Why Wait?

I was asked the other day, “what is the best advice you’d give someone with regards to investing?”  My first thought was to say something that sounded intelligent and would make a good impression.  After a second, I thought better of that and answered simply, “Start.”  They were taken aback and replied, “Start?  That’s it, just start?”

Yes:  start.

Let’s consider two scenarios:

Client 1 is 25 years old, just beginning his career.  Over the next ten years, he invests $5,000 each year.  If we assume an annual return of 7.5% (not unreasonable in a growth-based mutual fund), by age 35, Client 1 has $70,735 in his account.  At this point, he stops saving, but leaves his account alone to let it grow to age 65.

Client 2 is 45 years old and decides that if he wants to retire anytime soon, it’s time to start saving.  Over the next 20 years, he saves $10,000 each year.  Assuming the same 7.5% annual return, at age 65 his account value grows to $433,046.  Not bad!

Now, let us compare.

		Client 1	Client 2
Age started saving		25	45
Amount saved per year		$5,000	$10,000
Saving period		10 years	20 years
Total investment		$50,000	$200,000
Growth Rate		7.5%	7.5%
Account Value at age 65		$619,281	$433,046

Client 2 saved four times as much as Client 1, and for twice as long.  You’d think Client 2 would be the winner in this scenario, but the numbers don’t lie.

When is the time to start?

Chuck Wade

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Weight Loss and Financial Planning – They Go Hand in Hand!

I ran into a friend the other day and nearly didn’t recognize him.  That tends to happen when over the course of a year, your friend lost 170 pounds!  It’s impossible not to be happy for someone who’s accomplished such a feat, and I had to know, “how did you do it?!”

His response of “eating well and exercising” nearly put me to sleep.

I was expecting to hear of a month-long fast, or the newest, cutting edge diet.  Not so.  Good old fashioned diet and exercise.  Boring?  Yes.  Time-consuming?  Absolutely.  You don’t lose an entire person in body weight in just two weeks.  It takes commitment, hard work, and a plan – all of which must be focused towards achieving your goal.

Wait a second.  We are talking about weight loss here, right?  The same applies to your financial future.  The quick fix that sounds too good to be true is always out there.  And maybe if you invest in the hot, cutting-edge company that everyone is talking about, you’ll make a quick profit. Chances are, in the long run, you’ll lose more than you win.  But if you define your goals and put a well-informed plan in place, with commitment and work, you’ll find yourself not only reaching, but exceeding your goals.

Funny how life works like that.  Why not start now?

Chuck Wade

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Playing the Powerball Odds?

Driving to work this morning, the fine folks on 1180 WHAM were sharing their thoughts on what they would do with the estimated jackpot of $500 million should their numbers be called.  It got me thinking.  Did you know that that you have a better chance of picking a perfect NCAA tournament bracket or becoming President than winning the jackpot?   Let’s say you do win.  After the cash payout and taxes, your sum has been more than cut in half, but with some $200,000,000 in your pocket, you’re still a happy camper, even though studies have shown that you may not be as happy as you think.

Enough fun, here’s my point:  Instead of taking a shot at something that is less than likely to happen, why not replace that hope with tax-free income when you’re ready to retire?  Here’s how:

Funding a Roth IRA allows you that benefit, and you don’t need to win Powerball to start one.  Many mutual funds will allow you to start a Roth for as little as $50 each month.  That’s $600 over the course of a year.  Not a huge amount by any means, but consider:  if you started today with $50 each month, and continued for each month over the next 30 years, you will have invested $18,000 over that period.  If you earn 5% over that time, 30 years from now your investment will have grown to $41,856 – a return on your original investment of 132%.  And if you should need access to your cash in the meantime, your contributions come back to you tax-free, as do your earnings, if you wait until you’re 59½.

Something to think about if you find yourself with a little extra time while waiting to pick up a Powerball ticket.

Chuck Wade

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Perspective from the Checkout Line

As I stood in line this past Sunday at Wegmans, amidst the usual sea of candy bars, energy shots, and chewing gum, I was faced with a dilemma.  As I stared down my favorite pack of gum, I couldn’t decide whether to buy or leave it alone.  Luckily, my phone’s calculator helped my answer the question as I waited for those in front of me to cash out.  Allow me to explain.

Our good friends at the IRS recently raised the contribution limit for 401(k) retirement plans by an additional $500 starting in 2013.  This means the amount you are now able to save for retirement during this coming year is $17,500.  Those over the age of 50 have an even sweeter deal, as the “catch-up” contribution of $5,500 that you’re allowed brings your maximum contribution to $23,000.

Now, I am not naïve enough to think that money grows on trees and we‘re all contributing the maximum amount right now and can easily add another $500 to that total.  In fact, according to this CBS article, just 5% of participants nationwide are making the maximum contributions to their retirement accounts.  That is understandable when you look at the cost of daycare, college tuition, and a single gallon of gasoline.

But consider this.  Over the course of a year, $500 breaks down to approximately $1.40 each day.  If you take that $500 and put it towards your retirement in each of the next 20 years, assuming a 5% yearly return, the extra $10,000 that you’ve contributed will be worth nearly $17,000.

Now I can answer the question – do I really need the gum?

Chuck Wade

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

How Much is Too Much?

“I like it, but it’s just too expensive.”  I’ve heard that phrase often this summer, almost exclusively when discussing Apple’s stock price.  When it comes to investing, many of us get too enamored with the number of shares that we own, instead of the total dollar value of our investment.

Think of it like this.  How is a $10,000 investment that gives you 200 shares any different than a $10,000 investment that buys you 20 shares?

In late July Apple encountered a rare miss on earnings due to lagging sales of the iPhone 4s (because everybody and their uncle knew that the iPhone5 was due this fall).  Correspondingly, its stock price dropped from a high of $609 on July 24 to a low of $570 the next day.

