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Double Check Your Asset Allocation to maintain a Balanced Portfolio

If you take good care of your health, you understand the importance of scheduling an annual checkup for preventative health. The same concept holds true with investments: if you take good care of your portfolio, you understand the importance of checking to make sure your portfolio is balanced annually.

Buying and holding investments is the key to seeing a consistent return on investment. But even this strategy requires you to occasionally check in with your portfolio.

Investments that fit in the past may no longer suite your needs. Your goals, objectives and financial situation may have changed. You may want to make adjustments to your investment strategy as you move through your life. If you make regular contributions to your portfolio, as you should, your asset allocation might change due to the performance of different asset classes.   An annual checkup can help keep you on track.

If a financial advisor manages your portfolio, they should be monitoring your portfolio. However, ultimately it is your responsibility to monitor your investments. You should check in with your advisor on a regular basis. After all it is your money. If you manage your own portfolio, it is important to be aware of what classes of assets you own and how they may add value to your holdings and how both your objectives and markets conditions may change over time.

Balanced and Diversified

Every portfolio should contain holdings in different asset classes, such as stocks, bonds, real estate, mutual funds, etc. Your asset allocation, or the way that money is distributed over different types of investments, is a reflection of your investment strategy and depends on your specific goals and objectives.

For example, if you are young and setting aside long-term investments, you might consider putting more money into higher risk assets that may have a higher potential return. If you want to reduce the possibility of your investments losing value, you may want to invest your money in more conservative investments.

You need to check for balance within asset classes as well. You may want to consider purchasing assets in both domestic and international markets. You can diversify by purchasing stocks from different sectors or investing your assets into Mutual Funds or Exchange Traded Funds.

Over time, you will need to adjust your investment strategy and reconsider your portfolio holdings. Although it sounds like a daunting task, it comes down to three main steps:

Review Your Target Asset Allocation

What is your investment strategy? One investor may take an aggressive position and invest heavily in startup companies, while another might invest their money in more conservative investments. The first step to rebalancing your portfolio is redefining what your investment goals are and the best way to achieve them.

While there are many “quick” methods of calculating what your ideal mix of stocks, bonds, mutual funds, and other kinds of investments should be, the heart of your investment strategy lies in your relationship with risk. If you are not comfortable with the thought of losing money, you may want to keep a higher percentage of your money in more conservative investments. If you would rather take the chance of losing money for a higher return, you may want more money in stocks.

Your age may have an effect on how much risk you are will to take on. A young investor may be more attracted to the idea of risk because if they experience a loss, they have a longer time frame to recoup potential losses. As people get closer to retirement, they may want to avoid losing any money because they will need to begin drawing on it soon. Although not everyone feels the same in general the older you are, the less comfortable you may be with the idea of risk.

Look at Your Current Allocation

How are your assets currently allocated in your portfolio? If you keep all of your assets in one place, such as in your company-sponsored 401(k), it may be pretty easy to figure out your current asset allocation. In fact, that information can often be found on the dashboard of your portfolio account. But if your investments are spread out over different accounts, determining asset allocation is a little more difficult.

There are different tools online to help you with this task, but a simple spreadsheet can give you an overview of where your money is located.

Buy and Sell as Needed to Rebalance Portfolio

Once all of your investments are laid out, you can compare your current asset allocation to your ideal asset allocation. This often means you may have to buy and sell assets in order to rebalance your portfolio.

For example, a young investor is interested in taking on greater risk with the chance of higher returns, so he/she decides to allocate 80% of their money to stocks and 20% to bonds. His or her current portfolio has an asset allocation of 60% stocks and 40% bonds. In order to rebalance their portfolio along the guidelines of their new goals, they will need to sell 20% of their bond holdings and use that money to purchase stocks.

At the end of the day, it is a simple three-step process to bring balance to your portfolio. However, the number of moving parts in any given portfolio makes it easy to get confused and overlook things. An experienced financial advisor can help you decide which asset allocation works for you, determine your current allocation, and make recommendations for how to structure your portfolio.

