Insurance Basics: Adding Long Term Care to your Coverage

Contributed by: Nick Defenthaler, CFP®

I can almost guarantee that if you’re reading this blog post, you know at least one friend or family member who unfortunately, at one point in their life, required some form of assisted living or nursing care. As our population grows and lives longer, the threat of a long-term care (LTC) event is becoming more real and more expensive! Just check out the chart below JP Morgan put together from the research New York Life conducted in 2014, showing the annual cost depending on what state you live in: 

Insurance, especially when it’s expensive like LTC, is a difficult thing for clients to get on board with. Let’s look at the various forms of coverage to have a better understanding of the mechanics of the policies.

Traditional

This is the most common type of LTC coverage because in almost all cases, it will offer the highest benefit payment. This of course, comes at a cost. For a healthy 60 year old couple, it’s not uncommon to see the annual cost (from both policies) be between $7,000 and $10,000, depending on coverage. In most cases, we recommend a more basic policy that does not have all the “bells and whistles” but can still be a great safety net if claim is required. Similar to a disability policy, there is a waiting period before benefits will kick in, which typically 90 days. For benefits to be paid, certain activities of daily living (ADLs for short) must be impossible for the insured to do on their own. This must also be verified in writing by a licensed physician. One of the most important aspects of a LTC policy is the cost of living adjustment (COLA) rider. In the majority of cases, this is something we almost always recommend so the benefit you’re paying for will increase each and every year to (somewhat) keep up with the rising cost of care. Similar to college tuition, the inflation rate for long-term care coverage is rather high in comparison to normal inflation for the rest of our economy. Unfortunately, traditional LTC coverage is almost always “use it or lose it” – similar to your car and homeowner’s insurance, if you never need it; you don’t get reimbursed for premiums paid.

Hybrid and Life Insurance

One of the gripes most of us have with LTC coverage is that they lose all of their premium dollars if they never need to actually use the coverage. Different products have emerged in the LTC world to accommodate those who may not purchase LTC insurance for this reason, known as “hybrid” policies.  Without digging too deep into the weeds, these policies offer additional flexibility on receiving a portion of premiums back if you never use the coverage. It’s important to note, however,  that the leverage you receive in regards to your overall benefits if you did actually need to go on claim are typically far less than a traditional LTC policy.  

Life Insurance

Life insurance may also be considered as a form of LTC protection. The average length of stay in a nursing home is approximately two and a half years which, depending on the level of care, could easily exceed $250,000 without LTC coverage. In many cases, this means that the now surviving spouse is truly the one who is facing the financial hardship because they had to pay such a large amount, out of pocket, for care which could have easily erased the majority of their once plentiful nest egg. Using life insurance in this case would guarantee a death benefit on the spouse who required care but has since passed, which would essentially “replenish” the assets that were spent down to cover the cost of care. As with hybrid policies, in most cases, the benefit you’d receive using life insurance isn’t comparable to a traditional LTC policy but it certainly has its place in certain situations.  

When you’re working and accumulating assets, your two greatest financial perils are typically a pre-mature death or a disability – which is why we purchase life insurance  and disability insurance to protect us during this stage of life. As you transition into retirement, however, those perils typically disappear and a new one emerges – the threat of a long-term care event. Just like we purchase insurance to cover the cost of an unforeseen event such as a pre-mature death or disability, LTC coverage is obtained to help cover a portion of the cost to potentially help avoid a financial catastrophe. This form of coverage does not make sense for everyone but there are many out there who should seriously consider it. Risk management is a key component of a well-rounded financial plan, and having a formal game plan on how you’ll pay for a potential LTC event is a must.

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc. Nick is a member of The Center’s financial planning department and also works closely with Center clients. In addition, Nick is a frequent contributor to the firm’s blogs.

