10 Mistakes You May be Making in Investing
10 Mistakes You Maybe Making
Now that the markets and economy has stabilized and estate sizes may have changed, as well as the fact that the estate tax laws may change significantly over the next 2 years it is time to revisit our estate plans. Following are the top 10 errors I see people making with their estate plans. If we are making one of these errors, now is the perfect time to make the proper changes.
Top 10 mistakes People make with their estate planning
- Not having a current will or trust.
There really isn’t a need to add an explanation on this one. We all know we should have a will or trust in place, but like a financial plan, doing it can be seen as a pain or nuisance. Based on my experience, let me just state that it is much more of a pain and nuisance for your loved ones that have to deal with your estate when there is no will or trust.
- Choosing wrong Guardian
Choosing a guardian in many cases can be the most difficult part of preparing estate plan. There are many variables that come into play when deciding this very important decision. However, in many cases the ability of the guardian to manage money for the children is not considered. In cases where this maybe the case, consider using a corporate trustee over the funds to ensure proper money management.
- Not naming back up trustees
We have seen this issue many times and the cost and inconvenience can be significant. Trustees can back out or refuse to take the trust for many reasons.
- Not funding trusts
Why have a trust if it isn’t funded. The entire estate settling process may be twice as hard and costly if there is a trust not funded correctly. There is usually a “pore over” section of a trust to include limited assets not necessarily specified in the trust. However, people should not rely on that to account for all assets.
- Not coordinating beneficiary designations
Most estates include non IRA accounts, IRA accounts, Insurance, and other assets (real estate). In many cases people have different beneficiaries on IRA and Insurance investments than what is desired in their trust or will. Beneficiary designations on IRAs and Insurance take priority over those stated in a will or trust.
- Not taking advantage of gifting exemptions and/or gifting wrong assets
Gifting tax laws are currently advantageous for high net worth individuals. Understanding these tax laws may save significant tax dollars. Gifting should be reviewed to understand if it best fits your objectives.
- Not reviewing plans at least every 3 years
Life changes: not reviewing the estate plan leads to errors that may lead to significant tax savings being lost or assets ending up with the wrong beneficiaries.
- Naming children as beneficiaries
Children as beneficiaries can lead to major problems. The courts will normally require that a court supervised and costly conservatorship be created to control the money while the child is a minor, which will have the effect of depleting the proceeds
- Not understanding IRA/Pension Rules
There are so many tax laws that impact estates in respect to IRAs and pensions (too many to explain in this newsletter). Very few of these are understood by the average investor. It is imperative that you understand how each and every one of these may impact your estate. The cost to not knowing the tax laws may cost you or your loved ones thousands of dollars.
10. Having too complicated of an estate plan
The K-I-S-S theory (keep it simple) is best used in the average estate plan. Based on my experience, I have seen trusts so complicated that they do more harm than good. In fact, the people making the most money are the lawyers trying to decipher the mess. Not only did lawyers make thousand putting the complicated plan together, their services are required just for the beneficiaries to understand how it is suppose to work. As is the case in most cases, a second opinion is wise. If the first estate planning attorney tries to sell you a very complicated and costly trust, please get a second opinion. Or give me a call and we can discuss the advantages and disadvantage.
I am not an Estate Planning Attorney so please consult with one while preparing your estate plan. However, I provide my experience and knowledge to my clients as a service at no additional charge. That way, you have someone in your corner with experience to help prevent being taken advantage of or making mistakes when preparing your plan. Please call me if I can be of assistance in your estate planning needs.
817.717.3812
The “Virtus View” week of 9.18.09
The Virtus View
Although there are many reasons investors take a position in an investment, there are really two primary methods to evaluate a particular asset; fundamental and/or technical analysis. I want to discuss Gold in this Virtus View because it has been in the news a lot lately and has made a move up here recently. Gold and metals/commodities in general trade on technical analyses more than stocks, and a technical break out appears to be why gold is on the move right now.
As we have discussed in the Virtus View before, the simplest of technical analysis is the trend of a particular investment. Many experts refer to this as the higher highs and higher lows or vice versa of an investment. So if we take a look at the S&P 500 in Chart 1 for the last 6 months, you will see the trend is up and we continue to make higher highs and higher lows, with the exception of one little correction in the summer (which is why your investment horizon is so important in both fundamental and technical analysis).
Obviously, when stocks are moving down it looks just the opposite and has lower highs and lower lows.
