Tag: business

On January 30, 2009 the VXX began trading. Since this time the VXX is down an astounding 99.65% (it could be even more but my calculator had trouble rounding an investment down so much.) Even though this investment has lost almost 100%, many new unsuspecting victims are drawn to the gravitational pull of this horrible investment. Why?

Many investors lose sleep over staying invested in stocks and losing their retirement savings. One day back in 2008, a marketing guy at Barclays got the idea that one way to hedge a portfolio was to buy volatility. The idea goes like this: bad news + volatility = stock losses. If we financially engineer a product that tracks volatility, investors will have an instrument that hedges losses in their portfolio. Please note that this product began trading in 2009, immediately after the credit crisis.

You want to own this ETF when the financial world is going to collapse. Adjusting for reverse stock splits, Yahoo Finance shows how VXX went from $7,000 to around $17.50. The average daily volume over a 3 month period is still 39 million shares! Yes, investors are still buying this thing. Investors who bought and held this speculative “investment” are down 40% from the beginning of the year.

I would consider this ETF as the panic button. If Greece collapses or a terrorist attack or stock market meltdown, this ETF has the potential to go up 100% overnight. But the wealth that has been lost is truly staggering. Where has this money gone?

I believe that some smart MIT guy have figured out a way to continuously bet against this ETF and make a fortune. In 2012, a few MIT students figured out how to make winning the Massachusetts lottery a sure bet. They won close to $8 million. I wouldn’t be surprised if someone has made $100’s millions on this ETF.

According to investorplace in 2012, “Like most commodity price curves, the VIX curve increases as the maturity date becomes more distant — a condition known as “contango.” For VXX, this has represented a serious problem because the fund continuously rolls the first-month contract to the second-month contract as each month progresses. The result: The fund, by its mandate, is forced to sell low and buy high in perpetuity.”

This VXX is an exchange-traded fund (ETF) from Barclays that supposedly tracks the Volatility Index (VIX) futures. This index is the S&P 500 VIX Short-Term Futures Index Total Return which is a strategy index that maintains positions in the front two-month CBOE Volatility Index (VIX) futures contracts.

This ETF is cursed by roll risk or time decay. Every two months this product will roll into another contract and loss money. Over the long run this product (and others similar) are all going to zero.

As policy, I normally do not discuss trade ideas and do not recommend shorting or even buying this security. I’m just informing you that there will be a story one day on 60 Minutes about a few guys that bought an island from shorting this ETF.

This is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any security.

The material on this site represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed to be accurate, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. It should not be construed as advice meeting the particular investment needs of any investor.

Exchange-traded funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from the Fund Company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

Constant Guidance Financial LLC does not offer legal or tax advice, individuals are encouraged to discuss their financial needs with the appropriate professional regarding your individual circumstance.

Please read our disclosure statement regarding the contents of this post and our website as a whole.
Advisory services offered through Constant Guidance Financial LLC, a registered investment adviser.

If you are going through a divorce your emotions are running on overload. An unexpected divorce has been said to be more draining than an illness or the death of a close family member.

Here are a few tips to help guide you or a friend that you know that is going through a divorce:

• All divorces involve financial settlements. Take a closer look at your finances/investments to be sure that nothing is missed. Make a list of everything!
• Your divorce attorney is an expert on the law; however, don’t expect them to understand investments, taxes, and insurance.
• Now more than ever, you need a post-divorce financial plan. It is best to understand what your budget and cash flow will be after you separate.
• A good practice is to understand how divorce will impact financial aid, insurance policies, and retirement plans.
• Understand the rules of a qualified domestic relations order (QDRO) – there are tax consequences and rules that you need to follow.
• Always consider taxes – there are enormous mistakes made around negotiating pre-tax vs post-tax. You should always consider post-tax.
• Find a new financial advisor that is not associated with your ex.
• Take the time value of money into consideration. Always calculate a stream of payments rather than lump payments. You need to determine the rate that money is being discounted.
• Make sure you will have adequate health, disability, and life insurance coverage after a divorce.
• Update beneficiary information on all of your investment accounts.
• Request a copy of your credit report and look for any misinformation. A good credit will be essential to rebuilding your financial future.
• Open new bank accounts and credit cards in only your name.
• If you do not fully understand something, do not be afraid to seek another expert to ask your questions.

