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Education 101


Defining your goals is imperative to prepare for your financial future.


Consulting with our financial planners will prepare you for your financial future.


Our financial planners will keep you educated on the all aspects of your investments.

Having a father who was a teacher, I am a big proponent of education clients. Helping them with their financial path is a big decision and one that they should make being property educated. Many advisors today are more salesman than advisors. We believe in building long term relationships with clients than making a large sales commission on selling a product. It takes time to build clients trust and we understand this. Below are some examples of simple things clients need to consider when making their investment choices.


Average Return Vs. Real Return

Do you ever look at a mutual fund performance to determine how well they have done over a 3yr, 5yr, or 10yr time period? Of course, we all do. However, do you ever look at the volatility or the Beta of the mutual fund? I would venture to guess that the answer is no.

Let’s say you invest $10,000 into a mutual fund and it grows 100%. Your new balance is $20,000. The next year, you lose 50%. Your new value is now $10,000, which is your initial contribution. Quick, what is your real return? What is your average return?

Your average return over the 2-year period is 25%. However, your real return is 0%.

Click here to compare real returns vs. avg. returns over a given period of time.


How Diversified are you? Diversification, in my opinion is sometimes an overused word. Most people have heard of it, but do most people really understand it? A better word I like to use is correlation. Correlation is a statistical measure which indicates the degree to which the prices of two assets move together. Correlation between two stocks is 1.0 when the prices of the two stocks move completely in tandem. Stocks with a -1.0 correlation indicates they move in completely opposite directions. If the price of stock A goes up, the price of stock B goes down. Correlation is 0 if the two stocks move completely independently of one another.

Here is a link that provides some correlation of some asset classes:

Eroding Factors of Money

When making investment decisions, one needs to consider some of the following before making investment decisions as it can affect your overall returns.

  1. Inflation: Inflation is caused by the high rates of growth in the economy’s money supply. So, when the government pumps more money into the economy, it weakens the dollar. This means that your money’s rate of return has to keep up with the rate of inflation in order to maintain its buying power. One other thing is that Inflation is not tax deductible.
  2. Taxes: Imagine this; most families work from January to mid-May for the government. This is just to cover their taxes. The more you earn, the more you pay in taxes. Taxes are a part of life. They help pay for things like our roads and public safety. Tax deferral is not a good strategy to lessen the tax impact. It just delays them.
  3. Technology Change: If you remember the VHS, it became the standard format for consumer viewing and recording in the 1980s. By 2006, most major film studios stopped releasing new productions in this format. The DVD format took over. So what does this mean to the consumer? Changes in technology erodes your money because you have to either pay to keep up or be left behind.
  4. Planned Obsolescence: How many times do you have to replace your cell phone? It’s not that they breakdown, but companies improve their products over time. Products are not designed to last long. Companies know and plan on this for consumers to purchase their new products as the previous ones become obsolete.
  5. Financial Expenses: Fees, commissions, premiums, and charges can cut into your returns.
  6. Lost-Opportunity Costs: If you pay $100 towards tax, you not only lose that $100, but you also lose the interest that you would have received if you had invested that money. Have you ever considered the lost opportunity costs on auto, home, health, disability, and other insurance policies? If they never pay a claim, then those dollars (and the interest i could have earned) are lost forever. But, if you don’t get in a wreck, if your home doesn’t burn down, and you don’t get disabled, that’s a good thing right?
  7. Interest-Rate Declines: If you depend on a certain interest rate in order to meet your financial goals and the interest rate declines, then it may be harder for you to make ends meet. One of the things that retirees fear is investing in the market when they need this money to live on. They are afraid that they will lose their money. So they put their money in a savings account. But this strategy can still erode their money because if the interest rates decline, then that’s less money it can earn.
  8. Loans and Interest Charges: Let’s say that it’s time for a new car. You find one for $15,000. You go to the dealership and finance the vehicle with the auto company at 6% APR. But you also have $15,000 in your savings account. You are getting 3% return. So what you have just done, regardless of financial institution, is borrow your own money for a negative -3% return.