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Nick Defenthaler and not necessarily those of Raymond James. Long Term Care Insurance or Asset Based Long Term Care Insurance Products may not be suitable for all investors. Surrender charges may apply for early withdrawals and, if made prior to age 59 ½, may be subject to a 10% federal tax penalty in addition to any gains being taxed as ordinary income. These policies have exclusions and/or limitations. The cost and availability of Long Term Care insurance depend on factors such as age, health, and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of Long Term Care insurance. Guarantees are based on the claims paying ability of the insurance company. Please consult with a licensed financial professional when considering your insurance options.

Sell in May and Go Away, Revisited

Contributed by: Angela Palacios, CFP®

Questions arising during this election year have prompted me to revisit an old topic. This election year seems anything but average (or at the very least entertaining), but what happens when you layer in the old debate of whether it is a good idea to, “Sell in May and go away.” Will this election year be different? 

Markets tend to have their stronger performance between October and May, which, despite a major bump in the road during January and February this year, has certainly held true in the past year. 

This chart is for illustration purposes only.

There are many theories as to why this could be true:

• Investors tend to fund their IRA accounts either early or later in the year.
• There could be lower summer productivity for business.
• And the most obvious, people prefer to be outside rather than inside investing their money (especially in Michigan).

However, this year could be different. If you look at monthly returns in Election years the above picture is contradicted.

This chart is for illustration purposes only

Strategies involving the short-term timing of the markets usually end up hurting investors rather than preserving or boosting returns, so take caution.

I am often asked if investing should be held off until after the election during years like this. However, I believe experience teaches us that we are better off if we keep our voting and investing decisions separate.

Angela Palacios, CFP® is the Portfolio Manager at Center for Financial Planning, Inc. Angela specializes in Investment and Macro economic research. She is a frequent contributor to The Center blog.

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Source: The Big Picturehttp://www.ritholtz.com/blog/

Any opinions are those of Angela Palacios and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Investing involves risk and investors may incur a profit or a loss.

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results.

The Team behind the Team

Contributed by: Clare Lilek

Have you ever wondered how our website always looks so organized or how our graphics are so cohesive? What about how we have so many professional videos with succinct content and consistent messaging? How about how creative our digital and social media is? All the while providing top financial service to our many clients! Well that doesn’t happen by accident; it occurs due to hard work, planning, and an array of talented professionals. We have a Creative Team that supports our Center Team every step of the way: Laura Garfield and Sharon Golutta of Idea Decanter, and Kimberly Wyman, our brand agent + graphic designer.

Idea Decanter provides a sounding board for new and intriguing ways to get pressing financial information, upcoming deadlines, and the daily activities of The Center out to our clients. The Center is a family and we want our clients to stay informed so they feel a part of the family, too. Creating fun videos, sharing pictures, and starting social media campaigns helps us do just that. In addition to Idea Decanter’s role, Kimberly Wyman coordinates and curates our brand aesthetics, website and all the fun graphics you see throughout social media, our monthly newsletter, CenterView, and reminders via social media. Together they help us cultivate and maintain our brand, communication tactics, and creative sanity!

Why utilize a Creative Team? Like all good plans, The Center must have its own personal strategy for our growing business, communicating with clients, and providing an overall engaging experience for our current and potential clients. Having a Creative Team whose time is dedicated to crafting our particular Center brand, breathes new life into our business and our company culture. We believe in the importance of digital communication and the transformative power of creativity. If we can get our message across in a manner that not only enlightens but engages our clients, then we have done our job. The Center staff focuses on making sure our clients can live their plan, and our Creative Team helps make sure The Center stays on mark with their own plan, while staying current with the changing times. 

Just like we are your supporting team, accomplishing financial tasks to make your life easier, our Creative Teams keeps The Center on track with branding and digital communication. This allows The Center Team to better focus on our clients financially, all while providing an engaging and cohesive experience for them digitally. We thank our Creative Team that allows us to better showcase the work we do and get helpful information to keep our clients informed and entertained.  

Clare Lilek is a Challenge Detroit Fellow / Client Service Associate at Center for Financial Planning, Inc.

