A 60-second read by Anthony Benante: Comparing the Dow Jones Industrial Average (DJIA) to a specific investor’s globally-diversified portfolio is like comparing apples and oranges. Though there may be many more differences, we highlight a few here to consider. The DJIA consists of 30 large U.S.-based companies representing all industries except transportation and utilities. A globally-diversified portfolio should be tailored to a specific investor’s profile, and may have exposure to well over 500 different companies (through Exchange Traded Funds and mutual funds) in all industries, as well as possible exposure to fixed income and other financial instruments. The DJIA is a price-weighted index, not market-cap weighted. This means that the index is constructed with companies with higher stock prices, such as those in August of 2017, like Boeing (BA), Goldman Sachs (GS) and 3M Co. (MMM). These companies carry more weight than those with lower stock prices, like Pfizer (PFE), Cisco (CSCO) and General Electric (GE), regardless of the total market value of each company. So, if a few of the high-priced stocks are doing well, the index can do well compared to a diversified strategy. A good globally-diversified strategy is typically constructed for a specific investor with a unique profile. The strategy should identify a risk profile and attempt to maximize return within that risk profile, while helping the investor achieve their financial goals. Finally, the DJIA typically only makes changes based on corporate actions and market developments while a globally-diversified strategy should make changes specific to the investor – when investments move outside of targets (rebalance), underperform (choose a better performing peer investment) or if there is a change in the investors specific profile (change the risk profile).
So when you hear about the performance of the DJIA, know that you are hearing about the performance of a few “popular” U.S. equities. For a more personal understanding of your investments, you should understand the risk profile of your strategy and understand how your investments are helping you to achieve your long-term financial goals.
Please reach out to your Baron Team if you have any questions.
A 30-second read by Victoria Cannillo: In a previous post, we provided an overview of myRA, a retirement savings option, backed by the U.S. Treasury, for those who didn’t have access to an employer-sponsored retirement savings plan. The program was introduced in 2014 to enable participants to contribute to a retirement plan with flexible contribution amounts and no fees to open an account. The Treasury Department has recently announced that the myRA program will no longer continue, stating the demand for the program did not warrant the expense.
On the myRA website it states, “The U.S. Department of the Treasury has decided to phase out the myRA® retirement savings program and the program is no longer accepting new enrollments…” According to a July 28, 2017 article in The New York Timesby reporter Tara Siegel Bernard, in the few years that the program was in existence, there were roughly thirty thousand participants. Participants of the program have the opportunity to rollover the savings that they accumulated through myRA into a Roth IRA. The myRA website provides participants information about selecting a new Roth IRA provider so that they can continue saving.
Please reach out to your Baron Team for any further questions.
A 60-second read by Anthony Benante: If staying up-to-date on market events is a part of your regular routine, that is fine, but remember that volatility is a constant factor when it comes to investing. It’s best to have a plan established before you invest, so that you know what to do when markets make unexpected short-term moves. For the assets you are investing for the long-term, the day-to-day fluctuations you experience now may not seem as significant over time. However, there are actions you want to take.
At Baron Financial Group, we review our investment choices versus peer investments, to determine if any individual investment choices need to be changed. Also, we review client portfolios versus their specific long-term strategy and rebalance them if needed. These actions are part of working towards our main objective, which is to help our clients achieve their financial goals. Volatile markets are incorporated in our financial plans for clients and we keep clients informed about their chances for achieving those goals in different market environments. This helps give our clients a clear perspective of where they stand and what it will take to achieve their long-term financial goals, even after incorporating recent market moves.
James is a valued team member at Baron Financial Group. As an Associate Financial Planner, James performs research and assists the advisors with the creation and updating of financial plans for clients. In addition, James is our technology expert, researching and implementing technological advances within the field of financial planning to help enhance the service we provide to you.
Founding partner, Victor Cannillo, enjoys mentoring James and the other members of the firm. “James is knowledgeable and enthusiastic, and is a great support to the team, whether he is assisting the investment committee with fund research or aiding the firm with the important software we use.”
James is a member of both NAPFA (National Association of Personal Financial Advisors) and FPA (Financial Planning Association). NAPFA is the country’s leading professional association of Fee-Only financial advisors, committed to working in the best interests of those they serve. Like NAPFA, the FPA aids in the professional development of its members and adheres to “a code of ethics that reflects their commitment to help clients achieve their life goals”.
Fiduciary (fi·du·cia·ry) stems from the Latin word fidere, which means “to trust.” The definition of fiduciary, according to Merriam-Webster, is: relating to, or involving a confidence or trust. One can act in a fiduciary manner (adjective) or act as a fiduciary (noun). A fiduciary is trusted and relied on to act in the best interest of the client at all times.
