Month: June 2015

It’s all about Greece

Written by Minich MacGregor Wealth Management on June 30, 2015. Posted in Archives.

Weekly Wire – “It’s all about Greece”

If you have been following the financial media over the past week, the crisis in Greece has probably came up more times than any other topic. You might be wondering how this relatively small country can have such an impact on the world financial picture.

A 50,000 foot overview is that this is a debt crisis, similar in some ways to our debt crisis back in 2008. Over the past few years, several countries have stepped in to help bail out Greece and now it is time to repay them. The debt is due, but Greece cannot afford pay nor has it made the changes that were required by its creditors. The uneasy feeling that is being experienced now can be attributed to the uncertainty of how this will play out. It remains to be seen if there will be another bailout (and from whom) or will the country default and go bankrupt?This question also remains – will Greece leave the “Eurozone“?

Back in April, the New York Times posted a good overview of the debt crisis in Greece and they updated the same article this morning. Click here to go to that article on the NY Times website.

Video: 5 Best Practices for Limiting Your Tax Burden in Retirement

Written by Minich MacGregor Wealth Management on June 22, 2015. Posted in Archives.

Video: 5 Best Practices for Limiting Your Tax Burden in Retirement

Tax implications and in particular, limiting your tax burden during retirement, is often one of the top concerns for our clients whether they are retired or approaching retirement. It’s a topic that must be addressed in any thorough retirement plan. We found this video from Morningstar. We wanted to share it with you because it discusses several of the strategies we implement with clients on the regular basis.

“A flexible withdrawal strategy, diversification across account types, and targeted Roth conversions can limit the tax drag for retirees,” says Morningstar’s Christine Benz. Click to image below to watch the video.

[lyte id="dzQR7RfbmR4" / alt="tax burden"]

If you would like to talk to us about how these strategies might fit into your financial plan, click here.

What’s the Parasitic Drag on Your 401k Plan?

Written by Minich MacGregor Wealth Management on June 17, 2015. Posted in The Fiduciary File.

What’s the Parasitic Drag on Your 401k Plan?

When we do a benchmark analysis on a 401k plan, we are always looking for factors that create excess drag on the performance of the plan. There are several factors that can impede the growth of a 401k plan including the mix of funds each participant chooses and how much they are deferring into the plan. In fact, those factors have the largest effect on the growth of the plan; however, those factors are not directly controllable by the plan sponsor. Parasitic drag as we see it is anything that causes the growth of the plan to suffer regardless of the choices that participants make.

There are two main potential sources of drag on performance at the plan level:administrative expenses and investment expenses. Administrative expenses are related to the actual operation of the plan. This includes the TPA, record-keeper, financial advisor, custodian, sales broker etc. Investment expenses are those built into the investment choices themselves, usually expressed in terms of an expense ratio.

Part of the problem is often that the true costs associated with each of these are buried in complex disclosure documents. To further confuse the issue – some of the fees collected in one area are shared with service providers in another (a practice called “revenue sharing”.)

Drag from various expenses can not be 100% eliminated, however, knowing what is reasonable for a plan similar in size to yours so that you can compare what you are paying to that benchmark is a good place to start.

abc News featured one small business owner’s discovery of the drag in their plan back in September of 2013. You can watch their report by clicking on the abc News logo to the right.

The Department of Labor over the past few years has also recognized the issue and begun to implement regulations to help plan sponsors make more informed choices with regards to expenses. They even produced a video for sponsors to illustrate why expenses can be such a big issue. You can see the video by clicking the video to the right.

The Fiduciary File is published 1 to 2 times monthly

It’s all relative strength

Written by Minich MacGregor Wealth Management on June 8, 2015. Posted in Archives.

Weekly Wire – It’s all relative strength

So far, 2015 is the year of the yawn as far as the markets go. Record low volatility and a very narrow trading range in the US stock markets make it pretty quiet on the portfolio front. So how does an investor know what is a good idea to own vs. what is not so hot?

If you are a client of ours, or have ever come to one of our workshops, you have heard us use the term Relative Strength. Relative Strength is an indicator that we use that measures how an investment / sector / market is performing relative to others over time. Because the comparison is on a relative basis, it allows for the comparison of dissimilarly priced investments.

An easy example would be comparing two stocks – one starting at $10 per share, the other starting at $100 per share. Over a given period, the $10 stock increases to $20 per share, while the $100 stock increases to $150 per share. In relative terms the one that went to $20 is ranked higher than the one that went to $150, because on a percentage basis, it had a larger increase over the same period of time.

Although the analysis over time of a Relative Strength ranking chart can be somewhat complex, the basic theory is not hard to understand:

It is generally better to own things that are ranked highly against their peers.

Relative Strength rankings are helpful to show which markets or sectors are doing better than others, and then can be used to rank investments within those markets or sectors to see which specific securities are outpacing the competition.

Learn more about Relative Strength on Investopedia here:

What is your advisor or broker’s investment style?

Written by Minich MacGregor Wealth Management on June 1, 2015. Posted in Archives.

What is your advisor or broker’s investment style?

For many people, the answer is “I don’t know, but as long as it makes me money, I’m good.” This is not a horrible answer. However, one problem with not knowing is the element of SURPRISE. People do not like surprises when it comes to their portfolios. You may be surprised at what does (or does not) happen in your portfolio during certain market conditions if you do not have a basic understanding of the investment style the person you entrust with your money uses.

Investment style and portfolio management strategy can be a complex subject and not one you are likely interested in spending years learning. After all, that’s why you hire an advisor. Let’s look at a typical bear market pull-back. We all know they happen, remember 2008 and 2001? If you are using a passive style and the market drops 30% over 6 months…SURPRISE!

Your portfolio value drops too and depending on your allocation, the drop may be pretty significant. You may be a bit upset because your advisor didn’t “do anything” about it. However, since the investment style is passive and based on a buy and hold mentality, you really should not have expectedmuch activity. If your advisor’s style was more active, you may have been able to expect a different set of actions.

Our investment style is often referred to as “momentum investing”, which is an active management style. The actions we would take in a portfolio during that same bear market event may be very different than the passive example above. This is not to say that an active investment style is always better, but statistics show that momentum investing can provide consistent results when compared against other styles or a passive index like the S&P 500.

The bottom line is: if you understand a little bit about the investment style of your advisor or broker, you are more likely to have your expectations met rather than… SURPRISE!

If you would like to learn more about our firm’s active investment strategy, consider coming to one of our monthlyworkshops or simply contact us for a consultation. We would be happy to discuss it with you.