Planning for your financial future

Basics of Investing

Measure Twice and Cut Once:

Plan and prepare in a careful, thorough manner before taking action. This is the best way to reduce risk before you invest valuable money. The best carpenters always measure twice before cutting, this allows them to make precise and accurate cuts that will allow them to use their resources to the maximum.

The goal is to have a plan. Figure out where you are at personally—i.e. how much you owe and how much you have saved up. Do you want a car, a college education for your children, or a comfortable retirement? Then set your goals according to your desires.

Set Long Term Goals:

The objective is to start visualizing your personal goals, then hone in on what’s really most important in your life. With your core values identified, an investment plan can be built to help make the dream an eventual reality.

Some questions you can ask yourself are:

* What’s standing in between me and what I want?
* What’s my plan for overcoming each of these obstacles?
* What do I have, in terms of personal strengths and outside resources, that will help me deal with these obstacles?
* What skills and knowledge do I need to add to accomplish this goal?
* Are there other people I can call on for help in overcoming these obstacles?
* How can I make these changes happen sooner?
* Do I need my family’s support for making this change?
* If so, how can I rally that support?
* How can I evaluate and monitor my progress toward my goals?

One of our goals at Paragon is to implement financial life planning with our clientele. Not only discovering your goals in regards to retirement, funding college educations, estate planning and family protection, etc., but also discovering what your desires are. Instead of the obvious “I want to retire in five years”, “I want to double my money in 10 years”, etc., the goal discovery process will include questions about a client’s core values and what is most important in your lives. This begins a dialog between us and our client that results in a process that will help merge your money with your life.

It is said that the best protection against risk is time. The stock market is always going up and down. At times the market can have a downturn that lasts for months or more. Investors who acquire a “buy and hold” approach to investing end up ahead of those who try to time the market.

Start Now Before its Too Late:

For compound interest to be truly powerful, it must have the benefit of time. The more time the better. Think of it like a snowball rolling down a hill. It starts out small and then gets bigger and bigger the longer it rolls.
For example, compare two investors who each put away $2,000 a year and earn 10% annually. The first investor starts at age 19 and puts away $2,000 per year for eight years in a row and then holds it there. The second investor waits eight years before investing $2,000 per year for 38 years. At the end of the 38 years, the first investor’s account will have grown to $941,054. The second investor’s account will be at $800,896. The first investor invested $60,000 less, but ended up with $140,158 more.

How Can You Avoid Investment Fraud?

Ask Questions: They are counting on you to not investigate before you invest. Measure twice before you make a decision. Ask for references or more information, fraudsters have no incentive to set you straight. Take all the time in the world to do your own research.

Know the Financial Advisor: Always get to know the person that is helping you in your pursuit to financial wealth. Even if you do know them socially, get to know them in work and out of work. You can also check out the disciplinary history of brokers and advisers for free using the SEC’s and FINRA’s online databases.

Protect Yourself Online: Fraudsters are tapping into the internet more then ever. The internet has made all of our lives easier in a lot of ways. But, there is so much of our information online that it helps aids them in sending materials, solicit or phish. Phishing is the attempt to obtain financial or confidential information form internet users. It typically starts with an email that looks like it is from a legitimate source. It will contain a link to a false website that appears like a real site. They want you to provide account and password information, and then they have access to your account.

Watch for Red Flag Warnings:

Make a Plan

The key to financial security is to have a financial plan. You’ll first need to figure out where you’re starting from – for example, how much you owe and how much money have you saved. Then set your goals. Do you want a car, a college education for your children, or a comfortable retirement? Once you know what you want, when you want it, and how much it costs, you can figure out how much you’ll need to save.

Save and Invest for the Long Term

Perhaps the best protection against risk is time. On any given day the stock market can go up or down. Sometimes a market downturn can last for months or more. But over the years, investors who adopt a “buy and hold” approach to investing tend to come out ahead of those who try to time the market.

Investigate Before You Invest

Avoid the Costs of Delay

Time can be one of the most important factors determining how much your money will grow. If you saved $5 a week at 8% interest starting from the time you were 18 years old, by age 65, your savings would total $134,000. If you wait until you are 40 years old, you’ll have to save $32 a week to have $134,000 at age 65. In fact, just one year’s delay – waiting until you’re 19 years old to start saving $5 a week at 8% interest – will cost you more than $10,000 by the time you’re 65.

What about Annuities

Annuities are a product that Paragon rarely recommends to their clients, even though they are sold extensively by financial salespeople, most of whom do not have a fiduciary responsibility. In our experience, annuities typically only meet the needs of a very small segment of the investing public.

Why are they sold so frequently?  It may have something to do with the exorbitant commissions they pay to the salesperson. Unfortunately, the worse the annuity and the longer the surrender charge period, the higher the commission it pays. To make matters worse, annuities usually contain significant hidden ongoing fees and charges. Over time, these expenses create an unnecessary and significant drag on the investor’s returns.

There is a solution. For most investors, there are other more flexible and cost effective ways to invest. While we rarely recommend annuities to our clients, for those investors that are trapped in high-cost annuity contracts we do have a solution. We work with annuity companies that offer “stripped” annuities. They are traditional variable annuities that pay no commissions and therfore have no surrender fees. Also, their ongoing fees are a fraction of what traditional annuity contracts typically charge. We also provide the option to manage the funds within the “stripped” annuity using Paragon’s proven investment strategies.

Avoid Fraud

Don’t be a fraud victim. A basic understanding of how scam artists work can help you to avoid fraud and protect your hard-earned money. Learning how to invest safely also can assist you in reaching your financial goals and will mean a huge difference in your retirement years. Here are some ways to help you avoid being scammed.

