2015 Best of State Winner Paragon Wealth Management Receives the Wealth Management Advisor’s with Heart Award
Provo, Utah (May 4, 2015) Paragon Wealth Management announced today that Founder and CEO, Dave Young has been chosen as a recipient of the 2015 Advisors with Heart Award from WealthManagement.com. The 10 recipients were chosen from nearly 150 nominations. Wealth Management’s 35th annual Advisors with Heart Award honors advisors around the nation who put sweat equity into philanthropic and charitable causes. These Financial Advisors go beyond just writing a check or serving on the board of an organization. Each one brings his or her unique skill set to the table when serving others. “It’s all about empowering single moms and giving them hope. We do it because it’s the right thing to do.” said Young.
Dave Young launched Paragon Wealth Management in 1986 because he wanted to spend more time with his family. He also realized that investors needed better and more effective ways to invest their money if they wanted to be able to reach their financial goals. He turned a personal knack for investing (and some proprietary momentum trading models) into a financial advisory firm, Paragon Wealth Management, and now oversees some $100 million for about 150 clients.
In 2010 Dave’s son in-law unexpectedly passed away, leaving behind his daughter Katie and his newborn granddaughter. After watching his daughter go through the struggles of single parenthood combined with the financial strain of trying to go back to school to earn her degree, Dave knew he needed to do something. Together with his daughter Katie, they founded the Live Your Dream Foundation. It’s sole purpose is to help single mothers obtain a college education to better their futures, support themselves and their families.
Each year the foundation hosts their Pioneer Day “Raft and Run” event where participants paddle five miles down the Provo River, followed by a five-kilometer run. “It’s a unique event,” Young says, and other organizations have approached him about replicating it. Some 300 people participated, and the foundation has raised over $50,000 to fund dozens of scholarships for single mothers with little means to help themselves.
The next goal for the Live Your Dream Foundation is creating an intuitive website where single moms can easily find all the resources they need to put their lives back on track. “These women need someplace they can go where they can say, ‘Yes, I can see a path to this. I can see how to make this happen.” Commented Young.
About Paragon Wealth Management:
Paragon Wealth Management is registered investment advisor (RIA) located in Provo, Utah. Established in 1986 by Dave Young, the company gives investors a smarter way to invest their money, develop sound investment strategies and achieve financial goals. Paragon was created to provide a more active and personalized alternative to the traditional buy, hold and hope approach to wealth management. Today, after over 28 years of refining proprietary quantitative financial models and building a trusted world-class organization, Paragon offers its clients across the U.S. a unique blend of proactive and proven money management techniques, extraordinary personalized service and a proven track record. For more information about Paragon Wealth Management, please visit: www.paragonwealth.com.
Congratulations to Dave Young for getting a “High 5” from KSL TV! KSL came to surprise Dave last week with a “High 5.” They recognized him for starting the Live Your Dream Scholarship for single mothers who are widowed or divorced. Watch this short clip to learn more.
Paragon Wealth Management is a provider of managed portfolios for individuals and institutions. Although the information included in this report has been obtained from other sources Paragon believes this 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.
When people find out I am in the investment business, they usually ask me where they should invest. They ask if it is better to be in stocks, bonds or real estate. They want hot tips like, are U.S. stocks better than international stocks? What about China and Brazil? Etc., etc.
Next, they tell me their horrible investment experiences. Typically, they are convinced that anything they invest in is destined for doom. This leads me to ask, “Why do the majority of investors have bad experiences?”
It doesn’t help that for the past 10 years, the stock market and real estate markets haven’t gone anywhere. After mostly going up during the ’80s and ’90s, the markets went down hard between 2000 and 2002. From 2003 through 2007, they did great. But, what came in 2008 to early 2009 was one of the worst bear markets in history, after which the markets rallied once again.
It’s understandable investors have had it tough. However, studies have shown that the average investor did poorly during the good times, too. Historically, retail investors have underperformed horribly when markets are bad. No wonder investors are frustrated and disillusioned.
So, are people hard wired to invest in the wrong place at the wrong time? Yes. And I’ll tell you why: emotions. Most investors invest based on emotions, driven by a constant tug of war between fear and greed.
Will Rogers said investing is simple: All you do is buy low and sell high. The problem is when prices are low, everyone is consumed with FEAR. And when people are afraid to invest, prices plummet.
