J. Edward Group November Newsletter


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November, 2012 Newsletter from Jim Eastwood

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J. Edward Group November Newsletter

  1. 1. J Edward Group Jim Eastwood, CFP® Financial Coach P.O. Box 45484 Westlake, Ohio 44145 Financial Formulas…... Tel. (440) 655-1957 jim@jedwardgroup.net “Those who spend too much will eventually be owned by those who are thrifty.” - Sir John Templeton Ready For Retirement? Market Risk - It’s Growing! When it comes to planning for retirement, there are Do markets seem riskier than ever? It’s not yournearly as many approaches as there are individuals imagination….they are! For many years, marketsinvolved. Although there is no single best way to counted on investors to behave randomly, neverapproach the day your “last paycheck” arrives, there moving in unison into or out of the investment mar-are definitely some important points to consider, and kets unless there was some external influence suchwhich ones you adopt as part of your own planning is as a natural disaster, war, or identified threat to over-largely determined by your outlook as well as your all well-being. In recent times, there have beeninvestor personality. There is no right way or best three events that caused investors to move in a uni-path to take; you can be in or out of the market, ac- fied manner not seen before: the 1987 stock markettively trade or buy-and-hold, but no matter what your crash, the 1998 S&L bailout, and the 2008 financialapproach, it’s critical that you have a plan in place! crisis. It comes as no surprise that there has been a significant event just about once each decade, but The single biggest mistake most people make is the underlying cause - the triggers coordinating thisthat they have a dollar figure in their heads rather than behavior - include among them the three factors ofa plan for generating the income they’ll need. What “financialized” capitalism, an increase in speculationyou’ll need is based on how much you’ll need, and fig- as opposed to investing, and a dramatic increase inuring how much is based largely on factors unique to the leveraging of markets.you, such as your own habits for spending, your fam-ily history of longevity and your health history. Since the 1980’s, markets have become muchDon’t assume you will immediately wind down your more financialized, meaning that wealth is more con-spending the first day of retirement - we are who we centrated through financial engineering. More andare. If your parents or your spouse’s parents lived more the focus has turned to producing money as op-well into their 90’s, it’s safe to assume you’ll do the posed to creating things of value. As proof of thesame (or better). If your health is such that you change, consider that in recent years the financial(continued on page 2) (continued on page 2) ©2012-2013 J Edward Group, Inc. P.O. Box 45484 Westlake, Ohio 44145 Phone: 440-655-1957 Website: www.jedwardgroup.net
  2. 2. Page 2 Financial Formulas…. Ready For Retirement? (continued from page 1) are already spending for burned by market down- asset manager who, on a care services, it would be turns, the problem is that fee-only basis, will posi- unwise to assume those cash positions will never tion your money so as to costs won’t continue or keep up with the cost of take advantage of market even increase as you age. living, even as interest movements. The two rates return to normal benefits you get are mar- Another planning pitfall levels. If you are tempted ket returns along with ac- that many face at a critical to sit in cash - not simply count protection! point prior to their retire- to avoid a currently de- ment is deciding to avoid clining market, but you The final piece of the the market by escaping to stay there through more retirement planning puz- cash. While it may seem a than one market cycle - zle that can’t be over- safe strategy, particularly you may want to have a looked is the tendency for for those who have been discussion with a qualified (continued on page 3)“ The only reason a great many American families don’t own an Market Risk - It’s Growing! (continued from page 1)elephant is that they sector contributed 20% to are now following the Perhaps the factor causing have never been Gross Domestic Product path of buy-and-sell, us- the greatest level of con- offered an elephant but reaped 40% of total ing the internet as their cern of the three is the for a dollar down corporate profits! trading platform for tradi- leveraging that has come tional investments, IRAs largely through the use of and easy weekly It has also become self- and even their employer- derivatives. Originally payments.” evident that speculation sponsored retirement created to hedge market has increased dramatically. plans (though the latter risk, the derivative market Mad Magazine Those who once bought may have built-in trading has now grown to a face and held quality invest- restrictions that limit amount of some $600 ments for the long term speculative activities). (continued on page 3) Financial Planning is Not Investing It’s absolutely amazing whatever is done in this ture”. How will your tax to learn that not only do area may significantly im- situation be affected by many individuals believe pact one or more area. selling? Will you benefit financial planning is the For example, when you from capital gains rates? same as investing, but so ask your advisor whether What was the original ob- do their advisors! Much you should sell an invest- jective of this asset? Will of financial planning is ment to capture gains or there be a negative impact devoted to investment take a strategic loss, the on your short-term cash planning, when in fact it’s overall plan must be con- flow? only one of the six major sidered - what we always areas of planning, and refer to as the “big pic- It isn’t always about maximizing returns, but
