FINANCIAL FOCUS – Is a Managed Account Right for You?

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As an investor, you’ll face many decisions over the years. How much should you invest? Where should you put your money? When is it time to sell some investments and use the proceeds to buy others? Some people enjoy making these choices themselves – but not everyone. Consequently, the type of investor you are will influence your thinking about whether to open a managed account.

As its name suggests, a managed account – sometimes known as an “advisory” account – essentially is a portfolio of stocks, bonds and other investments chosen by a professional investment manager who makes the buy and sell decisions. Typically, each managed account has an investment objective based on your goals, and you may have some voice in investment choices – for example, you may be able to request that the manager avoid certain investments. Or, you might still work with a personal financial advisor who can help you identify and quantify your goals, define your risk tolerance, and track changes in your family situation – and who can then use this information to help guide the investment manager’s choices.

Beyond this basic structure, managed accounts can vary greatly in terms of administration, reporting, fees and minimum balance.

So, assuming you meet the requirements for a managed account, should you consider one? There’s really no one right answer for everyone. But three factors to consider are cost, control and confidence.

  • Cost – Different managed accounts may have different payment arrangements. However, it’s common for a money manger to be paid based on a percentage of assets under management. So, if your manager’s fee is 1% and your portfolio contains $100,000, the manager earns $1,000 per year, but if the value of your portfolio rises to $200,000, the manager earns $2,000. Because the manager has a personal stake in the portfolio’s success, this arrangement could work to your advantage. Be aware, though, that other fees may be associated with your account.
  • Control – With any managed account, you will give up some, or perhaps all, of your power to make buy-and-sell decisions. If you have built a large portfolio, and you’re busy with work and family, you may like the idea of delegating these decisions. And, as mentioned above, you can still oversee the “big picture” by either working through a financial advisor or, at the least, having your goals, risk tolerance and investment preferences dictate a money manager’s decisions. But you will have to decide for yourself how comfortable you are in ceding control of your portfolio’s day-to-day transactions.
  • Confidence – It’s essential that you feel confident in a managed account’s ability to help you meet your goals. And the various elements of a managed account may well give you that assurance. For example, some managed accounts include automatic rebalancing of assets, which, among other things, can help you achieve tax efficiency. Other features of a managed account – such as the experience and track record of the manager – also may bolster your confidence.

Ultimately, you’ll need to weigh all factors before deciding whether a managed account is right for you. In any case, it’s an option worth considering.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
Email: marques.young@edwardjones.com
Member SIPC

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FINANCIAL FOCUS – Consider Financial Gifts for All Your Valentines

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Valentine’s Day is almost here – and it’s a pretty big business. In fact, U.S. consumers spent about $18 billion on their valentines in 2017, according to the National Retail Federation. Of course, recipients certainly appreciate flowers, candy, jewelry and so on, but this year, consider going beyond the traditional favorites to give your loved ones something more long-lasting – a financial gift.

And, while you’re doing so, why not also go beyond the traditional definition of a “valentine”? After all, not all that $18 billion went to spouses or significant others. A sizable amount also went to non-romantic connections, including children, parents, friends, teachers – even pets. So, in the spirit of ecumenical Valentine’s Day gift-giving, here are some suggestions for financial gifts for your loved ones:

  • For spouse or significant other – One valuable gift to your spouse or significant other might be an IRA contribution. While you can’t directly contribute to someone else’s IRA, you can certainly write a check to that person for that purpose. This gift is particularly valuable because many people have trouble coming up with the maximum annual IRA contribution, which, in 2018, is $5,500, or $6,500 for individuals 50 and older. As an alternative to an IRA contribution, you could give shares of a stock issued by a company whose products or services are enjoyed by your spouse or significant other.
  • For your children –  It’s never too soon to start saving for college for your children. Fortunately, you have a few attractive college-funding vehicles available, one of which is the 529 Savings Plan. You can generally invest in the plan offered by any state, even if you don’t live there. If you do invest in your own state’s plan, you might receive a tax incentive, which could include a deduction, match or credit. Plus, all withdrawals from 529 Savings Plans will be free from federal income taxes and, in most cases, state income taxes as well, as long as the money is used for qualified college or graduate school expenses of the beneficiary you’ve named. (If a withdrawal is taken from a 529 Savings Plan but not used for a qualified expense, the portion of the withdrawal representing earnings is subject to ordinary income tax and a 10% federal penalty.)
  • For your parents – You can probably find a number of thoughtful and valuable financial gifts for your parents. You could, for example, offer to pay a month’s worth of their premiums for their auto or health insurance. Even if they are on Medicare, they may still be paying for a supplemental policy, so your gift may well be appreciated. But you might want to go beyond helping them with just a single component of their financial situation and instead provide them with assistance for their “big picture.” To do so, you could arrange a visit with a trusted financial professional, assuming your parents aren’t already using one. This person could look at all issues, including investments, retirement accounts, long-term care and estate-related financial strategies, and then make appropriate recommendations and even referrals to other professionals.