Sometimes though, an investment will go through a compression phase where it makes lower highs and higher lows over several months. This is called a pennant or triangle, depending on the previous movement of the investment. Let’s take a look at GLD, the ETF that closes tracks the price of gold.
You can see why they call it a triangle or pennant. When an investment is compressing or consolidating like this, historically when it breaks the triangle it moves significantly to the side it breaks. As I said above, since commodities, including metals, are traded based on technical analysis, moves like this can generate a lot of volume, which in turn makes it way into the news.
But back to the chart, GLD broke upside at around $94.50 and has moved up nicely since. I believe this is a major reason for the gold movement recently. Keep in mind; the fundamental reasons to invest in gold are fears of inflation and to profit from the falling dollar. Not many experts fear inflation on a short-term basis and interesting enough, the dollar broke out on the downside of a triangle at the same time gold broke to the upside.
As for the market, many analysts including myself have looked for a correction since the S&P 500 is up approximately 55% since the low of March 9, 2009. Not since the 1930s have we seen a short-term rally like that. The difference is the market in the 1930s fell 90% prior to the rally of 100% that followed. With that said, the important metric from my view is the fundamental analysis. Since the market is currently trading at an approximate P/E of 15 for next year’s earnings projection (source Standard and Poor’s), I feel it is fairly valued. So, bottom line, it just depends on how much risk an investor wants to take.
Feel free to call Amy and schedule a meeting if you would like to discuss any of this information further.
Don’t forget to listen to my radio show, airing every Saturday on CNN 1190 radio (am) from 4:00 to 5:00 pm. We also have previous shows on the website: http://www.virtuswealth.com/radio.aspx . The September 12th show focuses on gold and metals. Please visit the website if you want to check out the discussion with Kevin Cook, an expert on Gold and other precious metals. This week’s show will have Bill Griffin, local Real Estate Broker.
Brian Tillotson
Wealth Manager
Virtus Wealth Management
2435 E. Southlake Blvd
Suite 120
Southlake, TX 76092
817-717-3812
866-407-4320
CNN 1190 AM Radio Show:
Join us this week on “Your Money, Your Retirement” on CNN 1190 AM, Saturday at 4:00 Pm Central with Brian Tillotson, owner of Virtus Wealth management and guest-host, local Real Estate Bill Griffin as they discuss where Dallas and the Dallas Fort Worth Metroplex is in the Real Estate Cycle…are we recovering, bottoming, breaking even, etc…
Find out how this impacts YOU on the best time to buy and sell Real Estate.
Listen to our previous shows online
Daily Market Update
The major stock averages touched new highs for the year thanks to favorable signs on the economy. Fed Chairman Ben Bernanke also encouraged investors when he said the recession is probably over. August retail sales jumped at the fastest rate in three years primarily due to the cash for clunkers program and manufacturing in the New York region improved for a second straight month. Industrial and raw-material stocks were among the best performers as commodities rallied. Disappointing earnings kept a lid on retailers. Best Buy and Kroger results missed forecasts. Health insurers dropped on concern that health care reform might hurt profits. JPMorgan Chase fell 0.6% after the lender said credit-card defaults increased. The Dow closed up 56 points at 9683. NYSE volume totaled nearly 1.5 billion shares. The S&P 500 gained 3 points to 1052. The Nasdaq was up 10 points at 2102.. 10-year Treasury notes were down 7/32 to yield 3.45%. For more market news visit Virtuswealth.com.
Don’t forget to listen to Your Money, Your Retirement, airing every Saturday’s from 4:00 pm to 5:00 pm. This week’s show will have Chuck Weaver from VIP Mortgage.
Securities and advisors services offered through VSR Financial Services, Inc. Member FINRA/SIPC.
Daily Market Update:
September 10th, 2009
Wall Street made it five gains in a row. The S&P 500 and Dow posted new highs for 2009 on an upbeat forecast from Procter & Gamble and gains in energy stocks. P&G predicted a rebound in sales and the shares rose 4.2%. Managed health care stocks advanced as opposition remained in Congress to the President’s health care plan. Technology stocks also enjoyed gains on improved forecasts for chip sales. On the downside, Monsanto warned that earnings would be at the low end of previous forecasts and said it would cut more jobs. The shares fell 5%. First-time jobless claims in the latest week were lower than expected, but were still not at a level that would suggest recovery in the labor market. The Dow closed up 80 points at 9627. volume totaled nearly 1.5 billion shares. The S&P 500 gained 10 points to 1044. The Nasdaq was up 23 at 2084. The 10-year Treasury note was up a full point to yield 3.35%. For more market news visit Virtuswealth.com and don’t forget to listen to Your Money, Your Retirement, airing every Saturday’s from 4:00 pm to 5:00 pm. This week’s show will have an expert on gold to discuss metals and where they go from here. Securities and advisors services offered through VSR Financial Services, Inc. Member FINRA/SIPC.
