Are we being “Penny Wise, Pound Foolish”?

Do you really know how to evaluate the right mutual fund for your investment goals?  To look at this question on whether we are being penny wise and pound foolish, I put the following statement to a test: Investors should look for low cost, no transaction fee funds out of the same peer group. 

To answer that statement there are a few things to consider.  Do you believe that all no load, no transaction fee mutual funds are created equal?  You may want to take a second look.  How about the thought that it is better to pay a one-time transaction fee when you buy a mutual fund that offers a lower expense ratio?  Ah, well, you may want to reevaluate this as well.  Okay, then should you believe that a higher expense-ratio mutual fund should be shunned for their lower expense-ratio options?  Umm, well, not always. 

I looked at four random mutual funds in the same peer group.   I reviewed their actual performance after fees.  My findings may surprise you.  I have listed the four mutual funds below (names are withheld to protect the feelings of the loser funds):

	FUND A	FUND B	FUND C	FUND D
ANNUAL EXPENSE	.50%	.10%	.09%	1.25%
TRADE COST @PURCHASE	$0.00	$76.00	$0.00	$0.00
TOTAL FEE ON A $50,000 INVESTMENT	$250.00	$50.00	$45.00	$625.00

Which fund do you think would have been the best choice (5-year performance, ending September 10, 2013)?

No peeking!  Write your answer first: Fund A, B, C or D???

The winner is…. Fund D.  Who knew?  Buying a mutual fund with the highest annual expense outperformed its peer group with little or no trading costs and lower annual expense ratios.  So, what should you make of this? 

Well, we know that we are told as investors to be patient over time with your investments.  Is 5 years a long enough period?  Maybe, but to be safe, I looked again, and this time looked for 10-year performance of the same funds (period ending September 10, 2013).  What do you think I found?

And the winner is….Fund D, once again, and by several percentage points.

Myth busted: Always using a low cost fund expense ratio, or a no load, no transaction cost fund does not always mean you made the best choice on a performance basis.

My advice to you, the investor, is not to beware but instead to Be Aware so that you can make the correct decision.

As always, your BMM team stands ready to assist you in making these choices whether you are a do-it-yourself investor just needing occasional guidance from someone or if you prefer to work step-by-step with an advisor.  We have programs to fit all types of investors.  Check us out at www.bersonmoney.com.

To your continued Health & Wealth!

Investment advisory services are offered through Berson Money Management, a registered investment adviser offering advisory services in the State of California and in other jurisdictions where exempted.  This communication is not to be directly or indirectly interpreted as a solicitation of investment advisory services to residents of another jurisdiction unless otherwise permitted.   The contents of this email and any accompanying documents are confidential and for the sole use of the entity to whom they are addressed.   They are not to be copied, quoted, excerpted or distributed without express written permission of the firm.  Any other use beyond its author's intent, distribution or copying of the contents of this e‐mail is strictly prohibited.  Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.

Do It Yourself Financial Plan

As we head toward the end of this year, we should begin to review and evaluate our personal financial plan and look to make important changes for 2014. These are the critical times that help us work optimally with our advisors (tax, estate, insurance, investments, banker, etc.).

I was talking with a good friend, Sue Hines, Founder, Aspects Galore, about recognizing trends. The trend I observed is the “I can do it myself” trend. I smile as I write this because that is what my son always said to me, as I’m sure a few of your own kids have as well.  My friends prepare their own taxes at year-end, color their own hair instead of a hairdresser, select their own investments without the help of a broker or investment advisor, finalize their own divorce, or create their own corporation online. So, why not create your own financial plan?  Do we really need the help of a financial planner?

What is a financial plan anyway? According to the Certified Financial Planner Board it is a SWOT analysis of your current financial situation, covering the following:

• Risk you take or avoid in terms of insurance (life, home, health, disability, long term care, auto, and personal liability)
• Short and long term savings and investments
• How much to fund for education &/or retirement
• How to invest wisely, low cost, low tax with good returns over time
• When is it time to sell or buy or how and how often to reposition 
• What is the correct account to use, Defined Benefit, Defined Contribution, 401k, 403b, 457, Roth IRA, Contributory IRA, Trust account, TIC, JTWROS, etc.)
• How to measure the risk return ratio for you to feel safe & know you are on the right track
• How to know what is the magic return you need overtime so you can limit unnecessary risk 

• Legacy review for example your will or trust, durable power of attorney, and medical directive
• Debt review (good, reasonable, or bad debt).  Contrary to popular opinion, not all debt is bad debt.

Plan some time to sit down this month and review your financial situation.

Then take a closer look at your plans strengths and weaknesses, and evaluate what needs to be changed or left alone. Afterwards, take a closer look at the opportunities and threats to the success of your plan in terms of economic, social, political, legal, and technological factors. And last but certainly not least, take a look at your tax plan.

A skilled financial planner—like a member of your BMM Advisory Team—is happy to schedule some personal time if you prefer not to go it alone.