Everyone likes the hearts, flowers and sweets of Valentine’s Day. Nonetheless, give some thought to making financial gifts – they can make a difference in your loved ones’ lives long after the chocolates are eaten and the roses have faded.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
Email: marques.young@edwardjones.com
Member SIPC

marques-young

FINANCIAL FOCUS – What Should You Do With Your Tax Refund?

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You may not get much of a thrill from filing your taxes, but the process becomes much more enjoyable if you’re expecting a refund. So, if one is headed your way, what should you do with the money?

The answer depends somewhat on the size of the refund. For the 2017 tax year, the average refund was about $2,760 – not a fortune, but big enough to make an impact in your life. Suppose, for example, that you invested this amount in a tax-deferred vehicle, such as a traditional IRA, and then did not add another penny to it for 30 years. At the end of that time, assuming a hypothetical 7 percent annual rate of return, you’d have slightly more than $21,000 – not enough, by itself, to allow you to move to a Caribbean island, but still a nice addition to your retirement income. (You will need to pay taxes on your withdrawals eventually, unless the money was invested in a Roth IRA, in which case withdrawals are tax-free, provided you meet certain conditions.)

Of course, you don’t have to wait 30 years before you see any benefits from your tax refund. If you did decide to put a $2,760 tax refund toward your IRA for 2018, you’d already have reached just over half the allowable contribution limit of $5,500. (If you’re 50 or older, the limit is $6,500.) By getting such a strong head start on funding your IRA for the year, you’ll give your money more time to grow. Also, if you’re going to “max out” on your IRA, your large initial payment will enable you to put in smaller monthly amounts than you might need to contribute otherwise.

While using your refund to help fund your IRA is a good move, it’s not the only one you can make. Here are a few other possibilities:

  • Pay down some debt. At some time or another, most of us probably feel we’re carrying too much debt. If you can use your tax refund to help reduce your monthly debt payments, you’ll improve your cash flow and possibly have more money available to invest for the future.
  • Build an emergency fund. If you needed a new furnace or major car repair, or faced any other large, unexpected expense, how would you pay for it? If you did not have the cash readily available, you might be forced to dip into your long-term investments. To help avoid this problem, you could create an emergency fund containing three to six months’ worth of living expenses, with the money kept in a liquid, low-risk account. Your tax refund could help build your emergency fund.
  • Look for other investment opportunities. If you have some gaps in your portfolio, or some opportunities to improve your overall diversification, you might want to use your tax refund to add some new investments. The more diversified your portfolio, the stronger your defense against market volatility that might primarily affect one particular asset class. (However, diversification, by itself, can’t protect against all losses or guarantee profits.)

Clearly, a tax refund gives you a chance to improve your overall financial picture. So take your time, evaluate your options and use the money wisely.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
Email: marques.young@edwardjones.com
Member SIPC

marques-young

FINANCIAL FOCUS – When Do You Need a Financial Advisor?

If you could accomplish all your financial goals just by putting your paycheck

into the bank every couple of weeks, you wouldn’t need the services of a financial advisor. But life isn’t that simple – and so, at some point, you may realize you need some professional assistance. But when?

Actually, you might benefit from the services of a financial advisor during many life events, including the following:

  • Starting your career – When you’re starting out in your career, you may encounter several questions related to your benefits package. Should you contribute to your 401(k) or other employer-sponsored plan? If so, how much, and where should you invest your money? Are the life and disability insurance policies offered by your employer sufficient for your needs? A financial advisor can help you answer these and other questions you may have.
  • Getting married – When you get married, you’ll have to decide if, and how, you want to combine your finances. Also, you and your spouse may have different attitudes about investing and different tolerances for risk. A financial professional can help you find common ground.
  • Changing jobs – When you switch jobs, what should you do with your old employer’s retirement plan? And how should you invest in the plan offered by your new employer? As was the case when you first began your career, you may find that a financial professional can help you make the right choices.
  • Facing a layoff or buyout – You may never go through a layoff, or take a buyout offer from an employer – but if either of these events happen, you will face some financial decisions. And during such a potentially stressful period, you may be tempted to make some financial moves that won’t be beneficial. A financial advisor can suggest some strategies that may help you keep your investment situation relatively intact until you land your next job.
  • Saving for college – If you have children whom you’d like to send to college someday, you’ll probably want to start putting money away as early as possible. A financial professional can show you the various college-savings vehicles, and help you choose the ones that are most appropriate for your needs.
  • Getting divorced – If you are fortunate, you won’t ever experience a divorce, but, if it does happen, you’ll want to get the professional assistance necessary to ensure fair outcomes for everyone. You’ll obviously need to work with an attorney, but you may find that, in the area of investments, a financial advisor also can be useful.
  • Entering retirement – As you near retirement, your key questions will switch – but not entirely – from putting money in to taking money out. How much can you withdraw each year from your 401(k) and IRA without running the risk of outliving your resources? When should you start taking Social Security? If you were to work a couple of years longer than you had originally intended, how would it affect your withdrawal strategies? Again, a financial advisor can help you with these issues.

As you can see, most important life events will carry some financial concerns. But you don’t have to face these challenges alone – and by getting the help you need, when you need it, you can ease the transition from one stage of life to another.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
Email: marques.young@edwardjones.com
Member SIPC

marques-young

FINANCIAL FOCUS – Time to Review Your Investment Strategy for the Year

As the year draws to a close, it’s a good time to review your progress toward your financial goals. But on what areas should you focus your attention?

Of course, you may immediately think about whether your investments have done well. When evaluating the performance of their investments for a given year, many people mistakenly think their portfolios should have done just as well as a common market index, such as the Standard & Poor’s 500. But the S&P 500 is essentially a measure of large-company, domestic stocks, and your portfolio probably doesn’t look like that – nor should it, because it’s important to own an investment mix that aligns with your goals, risk tolerance and return objectives. It’s this return objective that you should evaluate over time – not the return of an arbitrary benchmark that isn’t personalized to your goals and risk tolerance.

Your return objective will likely evolve. If you are starting out in your career, you may need your portfolio to be oriented primarily toward growth, which means it may need to be more heavily weighted toward stocks. But if you are retiring in a few years, you may need a more balanced allocation between stocks and bonds, which can address your needs for growth and income.

So, assuming you have created a long-term investment strategy that has a target rate of return for each year, you can review your progress accordingly. If you matched or exceeded that rate this past year, you’re staying on track, but if your return fell short of your desired target, you may need to make some changes. Before doing so, though, you need to understand just why your return was lower than anticipated.

For example, if you owned some stocks that underperformed due to unusual circumstances – and even events such as Hurricanes Harvey and Irma can affect the stock prices of some companies – you may not need to be overly concerned, especially if the fundamentals of the stocks are still sound. On the other hand, if you own some investments that have underperformed for several years, you may need to consider selling them and using the proceeds to explore new investment opportunities.

Investment performance isn’t the only thing you should consider when looking at your financial picture over this past year. What changed in your life? Did you welcome a new child to your family? If so, you may need to respond by increasing your life insurance coverage or opening a college savings account. Did you or your spouse change jobs? You may now have access to a new employer-sponsored retirement account, such as a 401(k), so you’ll need to decide how much money to put into the various investments within this plan. And one change certainly happened this past year: You moved one year closer to retirement. By itself, this may cause you to re-evaluate how much risk you’re willing to tolerate in your investment portfolio, especially if you are within a few years of your planned retirement.

Whether it is the performance of your portfolio or changes in your life, you will find that you always have some reasons to look back at your investment and financial strategies for one year – and to look ahead at moves you can make for the next.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
Email: marques.young@edwardjones.com
Member SIPC

marques-young

FINANCIAL FOCUS – How Can You Share Your Financial “Abundance” With Your Family?

Thanksgiving is almost here. Ideally, this day should be about more than football and the imminent arrival of Black Friday mega-sales. After all, the spirit of the holiday invites us to be grateful for what we have and for the presence of our loved ones.