The 5 C's of Credit

Lenders need to make smart choices when it comes to who to lend their money to. In fact, having a system for lenders to measure a borrower’s credit may make it less expensive to take out loans. Banks can offer lower interest rates to responsible borrowers in hopes of attracting more of them and charge higher rates for borrowers who are less likely to pay. 

Thy system used by financial institutions to determine your creditworthiness is called the 5 C’s of Credit, and they include character (or credit history), capacity, capital, collateral, and conditions. Together, they paint a picture of the borrower’s financial situation, whether or not they can afford to pay back a loan, and how likely the institution is to get their loan back if the borrower defaults. 

Character (Credit History)

Paying your bills on time every month and not letting any accounts go to collections is the first step to showing lenders you are creditworthy. The lender can see the details of your credit history on your credit report, although with any debt you have in collections or negative legal actions against you. A FICO score is a bird’s eye view of the information collected by each of the three major credit bureaus, and banks will start with your FICO score before moving through the details of your credit history. 

Capacity

Capacity refers to the actual ability to pay the monthly loan payment. To calculate a borrower’s capacity, the financial institution will look at all the debt the borrower currently has, their income, the stability of that income, and their debt-to-income ratio. A borrower is destined for failure if they get into a situation where they have to pay more on their debts each month than they have coming in as income. 

Capital

A financial institution wants to know that borrowers are serious about the loans they are being given. Capital refers to the borrower’s ability to contribute money toward the purchase price of the item requiring a loan. Placing a down payment towards a home is a common example. A larger down payment shows the financial institution that you are willing to do your part to finance the purchase. The more money you can pay up front, the more you stand to lose if you default on the mortgage and go into foreclosure. 

Collateral

A borrower is more likely to get a loan if they have some collateral to secure it. That means if the borrower is unable to pay back the loan, there is some item of value that the financial institution can claim in exchange. Collateral is fairly straight-forward when it comes to loans in exchange for purchases, such as cars or property. The loans are secured by the item. 

If you need to borrow money for something other than purchasing an item that can be used for collateral, it can be more difficult. Borrowers are sometimes able to take a second mortgage or refinance loans on the collateral they’ve built in their property. That is, borrowers can take loans on the difference between the value of their property and the amount they still owe on it. 

Conditions

Finally, the specific conditions of the loan play a role in whether or not it is a good fit for a particular borrower. This can refer to the terms of the loan, such as the length of time the borrower will pay back the loan and how much interest they will pay. But it can also refer to slightly more arbitrary conditions of the loan. For example, what will the borrower spend the money on? A mortgage for an individual’s primary residence will likely be more attractive than a signature loan with no specifications to how the money should be spent.

How to Protect Yourself Against Identity Theft

A data breach at a major company can put millions of people in danger of identity theft. Unfortunately, this seems to happen nearly every other day, with new company names splashed across the headlines each week. As security technology gets stronger, hackers and malicious actors meet the challenge of finding new ways to break it. It is important to understand what kinds of activities put your information in danger and what you can do to protect yourself from identity theft.

Secure Your Personal Information

It is possible to leave your personal information lying around, both in the physical world or online. Leaving a public computer without logging out and clearing passwords can be as damaging as losing a credit card on the bus. If you must use a public or shared computer, clear passwords. No matter what, it is a good idea to change passwords often and to avoid ones that are simple or easy-to-guess.

Shred Sensitive Papers

Bank statements, credit card offers, even utility bills can be used by thieves as part of the process of identity theft. Keeping your personal information secure means destroying papers with personal information instead of disposing of it while it can still be read. A shredder makes it easy to accomplish this task.

Phishing

Phishing is a common scam you need to be aware of it you want to protect yourself against identity theft. That is where a scam website tries to imitate a real website and convince you to enter your login credentials. For example, a scam might try to steal traffic away from Bank of America’s website with a dummy site that looks similar. If a person attempted to log into their Bank of America account, they would provide the scammers with their login credentials. Watch out for websites that do not look normal or seem off in some way.

Anti-Virus Software

There are many ways for thieves to try to access your personal information and steal your identity. One simple way to block their path is to keep your antivirus software up to date on every device you use to connect to the internet. Protection against viruses and security threats will watch for threats that you would not normally be aware of otherwise.