The wisest people know that they don't need to go it alone.  So, our gift to you (must signs up before 12/15/2013)  is a full financial plan (SWOT) for you at 50% off our normal rate.  The lowest plan at this rate is $1,500.  At a little over a $100 a month, this might be your wisest investment in yourself. 

To your continued good health and wealth!

Investment advisory services are offered through Berson Money Management, a registered investment adviser offering advisory services in the State of California and in other jurisdictions where exempted. The contents of the blog are not to be copied, quoted, excerpted or distributed without express written permission of the firm. Any other use beyond its  author's intent, distribution or copying of the contents of this e‐mail is strictly prohibited. Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.

 

The Retirement Gamble

Millions of us invest in our company’s 401k plan and many still have money in our prior employer’s 401k plan.  We don’t understand exactly what we are investing in, how to invest, how to review if our investments are on track for a brighter future. 

You are right to be confused.  With lack of information on how to  invest wisely we default on the funds that seem to have the best performance hoping this track record will continue.  

The enrollment meetings are confusing and information regarding the particular family of funds and fees are not always quite as transparent as they should be.  The amount you pay in fees over your lifetime will take a huge bite out of your nest egg.  Most Americans aren't aware of the fees they are paying in their 401(k) accounts or that over a lifetime, such charges can cost an ordinary American in the $100,000's. 


According to John Bogle, Founder of The Vanguard Group - it is a “Train Wreck” awaiting American retirement.  A toxic mix of too much choice, backwards incentives, and a misplaced faith in the market’s past performance has positioned America’s retirement system for an uncertain future.   At BMM we meet daily to help people with this decision and felt compelled to share this documentary by FRONTLINE’S  Martin Smith on the subject.

It should surprise and anger you, it did your BMM Advisor Team.  You will hear Prof. Teresa Ghilarducci, an Economist, say: “The 401k is the one product that Americans buy but don’t know the price of, or the quality of, nor do they know its danger”

You don't have to stay in the dark  - Click here to watch the video “The Retirement Gamble”


We can help, after you watch – and/or if you would just like to learn how to understand and benefit from your 401k plan – email us to receive information on our free webinar in September.  If you prefer you can email us to schedule private time to talk to a member your BMM Advisor team.

We help people just like you every day work through these problems and invite you to do the same. Reach out to a member of the BMM Advisor team.


Investment advisory services are offered through Berson Money Management, a registered investment adviser offering advisory services in the State of California and in other jurisdictions where exempted. The contents of the blog are not to be copied, quoted, excerpted or distributed without express written permission of the firm. Any other use beyond its author's intent, distribution or copying of the contents of this e‐mail is strictly prohibited. Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.

Going nowhere fast!

This is the reality for most people I talk to every day. We know how much money we need to live on. A few know how much money they spend. But is this enough? As I saw on a friend's business card: life is not a dress rehearsal. There is no do over.

How do we make a course correction without feeling completely overwhelmed? We need a strategy. We need to outline the strategy, and then implement, monitor, and tweak it as needed. 

Do you have a strategy that is in place?  Do you review it regularly?  If you do then you are comfortable when the stock market feels like a roller coaster ride.  Without your own professional advisor you aren't aware of the fact that the S&P 500 was down just under 10% in the spring of 2012.  Then in the fall of that year it fell again and was down just under 8%. But it finished 2012 with a nice gain.

Is it possible that last week when the stock markets was down for several days in a row and the DOW broke below 15,000 that the market was taking a much needed breather or pullback? If we feel it is the beginning of a down market, we’re guessing. If we feel it is the beginning of a nice run up, we’re guessing. If you want to guess, head to Vegas, go to the buffets, see a terrific show, and put your money on red or black at the roulette tables.

So, what are you supposed to do?

You need to work with a professional advisor and create a financial plan. You can’t and shouldn't do it yourself. It doesn't matter if you are a baby investor just starting out with $5,000 or someone who has over a million who can't afford to lose their hard-earned money.  It doesn't matter if you aren't ready to save and just need help getting out of debt.  Don’t fool yourself that you can analyze this on your own.  I see many make this mistake until it is too late.

Put the plan into action and start the journey. It’s no different when your kid is going to college. I have seen many parents pay a pretty penny for a college admissions coach to sit down with their kids and do the same thing: discuss the easy school to go to (easy financial plan), the realistic (what you should be doing but usually don't) and the stretch (still possible but requires you to buckle down).  You don't want to risk their journey, why risk yours?

I see too many people get caught up in the noise and take no action.

Conversely, I see too many people not get interested in the important stuff—like getting the proper insurance, reviewing contracts, talking to CPA's before tax deadlines, and working with a professional advisor for financial planning matters. Take a look at your college-bound kids—they don’t do it all themselves and neither do you.

Don't go this alone. Call us today to discover a comfortable yet productive plan that we will develop just for you. Stop going nowhere fast!

At BMM, we help folks like you every day work through these problems and questions and would like to do the same for you or anyone you know. Reach out to a member of the BMM Advisor team.

