The popularity of income streams at the recent Las Vegas Money show was unbelievable. Most people are interested in income strategies, and there are a lot of questions about how to achieve income through investments.
We’d like to let you know about a new investment idea to think about – these are floating rate senior loan ETFs. They are paying about 5-6% in yield, and we think they could be a good tool for your portfolio. The ticker symbols to watch are:
These ETFs invest in credit from the banking industry and are tied to variable rates, so they’re not tied to the interest rate cycle. The income is paid monthly. However, remember that higher yield investments need to be watched on a daily basis, because risk is higher in these kinds of investment vehicles. Income is important, but so is protecting your portfolio.
We use a combination of mutual funds and ETFs for many of our income clients – there are so many great innovative ideas out there and it’s an exciting place to be investing right now. We love ETFs, but there’s nothing wrong with mutual funds; we like ETFs because they are lower in cost and very transparent, but sometimes mutual funds are the best way to move your portfolio forward. If you have any questions, are concerned about the risk in your portfolio or just want a second opinion on your investing strategy, please don’t hesitate to call us at 800-391-1118.
A lot of people are rushing into stocks right now, but patience is the ultimate virtue. We think that this unusual market will still pull back eventually, so don’t be fooled by the rush higher.
New bull markets are good markets to invest in right now, such as Japan, clean energy and natural gas. Getting into a new bull market is a much better place to enter the market than an old bull market (such as the U.S. right now).
We also want to encourage you to sign up for the Making Money Alert as you think about investing, and check out our five ETFs for income here.
Right now, the Federal Reserve is in the market because the economy would not be able to grow without its involvement. We have a situation where interest rates are artificially low and so people are wondering what to do with their savings accounts and CDs – how do you make money on your savings without interest?
We continue to believe in the bond market for investors, but we know that it’s tempting to get into stocks because of dividend yields. Many investors are afraid of a bond market bubble and so hesitate to invest in bonds. However, we will say it again – we believe that bonds are the place to be for the majority of your portfolio.
Even if bonds do decline, you’re still getting an income stream and you are not exposed to risk and losses like in the (right now, very volatile) stock market. There are decent income streams available in the bond market, you have to be wise about what you buy and why. Also, you don’t have the downside risk in bonds that you have in the stock market.
For more information, please check out this excellent article and presentation by Jeff Gundlach. We think that he makes some excellent points and we encourage you to take this advice seriously. If you have questions about how to use bonds in your portfolio, please call our offices at 800-391-1118.
This is a podcast summary. For more information, please listen to the entire broadcast here.
This is a scary topic, but it needs to be discussed. Widely, most people are not saving enough for retirement and it has become a difficult trend to deal with. We suggest that you save for retirement ahead of your kids college education or other desires, because when the time comes, that money will be what you will live on.
In Cyprus, in Europe, there’s a proposed tax on depositors, and it is causing a lot of tension and upheaval over there. Europe is not fixed and we need to not be lulled into false confidence because the EU has been largely quiet of late. We are also still advising caution in the U.S. stock market, even though it is performing well this year.
As always, email any investment questions or concerns to askdoug(at)dougfabian(dot)com. We want to help you make the best possible decision for your portfolio.
Every week, we have lots of conversations with investors. One of the things we’ve really noticed lately is that most people are sitting on cash, because of fear of volatility. If that is your strategy, we want to encourage you to look at your options – for example: the bond market is stable right now. One thing that can disrupt a strong bond market is a weak currency, but right now the dollar is strong, so that’s not a risk at this time.
For our clients who invest in bonds, their income streams are steady. There are plenty of places to invest in the bond market that can give you income, capital appreciation and liquidity while we wait for market corrections and other opportunities. Our portfolios are conservatively positioned, awaiting other opportunities – but not necessarily all in cash.
We’ve also talked to several clients who have a highly appreciated assets, particularly in real estate. We are advising them to exit those assets in this “recovery phase” of the real estate market in order to get out of illiquid investments and be in a better position from a legacy standpoint. It’s important, if you have highly appreciated assets, to make a plan to manage those, taking taxes, legacy, philanthropy and other goals and considerations into account.
