The Importance of a “Trusted Contact”

A 30-second read by the Baron Team:  Increasingly, we understand that there can be a need to have an additional person like a trusted family member or friend we can contact to ensure the well-being of a client.  As we age, we may start to see that a person’s mindfulness and mental capacity diminishes.  For some, early-onset dementia or other illness necessitates having a trusted contact in place at an earlier age.  In those instances, who can you trust to be contacted on your behalf, if necessary? 

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Should You Reduce the Amount of Stocks in Your Portfolio When You Retire?

A 60-second read by Nicholas Scheibner: The theory of, “reduce my risk as I near retirement” has been a long-standing investment mantra for many years.  However, a reduction in risk at retirement age may not be the best course of action for every investor. The theory of reduction in risk as you near retirement needs to be looked at more closely. 

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Class of 2018: It Isn’t Too Early to Start Thinking about Your Retirement

A 60-second read by the Baron Team:  Congratulations 2018 College graduates! Throw that mortarboard as high in the air as you can and before it circles back down to earth, start thinking about saving for your retirement. You are most likely going to be responsible for setting yourself up for a successful retirement, so your best bet is to invest early and often.

Invest in yourself first. Most people think investing is the key to wealth, but while certainly important, you have to have some money first to invest. So as soon as you begin your first job out of school, start saving a minimum of 10% of your annual income for retirement. This will ensure that you invest in yourself first.  You should plan on saving this much or more for the rest of your working career.

Here is a behavior trick to help you accumulate savings: have money taken out of your paycheck automatically and deposited into a 401(k), 403(b), thrift savings plan, or other retirement account. Read our previous post on “What is the Best IRA for a Young Investor?”. Almost all employers offer retirement investment vehicles like these, where you can contribute a certain percentage of your salary for the future. What you put into the account will grow tax deferred and be earmarked specifically for retirement. Because your contributions are automatically saved, it forces you to invest, which you might not otherwise do, and the money will be spent. Consider the IRS’s system of collecting taxes throughout the year through tax withholding. They know that if it was up to us to save and pay them one big check at the end of the year, we would have already spent the money.  The same is true with investing. If a percent is taken out of every check directly, you won’t miss it. This is all part of behavioral finance, or the study of human behavior in financial decision-making. A fascinating field that we wealth advisors see play out on a daily basis.

Another behavioral finance mental trick is to keep three to six months of living expenses in a separate account from your checkbook, also known as an emergency fund. This will provide you with peace-of-mind to always know that no matter what bills come in or what happens in your career, you’ve got this safety-net of cash at your disposal that you can tap into. Keep the money liquid by putting it in a savings account or money market mutual fund. This will help protect you from those potential future financial downturns.

As always, if you have any further questions, don’t hesitate to contact the Baron Financial Group Team.

Taking a Closer Look at ETFs – the Importance of Liquidity when Investing

A 30-second read by Nicholas Scheibner: You may have heard about low- or no-expense-ratio Exchange-Traded Funds (ETFs), but cost is not the most important factor when investing in an ETF – it’s liquidity. You want to make sure that the ETF you’re investing in has a high daily volume of trading. Everything can seem great with an ETF when markets are going up, but when things are going down, and you want to sell out of your fund, you may take a big loss.

To illustrate this, picture a room with 100 people, and a door that can only fit one person at a time.  Imagine everyone wanting to leave the room at the same time.  As you can imagine, there would be a rush to the door, and it would be difficult for everyone to get out – a similar theory applies to ETFs.  If there are very few people trading an ETF on a daily basis, it can be difficult to sell at the price you would like. You want to invest in an ETF that has a lot of activity, (a large door), so that when you want to exit, you can at a reasonable price. 

For more information on ETFs, you can read our “What are some differences between Exchange-Traded Funds and Index Mutual Funds? ” article.

For any other questions, please reach out to your Baron Team

Does Your Advisor Offer Institutional Pricing?

This post originally appeared in April, 2016.  For more information on institutional pricing, visit our Investment Management page.

A 60-second read by Anthony Benante: Baron Financial Group is an institutional investor.  As an independent RIA (Registered Investment Advisor) with no allegiance to any investment company, we seek the most attractively-priced investments for our clients. We look at every situation, and when we have the opportunity to invest in institutionally-priced mutual funds that make sense for our clients, we take advantage of the opportunity. The result of this is a direct benefit to the clients’ bottom line. And here’s why:

In the world of mutual funds (which are pools of assets such as stocks and/or bonds), there can be different pricing for the same underlying investments.  For simplification, you could think about these different pricing levels as institutional and retail. Whether you buy institutional-class shares or retail-priced shares from a mutual fund, the investment itself will be exactly the same. The major difference between the two is their fees and this can directly impact investor performance. For example, retail-priced shares can have higher expense ratios, while institutional-class shares have ongoing lower expense ratios (an expense ratio is a measurement of what an investment company charges to run a mutual fund). Retail customers may experience the effects of higher expense ratios because they typically have lower purchasing power.  Retail investors may also be subjected to upfront fees (fees when you purchase shares) as well as back-end fees (fees when you decide to sell your shares). There can also be yearly marketing fees called “12b-1” fees that you might have to pay. Finally, there may be a minimum to what you have to buy.

Institutional-class shares, on the other hand, tend to offer 25 to 50 basis points (a basis point is 1/100th of 1%) of pricing advantage because of their lower fees. There are no initial upfront percentage fees (note that there can be a small nominal transactional fee to purchase these funds) and no maximum sales fees are allowed. With lower expense ratios, more of your money is actually being invested. The result of this can be better performance and better returns for longer periods. 

Ask an advisor at Baron Financial Group to find out if institutional-class mutual funds are right for you.