But it’s important to look beyond just one day in November if you want your family to take part in your “abundance.” If you want to ensure your financial resources eventually are shared in the way you envision, you will need to follow a detailed action plan, including these steps:

  • Identify your assets. If you haven’t done so already, it’s a good idea to take an inventory of all your financial assets – your retirement accounts (401(k) and IRA), other investments, life insurance, real estate, collectibles and other items. Once you know exactly what you have, you can determine how you would like these assets distributed among your loved ones.
  • Get professional help. To ensure your assets go to the right people, you will need to create some legal documents, such as a will and a living trust. The depth and complexity of these instruments will depend a great deal on your individual circumstances, but in any case, you certainly will need to consult with a legal professional because estate planning is not a “do-it-yourself” endeavor. You may also need to work with a tax professional and your financial advisor, as taxes and investments are key components of the legacy you hope to leave.
  • Protect your financial independence. If your own financial resources were to become endangered, you clearly would have less to share with your loved ones, and if your financial independence were jeopardized, the result might be even worse – your adult children might be forced to use their own resources to help support you. Consequently, you will need to protect yourself, and your financial assets, in several ways. For one thing, you may want to work with your legal professional to create a power of attorney, which would enable someone – possibly a grown child – to make financial decisions for you, should you become incapacitated. Also, you may want to guard yourself against the devastating costs of long-term care, such as an extended nursing home stay. Medicare typically pays very little of these expenses, but a financial advisor may be able to suggest techniques or products that can help.
  • Communicate your wishes. Once you have all your plans in place, you’ll want to communicate them to your loved ones. By doing so, you’ll be sparing your loved ones from unpleasant surprises when it’s time to settle your estate. And, second, by making your plans and wishes known to your family well in advance of when any action needs to be taken, you’ll prepare your loved ones for the roles you wish them to assume, such as taking on power of attorney, serving as executor of your estate, and so on. And you’ll also want to make sure your family is acquainted with the legal, tax and financial professionals you’ve chosen to help you with your estate plans.

Thanksgiving comes just once a year. Taking the steps described here can help ensure your family will share in your financial abundance as you intended.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
Email: marques.young@edwardjones.com
Member SIPC

marques-young

5 Tips to Recapture Your Wealth

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Did you know that many American’s transfer away between $2,000,000 and $5,000,000 of their wealth over a lifetime.  Yes, millions according to U.S. News and World Report.

Could you be one of them?

The truth is we will all transfer away wealth but we all have the opportunity to recapture a good chunk of that if we know the rules of the game.

After 20 years of working in almost every capacity in the financial industry, I have learned one important thing:  the rules of the game are not taught to us.

Why?  I will let you draw your own conclusions, but hope these points will help you make better financial decisions and allow you to recapture some of your hard-earned money.

First, what are the major wealth transfers in someone’s financial life:  taxes, fees paid to financial firms and the cost educating college students.

Here are few tips that could help you recapture that money:

  1. If you are invested in mutual funds, STOP until you know the costs. According to this benchmark Forbes article: The Real Costs of Owning a Mutual Fund, an average fund can have up to 2.5% – 3.25% of internal costs. Compounded over time can equal a lot of money. That is why, according to a Dalbar study, the average equity mutual fund investor underperformed the S&P 500 by a margin of 3.66% in 2015.  If you factor in buying and selling at the wrong times it should be no surprise the average retail investor underperforms the market by over 6%.
  2. Your typical stockbroker is not your friend but your fiduciary always works in your best interest. Most people do not know there are two different standards with which advisors do business.  This funny video will explain the difference in less than 30 seconds.  Afterwards, ask your advisor.
  3. Colleges act like businesses and there is a practice in the industry known as enrollment management that should change the way you think about planning your student’s education. With the average cost ranging from $24,385 for public school to $73,286 for elite colleges annually, a student taking longer than four years to graduate (and the average student loan debt per student of $37,0000) must focus more on SAVING ON THE COST of college than saving for college.  The college planning process has changed, and families need a new approach to recapture and lower their costs.  If you have two kids you very well could pay $150,000 to $250,000 for their education hoping they graduate in four years.  See if this new approach to college planning makes sense to you:  Know before you go, a new approach to college planning.
  4. Is your CPA a tax preparer or a tax planner? Think about it, most good CPAs are focused on saving you money today so they look good and will get your repeat business next year. How to tell if your CPA is a good one from this Forbes article: Red flags, how to know your CPA is working for you or not.
  5. Paying an advisor 1% or more to manage your money is a loser’s game. Most families don’t know all of the services an advisor should be providing and what is the true value.  According to this Vanguard study, a great advisor will help you potentially net about 3% in additional returns.  Now that is a deal, but so often most firms do not provide the additional services a family deserves.

Hopefully, you have found something in this post that will change your financial life so you can spend and enjoy more of your money!

If you want to learn more, please feel free to schedule a complimentary 30-minute call to discuss your situation.  Schedule Your Call.

Article written by STUART CANZERI
You can reach Stuart at (404) 477-1770 or canzeri@peachtreefg.com

STUART CANZERI