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Honor the Lord with your wealth, with the first fruits of all your crops; then your barns will be overflowing and your vats will brim over with new wine.
Proverbs 3:9-10
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You are here: Home / Archives for Investing

November 3, 2015 by Michael Gauthier ·

Should You Give Your Advisor Authority to Trade on Your Behalf?

When the market is changing under your feet, does your financial advisor have the authority to act on your behalf for the betterment of your investments?

They may or may not. That’s why you should ask them.

Some financial advisors don’t have the ability to buy and sell your stocks/investments on your behalf without your prior authorization. If you trust your financial advisor, wouldn’t you want them to have this ability?

This ability is what’s called “discretionary investment management.” This is one type of investment management that allows investment managers to buy and sell investments at their own discretion without prior approval from their clients.

Aligning Goals

Both the investor and the financial advisor have an interest in making money. Many financial advisors charge a fee for their services based on a percentage of assets under management. Therefore, it is in the best interest of the investor to seek a financial advisor who both charges a percentage of assets under management and provides discretionary investment management – when a client’s portfolio goes up in value, so does the investment advisor’s paycheck. Discretionary investment management has the potential to increase earnings for both the client and their financial advisor.

This alignment of goals benefits the client as the financial advisor has a real incentive to increase the client’s portfolio value.

Efficient Service

Non-discretionary investment managers unfortunately have their hands tied behind their backs when they see an opportunity for their clients because they must first gain their approval. Sometimes this takes a great deal of time, as clients are not always readily available to authorize their financial advisor’s recommendations.

Discretionary investment managers are able to take action on their recommendations immediately. This gives clients of discretionary investment managers a huge advantage as their financial advisors can take timely action in the midst of changing market conditions. This level of efficiency may make a real difference in a portfolio’s performance over time.

Strategic Portfolios

At my firm, Strategic Income Group, we undertake discretionary investment management on behalf of our clients. The ability to make decisions for our clients without calling them ensures we can provide our clients with the prompt service they deserve.

For example, when emerging markets are dropping like a rock, we can do something about it immediately to ensure our clients aren’t subject to further loss.

We practice discretionary investment management through the use of our Strategic Portfolios. These portfolios are tailored to specific types of clients and their investing goals. When our team feels strongly that a change needs to be made to one, several, or all of our Strategic Portfolios, we’re able to execute trades right away so that the clients who are invested in our Strategic Portfolios are positively impacted.

Fiduciary Responsibility

Financial advisors like those of us at Strategic Income Group have a fiduciary responsibility to do what is in the best interest of their clients. This responsibility is mandated by various credentials and also through government regulation.

However, some financial advisors – although they have a fiduciary responsibility to their clients – aren’t able to immediately do what’s in the best interest of their clients because they are non-discretionary investment managers.

That’s why it’s so critically important to figure out which type of financial advisor you have and ensure that your financial advisor has the power to make trades on your behalf in your best interest without your prior authorization.

Take a few moments to call your financial advisor to learn more. If they can’t make changes without your authorization, you might want to consider giving this ability to your current advisor.  Be sure to also ask them if they are acting in fiduciary capacity so that your interest are placed first!

Filed Under: Investing, Phase 2: Accumulating Wealth, Phase 3: Strategic Income Tagged: discretionary investment management

October 12, 2015 by Michael Gauthier ·

How to Keep Calm During a Stock Market Drop

Imagine yourself at the apex of a rollercoaster. You can see almost everything from here. Life is grand.

Sure, you know the coaster is about to drop down an unspeakable plunge at some point, but for now, you’re on top of the world.

Then it happens. You suddenly free-fall down and for a moment have the irrational thought that the coaster might come off the tracks. You get scared and start thinking things like:

  • I know this is a rollercoaster, but is it really supposed to be this scary?
  • What if this thing fails? After all, I know people who have lost their lives on these things!
  • I can’t see the end of the tracks – there’s a foggy tunnel ahead. When will it go back up?