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Raymond James is not affiliated with and does not endorse the opinions or services of Laura Garfield, Sharon Gottula, Idea Decanter or Kimberly Wyman. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

Everyone’s Favorite Topics: Social Security and Taxes

Contributed by: Kali Hassinger

Throughout our entire working lives, our hard-earned cash is taken out of each paycheck and paid into a seemingly abstract Social Security Trust fund. As we see these funds disappear week after week, the pain of being taxed is hopefully somewhat alleviated by the possibility that, one day, we can finally collect benefits from the money that has been alluding us for so long. (Maybe you’re also comforted by the fact that you’re paying toward economic security for the elderly and disabled – or maybe not, but I’m an idealist). 

When the time to file for benefits finally arises, however, it may not be clear how this new source of income will affect your tax situation. Although no one pays tax on 100% of their Social Security benefits, the amount that is taxable is determined by the IRS based on your “provisional” or “combined” income. Provisional and combined income are terms that can be use interchangeably, so we will just use provisional from this point forward. Many of you may not be familiar with either term, but I’ll bet it’s no surprise that the beloved IRS uses a system that can be slightly confusing! No need to worry, though, because I’m going to provide you with the basics of Social Security taxation.

Determining your provisional (aka combined) income requires the following formula: 

Adjusted Gross income (AGI) includes almost all forms of income (salaries, pensions, IRA distributions, ordinary dividends, etc.), and it can be found on the 1st page of your Form 1040. AGI does not, however, include tax exempt interest – such as dividends paid from a municipal bond or excluded foreign interest. These can be powerful tax tools in individual situations, but they won’t help when it comes to Social Security taxation. The IRS requires that you add any tax-exempt interest received into your Adjusted Gross Income for this calculation. On top of that, you have to add ½ of your annual social security benefits. The sum of these 3 items will reveal your provisional income for Social Security taxation purposes.

After determining the provisional income amount, the IRS taxes your Social Security benefits using 3 thresholds: 0%, 50%, or 85%. This means that the maximum portion of your Social Security Benefits that can be considered taxable income is 85%, while some people may not be taxed at all. The provisional income dollar amount in relation to the taxation percentage is illustrated in the chart below: 

As you can see, it isn’t difficult to reach the 50% and 85% thresholds, which can ultimately affect your marginal tax bracket.  These thresholds were established in 1984 and 1993, and they have never been adjusted for inflation. The taxable portion of your benefit is the taxed at your normal marginal tax rate. 

Social Security, in general, can be a very confusing and intimidating topic, but it is also a valuable income resource for all who collect benefits. Everyone’s circumstance is different, and it’s important to understand how the benefits are affecting your tax situation. I encourage you to speak to your CPA or Financial Planner with any questions.

Kali Hassinger, CFP® is a Registered Client Service Associate at Center for Financial Planning, Inc.

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Kali Hassinger and not necessarily those of Raymond James.

New Face around The Center!

Contributed by: Center for Financial Planning, Inc.

At Center for Financial Planning, we love hiring promising student leaders and accomplished young professionals. It gives them a chance to get to know the financial services industry and how we work at The Center. At the same time, we get to capitalize on their bright talent and fresh perspective. This summer, we will have a new intern in the office, Ben Wright. Ben will work primarily with the Investment and Financial Planning Departments to complete research projects, mutual fund performance reporting, and special Client Service based work. Below is a quick note from Ben to you!

 Hi Center for Financial Planning!

I am extremely excited to be joining your team as an intern this summer. Between your modern website and the colorful office setting, CFP looks like an incredible atmosphere to work in. Academically, I am a sophomore at the University of Michigan studying Economics. Working as a Student Equipment Manager for the Michigan football team has allowed me to work directly with coaches and players. I can usually be spotted on the sideline holding a football during home and away games. Professionally, my experience interning at Hoover & Associates gave me the introductory knowledge to mutual funds, model portfolios, and the general operations of a financial advisors office. Outside school and work, I enjoy golfing, running, playing tennis, and almost every other sport you can think of. My love for sports and commitment to serving others led me to travel to Africa last summer where I ran a Christian sports camp at an orphanage in Zambia. I enjoy traveling across the country and all over the world. I am excited to get to know everyone personally, share some of my stories and learn from each of you professionally.