If you’d like to find out more about how we can help you and your money face upcoming challenges, act now by listening to the Monday Morning Market Outlook podcast, and then by giving us a call at 800-391-1118.
As always, email any investment questions or concerns to askdoug(at)dougfabian(dot)com. We want to help you make the best possible decision for your portfolio. This is a podcast summary. For more information, please listen to the entire broadcast here.
Contrary to popular opinion, setting goals and achieving them is relatively easy. However, there are two ground rules that people often miss, and then wonder why they don’t have more success. The rules are these: make exact, attainable goals, and write your goals down. Here are a few examples of the goals we encourage investors to make:
Income investors: exact amount of income you want to make this year from your investments
Growth investors: set growth target and decide what percentage of return you are aiming for
Add to retirement accounts through saving
Pay down debt
Increase non-retirement savings
Whan you have exact, written goals, it’s much easier to implement plans to make those goals a reality in your portfolio. If you want an 8% return on your investment, you need to think through what you are currently doing to accomplish that, and what you need to change this year.
This is the key to a good financial plan: calculate your net worth and set good goals. This is the time to do it, too, as January is the month that we are open to change and new ideas, and we want to set the right habits in place in the beginning of the year.
Also, don’t forget to listen to recent teleconference for some of our latest investment advice for achieving your goals, and if you have questions about your specific financial plan or portfolio, please call us at 800-391-1118 or email askdoug(at)dougfabian(dot)com.
This is a recap of our recent teleconference (Tuesday, November 13, 2012) titled: The Election, Your Money, Your Future. If you missed the presentation, we encourage you to listen to the audio recording and download the handout, as well as read this blog for more information.
The purpose of this teleseminar is to help you with a thoughtful investment process. This is for general information and education, not personal investment advice.
Here are the main points we want investors to think about in this season:
The elections are over, and it’s time to remove politics from your investment thinking.
Think before you act. Make good investment decisions, follow good strategies.
Avoid speculation. No one can predict, guess or bet on what will happen next. There’s a lot of noise out there, so be wary of fear-mongers.
Think about solid investment ideas to build upon.
First, let’s discuss the things that we are certain of, that will absolutely affect our money and our decisions:
Obama re-election, Congress remains the same.
Obamacare implementation, taxes, and regulation.
Recession in Europe is worsening
Recession in Japan
New leadership in China
Next, examine those things which we are less sure of. These are not news items we should be speculating about or making decisions based on, because we simply do not know their outcome. Be aware of these items but not panicky about them:
Fiscal cliff outcome
Greece to exit the euro and deal with current cash needs
Spain also has severe cash needs
New policies from China
Potential global recession
Again, we are not making investment decisions based on things we don’t know. We need to be prepared for worst-case scenario, but not investing our of fear or an end of the world scenario. For your continued education and information, we will be having another teleseminar on Tuesday January 15, 2013 in order to update these uncertainties and continue moving forward, so mark your calendar!
Fixed-Income Review and Outlook
Bond market uptrend still in place, which makes bonds a good place for your money right now. There are a lot of people predicting bond market collapse, but we think this is inappropriate speculation, and we want our clients to know that we believe the bond bull market to be still intact.
(Click on chart to enlarge – Key to charts: AGG = Aggregate tripleA rated bonds, LQD = Large corporate bonds, TFI = National municipal bonds, EMB = Emerging market bonds)
Speculation continues that interest rates will rise in the next year, but for right now, these price trends are clearly in place. Obama being elected is an affirmation of Ben Bernanke and the Federal Reserve’s monetary strategy, which is keeping interest rates low. We want to dispel the myth that worries about the strength of the U.S. dollar right now. We believe that the dollar is doing just fine, currently in a short-term uptrend, and is stable. We are monitoring it and global faith in our currency, but we are not seeing anything to worry about in that area right now.
U.S. Indices Review and Outlook
(Click on chart to enlarge – Key to charts: DIA = Dow Jones Industrial Average, QQQ = Nasdaq 100, SPY = S&P 500, IWM = Small-cap stocks)
The longer we stay below the 200-day moving average, more probability of a longer and more serious correction in the markets. We believe that there is still a great deal of short-term risk in the market, but that this will present good opportunities for smart investors. We are defensive with our portfolios but looking for opportunities, and hoping to be buyers in this climate.