You want off. But this coaster is one you’ll have to ride out – you’re locked into place. Besides, if you bail now, you’d probably die.

The stock market is similar rollercoasters. It goes up and down and you might literally or figuratively lose your lunch from time to time. But there’s a key difference with the stock market: you can get off the ride whenever you want to, and that’s not necessarily the best thing for your money.

The Recent Stock Market Drop

The S&P 500 Index, a frequently used market benchmark, dropped 11.17% from August 17th, 2015 to August 25th, 2015. Ouch. That’s scary.

But there’s good news: it recovered over half of its value since August 25th, 2015. The rollercoaster is going back up. Granted, more recovery is still needed, but things are looking up.

What does this teach us? Imagine being scared out of your mind on August 25th, 2015 and thinking that the stock market was going to go lower. So, you decide to sell your investments. Then the market starts to go back up. You get excited, and eventually decide to buy again. See what happened? You sold low and bought high: a bad idea!

How to Keep Calm During a Stock Market Drop

Financial advisors like myself have to reassure people that the stock market has followed this up-and-down pattern for the life of the market. It’s a rollercoaster, so you should expect some dips and drops.

The best way to keep calm during a stock market drop is to understand the history of the stock market. Knowing that these drops will occur, reason can kick in and give you the wisdom to hold onto your funds – not sell them at a low point.

Money tugs on one’s emotions, so it’s understandable to have some “freakout moments” when the market looks grim. As long as the investor doesn’t act on those emotions, their investments are likely to be just fine in the long run.

It is the duty of a financial advisor to proactively reach out to their clients to calm their nerves when their investments plummet in value. And that is exactly what we did at Strategic Income Group when our clients experienced this most recent drop. Our clients deserve to be reassured – and our assurance is based on experience.

Many people call us and say “sell everything.” We honor their requests, but we also tell them what we think because it’s our fiduciary responsibility. If a client’s portfolio is designed for retirement, and a client is several decades away from that, should they really be worried about the daily movements of the market? Of course not.

That’s why we help our clients create what we call a “Family Investment Policy Statement” in Phase II: The Accumulating Wealth Phase of the Three Phases of Wealth. This statement allows our clients to confirm their goals for their accounts including their time horizon. This gives our clients something to look at when thinking about their accounts and encourages them to press on should they experience a market drop well before the time they intend to use the money.

Bottom line? Have a protocol in place before drops happen, remember that corrections happen, and think long-term.

Filed Under: Investing, Phase 2: Accumulating Wealth Tagged: Keep Calm, Market Correction, Market Drop

June 2, 2014 by Kevin Mercadante ·

Why You Should Pay Off Debt Before Investing in Stocks

Why You Should Pay Off Debt Before Investing in Stocks

In another approach to Phase I: The Foundation Phase, Step 4, Pay Off All Consumer Debt, we’re going to emphasize the need to pay off debt before investing in stocks. While that may seem like something of a repetition of our general advice to get out of debt, it actually rates a special discussion when it comes to investing in stocks.

There’s a myth – or perhaps an excellent example of wishful thinking – that it’s possible to invest your way out of debt. That’s a process of investing and growing your money until it reaches the point where it’s greater than your debt obligations. If only that were possible. More often than not, human emotion gets in the way, and the strategy turns into a recipe for failure.
Continue Reading…

Filed Under: Debt, Investing, Phase 1: Foundation Tagged: debt, investing, pay off debt, stocks

March 3, 2014 by Kevin Mercadante ·

Why You Should Have an IRA Even if You’re in an Employer Plan

Why You Should Have an IRA Even if You’re in an Employer Plan

Have you ever heard – or used – the phrase, “I’m covered at work?” It comes in handy for putting off meetings with your Certified Financial Planner™. But if you’re serious about Phase II: The Accumulating Wealth Phase, you probably know already that you should never take cover under clichés. And so it is with retirement. You should have an IRA even if you’re in an employer plan.