“A financial advisor who follows a fiduciary standard must disclose any conflict, or potential conflict, to their clients prior to and throughout the advisory agreement. Registered Investment Advisors (RIAs) are held to a fiduciary standard of care. By law, they must act solely in the best interest of their clients.” -From the National Association of Personal Financial Advisors (NAPFA)
A recent article in The New York Times by reporter Tara Siegel Bernard posed the question “What kind of adviser should I work with”… “You’ll want to hire the type of financial adviser who promises to act as a fiduciary all of the time, with all of your money, which is a fancy way of saying that person must be loyal to you first. In fact, you should ask your financial planner to sign a fiduciary pledge, a promise not to profit at your expense.”
Baron Financial Group is a Registered Investment Adviser (RIA). We are long-time members of NAPFA, and we sign a fiduciary oath for every client we serve. Advisors in our firm hold the CFP® and CFA® designations, as well as the NAPFA-Registered Financial Advisor designation. We work hard to educate our clients and the public about transparent- and objective-financial advice, where the client’s interests come first.
We are proud to be a Women’s Choice Award® Financial firm since its inception in 2013. The Women’s Choice Award for Financial Advisors was created by WomenCertified Inc. in an effort to help women identify financial advisors and firms that provide quality service and strong commitment to their female clientele. The award is based on rigorous research, 17 objective criteria and additional points of reference that obtain feedback regarding the advisor’s service and practices. Women’s Choice Award® Financial Advisors and Firms represent less than 1% of financial advisors in the U.S. As of July 2017, of the 807 considered for the Women’s Choice Award, 139 were named Women’s Choice Award Financial Advisors/Firms.
This recognition demonstrates our commitment to all clients, but allows us to further highlight our commitment to the women’s market and to our profession — symbolizing the integrity, knowledge and service excellence we strive to deliver to every client.
Click here for a list of the Women’s Choice Award® selection criteria.
A 45-second read by Anthony Benante: For your specific portfolio, you need to evaluate your ability and willingness to take risk to help determine your personal profile. Without knowing about your entire financial situation, we would not make a specific recommendation for any asset. Typically, including globally-diversified assets in your investment strategy offers statistical benefits. We encourage you to think about the long-term nature of investing and validate your investment strategy with a comprehensive financial plan. The plan should show outcomes based on different market environments and cycles.
Given the expectation that you could live into your 90s, it would probably not be best to look at your portfolio through a political lens. In the short-term, breaking news is constantly occurring and it would be difficult to react correctly to each new development as it relates to your investments. Over the long-term, there is the possibility for change in political parties and history suggests that the political party in charge in the United States has little impact on long-term market performance. The decision to include international investments should not be directed by current political situations, but rather based on which investment strategy can help you achieve long-term success.
Reach out to our Baron team if you have any questions…
Baron is pleased to award a Baron Financial Group Scholarship for the 7th consecutive year. Two deserving graduates from the Fair Lawn High School Class of 2017 were presented their awards in our principal office on Route 208 South in Fair Lawn. Duke Kwon will study Economics and Computer Science at Rensselaer Polytechnic Institute in Troy, New York. Duke’s future plans include developing business apps for iPhones and Androids. Alyssa Kline will be attending Messiah College in Mechanicsburg, Pennsylvania, as an Accounting major. Alyssa’s goal is to become a CPA.
Continuing in our commitment to education, Baron Financial Group is proud to help these deserving students further their education.
Editor’s Note: As of July, 2017, the Treasury Department has announced that the myRA program will no longer continue. For more information, read our update to this post.
A 45-second read by Victoria Cannillo: You have most likely heard of a Roth IRA or a Traditional IRA, but what about myRA? myRA was introduced in 2014 as an option for people who don’t have access to an employer-sponsored retirement savings plan or other retirement savings options. According to the myRA website, you can contribute up to $5,500/year into the account ($6,500/year for those older than 50). Once the account reaches an account balance of $15,000, or when the account is 30 years old, the savings will be transferred or rolled-over into a private-sector Roth IRA.
For 2016, the maximum income allowable to participate in the program was $132,000 for single-tax filers and $193,000 for couples filing together. Read more specifics about the program, here.
Some pros and cons of myRA to consider:
No cost to open an account and no fees
Flexible contribution amounts (a traditional IRA has a $1,000 minimum)
Investments are backed by the United States Treasury
Tax benefits are similar to a Roth IRA, such as earning interest tax-free
There is only one investment option – a treasury bond (accounts are invested solely in Government Savings Bonds)
Once the account balance reaches $15,000, it stops accumulating interest, so your maximum for savings is limited
Doesn’t seem to offer many long-term options at this time
Reach out to your Baron team if you want help in understanding what kind of IRA would be best for you.