Ben will start in the beginning of May, so if you get a call from him, or see him around the office, don’t be afraid to say “hi!” and welcome him to our Center family!

Identity Protection: Freezing your Credit Report

Contributed by: Melissa Parkins, CFP®

Some 9 million Americans are victims to identity theft every year. Anyone who has ever had their identity compromised knows how frustrating it can be to fix – trust me, I know from the experience. Last year, I wrote about how to check your credit report and what to do if you see something unusual. As you may know, you are entitled to pull your full credit report from each of the 3 credit bureaus once per year at no charge; but what about the remaining 364 days a year (or 365, in 2016’s case)? Chances are you won’t realize that your identity has been compromised until you check your credit report once a year OR you go to apply for a new line of credit and are denied because your score has plummeted. What’s worse is that when you do not catch it right away, it becomes more and more difficult to fix.

So what else can you do to protect yourself?

You can actually block access to your credit report information with a “credit security freeze.” To do this, you contact the three major credit bureaus and instruct them to prohibit new creditors from viewing your credit report and score. Companies with whom you currently have existing accounts with will still be able to access your credit information. You can set up a freeze on your credit information even if you haven’t experienced any fraudulent activity before. A credit security freeze can increase the likelihood of catching identity thieves before they can open new accounts in your name.

How do you do this, and what are the fees?

To freeze your credit reports, you must contact each of the three credit bureaus individually. This can be done online here: Equifax, Experian and TransUnion. Fees and filing requirements vary according to state law.

• In Michigan, The fee to freeze your credit report is $10 for each credit agency you decide to do this with – so $30 total if you freeze your credit with each bureau.

• Once you have frozen your credit report, it can be lifted at any time. In Michigan, it is another fee of $10 to permanently remove the credit freeze.

• You can also have the freeze temporarily lifted for a specific period of time or for a specific party (specific party lift is not available in Michigan, but it is in some states). For instance, if you were to start a new job or open up a new line of credit and that company needed access to your credit report, you would need to temporarily lift your freeze. Again, in Michigan it would be a $10 fee for a specific date range lift.

• If you are a past victim of identity theft, the fees are waived (must provide a copy of a valid complaint filed with law enforcement or a police report), so you can freeze your credit and utilize the temporary lifting at any time for no cost.

Who should freeze their credit reports?

As you can see, all of the fees can really add up. So if you are planning any action that requires a credit check, you may want to delay setting up a freeze. Some actions that would require a credit check are things like:

• Starting a new job

• Buying or refinancing a home

• Taking out a loan

• Opening a credit card

• Opening an account with anew utility company or cellphone provider

Placing a security freeze on your credit report does not affect your credit score, nor does it keep you from obtaining your credit report from each of the agencies at any time. Although a freeze can help block identity thieves from opening new accounts with your information, it does not prevent them from making charges on existing accounts. So you should still continue to monitor statements for existing accounts for fraudulent transactions. As you can see, freezing your credit report can be a useful tool for protecting your identity, but it may not be right for everyone. Before setting up a freeze on your credit report, you will want to make sure the timing is right for your unique situation. Let us know if we can be of help.

Melissa Parkins, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Melissa Parkins and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete.

Raymond James is not affiliated with Equifax, Experian, or TransUnion.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

The Center - Just like a Fine Wine

Contributed by: Timothy Wyman, CFP®, JD

Recently my wife Jen and I spent a few days in California Wine Country, and specifically Sonoma. While the weather was a bit wet, at least the wine was too! We had a chance to visit several wineries engaging in both tasting and learning of the rich and proud traditions of each winery. At its core, wine making is pretty straightforward: they plant grapes, they grow grapes, and then they make those grapes into wine. But boy can they share a story!

