Category Archives: Financial Basics

FIVE LESSONS LEARNED THE PAST 12 MONTHS

Posted September 27, 2012 by admin. tags:Tags: , , ,
The Canyon


Written by Dave Young, President of Paragon Wealth Management

“Buy and Hold” strategy doesn’t work.
The investment strategy that Wall Street and mutual fund companies constantly promote called “buy and hold,” has been a complete failure over the past 12 years. It has generated negative returns when adjusted for inflation.

Market forecasts by “experts” provide no benefit. 
Most forecasters completely missed this decline. The majority also missed the recent rebound.

Set your risk tolerance level.
Setting your risk tolerance properly before investing is critical to success. You must be comfortable with the amount of volatility in your portfolio or you are likely panic and sell at the wrong time. Once again, hoards of investors bailed out at the market bottom and then missed the entire rally.

Expect the Unexpected.
When building your retirement plan, hope for the best but plan for the worst.

Follow a disciplined, proactive investment strategy.
Remove emotion from your investment process. In the investment world, decisions based on emotion are usually wrong.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

Leave A Legacy By Planning For Retirement

Posted July 19, 2012 by admin. tags:Tags: , , , ,
Family


Written by Dave Young, President of Paragon Wealth Management

On a recent trip, I recognized the value of leaving a legacy. My trip reminded me of the sacrifice, hard work, vision and commitment made by others that have benefited me immensely. The gift of my ancestors has enriched my life and provided amenities for which I am grateful.

As I reflected on the greatness of leaving a legacy, it brought to mind the importance of leaving a financial legacy and the benefit of creating a nest egg for progeny and future generations.

It is prudent to not only prepare for retirement, but to keep in mind the beneficiaries of residual retirement and other savings and the enriched lifestyle it affords to them. I have one client in particular who communicated how important it is to him that his spouse and his children and their children are financially taken care of upon his death. His top priority for investing prudently and wisely is for the benefit of his family. In choosing Paragon as his financial advisor, it was important to him that his priorities were equally important to us.

The value of leaving a financial legacy is priceless for both you and your family. First, your financial preparation allows you to be self-sufficient during retirement. Your preparation contributes to your peace of mind knowing your family will have increased financial ease. And in some cases, a monetary gift now to family members translates into tax benefits to you now. Most importantly, the simple act of giving is empowering and fulfilling for you.

Your progeny, of course, also benefits from you gift and preparation in countless ways. First, your monetary gift continues its growth possibly for years after death. Your gift enriches the lives and lifestyle of its beneficiaries– college education paid for, down payment for your newly married son or daughter, unforeseen financial strains eased etc. etc. Your preparation also sets a precedent and begins the pattern and habit of financial intelligence and education for years to come. Your gift opens doors and opportunities to financial success that otherwise may not have been available. Most importantly, your forethought, sacrifice and commitment will be remembered, appreciated and emulated by the next generation.

I am a big proponent of retirement planning, and planning now. One way to give to our families is by naming spouses and/or children as beneficiaries of IRA’s, 401(k)s, etc. Not only designating beneficiaries, but apprising family members that they are the recipients of such a gift. And then follow up with education on prudent investing when the funds transfer to their possession. Several different retirement options allow significant contributions, tax deductions, and ample time for growth and compounding. Of course, it is always important to consider risk, inflation, tax bracket, and investment time horizon, etc. when considering how to invest retirement monies.

Another option to ensure future generations benefit from your financial success is to establish trust. Trusts specify to whom assets are to be allocated and of course, are legally binding. Trusts also aid in estate planning and reconciling this aspect of financial planning. Most importantly, as my client did, make it a priority to leave a financial legacy.

My trip was enlightening as it reminded me that it isn’t all about me or us, but about what we give to others and the principle this instills in ourselves and in our families. Leaving a financial legacy to our families and future generations is empowering to both the giver and the recipient, and it is a gift that can grow for years to come.

Disclaimer
Paragon Wealth Management is a provider of managed portfolios for individuals and institutions. Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy. All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not a guarantee of future results.

Money And Happiness

Posted July 5, 2012 by admin. tags:Tags: , ,
Happy Family

Written by Dave Young, President of Paragon Wealth Management

A friend of mine, Steve Moeller, did research on the science of happiness. He gathered information to write a book about what really makes people happy. He gave me permission to share some excerpts with you from an article he wrote for Investment Advisor magazine. I found his thoughts very interesting, and hope you will too.