Knowledge + Vigilance

The only way to act against identity theft is to first know that someone has committed the crime against you. We live in a world today where there is simply no other option: individuals need to keep an eye on their accounts and credit report on a regular basis.

Everyone is entitled to a free copy of their credit report every year through each of the three major credit bureaus. Credit report monitoring is also included with an increasing number of financial products, such as credit card accounts. 

Credit Card Protections

It is more common to see credit card companies offering enhanced security features and measures designed to protect against identity theft. These features are less common on debit cards and you should be careful using them for online purchases.  When you make a purchase online, use the safest payment method available to you. You should know what protection is included on the card before using it.

Outside Investment Protection

As security breaches and identity theft becomes more common, there are an increasing number of services on the market today to help you guard your credit and identity. For example, an identity guard service might monitor your credit report for new accounts and notify you when something new is opened. If you did not authorize the account, you would be empowered to immediately act. 

Identity theft is alarming, but online shopping and banking are here to stay. We must adapt, and that means taking vigilant steps to monitor your financial identity and protect sensitive information.

Shred Sensitive Papers
Bank statements, credit card offers, even utility bills can be used by thieves as part of the process of identity theft. Keeping your personal information secure means destroying papers with personal information instead of disposing of it while it can still be read. A shredder makes it easy to accomplish this task.
Phishing
Phishing is a common scam you need to be aware of it you want to protect yourself against identity theft. That is where a scam website tries to imitate a real website and convince you to enter your login credentials. For example, a scam might try to steal traffic away from Bank of America’s website with a dummy site that looks similar. If a person attempted to log into their Bank of America account, they would provide the scammers with their login credentials. Watch out for websites that do not look normal or seem off in some way.
Anti-Virus Software
There are many ways for thieves to try to access your personal information and steal your identity. One simple way to block their path is to keep your antivirus software up to date on every device you use to connect to the internet. Protection against viruses and security threats will watch for threats that you would not normally be aware of otherwise.
 Knowledge + Vigilance
The only way to act against identity theft is to first know that someone has committed the crime against you. We live in a world today where there is simply no other option: individuals need to keep an eye on their accounts and credit report on a regular basis.
 
Everyone is entitled to a free copy of their credit report every year through each of the three major credit bureaus. Credit report monitoring is also included with an increasing number of financial products, such as credit card accounts.
 
Credit Card Protections
It is more common to see credit card companies offering enhanced security features and measures designed to protect against identity theft. These features are less common on debit cards and you should be careful using them for online purchases.  When you make a purchase online, use the safest payment method available to you. You should know what protection is included on the card before using it.
 Outside Investment Protection
As security breaches and identity theft becomes more common, there are an increasing number of services on the market today to help you guard your credit and identity. For example, an identity guard service might monitor your credit report for new accounts and notify you when something new is opened. If you did not authorize the account, you would be empowered to immediately act.
 
Identity theft is alarming, but online shopping and banking are here to stay. We must adapt, and that means taking vigilant steps to monitor your financial identity and protect sensitive informat

Fixed Payment Annuities- An Income you Cannot Outlive

There is no such thing as a “safe” investment. There are always risk, market volatility and inflation, no matter how you invest, but if you want a guaranteed stream of income while forgoing market risks, perhaps a fixed payment annuity is for you. 

A fixed payment annuity is essentially a contract with an insurance company guaranteeing a stream of payments (annuities) over a specified period. The contract first requires that you pay an upfront premium (lump-sum).  There may also be a number of payout options that are available to you.  There are commissions and fees associated with the purchase. You should make sure that you fully understand all of the options costs and fees associated with an annuity contract.

A fixed payment annuity will provide you with an income for a specified time period at a contracted interest rate.  A fixed payment annuity is considered a long-term investment and is not for short-term gains. Fixed payment annuities are predictable as you will receive a contracted (known) payment every month, and it is because of this that many will use fixed payment annuities to supplement their retirement income. However, though fixed payment annuities forgo market volatility and are essentially risk-less, there are risks associated with them.

An insurance company sponsors fixed annuity investments. Therefore, your investment and cash flow are dependent on the financial health of the insurance company. You should check the insurance company’s rating before signing the contract.