One winery visit in particular stood out. The guide at the Gundlach & Bundschu Winery shared their longstanding tradition of their family owned winery and their focus on “making small lots of ultra premium wines from a distinctive and historic property.” As I listened to the rich history, I couldn’t help but think of The Center – now celebrating over 30 years of service. The Center is very much a family in terms of how we treat both our team and our clients. Our collective goal is to serve a select clientele providing ultra-premium financial advice.

As Jen and I continued to visit several wineries I was struck how it wasn’t just about “making those grapes into wine.” Each and every one had a unique story to share – sharing how they felt they were indeed different from the soil or grapes in the rest of region and even right next door. Jen and I heard of tales of family, strong work ethic, and careful attention to the land and processes used to harvest their grapes. Each winery seemed to articulate how they were unique.

So what makes The Center a financial winery of sorts? After all, like wineries, there are hundreds and even thousands of folks providing what may generically be called financial planning. Like the great wines that reflect the complexity and character of great vineyards, The Center has cultivated a rich vineyard of sorts to harvest distinctive and helpful financial solutions. Moreover, just like the fine wineries, the combination or totality of the process is a differentiator.

For over 30 years we have been helping families, like you, to “Live Your Plan™.” First and foremost, our work together is all about You, Your Plan, and Your Goals. Our firm was created by founders looking to provide financial planning advice in a better, more holistic way in order to give clients a greater chance at educating their children and at planning a successful retirement. Secondly, The Center offers a multigenerational approach in terms of both serving our clients’ families and our team of 20 professionals. Lastly, The Center focuses on a Team Approach to provide world-class solutions and strategies to clients rather than relying only on individual talent. The sum of the parts is certainly greater than the individual pieces. Providing our clients a full team of skilled service oriented professionals has been a cornerstone for many years.

The Center strives each day to produce the finest financial planning advice to you, our clients, so that you may enjoy the fruits of the harvest. Carpe Vinum!

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc. and is a contributor to national media and publications such as Forbes and The Wall Street Journal and has appeared on Good Morning America Weekend Edition and WDIV Channel 4. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), mentored many CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.

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Any opinion are those of Time Wyman, CFP®, JD, and not necessarily those of Raymond James.

Care Agreements Document for Couples

Contributed by: Sandra Adams, CFP®

In the last several months I have been a part of several client conversations, many of which left me feeling a sense of great concern for at least one member of the couple. You see, these conversations all involved client couples that were dealing with one spouse having been diagnosed with some form of cognitive impairment, and the other serving as the primary care giver. In all of these cases, the caregiver expressed a multitude of emotions: responsibility, stress, worry, grief, and even a sense of being lost – as if they didn’t know where to go from here and they didn’t want to let their loved one know how they were feeling.

We all want nothing more than to love and care for our partners, to our best abilities, for the rest of our lives. At least that is what we vow when we marry on our wedding days. Little do we know what lies in our futures—chronic health issues or possible long term cognitive impairment—that may require intensive caregiving. What do we expect of our spouse in those cases? Will we want our spouse to provide personal care and will we want to remain at home, no matter the personal and financial sacrifice?  We have all heard and read that caregiver stress is a very real issue in the U.S., as many spouses and families strive to keep their loved ones cared for at home; unfortunately, this “I can do it all” approach leads to many caregivers falling ill and passing away before the “ill” spouse (or just giving up the quality of life once hoped for). So, how do we prevent this from happening?

I propose that when we are writing all of our other estate planning documents—our Wills, Patient Advocates, and Durable Power of Attorney Documents—that we consider writing a Care Agreements Document with our spouse or significant other.

What would this agreement include, you ask?

• If I get ill, or become cognitively impaired, how do I want to be cared for?

• If I am cognitively impaired/what do I expect of you as a caregiver and do I expect you to care for me at home (is there permission for you to make a move to a facility for safety reasons)?