“Your Money, Your Retirement” on CNN 1190 AM this Saturday
Join us and listen to “Your Money, Your Retirement” with Brian Tillotson, Wealth Manager and owner of Virtus Wealth Management with guest-host Kevin Cook as they discuss “Gold” as a commodity and find the answers to the questions below:
1. Why is gold approaching/over $1,000 an ounce? What’s driving this and does it make economic sense in the modern world of finance?
2. Is it a bad sign that gold is in such demand? Are we on the verge of another financial panic?
3. Is the U.S. dollar in danger of becoming less important? Are we in danger of losing our AAA credit rating? Some people say the dollar will lose its status as the world’s reserve currency… is that the trend?
4. Related to this, is China going to sell its Treasury holdings and what does that do to our economy?
5. What were the technical signs you saw that told you gold was going higher?
6. Should gold be a part of everyone’s investment portfolio? What are some ways to safely get exposure to gold and other commodities?
7. What does the price of gold say about global economic health?
8. Is gold the best inflation hedge?
9. Are the gold ETFs such as GLD and GDX good investments? What about the XAU?
10. What about other “commodity basket” ETFs like GSG and DBC?
Listen in to our other radio shows of “Your Money, Your Retirement” as Brian discusses different alternative investments:
The 5 R’s Of Emotionally-Rewarding Retirement
How does someone flourish during retirement? Best adjust to the changes?
Like any other transition, retirement is one of our biggest life changes/transitions. As with all changes we need – Insight into ourselves – our needs and desires, a vision of a successful retirement, an action plan … and support and encouragement to get there.
Not just stopping working, but creating a thriving lifestyle that addresses each person’s needs for fulfilling relationships, connection to others/society, personal interests and pursuits and a general sense of connection, significance and purpose. Once you have decided to retire how can one best navigate the emotional components of this huge transition?
The old outdated version of retirement has 2 Rs- Rest and Relaxation, now experience the new updated version of retirement has 5 Rs – cool huh!
Retirement is a big life transition and one that needs to be carefully planned and considered. All too often people think happiness will come just because they aren’t working, but there is much more to it than that. Granted, the initial reprieve and stress relief from daily demands of a full-time job may be a tremendous relief of pressure in the short-term, but after a period of time, a few months or a year, other needs and feelings begin to surface. Retirement is a total identity shift – it is a process – not a one day event – if you prepare well financially and emotionally, you can feel confident, purposeful and fulfilled during the process. Today I would like to review the key needs and components of creating a retirement lifestyle that is successful and emotionally rewarding retirement and the transition/change that one goes through.
The 5 Rs of an Emotionally Rewarding Retirement.
What role does self-knowledge play in retirement?
1) Re-Discover you. Discover who you are and want to be now. What is my purpose going forward? How can I be useful and of service? Who am I without my career? How can I best take care of my overall health? Learn about yourself. This part is about building a new identity not based on work. This would be a wonderful time to re-discover you and take time to reevaluate your needs and desires. Understand yourself better and what gives you life satisfaction. What you enjoyed or wanted at 30 or 40 may have changed. It is time to re-explore you – your emotional, social, physical, mental and spiritual needs and desires. Retirement is about you – give yourself the gift of discovery.
What about the role of physical activity? Is this a factor?
2) Raise those feel-good endorphins. Stay as physically engaged and active as you possibly can. Most people overestimate their need for downtime and relaxation and underestimate their need for a wide range of activities that brings physical and intellectual stimulation and overall good health. Don’t get in the habit of being sedentary. Keep activity up – there are many physical and emotional consequences of being sedentary. Keep moving – Daily exercise of some sort will keep you healthy and boost the “feel good” endorphins that help us stay positive. i.e. a water aerobics class, light weights, walking to the store or more aerobic activities such as walking, biking or tennis.
Many people think once you hit retirement it is too late to start something new? Is this true?
3) Re-explore interests & dreams. Develop a variety of personal passions and pursuits. If you are a young retiree this is a great opportunity to not only stay active but to revisit dreams you had put on a shelf for someday – now is that someday! Take risks, learn new things you didn’t have time for before. Possibly go back to school. Find a cause you truly are passionate about. Take up a hobby like painting or fishing. If you’ve always wanted to travel but never had the time – research places and go – now is the time!