There is currently nothing guaranteeing the payment of your principal lump sum if the insurance company defaults. However, annuities can differ from state to state so be sure to check with your state insurance commissioner. Another risk to consider are the various payout options. If the annuity holder passes away, there is no guarantee that you will get the initial lump sum payment returned to you.  In this case, there is no guarantee to get the initial lump sum payment back. 

Something else to consider is if you change your mind after signing a contract there may be ¨surrender charges¨ incurred to get your money back, depending on when you change your mind.  On top of this, fixed annuities do not factor in inflation. Because of this, your annuities could be less valuable over time. A fixed income annuity is not for everyone. Make sure you get a suitability analysis done to see if this type of investment is right for your financial goals and future income needs. Contacting your state insurance department can help you navigate the facts and figures you need to know before making this investment. 

There are different types of annuities and doing your research upfront can help you decide which annuity and insurance company is best for you. While you are deciding on a fixed payment annuity or you have already chosen to invest, be sure to become acquainted with your contract as it will control your interest rates, costs, fees, annuity payment, and payment schedule.

 A fixed payment annuity is an investment that offers a steady flow of income over your desired time period. With this type of investment, you know how much you are investing and you know how much you will be receiving in return. It is due to these unique characteristics that many will choose to invest in a fixed payment annuity. The words ´investment´ and ´guaranteed income stream´ do not fall in the same sentence often, if ever. However, if you are looking for an income you can not outlive, a fixed payment annuity may be for you.

Understanding your Liabilities - Liabilities Drive Investment Decisions

Who knew that keeping track of our bills could help guide our investment decisions?

Each month, we keep track of our bills: rent, mortgage, water, electricity, internet, and other expenses. We do it mostly so we can avoid late payments and the penalties that come with them. However, there is another reason why we should keep track of these payments, and it will help drive our investment decisions.

When starting to formulate investment decisions, it can sometimes feel a little overwhelming. Short-term securities, long-term securities, stocks, annuities, insurance, and mutual funds, where do we start? There are many places to invest money. When faced with this long-list of investment choices, it is easy to forget the reason why we sat down to invest in the first place, but if we know what our liabilities are, now and in the future, we will be able to create a framework and strategy for our investments. However, what exactly are liabilities?

Specifically, liabilities are what we are legally responsible for paying, now or in the future. They can consist of loans, accounts payable (like bills), mortgages, deferred revenues, and accrued expenses. Knowing our liabilities can help drive our investment decisions because when we see what we need to pay and when we need to pay it, we have a greater understanding of when we need our investments to be more liquid (cash) or less liquid (real estate). For example, when we know we have a recurring payment of $500 in May, we can plan to have at least that much in cash at that time. At that time, holding all of our assets as 30-year bonds does not make sense for our lifestyle and liabilities. This example clarifies why it is essential to understand our liabilities. Knowing them can help drive our investment strategy and set us up for the future. Here are some specific examples of personal liabilities and some things to know about each one (The list does not include every liability):

Expenses

Expenses include bills and other payments. Typical expenses include rent, water and electricity bills. We can predict the recurrence of these payments as they are generally contracted to occur on a specific date in a certain amount.

What to know: Keep a list of your monthly expenses so you can plan your investing schedule around them. By understanding monthly payments, it can be easier to implement not only investing strategies but also saving strategies.

Mortgages

Fixed-Rate mortgages are mortgages where you pay the same principal payment and interest amount every month.

Adjustable Rate Mortgage is a mortgage where the interest rate you pay varies with the market. When market rates are low, your mortgage may look more affordable. As the market changes, the change in interest rates may make your monthly payments less accessible.

What to know: Do not forget to factor in interest, and its volatility. The changing interest rates can affect monthly payments, for better or for worse.

Loans

A loan is a lump sum amount loaned by a bank (or person) that you can pay back in installments.

What to know: Understand the number of installments, the period, and the interest rate of the loan to be paid back. These details will help drive your investing strategy.

Credit Card Payments

If you do not pay your credit card bills in full each month, you will generally have to pay back the amount with a significant interest rate, meaning the value you initially spent will exponentially multiply as time passes.