• If I get ill or become cognitively impaired, do I expect you to provide the care, or do I give you permission to hire care and do I prefer that you visit with me and spend quality time with me.

• Any other items that seem important (i.e. whether or not it is important to keep pets, and or other items that are important to you if you become ill).

Having a Care Agreements Document between spouses/partners in advance of an illness does a couple of things:

1. It helps both partners make clearer decisions in times of stress if/when the time comes. It also takes away any feelings of guilt because you have had the conversation advance of an illness.

2. You have in writing what the care wishes are for your partner in the case of any disagreement from children (whether your children or from a second marriage, etc.). 

While a Care Agreement Document is not a legal document, it is something that helps express wishes for the person that is named in charge of making decisions for you (Durable Power of Attorney, etc.) and can be a great way to begin a conversation about those end of life issues that we don’t like to talk about, but need to. 

In next month’s blog, I will write about using the Care Agreements Document for family caregiving, so stay tuned!

Sandra Adams, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Sandy Adams and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. You should discuss any legal matters with the appropriate professional.

First Quarter 2016 Investment Commentary

Contributed by: Angela Palacios, CFP®

The relatively benign appearing performance year-to-date of the S&P 500 of 1.35% does not tell the full story of the storm beneath.  Markets started out the year spooked by China and the prospects of four interest rate increases being projected by the Federal Reserve (the Fed).  Recessionary fears seemed to spike mid-February and then recede as economic data such as retail sales, manufacturing, employment, and consumer sentiment came in slightly better than expected or at least didn’t surprise to the downside. 

Janet Yellen, chair of the Fed, ended the quarter with a noticeably dovish speech justifying the Federal Open Market Committee’s lower path for rate increases by citing global growth risks.  The Fed now anticipates only two interest rate increases this year instead of their original four.  Meanwhile, interest rates overseas pushed farther into negative territory while the Bank of Japan introduced their own negative interest rate policy leaving the U.S. as one of the few havens in the world that is still providing yield. 

Last Year’s Losers are this Year’s Winners

2015 positive market returns were driven very narrowly by just a handful of stocks.  This year has turned on a dime with the worst performing companies of 2015 being the best performers in 2016.  The below chart breaks the S&P 500 up into 10 groups based on 2015 performance.  Group one represents the best performing stocks in 2015 and group ten represents the worst performing stocks in 2015.  The green and red bars represent performance from each of these groups during the first quarter of 2016.

*Bespoke Investment Group

Moderation in the U.S. Dollar

The dollar slowing its steady advance has helped to ease some of the headwinds for commodities, namely oil, as well as emerging markets debt and equities.  The dollar has given up some of its gains from 2015, due to lowered expectations of the Fed hiking rates.  It is quite common for currency markets to over-react to the monetary policy differences that we are seeing between the U.S. and other countries (negative interest rates overseas versus interest rate increases here at home) so we may yet see the dollar move back into slow strengthening mode.

Summer Real Estate Sizzles

Current housing markets seem to have a severe lack of supply of single family homes similar to the late 1990’s and early 2000’s.  Yet new homes being built are at much lower levels then they were during those years.  Prices will likely continue their upward trend of the past few years as demand continues to exceed supply.  Mortgage rates continue to be low especially after the Fed decided to put on the brakes of raising rates.  All of these factors should equate to a favorable market for home sellers. 

Here is some additional information we want to share with you this quarter:

Checkout the quarterly Investment Pulse, by Angela Palacios, CFP®, summarizing some of the research done over the past quarter by our Investment Department. 

In honor of the Game of Thrones premier, Angie Palacios, CFP®, has also discovered a Game of Negative Interest rates that’s playing out in our world right now. Check out Investor Ph.D.

Confused by interest rates and interbank lending? Nick Boguth, Investment Research Associate, breaks it down for you in Investor Basics by using Game of Thrones.

It’s tax season, which also means refunds may be coming your way! Check out these scenarios from Jaclyn Jackson, Investment Research Associate, and see what the smartest plan for your refund is!