What You Can Do to Avoid Investment Fraud

Ask questions. Fraudsters are counting on you not to investigate before you invest. Fend them off by doing your own digging. It’s not enough to ask for more information or for references – fraudsters have no incentive to set you straight. Take the time to do your own independent research. For more about information see Ask Questions.

Research before you invest. Unsolicited emails, message board postings, and company news releases should never be used as the sole basis for your investment decisions. Understand a company’s business and its products or services before investing. Look for the company’s financial statements on the SEC’s EDGAR filing system. You can also check out many investments by searching EDGAR.

Know the salesperson
. Spend some time checking out the person touting the investment before you invest – even if you already know the person socially. Always find out whether the securities salespeople who contact you are licensed to sell securities in your state and whether they or their firms have had run-ins with regulators or other investors. You can check out the disciplinary history of brokers and advisers for free using the SEC’s and FINRA’s online databases. Your state securities regulator may have additional information.

Be wary of unsolicited offers. Be especially careful if you receive an unsolicited pitch to invest in a company, or see it praised online, but can’t find current financial information about it from independent sources. It could be a “pump and dump” scheme. Be wary if someone recommends foreign or “off-shore” investments. If something goes wrong, it’s harder to find out what happened and to locate money sent abroad.

Protect yourself online. Online and social marketing sites offer a wealth of opportunity for fraudsters. For tips on how to protect yourself online see Protect Your Social Media Accounts.

Know what to look for. Make yourself knowledgeable about different types of fraud and red flags that may signal investment fraud.

Red flags for fraud and common persuasion tactics

How do successful, financially intelligent people fall prey to investment fraud? Researchers have found that investment fraudsters hit their targets with an array of persuasion techniques that are tailored to the victim’s psychological profile. Here are red flags to look for:
If it sounds too good to be true, it is. Watch for “phantom riches.” Compare promised yields with current returns on well-know stock indexes. Any investment opportunity that claims you’ll receive substantially more could be highly risky – and that means you might lose money. Be careful of claims that an investment will make “incredible gains,” is a “breakout stock pick” or has “huge upside and almost no risk!” Claims like these are hallmarks of extreme risk or outright fraud.
“Guaranteed returns” aren’t. Every investment carries some degree of risk, which is reflected in the rate of return you can expect to receive. If your money is perfectly safe, you’ll most likely get a low return. High returns entail high risks, possibly including a total loss on the investments. Most fraudsters spend a lot of time trying to convince investors that extremely high returns are “guaranteed” or “can’t miss.” They try to plant an image in your head of what your life will be like when you are rich. Don’t believe it.
Beware the “halo” effect. Investors can be blinded by a “halo” effect when a con artist comes across as likeable or trustworthy. Credibility can be faked. Check out actual qualifications.
“Everyone is buying it.” Watch out for pitches that stress how “everyone is investing in this, so you should, too.” Think about whether you are interested in the product. If a sales presentation focuses on how many others have bought the product, this could be a red flag.
Pressure to send money RIGHT NOW. Scam artists often tell their victims that this is a once-in-a-lifetime offer and it will be gone tomorrow. But resist the pressure to invest quickly and take the time you need to investigate before sending money.

Reciprocity. Fraudsters often try to lure investors through free investment seminars, figuring if they do a small favor for you, such as supplying a free lunch, you will do a big favor for them and invest in their product. There is never a reason to make a quick decision on an investment. If you attend a free lunch, take the material home and research both the investment and the individual selling it before you invest. Always make sure the product is right for you and that you understand what you are buying and all the associated fees.

Protect Your Social Media Accounts

The Internet has made our lives easier in so many ways. However, you need to know how you can protect your privacy and avoid fraud. Remember, not only can people be defrauded when using the Internet for investing; the fraudsters use information online to send bogus materials, solicit or phish.
Phishing is the attempt to obtain financial or confidential information from Internet users. This phishing expedition usually begins with an email that looks as if it is from a legitimate source, often a financial institution. The email contains a link to a fake website that looks like the real site. Fraudsters want you to provide account and password information, and then they have access to your account.

Here’s what you can do to protect yourself when using social media:

Privacy Settings: Always check the default privacy settings when opening an account on a social media website. The default privacy settings on many social media websites are typically broad and may permit sharing of information to a vast online community. Modify the setting, if appropriate, before posting any information on a social media website.
Biographical Information: Many social media websites require biographical information to open an account. You can limit the information made available to other social media users. Consider customizing your privacy settings to minimize the amount of biographical information others can view on the website.
Account Information: Never give account information, Social Security numbers, bank information or other sensitive financial information on a social media website. If you need to speak to a financial professional, use a firm-sponsored method of communication, such as telephone, letter, firm e-mail or firm-sponsored website.
Friends/Contacts: When choosing friends or contacts on a social media site, think about why you use the website. Decide whether it is appropriate to accept a “friend” or other membership request from a financial service provider, such as a financial adviser or broker-dealer. There is no obligation to accept a “friend” request of a service provider or anyone you do not know or do not know well.
Site Features: Familiarize yourself with the functionality of the social media website before broadcasting messages on the site. Who will be able to see your messages — only specified recipients, or all users?

On-Line Security Tips

As with all computer and web-based accounts, take precautions to keep your social media account information secure. Here are some security tips:

Types of Fraud

Securities frauds come in many types and varieties. Whether you are a first-time investor or have been investing for many years, here are some basic facts you should know about the different types of fraud.

Advance Fee Fraud
Affinity Fraud
High Yield Investment Programs
Internet and Social Media Fraud
Microcap Fraud
Ponzi Scheme
Pre-IPO Investment Scams
Pyramid Scheme
Prime Bank” Investments
Promissory Notes
Pump and Dump Schemes