The other side of the cycle is when markets have gone up. Investors tell their friends about the 20 percent return they got last year, and all of a sudden the 1.5 percent they got in their CD doesn’t look so great. So then they, along with millions of other investors, come piling into the market consumed with GREED.
This cycle of fear and greed repeats itself over and over. Consider where the masses invested the past 10 years. Back in 2000, record numbers flooded the stock market right before a horrible three-year bear market hit. Investors in the NASDAQ watched their accounts lose 80 percent of their value.
Many of those investors said they would never invest in stocks again. So they piled into real estate to be safe. As we saw in 2008, it wasn’t safe after all. Depending on which part of the country they were in, they experienced losses anywhere between 30 and 80 percent. Some leveraged real estate investors wiped out completely.
For the past year, we’ve seen investors piling into bonds. Bonds have been pushed to the lowest yields I’ve seen — simply because everyone is buying them “to be safe.” The bond bubble looks a lot like the previous stock and real estate bubbles. Odds are that investors who buy bonds for safety are about to get crushed.
At Paragon Wealth Management, we avoid emotional investing by following our quantitative models. We do not care what the media is saying or what we hope or how we feel. Our models process the market data and we invest accordingly. We constantly adjust our portfolios to what the market is actually doing.
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.
In the next two weeks we will mail our 1st Quarter 2009 Print Newsletter. If you are not on our print newsletter mailing list and would like a complimentary copy, sign up on our website by clicking this link: Paragon Print Newsletters.
The newsletter will also be available as a downloadable version on our website at the end of April. Click on the image below to see last quarter’s print newsletter (4th Quarter 2008).
Dave Young, President of Paragon, and Nathan White, Paragon’s Chief Investment Officer, write articles each quarter that include stock market updates and their opinions on current events. There is also a “Paragon in the News” section, a performance review and miscellaneous information.
When clients and prospective clients see our performance numbers, they usually want to know how we were able to generate such returns.
I’ll use a hunting analogy to best describe what we do.
After a hunting trip to the Book Cliffs in Northeastern Utah, a friend asked me how I was able to consistently find and harvest trophy animals. Among North American animals, trophy quality mule deer are among the most difficult trophies to harvest. To fully appreciate the magnitude of a trophy mule deer, some hunting trivia will help.
The majority of deer (85%) taken on the Utah deer hunt are yearlings and are called two points because of their small rack. The trophy quality deer are much more elusive, and are rarely harvested by hunters.
To become a trophy, a mature buck has to dodge hunters, mountain lions, bears, coyotes, automobiles, illegal poachers, decreasing winter range and hard winters. Fe deer make it past these obstacles. The few that do survive and possibly live up to nine years old are rare animals. These animals are extremely cagey and clever; they are true trophies.
Occasionally hunters stumble across trophy animals and use a hunting technique know as “pure luck”. To consistently harvest such amazing animals, the hunter must be willing to do that which other hunters aren’t. He must work harder and smarter than the norm.
For example, a successful hunter is in the mountains before daylight preparing while other hunters are still in their sleeping bags. He uses topographical maps to determine where the roads and trails are– this way he know where the pressure from other hunters will originate. He knows if he hikes a mile beyond the pressure, he will possibly find trophy animals.
The hunter who consistently harvests trophies uses top quality binoculars and a spotting scope which enables him to visually scan and slice an entire mountain.
He does research by talking to game biologists, ranchers and sheepherders. He knows where all the creeks, springs, and ponds are located and he hunts in areas that have the genetics to produces quality animals.
On my recent hunt, two hunters approached me as I was looking for deer. At the time, I was observing a trophy deer in my spotting scope. I put the scope aside not informing them that I was watching a trophy buck.
We had a casual conversation in which these hunters described how they had covered several hundred miles and saw nothing except a few small deer. They continued complaining about how the unit had deteriorated, the hunting was dismal and how the good ol’ days had come and gone (the conventional wisdom in this area is that there are no decent deer). While we were having this conversation, these hunters probably drove another 100 miles carrying with them the same beliefs of all hunters who only bring home small deer each year. I never told the hunters about the trophy deer and over the course of the week, I was able to locate three other trophy quality deer.
So, exactly how does hunting trophies relate to our portfolio performance?
In essence, the successful trophy hunter and the successful portfolio manager have to sidestep conventional wisdom, and work harder and smarter than everyone else including the game he is pursuing.