Quarters like this one remind us of the importance of diversification.  While a well-diversified portfolio will likely never generate the highest returns possible it also shouldn’t generate the lowest returns.  The primary goal is to manage your risk and keep the end goal of your financial plan at the forefront.  The key to success in investing is developing that plan with realistic goals and then sticking to it even during times like February when it is tempting to deviate. 

We thank you for your continued trust in us to help you through all types of markets to reach your goals.  If ever you have questions, please, don’t hesitate to reach out to me, your planner or any other members of our staff.

Angela Palacios, CFP®
Director of Investments
Financial Advisor

Angela Palacios, CFP® is the Portfolio Manager at Center for Financial Planning, Inc. Angela specializes in Investment and Macro economic research. She is a frequent contributor to Money Centered as well as investment updates at The Center.

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The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Keep in mind that individuals cannot invest directly in any index. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. Any opinions are those of Angela Palacios and not necessarily those of Raymond James.

First Quarter 2016 Investment Pulse

Contributed by: Angela Palacios, CFP®

We hit the ground running in the New Year with great insight from outside experts on a wide array of topics ranging from fixed income research to how to conduct a more successful investment committee meeting and nearly everything in between!  Here is a summary of some of the highlights.

Chris Dillon, a global fixed income portfolio specialist with T. Rowe Price

An hour spent listening to Chris was one of the most informative yet exhausting hours of the quarter!  He spent much of his time explaining global complexities within the fixed income markets and how they could affect investors in the coming months.  Of particular interest was a discussion on negative rates and his opinion that we will likely look back on these negative interest rate policies around the world as being completely ineffective.  Also discussed was the coming money market reform here in the U.S. with the formation of Prime Money Markets that will have floating pricing (Net Asset Values).  While these will mostly affect institutional level investors his recommendation was not to purchase these, but they could create a fundamental change in the market place presenting interesting opportunities for short term bond investors.

Bob Collie, Chief Research strategist, Americas Institutional, Russell Investments

Bob discussed the difficulty of working in committees as it isn’t something that comes naturally to most people.  He offered many questions to ask ourselves to understand how our own investment committee measures up to others.  These answers helped identify areas to focus on improving.  Since our investment committee meets at least once a month you can imagine the agendas are usually very packed.  We need to make the most of our time together overseeing portfolios.  Areas we are focusing on improving after listening to Bob have been visioning (what does success of committee work look like), dynamic discussions, and pre-reading of agenda items and background research so we all have time to formulate our points for the discussion ahead of time.  We have already noted improvements during the meeting and outcomes from the meetings.  Hopefully even more improvements are on the horizon!

Jeremy Siegel, Ph.D., Russell E. Palmer Professor of Finance at the Wharton School of the University of Pennsylvania and Senior Investment Strategy Advisor, Wisdom Tree

"Bubble, the most overused word in finance today."

He believes the market has an aggregation bias, if there are a few stocks or a sector that has large losses, like energy does now, the entire market can look skewed.  The energy sector is biasing the P-E index of the market upward making it look more expensive as a whole than it really is.  He thinks fundamentals have driven interest rates to zero rather than artificial means, the FED has simply followed suit reducing interest rates along the way.  Economic growth and risk aversion are the most important determinants of real rates.  Increased risk aversion, aging investors, a desire for liquidity and the de-risking of pension funds has increased demand for bonds forcing their yields lower.  Jeremy has always had a very bullish view on the markets and now seemed no different.  He feels returns over the coming years will fall in line with long term averages.

Angela Palacios, CFP® is the Portfolio Manager at Center for Financial Planning, Inc. Angela specializes in Investment and Macro economic research. She is a frequent contributor to Money Centered as well as investment updates at The Center.

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Angela Palacios and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Raymond James is not affiliated with and does not endorse the opinions or services of Chris Dillon, Bob Collie, Jeremy Siegel or the companies/organizations they represent. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected. Past performance is not a guarantee of future results. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.