Now, hindsight is always 20/20, but stay with me for a moment.  If you’d invested $10,000 in Apple after the share price dropped, you’d have received approximately 17 shares of the company’s stock.

Over the next week, Apple’s share price would pass the $600 mark, and on August 17^th, Apple reached its all-time high.  It would go on to eclipse that new high eight times over the course of the next month, including Monday, September 17^th when the share price passed the $700 mark.

Today those 17 shares would be worth around $12,225 – a 23% gain in a little over a month’s time (and don’t forget Apple also paid its first quarterly dividend on August 9^th).  Now I will ask the question:  was Apple really too expensive?

Chuck Wade

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Guess?

It wasn’t long ago that I was in my backyard yelling at my smoking lawnmower that had just stopped working.  After calming down, I did some research and tried to fix it myself.  After tinkering with the carburetor (making it worse) and unscrewing the motor (felt like a man, didn’t help), I had fixed nothing.  This is what happens when I guess at things.  Luckily, our local repairman knows his craft and the mower was repaired and my lawn cut in no time.

It’s not all that different than retirement and answering the question, “how much do I need to retire comfortably?”  Many have taken to answering that very question with a time-tested solution called “guessing.”  That’s right, guessing.  A recent study showed that 34% of the participants either “guessed” or “made up” an estimate of how much they would need to retire.

Guessing is fine if you’re trying to win a stuffed animal at Darien Lake by letting the fellow with the microphone guess your age, give or take a few years.  Would you pay him a dollar to guess how much you should be saving in order to retire?

Instead of guessing, speak with an advisor you trust.  We have a powerful tool that allows our clients to not only define their retirement goals, but to design a plan tailored to their specific needs to get there.  Along the way, when life events and changes happen, we account for them.  And at any given time, our clients always know the answer to the question, “how am I doing?”

It’s called Envision, and we’d be happy to put a plan together for you.  One that provides specific answers and recommendations that fit your life goals – instead of a guess.

Chuck Wade

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Jargon, Big Words, and Wasting Your Time

“We are going to allocate your portfolio in such a way to minimize your downside risk while still maintaining strong cash inflows with the potential for capital appreciation.”

Did you get all of that?  I’m the one who wrote it, and I’m still not convinced!

Now, let’s try again.

“Our goal is to give you a plan to provide you with income and growth, while trying to minimize the risk that comes along with any investment.”

Better?

It is very easy for financial advisors to fall back on jargon and big words that we think make us sound smarter in front of our clients.  Truth is it does nothing except confuse and even intimidate.

When I worked at 13WHAM, my goal was to always “say it simple.”  Instead of talking about the Buffalo Bills lack of an edge rusher and lack of size in a 3-4 defensive front, isn’t it easier to just say the Bills defense can’t sack the quarterback enough?  Wit and wisdom are wonderful things, but when nobody understands what you’re saying, their time was just wasted.

The goal is the same as a Financial Advisor.  Whether you are planning for retirement, your child’s education, or starting a new life with your husband or wife.  To help you understand how to best achieve your goals in order to give you peace of mind and confidence that you’re on the right track.  That way, when we walk out the door, you’re excited to get started, not scratching your head wondering, “what did he just say?”

Chuck Wade

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Re-defining “Value”

“Value” is one of those chameleon-like words when it comes to investing.  To one person, it may be a stock that has grown in value over time.  To another, “value” is the monthly dividend that provides income during retirement.  Both are true instances of “value” and things that, as a firm located in the same building with the same name for the past 43 years, we strive to provide on a daily basis.

Now, for a different example of “value.”  A recent Life Insurance Marketing Research Association (LIMRA) study showed that almost half of Americans are not contributing to an employer-sponsored retirement plan or IRA.  That means that at this moment, half of us are walking blindly towards the future when it comes to that magical day when we decide to stop working.  That’s scary, unless you plan to never stop working.

I understand that life happens.  Budgets are tight, and things break all the time.  And when it comes to keeping the lights on and food on the table, it can be easy to stop thinking about a day that is 30 years down the road.  This is where a financial advisor can provide true “value.”

The study also showed that regardless of income, more than 60% of Americans who work with an advisor ARE contributing to a retirement plan or an IRA, compared to just 38% without an advisor.  Furthermore, more than 70% of Americans who work with an advisor have the confidence that they’re saving enough for retirement.  Just 43% of Americans without an advisor share that same confidence level.

So, how do we provide “value?”  It is the peace of mind that you’ll be ready to retire when the day comes.  And that in the meantime, you can worry about enjoying and living your life while your advisor keeps an eye on your retirement.

Chuck Wade

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

All Quiet on the Facebook Front

Things have certainly calmed down since May 18^th when I spent almost two straight hours on the phone talking with folks about Facebook.  It was THE thing in the week leading up to its IPO and it seemed like everybody wanted a piece of the action.

At the time, our advice was to be “cautious, not euphoric,” because there is usually something that can be said for not following the crowd when it comes to investing.

By now, we know what happened.  To call Facebook’s IPO a “mess” would be an understatement.  After briefly passing $45 on the first day of trading, it took FB just two and a half weeks to fall 43% to $25.52.  All of a sudden, nobody wanted it.

Then a funny thing happened.  Facebook’s stock started to rise, reaching $33.43 at one point Friday, June 22, 2012, an increase of 31% since hitting bottom in early June.  As of mid-afternoon Friday, FB had risen just over 4% for the day alone.

Now, I am not saying that just because Facebook’s had a nice run that we should all start to “Like” it.  The point is, when you follow the crowd, it can be tough to make money.

Chuck Wade

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).