We can help put your mind at ease and put your financial life back together.  We bring an interdisciplinary approach to the challenges of divorce with our knowledge of investments and financial planning. We have supported our divorced clients and their attorneys by providing solutions to complicated settlement issues as well as helping them avoid common mistakes that can occur during a divorce settlement. Getting the right divorce advice can help put you back on the path towards a more confident financial future.

Many of the clients we work with are from North Attleboro, Plainville, Norton, Mansfield, Raynham, Attleboro, Wrentham. We also have helped answer questions on divorce with people who have called us in Bristol County.

Please read our disclosure statement regarding the contents of this post and our website as a whole.

Advisory services offered through Constant Guidance Financial LLC, a registered investment adviser.

Investment advice alone is worthless if it cannot be verified. President Ronald Reagan made famous the phrase “Trust, but verify”. He used this old Russian proverb when discussing U.S. relations with the Soviet Union. The foundation of trust is built on evaluating and assessing someone’s ability, integrity, and honesty. Trust is developed in relationships over time when people do what they say, honor their promises, act in a fully transparent manner, and maintain open communications. At all times the bonds of trust should be verified.

When it comes to working with a financial advisor, most people fall short of trusting and verifying. They fall into the trap of judging based solely on a financial advisors’ likability. On the other hand, in the medical industry, we do not place trust in doctors based solely on likability. The bigger the medical decision the more common it is to seek a second opinion and base our decision based on ability, integrity, and honesty.  We will often take the time to verify any essential new information.

We believe that the best way for you to seek peace of mind and avoid bad financial advice, is to base your financial decisions just as you would major medical decisions.

Ability – You should work with a financial advisor that has accumulated the financial expertise to provide accurate financial advice. Ability can be determined by whether or not someone has passed exams and successfully achieved appropriate designations. Designations can help us to judge an advisor’s competency and knowledge to provide the correct financial advice.  We would never trust a doctor that didn’t have an M.D. after their name. In the financial industry, the designations that can help you to determine a higher level of ability are: Certified Financial Planner™ and Chartered Financial Analyst.

Integrity – Does your financial advisor owe you a fiduciary duty? The Investment Act of 1940 requires us, by law, to act in the best interest of our clients, and we must place our clients interests ahead of our own at all times. We must provide advice and investment recommendations that are viewed as being in the best interest of the client. On the other hand, brokers are generally not considered fiduciaries because their advice is merely incidental to the sale of their products.  They follow a suitability doctrine which requires them to recommend you the best products.  Would you trust a doctor who was mired in conflicts of interest and made decisions based on how much money they would make off of you? Doctors act with integrity because they do not sell products and will select the medicine that is best for you. Financial advice as well, can be trusted more if it is given with your best interest in mind.

Honesty – The hallmarks of an honest financial advisor are open communications and full transparency. The best financial advisors fully disclose potential conflicts and review investment results and communicate whether or not you are on track to meet your financial goals. In addition, they have established a track-record of being trustworthy.  Judging on honesty tends to be more based on ones personal decision, however, you can verify honesty through evaluating your financial advisors personal track-record and their ability to maintain relationships. We will trust a doctor’s honesty by the success rate of their cases and ability to connect with people through educating them on the potential outcomes. The same could be said for evaluating a good financial advisor.

Our mission is to preserve and grow our clients’ wealth. We do this through putting our clients first. We follow a fiduciary duty and build trust through our ability, integrity, and honesty. We believe that we can avoid giving bad financial advice because we have spent over half of our life acquiring the knowledge and experience to provide you the most appropriate financial advice.

Please feel free to review my work experience, qualifications, and full bio here. I’m also open to any of your questions on my investment process and my investment philosophy to help give you the financial confidence to achieve your goals.

Please read our disclosure statement regarding the contents of this post and our website as a whole.

