Because certain indexes have performed well over the past few years, those who promote passive investing are recommending that you follow the current fad and just buy index funds. Passive investing can be useful if it is done right. However, it can be dangerous done blindly. Passive strategies are fully exposed to the whims of the market and can expose investors to significant declines and risks. With this approach you must be aware that you will likely go through a 50% decline at some point.
Making money is difficult. Keeping your money is even harder. There seems to be ten ways to lose money for every one way there is to make it. To complicate things further, managing investments is counterintuitive. Research repeatedly shows that most people invest when they shouldn’t and don’t invest when they should. According to studies by Dalbar, for the 30 year period ending December 2013 the average stock market investor earned only 3.69% compounded versus 11.11% compounded for the broad stock market. Underperformance of 7.42% annually for 30 years is a huge penalty for the “average” investor to pay.
The bottom line is that if you do not have the time, resources, and expertise to manage your money then you are walking into a minefield. Over the years I have seen countless people lose their entire savings to bad investment decisions. Whether it be through leveraged real estate, misguided business ventures, poorly structured annuities, bad stock choices, expensive life insurance, loans to relatives, or even offshore investments, the end result is always the same. They lose their savings and what was once a good situation turns into a bad one.
Your success has brought you money. That money can be a blessing or a curse. If you manage it properly then it can help you simplify and enjoy your life by allowing you to do whatever is most important to you. If you don’t make good money decisions then it can bring you more grief than good.
Everywhere you turn there are different voices telling you how to invest. Financial news channels, magazines, insurance companies, infomercials, self-proclaimed experts, etc. There is no shortage of free advice. The problem is that most free advice is worth about what it costs.
Paragon has been guiding investors for 28 years. We have experienced, survived and thrived in some of the most difficult markets in U.S. history. Those very difficult markets include the Crash of 1987, the Asian Crisis of 1998, the Tech Collapse of 2000 and the Financial Crisis of 2008. We have steadily grown in the face of adversity.
Our clients are our friends. We are their guide. Our money is invested right alongside theirs. Most clients initially choose Paragon because of our stellar investment performance. However, as time goes on they realize that our highest value is actually protecting them from their inexperience and stopping them from making bad investments. It is our mission to help you make the right decisions and find financial peace.
Written by Dave Young, President & Founder of Paragon Wealth Management
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.
photo by pedrosimoes7
Written by Dave Young, President of Paragon Wealth Management
After starting out the year strong, the market has retraced, erasing its first quarter gains.
The S&P 500 is down about 6.66 percent year-to-date. From its peak in April, it has dropped a total of 14.5 percent from peak to trough.
Our conservative portfolio, Managed Income, has done well despite the difficult market. It s still up 0.48 percent year-to-date. Our growth portfolio, Top Flight, has done relatively well. It is down only 7.7 percent for the same period. At the end of the quarter, our investment models put Top Flight 20 percent in cash and 80 percent invested.
What is going on with the stock market?
I am asked this question on a regular basis. One day the Dow is down 300 points, and the next day it is up 300. Volatility levels have been extreme the past couple of months. In the short-term that can be a little unnerving to say the least.
In order to make good investment decisions, this question has to be addressed on two fronts.
-First, what is the market doing? (Going up or going down.)
-Second, do fundamentals justify the direction the market is moving?
The markets are continuously going through small up and down cycles within longer-term trends. Every time the market starts a downward cycle we attempt to determine if this is the beginning of the long-term trend turning downward. If it is, we should reduce market exposure. If it is not, we should stay fully invested.
If we sell out too early, we will miss out on returns if the market continues its upward trend. If we sell out too late, we may take more of a capital loss than we want to as the market declines. Investing when everyone is optimistic and selling out when everyone is scared is a recipe for buying high and selling low. It is also a great way to generate horrible long-term returns.
It is vital for us to make the right investment decisions, because if we are wrong, it negatively affects our long-term returns. A bad move not only negatively affects our clients, but it also hurts Paragon because our interests are identically matched with our clients’. If our clients are not happy with us, they can leave at any time without paying any surrender charges. This is unique in the financial industry. Most financial products have a penalty for leaving early. Because our clients’ investment success is very important to us, we place the utmost importance on our investment performance.
Fortunately, we have developed several investment models that take emotion out of the process and help us determine where we are in the market cycle. Also, we rely heavily on sector rotation models, which have done a good job of moving us towards those areas of the market that are holding up when the overall market is declining. While they are not always right, our long-term track record indicates that our models have done well at keeping us on the right side of things. From January 1, 1998 through June 30, 2010, our growth portfolio, Top Flight, has generated a net total return of 325 percent versus 32 percent for the S&P 500. (Click on this link to see our full track record and disclosures Paragon’s Track Record.)
To be continued next week…
What do you think? Feel free
to leave comments, questions or thoughts.
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.