Consistently generating higher returns than the market requires a similar discipline and skill set as the at of the trophy hunter. A successful money manager must not believe the mindset of the masses. By the time the masses believe an idea, (i.e. the economy is failing or the economy is rebounding, etc.), it is too late to make money from that knowledge. Information found in trade publications and the general media usually touts partial truths, but just enough to lead an investor to believe and get himself in trouble. Generally, this investor finds himself following a path of guaranteed mediocrity and under performance.
Similar to the hunter who must hike beyond the pressure from other hunters, a successful manager must follow trading models and systems that direct him where the masses are headed and arrive before they do. He must go above and beyond the norm. To be successful, he must have an edge.
The models and systems we’ve developed for our Managed Income and Top Flight Portfolio are our edge. The bear market from 2000 to 2003 enabled us to refine these models to their most advanced level since Paragon’s inception. After years of research and testing, the efficacy of our models is evident in recent performance.
Once an investor has accumulated capital and implemented a good investment strategy, then the final and most important piece of the puzzle is patience.
In 2006, Top Flight had an off year versus the S&P 500. Historically Managed Income and Top Flight haven’t underperformed very often. However, when they have, that hasn’t been a good time to change strategies. For example:
* In 1999 Top Flight earned 3% less than the S&P 500, but then the following year it gained 71% more than the S&P 500.
* In 2002 Top Flight had its worst year ever, losing 13.6%, and the next year it gained 50.3%.
* In 2002 Managed Income underperformed its benchmark, the Lehman Bond Index. The following year it gained 25.4% more than the Lehman Bond Index.
* In 2006 Top Flight had an off year earning 5.9% versus 15.8% for the S&P 500. The following year (2007) Top Flight earned 16.9% tripling the S&P 500 (see our track record for full disclosures).
Past performance is not a guarantee of future results, and there are no guarantees in this business. According to our track record, every time we have underperformed, our performance has exceeded the benchmark the following year, quite significantly in most cases.
Once again, we are at the beginning of a new year. Each year seems to pass by quicker than the previous. In 2007, the markets started strong with a lot of optimism. The optimism disappeared when the market dropped in March, because the Dow lost about 700 points and found itself just above Dow 12,000.
Just as everyone was beginning to question their optimism, the market rallied off of the March lows, and by April reached Dow 13,000 for the first time. By mid-January the Dow was knocking on Dow 14,000. Everyone was euphoric, and according to our sentiment models, most investors thought the market would continue its upward climb.
As usual, once everyone is in agreement about where the market is going, it goes in the opposite direction. The sub prime debt problems became a serious issue in July and August, and the market sold off once again. This time the Dow fell again, but hit higher lows than the March sell off. The Dow sunk to 12,7000.
This is when things became interesting. The media was in full swing with their pitch that the market is “always” horrible in September and October. Clients called us and wanted to be taken out of the market because of the recent sell off and all of the doom and gloom in the press.
Not surprisingly, the market performed the way it usually does in order to make the majority of investors wrong. In what are traditionally the worst two months of the year, September and October, the market instead rallied. During the historically worst months to invest, the market put together its strongest rally of the year peaking back at just under Dow 14,200.
The credit fears and worries about the strength of the economy pushing the market down came back again, and the Dow finished the year at 13,264.
The broadly watched, large cap DJIA gained 8.7% for the year. The S&P 500, which is also more representative of the large cap U.S. market, gained 5.5%. The Russell 2000 which represents 2000 small cap stocks lost – 1.6%. Finally, the Value Line Geometric Index, which is the broadest based index and represents 1,626 stocks, declined -3.8%. Overall, depending on where you were invested, it was a marginal year for many investors.
Paragon Top Flight Portfolio
Our Top Flight Portfolio had an exceptional 2007 returning 16.98% versus 5.5% for its benchmark, the S&P 500 (See track recordfor full disclosures).
How did Top Flight generate such good returns in a year when the major market indexes were just slightly positive or and even negative?
There were three reasons why we were able to triple the return of the S&P 500 benchmark this year.
1- The change from mutual funds to Exchange Traded Funds (ETF’s) boosted our returns. Because mutual funds are generally broader based, in the past they made it more difficult to “dial in” exactly where our models are pointing, and there is no slippage. Also, the ETF’s allow us to follow our allocation models with exactness because unlike mutual funds, we don’t face early withdrawal fees or penalties.
2- Our Allocation Models signaled opportune times for us to reduce and increase exposure during 2007. Twice, at opportune times, we reduced exposure from 100% invested to 56% invested. These allocation changes benefited our returns.