Advisory services offered through Constant Guidance Financial LLC, a registered investment adviser.

I believe that the best chance that you have to retire and to stay retired is to have a personal investment manager oversee your entire investment portfolio. The selection of your investment advisor should be just as important as the selection process of choosing your doctor. You should place just as much emphasis on making medical decisions as you do your finances.  You should not place your trust in any financial advisor because they dress well, are a smooth salesperson, or work for a large organization.

A few years ago, the National Football League (NFL) created a Financial Advisor Program because they recognized that there were too many financial advisors who were unfit to provide investment advice. Many current and former players complained that they had lost their fortunes to investment advisers who hung out a shingle and tried to pass as a qualified expert. Most financial advisors claim to be an expert in something – banking, insurance, financial planning, taxes, estate planning, or retirement specialists.  I believe that it is very difficult for you to distinguish between who is qualified and who is pretending. I believe the first step to select a financial advisor is to use the eligibility requirements set-up by the NFL, which is as follows:

• College Degree – Bachelor’s degree from an accredited four- year college (many financial advisors might not qualify!). I would personally add an MBA as a bonus but not a requirement.
• Work Experience – A minimum of eight years of relevant work experience and have relevant graduate education training in the field of expertise. I believe 10+ years is a more appropriate experience level.
• Professional designations – Certified Financial Planner, Chartered Financial Analyst, Chartered Financial Consultant, Chartered Life Underwriter, Certified Public Accountant, Certified Investment Management Consultant, Certified Investment Management Analyst, Chartered Mutual Fund Counselor (I would add most important are CPA, CFP, CFA, and a bonus if you have more than one of these designations).
• Other important qualifications – Insurance coverage or surety bond coverage, no past regulatory discipline, and no personal bankruptcy.
• My personal considerations (not NFL’s requirement) – If your financial advisor is managing your portfolio, they should be able to tell you the price and value off-hand of 100+ businesses and investments globally without looking them up on the internet. They should understand most major industries, macroeconomics, politics, finance, and have shown a personal track-record of success in life.
• More tips – Consider the financial advisor’s pay structure – avoid commission based advisors and investment professionals who are not fiduciaries. If your advisor is from a large broker, then they are most likely held to a lesser suitability standard and is not required to do what is in your best interest.

If retirement is important to you, then I believe you should take the necessary steps to screen and interview your advisor. Work with a financial advisor who spent over half of their life acquiring the knowledge and experience to provide you financial advice. You should not settle for anything less.

Please feel free to review my work experience, qualifications, and full bio here. I’m also open to any of your questions on my investment process and my investment philosophy to help give you the financial confidence to achieve your goals.

Please read our disclosure statement regarding the contents of this post and our website as a whole.

Advisory services offered through Constant Guidance Financial LLC, a registered investment adviser.

After a loved one’s death, there are often complications concerning money and understanding how to go forward financially. While it is hard to think about your own mortality in the event that you become ill or incapacitated, estate planning can help to plan for the inevitable. Estate planning can provide you with a great sense of relief knowing that the people you care most about will be protected.

Estate planning is not just for the wealthy. Some of the basics include not titling the accounts correctly, forgetting to update beneficiary information, and not having a will. Effective estate planning transfers your assets as you intended in a tax efficient manner that minimizes transfer costs, thereby helping to preserve the wealth that you worked so hard to secure. If you plan in advance, you can potentially save upwards of hundreds of thousands by avoiding probate, not losing your assets to the state, and by lowering your estate taxes.

Properly titled assets can reduce the burden on your loved ones at a time when they are still in mourning. The less decisions that need to be made when emotions are running high, the better your family will be able to cope with unexpected burdens. You can help to give yourself more peace of mind by working with an attorney to create these estate planning documents:

1) Will – A legal document that designates how you want your money to be distributed after your death. It also gives other instructions regarding your burial arrangements, or who will care for your children. You can learn more about the different types of wills here.

2) A power of attorney – A legal document that authorizes a trusted person to act for you in your place. An estate planner can help describe the different types of power of attorney’s. You can find more information here.