The assumption that more money will make us happier is etched into our consciousness. Happiness is something we all want; it’s the holy grail of Western civilization. Biologists have recently proven that all higher species from lizards up to humans are biologically programmed to pursue pleasure and positive emotions. It’s a basic subconscious drive that all creatures have. Everything we do, we do because we consciously or unconsciously believe that it will make us happy.

That more money will lead directly to more happiness is such a basic assumption that most people never stop to question it. When researchers at the University of Michigan asked research subjects what would improve the quality of their lives, the majority of the respondents said “more money.”

The assumption that more money will bring us more happiness is etched into our consciousness, championed by our culture, promoted with billions of dollars of advertising each year, and institutionalized in our public policy. And it is still the primary promise of benefits that many investment advisors focus on. But is it true?

“Happiness” researchers have conducted more than 150 surveys all over the world with more than a 1 million participants. Let’s take a look at what they have learned.

Since the end of WWII the purchasing power of American households has tripled. New homes are now twice as big as they were after the war, we have twice as many cars per person, and we eat out more often. The average American now lives much better than most of the kings and queens throughout history.

So are we happier? No!!

This spectacular increase in wealth has had almost no positive effective on our society’s happiness. In fact, from 1957 to 1996 the proportion of people telling the University of Chicago’s National Opinion Research Center that they are “very happy” declined slightly (from 35% to 30%.) Over the same time period; divorce doubled, the prison population quintupled and major depression rose tenfold, turning it into the fourth most common debilitating disease. America’s not alone; Europe and Japan have experienced the same basic trends.

One of the happiness researchers’ more noteworthy findings came from a survey of Forbe’s 400 wealthiest Americans. These cent millionaires and billionaires were asked to rate their life satisfaction from “extremely dissatisfied” (1) to “extremely satisfied” (7). Surprisingly, the respondents’ average rating was 5.7, only slightly above the average rating.

But here’s the really interesting part. Masai tribesmen from Kenya in East Africa also participated in the life satisfaction survey. Although they live in huts made out of dirt and cow dung, herd cattle for a living, have no electricity or running water, and don’t have any money, they also rated themselves a 5.7 in the life satisfaction scale.

Quite a few studies now show that believing that money is more important than other values—like relationships with loved ones, spirituality, a feeling that your life is contributing to the greater good—is actually detrimental to happiness. Clearly there’s more to happiness than wealth, luxury and material comforts.

So, how much is the right amount of money to maximize our happiness? Here’s the bottom line from the scientific research on happiness—once we have enough money to pay for life’s basics like food, clothing and housing, more money has very little impact on our happiness.

More money does buy more happiness and well-being if you are poor, and increases fairly quickly until you achieve a solid middle class income. But research shows once your household income reaches the middle class range, increased income has a diminishing positive impact on your happiness and well-being.

The point is, above a certain income level, which isn’t by any means “wealthy”, additional income alone has almost no impact on our happiness. And depending on the price you pay to earn it, more income could even reduce your quality of life.

In fact, a large and growing number of studies support happiness researcher Ed Diener’s comment that, “Materialism is toxic for happiness.” But most Americans don’t seem to believe this.

Why, if we tell researchers that more money doesn’t make us happier, do we chase it so hard? We could blame it on advertisers and the media, two giant institutions that have a vested interest in having us consume more and more stuff each year. But there is another, more subtle villain; the subconscious workings of our brain.

Psychologists have developed a term “hedonic treadmill” to describe humans adaptation to more wealth and material goods. So if you get a new car, you will be happier for a while, but then you will adapt, and so think it’s normal. In order to maintain the same level of happiness through consumption, you must continually buy new things. This is what the concept of “retail therapy” is all about. Adaptation is great for the economy, but bad for you and your financial security.

As an investment advisor, I often work with people who believe that more money will buy them more happiness. As evidenced by this article, in reality, I should help clients determine what will really make them happy and then determine how much income their ideal life will require. It may be a lot less than they originally thought.

Disclaimer
Paragon Wealth Management is a provider of managed portfolios for individuals and institutions. Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy. All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not a guarantee of future results.

Tips For Working Seniors

Posted January 19, 2012 by admin. tags:Tags: , , ,
Working Seniors

If you are among the increasing number of people who continue to work into their retirement years, keep these tips in mind when planning for your financial future.