Investment advisory services are offered through Berson Money Management, a registered investment adviser offering advisory services in the State of California and in other jurisdictions where exempted. The contents of the blog are not to be copied, quoted, excerpted or distributed without express written permission of the firm. Any other use beyond its author's intent, distribution or copying of the contents of this e‐mail is strictly prohibited. Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.

 

Are You Flunking Finances 101?

Last month wasn't only tax time—it was also “Financial Capability Month.”  I decided to share this link when I read that only 14% of Americans could pass the financial literacy quiz by FINRA (Financial Industry Regulatory Authority).  

We take time to clean out our garages, homes, and offices, but do we ever take the time to clean up our investment portfolios? Do we even know how to do this? I think it is worth taking a short break to test your own knowledge in this area. Test Time 

What I also found out as I researched this area was the following:

1. Not enough savings – More that half of us indicated that we are worried about a lack of savings, many worry about not having enough “rainy day” savings for an emergency or retiring without having enough money set aside. 
2. Not being able to pay financial obligations – 1 in 4 of us are worried about servicing debt commitments, including concerns around paying credit card debt, student loans, monthly car payments, and medical debt.
3. Health insurance – 1 in 4 are worried about health insurance (either not being able to afford it and/or not having any).
4. Credit – 1 in 5 are worried about their credit score and/or lack of access to credit overall, suggesting that we continue to realize the importance of credit in our lives. However, most adults have neglected to review their credit report (65 percent) or score (60 percent) in the past year.
5. Job loss – More than 42 million Americans indicated fear of job loss as a major concern—a number that is disturbingly high.
6. Foreclosure – Surprisingly, the least of our concerns (among those listed), a comparatively small 4 percent of us are worried about losing our home to foreclosure, undoubtedly a positive signal for the housing industry and the economy as a whole.

Remaining stubbornly consistent over the past three years, 40 percent of adults gave themselves a grade of C, D, or F on their knowledge of personal finance. How would you grade yourself? Should you put yourself in a financial time-out?

Based on this poor report card, it is not surprising that most agree that they could benefit from additional advice and answers to everyday financial questions from a professional.

At BMM, we help folks like you every day work through these problems and questions and would like to do the same for you or anyone you know. Feel free to reach out to a member of the BMM Advisor team.

We offer 30-minute complimentary consultation…

& promise to use common sense when talking to you if at all possible.

Investment advisory services are offered through Berson Money Management, a registered investment adviser offering advisory services in the State of California and in other jurisdictions where exempted. The contents of the blog are not to be copied, quoted, excerpted or distributed without express written permission of the firm. Any other use beyond its author's intent, distribution or copying of the contents of this e‐mail is strictly prohibited. Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.

The Taxman Cometh

Well friends, it is that time of year.  And I want to keep it light.  But I just couldn’t resist sharing the “Dirty Dozen” list of tax scams that the Internal Revenue Service recently posted.  I will share a few of these with you, but to read the full article click here.

It’s sad but true: tax fraud through the use of identity theft tops this year’s Dirty Dozen list.  In many cases, an identity thief uses a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund.  It’s called “phishing”—and no, this isn’t “fishing” misspelled.  According to the IRS, it is a scam typically carried out with the help of unsolicited email or a fake website.  The IRS will not initiate contact with taxpayers by email to request personal or financial information.

Tax professionals going awry?  Say it isn’t so.  But alas, it is (according the IRS).  They advise us to choose carefully when hiring an individual or firm to prepare our return. They remind us to use only preparers who sign the returns they prepare and enter their IRS Preparer Tax Identification Numbers (PTINs). But mostly, keep in mind that you are legally responsible for what’s on your tax return, even if it is prepared by someone else. Make sure the preparer you hire is up to the task.

“Free money” from the IRS & tax scams involving social security also tops the list. No such thing as a free lunch, or money, that is.  Flyers and advertisements for free money from the IRS have been appearing suggesting that the taxpayer can file a tax return with little or no documentation.  These schemes promise refunds to people who have little or no income and normally don’t have a tax-filing requirement, and they’re often spread by word of mouth as unsuspecting and well-intentioned people tell their friends and relatives.

Now don’t forget the misuse of Trusts.  For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are legitimate uses of trusts in tax and estate planning, some highly questionable transactions promise reduction of income subject to tax, deductions for personal expenses, and reduced estate or gift taxes. Such trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

With that said, I hope tax season wasn’t too much of a burden.  But, if it is and you would like some ways to legally reduce your taxes with wealth management, feel free to reach out to a member of our team at Berson Money Management. 

We offer a complimentary 30-minute phone consultation...

and promise to use common sense when talking to you if at all possible

Investment advisory services are offered through Berson Money Management, a registered investment adviser offering advisory services in the State of California and in other jurisdictions where exempted. The contents of the blog are not to be copied, quoted, excerpted or distributed without express written permission of the firm. Any other use beyond its author's intent, distribution or copying of the contents of this e‐mail is strictly prohibited. Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.