3) Medical power of attorney – A legal document that appoints someone to make health care decisions for you. There is also a living will which is actually not a will at all. It is a legal document that expresses your last wishes regarding end of life decisions.

4) Trusts – A well written trust helps to protect your assets and set forth who will manage your assets during your lifetime. A trust is a structure that gives legal title to the assets of one party who is the trustee and this trustee  manages your assets for the benefit of the beneficiary of the trust. Creating a trust can be helpful in the following ways:

• Avoids complex probate
• Distributes assets to heirs efficiently – create timetables for disbursements
• Saves on taxes (generation-skipping)
• Eliminates concerns for a family member who has a disability
• Avoids unintended estate taxation of insurance policies
• Dispels potential conflicts in cases of remarriage and extended families
• Creates tax efficient charitable giving
• Protects assets from creditors and lawsuits
• Avoids medicaid “spend down”
• Insures your assets are used for your benefit if you ever become sick

There are many different types of trusts that have been created for almost any type of financial situation that you can imagine. It is best to speak with an estate attorney about your particular circumstance. An estate planner will help make certain that your will and trust are coordinated. Assets such as a retirement account, life insurance policy, annuity, will pass directly to the named beneficiary on that account. Mistakes are made when these beneficiaries do not match your wishes in the will. This could potentially create unintended conflicts which may trigger unfortunate court battles within your family. It is critical that you understand how your assets are titled and the legal consequences of the titling. You should speak with an expert on the different ways that you can title assets. Common forms of property interests include Tenancy in Common, Joint Tenancy with Rights of Survivorship, and Tenancy by the Entirety.

Summary

You have worked hard to earn your money. Now is the time to take the next step and protect your wealth in manner that creates a plan for your loved ones . This will help to reduce the complications that may arrive financially if there happens to be a change in your health. The estate attorney I have partnered with can create an estate plan for you at a very reasonable cost. If you would like to learn more how I can help prepare your estate plan or if you have any questions, feel free to give me a call at 508-207-8049 or send me an email to mitch@cgfadvisor.com.

Mitch is a Certified Financial Planner™ and Chartered Financial Analyst whose passion is investing and helping others achieve their financial goals. Give us a call to schedule your free consultation and we can help give you peace of mind.

Please read our disclosure statement regarding the contents of this post and our website as a whole.

Advisory services offered through Constant Guidance Financial LLC, a registered investment adviser.

In my fee-only investing practice, I help my clients avoid many of the common mistakes that people make on their road to retirement. Below is a list of the 7 most common investing and financial mistakes that you should avoid as you save for retirement.

Mistake #1 – No tax sheltered income
The best way to save for retirement is through deferring as much income as possible through an IRA or work retirement plan. In 1997, the Roth IRA was established which has turned out to be the best vehicle to save for retirement.  No matter your income level, you can contribute to a Roth IRA. Affluent investors utilize “backdoor” contributions as long as they don’t have existing pre-tax IRA’s. (please contact a tax advisor or myself for a full explanation)

Mistake #2 – Tax inefficient investing
It is best to avoid paying short-term capital gains. Instead use short-term losses tactically to offset them. Tax-loss harvesting is a technique used by the best investors to lower taxes while maintaining the risk/return profile of their portfolio. We believe that you should invest in a separately managed account or personalized portfolio rather than a mutual fund to maximize your tax treatment.

Mistake #3 – Investing with no investment philosophy
9 out of 10 portfolios that I give a second opinion on either take the shotgun approach to investing or are not properly diversified. The over-diversified portfolios are invested in six or more mutual funds across the world with no care for valuation. The other investment philosophy that I see is portfolios overweight in the hottest stock that has the most momentum. These portfolios are marked by low returns and high fees.

Mistake #4 – Not Keeping Score
What all the best investors have in common is that they keep score.  These investors select a proper benchmark and monitor those results to determine if their strategy is working. They understand the tremendous power of compounding and how exceeding this bar will make more money over time.