3- Our Focus Models pointed us towards the areas of the market that showed the most strength. We experienced additional gains by following our Focus Models recommendations and investing in natural resources, emerging markets, Brazil, Canada, Australia, and Europe. Our limited exposure to the U.S. market was positive for Top Flight.
Top Flight portfolio recently completed 10 years of performance from December 31, 1997 through December 31, 2007. During this period, Top Flight generated a total return, net of all fees, of 417% versus 77.4% for the S&P 500. Its compound annual return is 18.03% versus 5.95% for the S&P 500 (see track record for full disclosures).
In the investment industry, 10 years is significant. Almost anyone can get lucky and have an exceptional year. If you see three years of good performance, investment advisors will start to notice. A five-year track record is even better. To generate 10 years of exceptional performance is even more meaningful.
I have sat on several industry panels where other “experts” have argued that active management doesn’t work. I believe that Top Flight’s 10-year track record indicates otherwise.
Managed Income Portfolio
Managed Income returned 2.24% for the year (seetrack record for full disclosures). It performed well from a relative standpoint, but not so well from an absolute standpoint. So what does that mean… it sounds like investment mumbo jumbo?
From an absolute standpoint, 2.24% is nothing to get excited about. We could have put our money in a bank CD and done much better if we had known the return in advance. Unfortunately, no one announced last January how the year would unfold.
From a relative standpoint, Managed Income performed exceptionally well. The underlying asset classes that make up Managed Income were a minefield last year. Managed Income invests in real estate, convertibles, preferred stock, high yield bonds, treasury bonds, bank loan funds, dividend income funds, etc. It invests in all of the more conservative asset classes that generate income. Most of those asset classes struggled last year and anything associated with real estate ended the year down about 15 percent.
Relative to previously mentioned investment groups that Managed Income is forced to stay within; we will take 2.24% for last year and be pleased with it. The fact that Managed Income was able to even generate positive returns last year was noteworthy.
Also, keep in mind that Managed Income’s primary objective is to avoid losses. Its secondary objective is to generate the highest returns possible within the investment constraints of avoiding losses. In 2007 it met both of these objectives.
Longer term, since Managed Income’s inception on October 1, 2001, the portfolio has generated a total return of 76.33% doubling the 36.95% earned by its benchmark, the Lehman Bond Index. Its compound annual return is 9.63% versus 5.23% for the Lehman Bond Index.
In simple terms, a Fiduciary Advisor has a legal responsibility to put the client’s needs ahead of his or her own. There are a number of important differences that separate advisors who have fiduciary responsibilities from those that don’t.
It has been estimated that 90% of the people who fall into the category of financial advisors do not have any sort of fiduciary responsibility. They are also known as stockbrokers, insurance agents, or sales Representatives. They may hold various licenses, but since they are not fiduciaries they are often more interested in selling insurance and investment products than managing your portfolio.
Non-fiduciary advisors are compensated by commissions which are often the equivalent of years worth of management fees. And in the end, if you’re dissatisfied with your service, the only way to get out of the product is to pay a large surrender fee.
Titles for non-fiduciary advisors are unregulated, which means that these advisors don’t need to call themselves brokers or insurance agents, but can adopt titles like: Advisors, Financial Consultants, or Financial Planners. They are not required to put investor interests head of their own, and as such as more interested in making “suitable” recommendations that involve selling a number of products.
These sales reps have limited disclosure requirements and are not allowed to have account discretion. And most of them receive a large commission upfront on the initial sale, which means they have very little incentive to continue helping the client.
It has been estimated that only 15-20% of advisors have fiduciary responsibility, and are usually Registered Investment Advisors (RIA’s) or Investment Advisor Representatives. These advisors are registered with the SEC or the state security division (depending on their size).
These are acknowledged fiduciaries who provide ongoing financial advice and services. Compensation is on a quarter by quarter basis for continued services, and ends if the investor is dissatisfied and chooses to leave.
An advisor with fiduciary responsibilities is held to a higher ethical standard and should have the knowledge to provide sophisticated wealth management services and advice. RIA’s are licensed to provide ongoing financial advice, and fiduciary advisors are required to provide disclosure in their ADV’s.
The investor must always come first. At Paragon Wealth Management, we have a fiduciary responsibility to always put your needs ahead of our own, and live up to all of our responsibilities.