  3. 3. Financial Formulas…. Page 3Ready For Retirement? (continued from page 2)many of us to build a re- the future. As costs rise off is to create a life insur-tirement account and then in retirement, income ef- ance plan that will replaceplan our income around fectively declines year-by- some or all of the originalpreserving the account year. The retiree is now principal, allowing for theprincipal. If we use cur- faced with the difficult retirement plan to be an-rent fixed rates as our decision to either cut back nuitized over life, result-benchmark for taking on lifestyle or make the ing in a significant in-withdrawals, a million- even more difficult deci- crease in annual income.dollar account will pro- sion to invade principle This will require advancedduce only about $20,000 and then what? Hope not planning and paymentsin annual income, with no to live too long? into life insurance, but theavailable provision to net income receivedcover increased needs in The planning alternative (continued on page 4) Always be mindful to take that will head this that to achieve the best possible outcomeMarket Risk - It’s Growing! (continued from page 2) from your financialtrillion, nearly nine times to encourage risk-taking, tual fund industry. Risk is planning, neverthe GDP of the entire as larger companies in the increased by diluting cor- shortcut yourworld! Not even the bank- private sector begin to porate ownership alonging industry is exempt believe there is an implicit with the responsibility of financial education,from entering into these government guarantee to middle and upper man- whether you’repractices to leverage their cover any and all deci- agement, ultimately lead-lending. sions, no matter how ing to this irresponsible taking responsibility badly conceived. The real corporate behavior. The for your planning or “Too big to fail” has culprit behind all this way for individuals toalso added to overall risk. thinking may actually be working with one or neutralize some of theCorporate bailouts serve the emergence of the mu- risk (continued on page 4) more advisors.Financial Planning is Not Investing (continued from page 2)reaching your goals that make reactive decisions of risk in order to achievereally matters. After all, rather than maintaining a greater returns can also befinancial planning is all properly proactive stance. counter-productive.about establishing, priori- What is often referred to What level is appropriatetizing and strategizing as a “paper loss” in one’s for you as an individualplans to reach financial portfolio often becomes a and matches your invest-goals. When the single real loss when people re- ment time consideration?category of investments act and sell into a fallingis granted greater weight market without consider- Whatever your invest-than it deserves, individu- ing their long-term goals. ment goals, keep them inals have the tendency to the proper perspective of Taking on greater levels your own big picture. JE
  4. 4. Dedicated To Helping You Find Your Financial Formula "It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena,J EDWARD GROUP whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up shortP.O. Box 45484 again and again, because there is no effort withoutWestlake, OH 44145 error or shortcoming, but who knows the great en-Phone: 440-655-1957 thusiasms, the great devotions, who spends himselfWebsite: www.jedwardgroup.net for a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat." Theodore Roosevelt Stories from page 1, 2, and 3 Ready - from page 3 Market - from page 3 time has become the en- emy, increasing rather throughout retirement is to invest directly into than reducing risk as our may easily be 50-100% stocks of strong, well-run potential exposure to the greater, using the same companies and then hold next catastrophic market dollar outlay for your those stocks for extended event is always looming. planning. periods of time. Diversification out of tra- No matter what your ditional market-driven No matter where your investments and an over- planning for retirement own point of view, there is little doubt the land- all position that is more takes you, take advantage conservative will protect of every possible strategy scape is changing. Time was always regarded as assets, and at the very to increase your income, least, increasing cash posi- reduce your risk, and pro- the great equalizer, serv- ing to reduce portfolio tions will allow investors tect your retirement nest- to do additional buying egg for lifetime enjoy- risk and return earnings to the long-term average when prices drop and ride ment. JE out the low points with- we all look for. Now out forced selling. JE