What to know: Be aware of banks´ interest rates as they all will vary.

Once we understand our liabilities, we can then start to build the framework of our investing strategy. Though there are other things to acknowledge when investing, knowing our liabilities is an essential first step. So, once we know our liabilities, we can start to identify the amounts of money we can use to invest and where we can invest them. 

We need to determine what the time frame is for our investments. How long do we have until retirement?  Can we utilize long-term investments?  Is our time frame shorter and the assets will need to be in a more liquid investment?

This shows how we now understand what our asset allocations should be, because we first took the time to understand the time frame of our liabilities. 

Understanding our liabilities is a pertinent step in creating an investment strategy that fits our lives. We each have different liabilities and commitments. Being fully aware of each one will help create a framework for your personal investing.

Who knew that keeping track of our bills could help guide our investment decisions?

Each month, we keep track of our bills: rent, mortgage, water, electricity, internet, and other expenses. We do it mostly so we can avoid late payments and the penalties that come with them. However, there is another reason why we should keep track of these payments, and it will help drive our investment decisions.
When starting to formulate investment decisions, it can sometimes feel a little overwhelming. Short-term securities, long-term securities, stocks, annuities, insurance, and mutual funds, where do we start? There are many places to invest money. When faced with this long-list of investment choices, it is easy to forget the reason why we sat down to invest in the first place, but if we know what our liabilities are, now and in the future, we will be able to create a framework and strategy for our investments. However, what exactly are liabilities?
Specifically, liabilities are what we are legally responsible for paying, now or in the future. They can consist of loans, accounts payable (like bills), mortgages, deferred revenues, and accrued expenses. Knowing our liabilities can help drive our investment decisions because when we see what we need to pay and when we need to pay it, we have a greater understanding of when we need our investments to be more liquid (cash) or less liquid (real estate). For example, when we know we have a recurring payment of $500 in May, we can plan to have at least that much in cash at that time. At that time, holding all of our assets as 30-year bonds does not make sense for our lifestyle and liabilities. This example clarifies why it is essential to understand our liabilities. Knowing them can help drive our investment strategy and set us up for the future. Here are some specific examples of personal liabilities and some things to know about each one (The list does not include every liability):
Expenses
Expenses include bills and other payments. Typical expenses include rent, water and electricity bills. We can predict the recurrence of these payments as they are generally contracted to occur on a specific date in a certain amount.
What to know: Keep a list of your monthly expenses so you can plan your investing schedule around them. By understanding monthly payments, it can be easier to implement not only investing strategies but also saving strategies.
 
Mortgages
Fixed-Rate mortgages are mortgages where you pay the same principal payment and interest amount every month.
Adjustable Rate Mortgage is a mortgage where the interest rate you pay varies with the market. When market rates are low, your mortgage may look more affordable. As the market changes, the change in interest rates may make your monthly payments less accessible.
What to know: Do not forget to factor in interest, and its volatility. The changing interest rates can affect monthly payments, for better or for worse.
Loans
A loan is a lump sum amount loaned by a bank (or person) that you can pay back in installments.
What to know: Understand the number of installments, the period, and the interest rate of the loan to be paid back. These details will help drive your investing strategy.
 
Credit Card Payments
If you do not pay your credit card bills in full each month, you will generally have to pay back the amount with a significant interest rate, meaning the value you initially spent will exponentially multiply as time passes.
What to know: Be aware of banks´ interest rates as they all will vary.
Once we understand our liabilities, we can then start to build the framework of our investing strategy. Though there are other things to acknowledge when investing, knowing our liabilities is an essential first step. So, once we know our liabilities, we can start to identify the amounts of money we can use to invest and where we can invest them. 
We need to determine what the time frame is for our investments. How long do we have until retirement?  Can we utilize long-term investments?  Is our time frame shorter and the assets will need to be in a more liquid investment?
This shows how we now understand what our asset allocations should be, because we first took the time to understand the time frame of our liabilities. 
Understanding our liabilities is a pertinent step in creating an investment strategy that fits our lives. We each have different liabilities and commitments. Being fully aware of each one will help create a framework for your personal invest