Mistake #5 – Not having an Estate Plan
Most of us are guilty of lacking a contingency plan because we believe nothing bad will ever happen to us. Trillions of dollars will be transferring generations over the next decade. While this conversation can be uncomfortable between family members, I advise that you should bring up this topic before your possible inheritance goes to the state.

Mistake #6 – Not fully understanding Social Security rules
With less companies offering Pension Plans, more retirees are relying on Social Security than ever before. Social Security is one leg of your retirement plan and you should work with an advisor who can maximize the most money out of the system.  Be sure to work with an advisor who understands the basic techniques to maximize social security.

Mistake #7 – Going it alone
The most successful investors have assembled their own team of all-star professionals. It is in your best interest to hire different professionals to prepare your taxes, invest your savings, and plan your estate. Your team should have letters after their names such as CFA, CFP®, and CPA. These designations mark professionals who are knowledgeable, believe in continuing their education, who maintain strong professional standards, and champion strong ethical behavior.

If you would like to have an accomplished investment professional with a Chartered Financial Analyst (CFA) designation personally manage your investments and a Certified Financial Planner™ advise you on retirement plan, feel free to give me a call at 508-207-8049, visit CGFadvisor.com, or email me at mitch@cgfadvisor.com.

Please read our disclosure statement regarding the contents of this post and our website as a whole.

Advisory services offered through Constant Guidance Financial LLC, a registered investment adviser.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market value weighted index with each stock’s weight in the index proportionate to its market value.

The single most successful character trait that trumps them all is preparation. We have all heard the phrase that success is where preparation and opportunity meet. Whether it is preparing for a game, test, meeting, interview, presentation, or saving for retirement, the most successful people are the ones who are the most prepared. There were two noteworthy news items this week that apply to early preparation and there was also another example that received no press. The first story is when 2014 PGA Player of the Year Rory McIlroy, who was preparing for this years Masters tournament, found his way to the gym early one morning — only to be joined by Super Bowl-winning quarterbacks Tom Brady and Peyton and Eli Manning in their off-season workouts. “Friday morning, I got in the gym about 6,” McIlroy said Wednesday, “Brady walked in at 6:15, and the Mannings walked in at 6:30. That was my time to leave.” Tom Brady has said on record numerous times that he has gained his edge by being better prepared than the competition. The other news item this week that you can apply in a business context was a tweet sent from Apple’s CEO Tim Cook before the iwatch launch that got retweeted 6.2k times, “Got some extra rest for today’s event. Slept in ’til 4:30.” If the foundation of your company’s corporate culture is built on preparation, you are more than likely working for a successful organization that is differentiated from the competition.

The other not so newsworthy headline yet clear example of how preparation trumps all other character traits came from a personal experience. One of my clients started saving early and often and is now on their way to a comfortable retirement. While some of my clients are fortunate enough to accumulated stock options over their careers, most have to grind it out by saving a few percent of their wages each year. These clients are not accomplishing this through buying gimmicky insurance products, or other high expense financially engineered products. They are keeping it simple by investing in a diversified, high quality basket of companies via a Roth IRA and company retirement plan. This is the winning formula I try to replicate for all my clients – defer paying taxes and compound wealth over time. I believe the key to your current or future retirement plan starts with the investment decisions that you will make today and how well you will be prepared to meet your next challenge. If you would like me to help you prepare your retirement plan, feel free to give me a call at 508-207-8049 or email mitch@cgfadvisor.com.

Please read our disclosure statement regarding the contents of this post and our website as a whole.

Advisory services offered through Constant Guidance Financial LLC, a registered investment adviser.

Hi Marie,

First of all, congratulations on winning Powerball! Welcome to the social class of the 1%. You are in some serious need of professional financial advice. Having hit Powerball for $188 million, your first step should be to consult a financial team of experts. Believe it or not, the statistics are not in your favor – on average, around 90% of winners go broke in less than 5-years.  We have all heard the horror stories of NBA stars squandering fortunes and around 70% of ex-NFL players are financially stressed after a few years. Sports Illustrated had the bankruptcy number as high as 78%.