8 Financial Tips for Seniors Who Work

Visit USNews to view the complete article

The percentage of persons past the age of 65 who are still employed has risen because of the Great Recession. Even without a downturn, however, there has been a longer term trend of more people wanting to keep working. There is the money, to be sure. But many people stay on the job to retain professional relationships and a degree of social engagement they think will be hard to match in retirement. Much of our personal identity is related to our work; it can be tough to give up a big hunk of self worth along with the paycheck.

Whatever the reason for continuing to draw a paycheck at age 65, here are eight recommended actions that older employees should consider:

1) Watch Your Tax Bracket. Check out the current IRS tax brackets and see where the income breaks are for tax-rate changes. Look at your taxable retirement income from Social Security, pensions and retirement accounts. Understand the impact of employment earnings on your tax bracket. Higher taxes may not drive your employment decisions. But it could make good sense to explore tax-deferred retirement accounts so you can avoid higher taxes and park your earnings until you can withdraw them when your taxable income has declined and you are paying lower rates.

2) Beware of Losing Social Security Dollars. Social Security rules calculate a full retirement age, which is 65 or 66 for most people. If you elect to begin receiving Social Security benefits before your full retirement age (you can start getting benefits when you turn 62), your benefits may be reduced if you also earn outside income.

3) Review Social Security Claiming Decision. If employment earnings reduce your need for Social Security benefits, deferring the date when you begin claiming those benefits may be a smart decision. You are entitled to 100 percent of your benefit when you reach full retirement age. However, for each year you delay, your benefit will rise by 8 percent a year. That’s a nice increase, and it’s adjusted for inflation as well. The longest you can delay and still get higher benefits is age 70, at which point your benefit will be 132 percent of what it was when you turned 66 (assuming this is your full retirement age). Outside income may also influence the way couples approach Social Security benefits. The Center for Retirement Research at Boston College has a useful Social Security Claiming Guide.

4) Seek Higher Investment Returns. Financial planners Carnathan and DeCarolis both say it may be appropriate for employees of retirement age to build a more growth-oriented investment portfolio if they are continuing to work and earn employment income. They are not subject to as much risk of a stock-market decline as a fixed-income retiree who has no other source of income and doesn’t have time to wait for depressed market holdings to recover. However, they stress that asset allocation decisions must reflect a person’s risk tolerance. Even “doing the right thing” won’t seem that way if it runs counter to your feelings. “You can’t make someone do something they don’t want to do,” DeCarolis says.

5) Keep Employer Healthcare Coverage. “Health care is the big reason my clients don’t retire before 65,” DeCarolis says. No wonder. Private health insurance for people in their late 50s and early 60s is very expensive, assuming you can find coverage at all. The health reform law will help here but its provisions don’t take full effect until 2014. In the meantime, keeping employer health insurance is an important consideration in the work or retire equation. Turning 65 and qualifying for Medicare hardly resolves this issue. Basic Medicare has big coverage gaps. So, if you can retain some form of health insurance along with a paycheck, consider yourself fortunate.

6) Play Catch Up With Retirement Accounts. Tax rules generally allow older employees to park an extra $1,000 in tax-deferred retirement accounts. This is on top of existing annual maximum contributions. Assuming you don’t need the current income, plow as much as you can in these tax-deferred accounts. You’ll be storing money you will need in retirement, and lowering current taxable income as well.

7) Keep Good Expense Records. Understanding exactly what you spend is great training for retirement and should be part of your retirement planning. Having such a record will make it easy for you to estimate your post-retirement spending needs and whether you will have enough retirement income to live comfortably. In addition, you might be able to deduct certain employment expenses on your taxes. With more and more people telecommuting, home office expenses can be considerable. Also, if you volunteer, there are deductible expenses that can reduce taxable income.

8) Watch Your Cash Flow. Carnathan says a solid cash flow analysis is a fundamental part of a client’s retirement thinking. He recommends doing scenarios with different time frames, looking out a year, three years, and five years. This helps clients better understand the merits of continuing to work. Equally important, it moves them into a life transition process. This process is really a more accurate description of retirement than a specific trigger date. “People tend to gravitate toward a specific scenario,” he says. “From there, we go on to figure out the best mix of assets” that will support their longer-term income needs.

Disclaimer

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions. Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy. All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not a guarantee of future results.