International Review and Outlook
(Click on chart to enlarge – Key to charts: EFA = 800 stocks of large international companies (no U.S. exposure), IEV = Europe, EEM = Emerging markets, FXI = 25 largest companies in China)
Opportunities for Income and Growth Investors
Mortgage backed security strategies
Emerging market bonds
Invest in securities that create a monthly income stream
Dividend equities (could be a good opportunity for purchase in a panic)
Equities that pay income stream (we like utility stocks and real estate investment trusts right now)
Precious metals, mining.
We want to remind our listeners and readers that position size is very important when making investment decisions. We are in defensive positions right now, but alert to buying opportunities. We are not speculating or panicky, but wise and ready for our next investment move.
Personal Finance Post-Election Strategies
With President Obama, tax issues are coming in 2013. California taxpayers, Prop 30 is retroactive, so there will be a large tax bill coming to California taxpayers that you need to be aware of and prepared for. Obamacare taxes will begin, as will fiscal cliff negotiations, and this all means that you should look closely at your taxes and meet with your CPA so that you can be prepared for the impact of this political and fiscal climate.
This is the investment area where most people make big mistakes. Before you do anything, declare the kind of investor you are, and make a plan for that investment goal. The mistake that income investors most often make is chasing yield. We encourage you, do not chase speculative or volatile investments in order to get higher yields. It’s not worth it. Your entry point is critical, and it’s important to pay attention and put your money to work at the right price and right time.
We’re in a secular long-term bear market. Have a shock absorber for volatility. Look for equities that pay income and avoid risk.
Everyone is going to die at some point, and how do you plan to take care of your spouse, family, heirs and other causes when that happens? Do you have a relationship with a competent investment adviser? You need professional help in order to insure that your goals and dreams are realized, both for you and your loved ones.
To close, we have some essential takeaways for all investors:
Know that short-term risk is high.
Revisit investment objectives.
Revisit asset allocation.
Prepare for buying opportunities.
As a thank you for participating in our seminar we would like to offer you a free consultation to discuss your portfolio and strategies to achieve your financial goals. This includes an in-depth analysis of all the holdings in your portfolio. We will share with you the unique strategies we are using for our clients right now and how active portfolio management can be of benefit to you.
This offer is available for goal-oriented investors with more than $250,000 in their investment portfolios. Contact us for a brief introduction and to schedule an appointment to review your accounts.
To schedule your free Portfolio Assessment, call us at 800-391-1118.
Ticker symbol IYLD is a relatively new fund, established in April 2012. It’s an Exchange Traded Fund focused at high current income, and should maintain long-term capital appreciation. It’s very affordable, is not actively managed, and is very broadly diversified, at about 60% fixed income, 20% equities, 20% alternative income sources.
We want to be aware of how these funds are working into our client’s portfolios and end-goals, and we are always watching how these funds perform over both long and short-term. This particular ETF is currently a core position for our income clients.
If you have any questions about how this fund might fit into your portfolio, please call us at 800-391-1118.
One thing that’s true in every decade of investing is this: Everyone needs to have both short and long-term goals and objectives for their financial plans. As you invest and make decisions about jobs, assets and your future, you need to think about where your money goes, how it can work for you and what you want to do with it.
For investors in their 40s, the key issue is managing habits and increasing cash flow. Everyone needs to be saving money aggressively for retirement if they can, but here are a few common-sense money tips that will help move the needle on your financial life and hopefully create good habits for the future:
Pay off Student Loan debt. If you have any student loan debt, get rid of it. Most people in their 40s have young children, so this is also a good time to get your college savings going for them.
Avoid car payments. Many people get in the habit of getting a new car frequently, but our advice is to avoid doing so, and avoid high car payments.
Eat at home more frequently. Even if you’re just getting take-out, it’s amazing how much money you can save by eating at home. Try eating out one night less a week and see how quickly it makes a difference.
Live close to work. Gas, wear and tear on your car and time spent on the road are all expensive. Give yourself a short commute and save some cash while you’re at it.
Avoid divorce. Nothing sets people back further financially then divorce, so avoid it if you can.