My recommendations for Marie are no different than if you received life insurance proceeds or a substantial inheritance, sold a business or real estate, cashed out a retirement plan, exercised stock options or won a large lawsuit. What should you do with this large windfall?

For starters, I believe you shouldn’t buy an annuity, life insurance, invest in private equity, buy undeveloped land, concentrate your wealth or speculate in any type of investment that hasn’t been in operation for at least 5 years.  Family members might be pitching new business ideas such as car washes, restaurants, or websites. Nobody will be thinking in your best interest.

My first advice is that you need to consult a team of experts. Your new wealth has created a net set of potential liabilities. For instance, you are now a target for a lawsuit and need to think asset protection. Your #1 problem will be how to overcome your sudden wealth feeling of “overconfidence”.  Most sudden wealth recipients tend to believe that they can buy anything at anytime.  This feeling of irrational exuberance is what usually leads to the ultimate bankruptcy. The typical questions that you need to answer are not much different from all my other clients such as:

• How do I not outlive my investments and leave a legacy for my beneficiaries?
• Should I invest in bonds, stocks, CD’s or all the above?
• With interest rates near 0%, how can I live off the income?
• How much money should I donate to charity and through which means?
• Where should I live and how many properties should I purchase?
• Does it make sense to pay off my mortgage or set aside money for education?

An estate planning attorney will help you will rethink an estate plan that may include trusts, a will, power of attorney, health care proxy, and other legal recommendations. In addition, the team of experts will include a certified public accountant, certified financial planner or an experienced financial advisor.  It is critical that you understand the net after-tax value of your windfall because you need to take into account gift taxes, estate taxes, and the impact of your new tax bracket for both the federal and state levels.

I believe the key to a comfortable retirement is that you will need to create two different streams of income. The first stream of income will cover all of your essential expenses for the remainder of your life, and this money should not be risked in the market. A financial plan will be essential to categorize these expenses. The second stream of income is much more complicated. You should seek a financial manager who has experience managing various types of investments at a reasonable fee.

If you need financial advice or help with your investments, I would appreciate the opportunity to speak with you. Feel free to call my office to schedule a consultation. You can learn more about my practice and how I work with clients by visiting CGFadvisor.com. And for you Marie, I look forward to hearing from you. 🙂

Please read our disclosure statement regarding the contents of this post and our website as a whole.

Advisory services offered through Constant Guidance Financial LLC, a registered investment adviser.

This week will go down as a classic case study of what happens to a company when they lose their competitive advantage. To nobody’s surprise, Radio Shack was delisted and is preparing to shut down and an announcement was made that Office Depot is being taken over by Staples. We believe that both of these companies were too slow to adapt to new technology and were unable to maintain their competitive advantage of mass distribution. Neither of these investments would have met our criteria of investing more like a shark.

Their tombstone should be a lesson to all managers:  Adapt to new technology and develop new leaders or suffer our fate.

We believe that businesses that are slow to adapt to new technologies and do not reinvest back in developing their employees will watch their competitive advantages erode slowly over time. Ten years ago each company had very talented managers and pristine balance sheets. What happened next can best be summarized in this Warren Buffett quote, “When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.”

The reputation of Radio Shack and Office Depot was lost because their management teams did not transition to the digital age. They lost what Buffett coined as “moat”. A company with a wide moat has one or more of the following advantages: brand name, pricing power, distribution, or cheaper access to natural resources. The best managers understand how critical it is to maintain and widen their competitive advantages or moat.  Companies with a narrow moat typically have unfavorable downside protection and low visibility of future earnings.

We prefer to invest in businesses that reinvest into technology and talented employees in order to build the long-term success of the organization. The best leadership teams shape and exploit their respective company’s competitive advantages and continuously try to improve their teams’ personal development. Companies that invest in professional development and leadership training have a better chance of recognizing changing competitive advantages in a fast moving economy. Our portfolio comprises of stocks that are developing tomorrow’s leaders and are continuously striving to differentiate their competitive advantages from the competition.

Please read our disclosure statement regarding the contents of this post and our website as a whole.

Advisory services offered through Constant Guidance Financial LLC, a registered investment adviser.