 

If it sounds too good to be true…

Posted June 18, 2010 by admin. tags:Tags: , , ,
Amazing Ocean Sunset


photo by Mundilfari

Written by Nathan White, CFA

I’ve had a few people lately inquiring whether certain annuity investment products that have been presented to them are a good deal or not. In light of the recent market volatility this product seems appealing. The conversation usually starts with a statement like this “I’ve had someone tell me that they can get a guaranteed fixed return or most of the gains if the market moves up.” This seems like a no brainer – all upside and no downside!  Who wouldn’t want such a deal? When evaluating products like these keep in mind the old saying “if it sounds too good to be true then it probably is.”

Because equity-indexed annuities (EIA) may seem so appealing, many fall victim to the sales tactic and then later feel significant buyers remorse when they experience the reality of these products. These annuities use complex formulas to determine what your gain is – if the market goes up, you actually end up getting significantly less than what it looks like on paper. In the end, no matter how much the market improves, all you may end up getting on average is a little more than what your minimum guaranteed return is. To make matters worse your money is locked up for years and the only way to get it out is to pay a hefty fee.  You basically get locked into a low returning investment. If a low return is all you need then maybe it is something worth considering, but you could probably buy a bond with a similar return and still have access to your investment should you choose.

Remember, beware of the investment advice from anyone selling you a product and get an objective opinion from an advisor with a fiduciary standard.

Click on the link below for more information on the pitfalls of EIAs.

http://www.guardingyourwealth.com/annuities/Equity-Indexed-Annuities.htm

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

 

Stop Spending Now!

Posted April 22, 2010 by admin. tags:Tags: , , ,
Real American Money

photo by photos8.com

Written by Dave Young, President of Paragon Wealth Management

In the past we have written about the negative impact of politics on our economy and how politics impact the investment markets.

Political meddling affects the markets in several ways. It creates a host of problems, with slower long-term growth being directly affected.

The problem is fairly simple.

Every couple of years politicians run for office. In order to get elected they make all kinds of promises to those who give them money and votes. In order to pay back their supporters they pass laws and spend money to benefit them. That translates into massive unnecessary spending, which costs everyone but only benefits a few.

The politicians are happy to spend endlessly because they figure that someone else – in the future – will pick up their tab and pay the bill. In other words, there is no accountability or responsibility for their spending because they don’t have to pay for it.

On a national level, the debt they have created has become enormous. The numbers are so huge that most people just glaze over them. In other words, if something doesn’t make sense to us then it doesn’t sink in, and we don’t really understand it. We just ignore it, and we don’t worry about it.

It is time to worry about it.

If this financial mess and its damage is going to be stopped, it is up to the people to get involved and elect people who will stop the out of control spending once and for all.

George Bush was fiscally irresponsible and spent far more than he should have when he was president.

With his promise of “change” Barrack Obama is on track to create a debt in 20 months equal to the debt that it took George Bush eight years to create. After that his own projections show it getting worse.

The short video below puts the debt in perspective. It also shows how insignificant the $100 million dollars that the White House is going to “save” is. It is time to get serious about the debt.

The time for political games is past.

Paragon Wealth
Management
is a provider of managed portfolios for
individuals and institutions.  Although the information included in this
report has been obtained from sources Paragon believes to be reliable,
we do not guarantee its accuracy.  All opinions and estimates included
in this report constitute the judgment as of the dates indicated and are
subject to change without notice.  This report is for informational
purposes only and is not intended as an offer or solicitation with
respect to the purchase or sale of any security.  Past performance is
not a guarantee of future results.

Do you know your Investment Risk Tolerance?

Posted January 28, 2010 by admin. tags:Tags: , ,
Risk

Playing the game of Risk

photo by Fayj

Written by Dave Young, President of Paragon

A 20-year study by Dalbar concluded that between 1987 and 2007 the average investor only earned 4.5%. During that same period of time the S&P 500 returned 11.8%. We all know it is tough to make money during bad markets. But why, even during the best of times, do the majority of investors suffer from poor performance?

One of the reasons is that they don’t stick with their investment strategy during difficult markets. When markets go up, investors are attracted to the market and stay invested easily. When the market starts to go down, most investors still stay invested. It’s usually after the market has fallen significantly that panic sets in and investors bail out. They usually bail out close to the bottom right before the market starts to rebound. This pattern repeats itself over and over with the result being that most investors are constantly buying high and selling low.