If that sounds like overkill, consider the following . . . .
Continue Reading…

Filed Under: Investing, Phase 2: Accumulating Wealth, Retirement Tagged: 401(k), employer plan, investing, IRA

January 18, 2014 by Kevin Mercadante ·

How to Build Your Basic Grubstake

How to Build Your Basic Grubstake

Financial advisers and bloggers talk about the importance of having an emergency fund and investing money. But what if you have no money? That’s actually the situation with many millions of households across America. In fact, a study conducted in 2011 found that nearly two-thirds of US households have less than $1,000 in liquid savings.

Are you one of them?

Don’t fret about it – do something about it! That something is building your basic grubstake – that money that will enable you to both build an emergency fund in the Foundation Phase and create a budding investment portfolio in the Accumulating Wealth Phase.

There are a whole lot of reasons why so many people have so little savings. We can hash out the details, but the better approach is to go forward from where we are.

There are two basic ways to begin building savings: cutting living costs and generating new income sources. Ideally, you’ll use a combination both, that way neither will be too painful.
Continue Reading…

Filed Under: Investing, Phase 1: Foundation Tagged: cutting costs, grubstake, income sources, saving money

November 22, 2013 by Michael Gauthier ·

How to Avoid Taking Risks that Might Be Killing Your Returns

How to Avoid Taking Risks that Might Be Killing Your Returns

Risk is an important factor to consider any time you choose investments. There are a number of risks when it comes to investing, and learning how you can best mitigate those risks now will mean higher returns in the future.

Below are three concepts you’ll need to remember as you’re making investment decisions. Internalize this information, it will serve you and your portfolio well.

1. Understand that diversification is critical.

You’ve heard it said that you should diversify your portfolio. This is one of the easiest concepts to grasp and it is also one of the most important.

Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land. – Ecclesiastes 11:2 NIV

This timeless investing principle has one critical purpose: to eliminate risk. Keeping a portfolio containing a variety of investments smooths out the rough patches in the stock market. It lowers your volatility.
Continue Reading…

Filed Under: Investing, Phase 2: Accumulating Wealth Tagged: investing, investing risks

November 4, 2013 by Michael Gauthier ·

5 Critical Financial Steps Before You Contribute to Your 401(k)

5 Critical Financial Steps Before You Contribute to Your 401(k)

Pensions are a thing of the past. Social security is questionable at best. Why would a Certified Financial Planner™ tell you to wait on investing in a 401(k)?

There’s a simple answer . . . .

Many Americans are trying to do everything at once, and in doing so, they are spreading themselves to thin and not taking care of their immediate financial needs.

Build a Solid Foundation First

Jesus once told a story about a wise man who built his house on the rock:

Therefore everyone who hears these words of mine and puts them into practice is like a wise man who built his house on the rock. The rain came down, the streams rose, and the winds blew and beat against that house; yet it did not fall, because it had its foundation on the rock. But everyone who hears these words of mine and does not put them into practice is like a foolish man who built his house on sand. The rain came down, the streams rose, and the winds blew and beat against that house, and it fell with a great crash. – Matthew 7:24-27 NIV

The foundation is a critical component to any structure because it helps the structure stand the test of time. Though many storms may come, the structure stands firm because it is firmly planted in place.
Continue Reading…

Filed Under: Investing, Money Management, Phase 1: Foundation Tagged: investing, money management

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Phase 1: Foundation

  • Is Having Debt Really a Sin?

  • GAP: An Easy-To-Follow Money Management Strategy

  • Why You Should Pay Off Debt Before Investing in Stocks

  • How Power Dollars Can Improve Your Financial Plan

  • Should You Really Tithe During Hardships?

Phase 2: Accumulating Wealth

  • Is Having Debt Really a Sin?

  • Should You Give Your Advisor Authority to Trade on Your Behalf?

  • How to Keep Calm During a Stock Market Drop

  • How to Purchase a Home Without the Mistakes

  • The Benefits of Homeownership vs. Renting

Phase 3: Strategic Income

  • Should You Give Your Advisor Authority to Trade on Your Behalf?

  • How to Maximize Your Social Security Payments

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