What about relationships – once we aren’t working anymore those must change pretty drastically?
4) Redefine your relationship roles. Have frank and cooperative conversations about what you want your relationship to look like and create a vision for the future, together you and the people closest to you can create an energetic vision. Your relationships with your spouse, friends, parents and/or children become more important and different once your role as a worker has been reduced or eliminated. You may need more privacy or more companionship activities together. Have a franxious conversation about the upcoming changes and more importantly – how you FEEL about them. Sharing fears, hopes and vulnerablities will bring you closer together. You may want to see a marriage therapist of coach to co-create your future and what you may encounter as far as change as you navigate the sea of retirement. If you are single it simplifies things because you are mainly considering your needs. Sense work is no longer a source for companionship, you will need to maintain even stronger bonds with friends and seek out new relationships and groups.
Retirement brings a lot of free personal time. Is this a plus or minus?
5) Reorient yourself by building a new routine. While personal freedom and flexibility is wonderful – When you are working your day is shaped by the familiar demands of your career. When you are retired, there is more open space and you now – you must plan your day, week and month. Once you have discovered new interests or rekindled old ones, it will be important to schedule activities and build your day around these activities so that your day is filled with what is most important to you. If not boredom, disillusionment, and depression can set in.
Michele Wahlder, MS, LPC, PCC
Life & Career Coach . Author . Speaker
214-823-LIFE (5433)
“We can become what we dream of if fat, furry worms can fly.”
– From “Butterfly” by Jana Stanfield/Joyce Rouse”
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Looking for An Investment That Is Not Affected By Market and Economic Conditions?
What IS a Life Settlement?
A life settlement is the sale of an existing life insurance policy held by a terminally ill or elderly person to another party. Life Partners analyzes every policy submitted to ensure it meets our stringent criteria for an investment grade policy. Once it has been approved by Life Partners, the price of the policy is negotiated with the owner who receives a portion of the face value for the transfer of the policy. Once the life insurance policy has matured, the investor then collects the full amount paid out under the policy.
Life settlements are similar to zero-coupon bonds. They are purchased at discounts to their face value which fall into general brackets according to the life expectancy of the owner or insured. These discounts will vary slightly based on individual policy features and market conditions.
Yield is computed from the difference between the cost basis (including any premiums paid) and the amount paid out under the policy upon the demise of the insured. An annualized returned on investment may be derived from this yield by adjusting it for the holiding period of the investment.
The acquisition cost includes all of LPT’s fees and costs associated with the acquisition of the policy as well as an amount for the payment of premiums during the maximum life expectancy of the insured as determined by independent medical consultants. In the event the escrow is depleted before the demise of the insured, the purchaser is responsible for replenishing the account to the extent of their interest in the policy. Likewise, in the event the policy matures earlier than the estimated maximum life expectancy, unused premiusm remaining in the escrow account are returned to the purchasers in addition to their share of policy proceeds.
Life Settlements provide a valuable service for both the investor and the insured. To the investor, a life settlement is a long-term investment unaffected by market conditions, global economy or worlld events. To the insured, the sale of their personal policy means a chance to receive money today for an asset they no longer need.
Life Partners acts as a matchmaker between life settlements and their invetors, making the best possible union based on the individual goals of each purchasing investor. Life Partners provides its life settlement services to individual accredited investors both through “cash” and IRA or other qualified plan investment and to institutional investors.
You may be asking yourself the benefits of Life Settlements. . .
1. Unaffected by Market and Economic Conditions
2. Superior Yield Potential.
3. Relatively Low risk to Investment Capital
4. Investor Controlled Policy Purchases
5. Integrity of Asset Safekeeping and Receipt of Proceeds
6. Esperience and Transparency
For a detailed explanation of the above benefits, visit our website at:
under “Services”. You may also contact us directly at AArey@VirtusWealth.com to set a (no-pressure, no sales) complimentary consultation with us to review the investment’s benefits and risks.
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ATR, Volatility and Standard Deviation
ATR, Volatility, and Standard Deviation…OH MY!
by Jared Levy
Tue, 01 Sep 2009 11:02 CDT
Related Symbols: SPX DJIA
Whatever your opinion, having a firm grip on these concepts is an integral part of not only setting realistic expectations for your trading and spotting anomalies, but possibly (and perhaps more importantly), finding a reasonable stop loss level in your trade.
