have with their business.  After they sell their business the conversation often moves from talking about the relationship to your business to your relationship with your finances.

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Topics: asset management, value creation, financial planning, finances, value enhancement


Some very cool tax benefits for the next two years

Tax gifts for the next two yearsA holiday gift for taxpayers? After a 277-148 passage in the House and an 81-19 approval in the Senate, President Obama signed the 2010 Tax Relief Act into law on December 17, extending the Bush-era tax cuts.1 Here is the impact of the new legislation:

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Topics: asset management, financial planning, risk management, estate planning


Why I think alternative investments make sense

Alternative InvestmentsAlternative investments often bring up visions of high risk investing that can leave you with no money.  I have a different view.  For me, alternative investments mean using a manager that has a number one goal of not losing money.  The second goal they have is to get a positive return when market situations allow the manager to do so.

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Topics: asset management, wealth management, alternative investments


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