If your investment risk tolerance is set too low, you won’t generate the returns you should. If it is set too high, when market conditions become difficult, you will likely sell your investments and miss out on superior long-term returns. Setting your risk tolerance and then aligning your portfolio with it allows you to reduce your portfolio volatility to a level that you can live with.

Before you invest, you need to ask yourself how you will react if your portfolio drops five percent. What about 10 percent? What about 20 or 30 percent? At what point would you want to sell out of your investments and run for the hills?

Once you answer that question, then your portfolio should be invested so you never hit the point that will force you to sell at the market lows. That will allow you to follow your investment strategy over the long-term and be invested when the best opportunities present themselves. It will also allow you to generate the best possible returns over the long-term.

Over my 23 years of wealth management experience, I believe that determining your risk tolerance is one of the most important steps an investor should take.

If you are married, both you and your companion should take the questionnaire and compare the results. Since identifying your tolerance can be difficult, Paragon Wealth Management created a short risk tolerance questionnaire to simplify the process.

Click on the link below to complete a short questionnaire to help you identify your investment risk tolerance.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

Investment Planning For 2010

Posted December 30, 2009 by admin. tags:Tags: , , ,
New Year Fireworks


photo by vogliovento

With the New Year upon us it is a good time to reflect on the lessons learned from this past year.  With the state of the economy at the beginning of 2009 would we ever have been able to anticipate or predict how the year would end?  Or can we possibly know what 2010 will bring?  Of course not.  One of the biggest lessons we can take away from 2009 is the importance of having and sticking to a long term investment plan.  Factors influencing the economy will inevitably vary from year to year but implementing a long term investment strategy will ensure we are not influenced by the fear and emotion of the moment and keep our end goals in sight.

Happy New Year from all of us at Paragon Wealth Management.

Selecting a Financial Advisor

Posted October 22, 2009 by admin. tags:Tags: , ,

Finding a financial advisor can be daunting. This is because the title “financial advisor” is not regulated, and advisors range from annuity sales people, to insurance agents, to registered money managers.

The video  below explains what to look for in a financial advisor and how to quickly identify a financial advisor who is competent and offers you the best service for your money.

For more information, download “How to Select a Financial Advisor: The Top Seven Questions You Should Ask” on Paragon Wealth Management’s website.

Should you invest based on what you hear in the media?

Posted October 5, 2009 by admin. tags:Tags: , ,

Below is a video interview with Dave Young, President and Founder of Paragon Wealth Management and Nathan White, Paragon’s Chief Investment Officer. They discussed their thoughts on investing based on what is said in the media.

Here are a few highlights:

Question:

Why shouldn’t you invest in the stock market based on what you hear in the media?

Answer:

Most
of what you see in the media is sensationalized. This creates a dangerous situation for investors because they will make decisions based on inaccurate information.

For example, last year as the economy weakened, it would have been
normal for the stock market to sell off. A normal sell off would have
been a decline of 25-30 percent. Instead, the market went into an
extreme sell off, losing 56 percent of its value. Much of that sell off
was driven by a media created frenzy coupled with political uncertainty.

Swine flu example:

Normally, each year, the flu kills about 30,000 Americans. Since
April, when this started, there have been only 550 American deaths.

The difference with the stock market…

-With swine flu you can convince yourself you are sick or might get sick, but you can’t make yourself die.
-With investments, when following the media, you can scare yourself silly and sell all of your investments.
-Selling at the wrong time kills your chance for long-term investment success.

Question:

If you can’t make investment decisions from what you see and hear in the media, then what can you use?

Answer:

It is important to follow a proven disciplined investment strategy that doesn’t follow emotion. At Paragon Wealth Management, we create customized investment strategies for every client. Each strategy follows this criteria:

  • Provides effective diversification
  • Works in different markets and time frames
  • Is flexible and stable
  • Fits clients’ personal needs and goals

 

Paragon Wealth Management
is a provider of managed portfolios for individuals and institutions.
Although the information included in this report has been obtained from
sources Paragon believes to be reliable, we do not guarantee its
accuracy.  All opinions and estimates included in this report
constitute the judgment as of the dates indicated and are subject to
change without notice.  This report is for informational purposes only
and is not intended as an offer or solicitation with respect to the
purchase or sale of any security.  Past performance is not a guarantee
of future results.

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