All three of these measurements are somewhat related, but each is expressed in slightly different ways and interpreted differently. For most of us “home-gamers,” we are not going to use ultra-complex mathematical models to find precise deviations for a stock’s “normal” patterns as a means of finding some sort of volatility arbitrage and trying to capture it.
More likely, we are using these observations as a means to identify “realistic” and relatively abnormal occurrences in either an option’s pricing or a stock’s behavior.
Let’s start with volatility. First off, there are several types, so for this example I’ll just use historical (observed) and implied. Historical volatility is an annualized number expressed in percentage terms telling us how much a stock has moved in the past.
Volatility helps us gauge a stock’s behavior and gives us a benchmark, so to speak, when examining a potential trade strategy and setting profit targets and stop losses. Volatility is typically measured using close-to-close prices as the inputs for finding deviation or volatility.
Using close-to-close observations helps to “normalize” the intraday noise that tends to occur in the marketplace. Plus, it’s quite cumbersome to take every single price movement into consideration to compute volatility. Although with today’s technology, that is certainly possible and I know that certain market participants use that data.
For example, if I said a stock was moving on a 40% volatility and the stock was trading at $100.00 per share, that means it would be realistic for the stock to move either 40% higher (($40.00) or 40% lower ($40.00) about 70% of the time (this is where standard deviation comes in …).
Now, on to standard deviation. As a professional market maker, my options and decisions on trades were based upon how volatile a stock is, was, or will be in the future. By definition, standard deviation is a measure of the variability or dispersion of a statistical population, a data set, or a probability distribution. A low standard deviation indicates that the data points tend to be very close to the mean, whereas high standard deviation indicates that the data are spread out over a large range of values.
To simplify, standard deviation is the annualized expected movement (expressed in whole dollars), using the current stock’s price as the mean, while plugging in the observed volatility. So if the current stock price was $100.00 and we were using an observed volatility of 40%, one standard deviation over a year’s time would be $40.00 up or down, and this distribution would occur about 70% of the time.
What are the Chances?
- 1 St. Dev = 68.3% chance the stock will stay within plus or minus 1 standard deviation.
- 2 St. Dev = 95.4% chance the stock will stay within +- 2 standard deviations.
- 3 St. Dev = 99.7% chance that the stock will stay between +-3 standard deviations.
Obviously, it’s all about the input. If you are using 40% as your volatility measurement and you are taking your measurements right after March 2009, your observed volatility may be high and you may be expecting too much movement out of your stock. If, however the markets have been quiet for some time and you use that measurement, your calculations may be low.
This ambiguity is what makes the marketplace work and is also why there is NO perfect answer. For me, I like to use a blend of both the historical volatility as well as the implied volatility of the options to generate my forward-looking volatility calculations.
By the way, to determine the daily expected volatility of a stock, take your annual volatility number and divide by 16 (the square root, roughly, of the number of trading days in a year). That will be your daily average % volatility.
Now, on to ATR. ATR stands for average true range or average trading range. ATR measures the average dollar movement of a stock over different time periods, typically taking 14 periods into account. It also measures more than close-to-close pricing.
ATR takes the LARGEST movements into account, which enables the trader to get a closer look at the true recent behavior of the stock he or she is trading. I use ATR as a quick confirmation of a stock’s over bought or oversold condition.
I also use this as the outer edge of where I would place my stop- loss or profit target or as an entry for a reversion to the mean trade. For instance, if a stock or index has exceeded its daily ATR and I see a chart pattern that looks attractive for entry, I may enter long or short then cover once the stock has hit its “normal” 1 standard level. As most times, ATR will be greater than daily standard deviation.
Just some thoughts!
Closing with another favorite three-word phrase of mine: “Keep selling, Mortimer” 🙂
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Recent
- Daily Market Update: Tuesday, October 6th
- Virtus Wealth Hires Jackie Dixon as Service Assistant
- What is the Baltic Dry Index and Why Is It Important for Investors?
- 10 Mistakes You May be Making in Investing
- The “Virtus View” week of 9.18.09
- CNN 1190 AM Radio Show:
- Daily Market Update
- Daily Market Update:
- “Your Money, Your Retirement” on CNN 1190 AM this Saturday
- The 5 R’s Of Emotionally-Rewarding Retirement
- Looking for An Investment That Is Not Affected By Market and Economic Conditions?
- ATR, Volatility and Standard Deviation
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