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Naughty or Nice Part Two: More Investment Ideas

investment ideas

Last week, we looked at investment ideas that focused on the Sin Category of stocks (liquor, tobacco, gambling, fast food, you get the idea).  Here are some ideas that may be of interest to you if you are looking to change the world in a more positive way.

 

PAX Balanced Fund (PAXWS)

Strategy:  The fund follows a sustainable investing approach, combining rigorous financial analysis with equally rigorous environmental, social and governance (ESG) analysis to identify investments. The adviser normally expects to invest approximately 60-75% of its assets in equity securities and approximately 25-40% of its assets in debt securities, though this allocation may vary somewhat depending on market conditions.

10-year average annual return:  4.05% vs. 5.07% for similar allocation funds (50% – 70% stocks)

Fees:  No sales load, .93% expense ratio – average for the category

PAX Ellevate Global Women’s Index Fund (PXWEX)

Strategy: Generally in the component securities of the Women’s Index and in both in the US and internationally.  Top holdings include Microsoft, Salesforce.com, Johnson & Johnson, and Texas Instruments.

10-year average annual return:  3.51% vs. 3.98% for comparable World Large Stock funds

Fees:  No load, .9% annual expense ratio – average for the category

 

Fidelity Select Environmental and Alternative Energy Portfolio (FSLEX)

Strategy:  Investing primarily in companies engaged in business activities related to alternative and renewable energy, energy efficiency, pollution control, water infrastructure, waste and recycling technologies, or other environmental support services. Investing in domestic and foreign issuers.  Top holdings include 3M, OwensCorning, Danaher Corp, and Honeywell.

10-year average annual return:  5.61% compared to 2.68% category average

Fees:  No sales load, .94% annual expense ratio – below average for the category

 

So, there you have it.  Ways to direct your money toward the lowest or highest instincts of human behavior.  Good luck choosing which one will be more successful over time!

 

Source:  www.fidelity.com

Naughty or Nice: Investment Ideas for Both Categories

investment ideas

No matter which of Santa’s lists you are on, there is an investment out there for you.  These are NOT investment recommendations (you need to talk to your financial adviser for those), but just some amusing ideas for those of you on the Naughty List.

 

VICE fund (symbol VICEX)

Strategy:  Generally, invests in stock of companies that derive a significant portion of their revenues from a group of vice industries that includes the alcoholic beverages, tobacco, gaming and defense/aerospace industries.

10-year average annual return:  5.93% vs. 7.44% for the S&P 500

Fees:  No load fund, 1.49% annual expense ratio – higher than average

 

Spirited Funds ETFMG Whiskey and Spirits ETF (Symbol WSKY)

Strategy:  The investment seeks to provide investment results that are similar to the Spirited Funds/ETFMG Whiskey & Spirits Index.  Top holdings include Diageo (brands such as Guinness, Ketel, Crown Royal, Johnnie Walker) and Pernod Ricard (Absolut, Jameson, Chivas, Beefeater).

52-week return (this is a newer ETF, so no long term results available):  26% vs. 23% for the S&P 500.

Fees:  Whatever your broker charges to trade ETFs plus .6% annual expense ratio

 

Rydex Leisure Fund (RYLIX)

Strategy:  Generally substantially all (at least 80%) of its net assets in stocks of Leisure Companies that are traded in the United States. It may invest to a significant extent in the securities of Leisure Companies that have small to mid-sized capitalizations. It is non-diversified.  Top holdings include Comcast, Disney, Philip Morris, McDonalds, and Stabucks.

10-year average annual return:  7.26% vs. 7.44% for the S&P 500

Fees: No sales load to buy, 1.38% annual expense ratio (higher than average)

 

Tune in next week for investment ideas that appeal to the angel on your shoulder.

 

Source for above data:  www.fidelity.com

Gearing up for Year-End: What you need to do NOW.

year end

Just because it’s the holidays, that doesn’t mean you can completely take a break from paying attention to your finances.  Here are a few items that need to be done by year-end.  By that, I mean DONE, not started.  It takes a while for financial institutions to transfer money or act on letters of instruction, so start the process now and avoid December 31st stress.

 

Tax loss harvesting.

If you have investment losses that you can use to set off investment gains, make those trades before year-end for use on 2017 taxes.  This only applies on your non-retirement accounts such as joint or individual brokerage accounts.  IRAs, 401(k)s, Roth IRAs and small business retirement plans do not track gains or losses.

 

Take your Required Minimum Distribution if you are over age 70 ½.

All tax-deferred retirement accounts required an IRS mandated amount to be taken out every year.  Your financial institution can help you figure out the amount, but don’t wait until December 30th to start this process.  See my blog from earlier in November for more info on donating to charity with your RMD.

 

Open a small business retirement account.

If you are considering using a Self Employed 401(k) for the 2017 tax year, the plan has to be established by December 31st of this year.  You don’t have to fund it until April 15th of the following year, but the account must be open.

 

Make your charitable contributions.

In order for your donations to be used as a write of in 2017, you need to make them by December 31st.  The stock market has been going gangbusters this year, so chances are that you have appreciated stocks/mutual funds in your investment accounts.  If so, you may consider gifting shares instead of cash to your favorite charity.  This has great tax advantages (see your CPA for more details), but takes more time than just writing a check, so get started now.

 

Got all that done?  Nice work!  Now go sit by the fire with some eggnog.

How about a Holiday Laugh? Here are some Fun Thanksgiving Quotes!

Thanksgiving Quotes

To give you and me a break from personal finance, I offer my traditional holiday menu of funny Thanksgiving quotes.  Happy Thanksgiving!  I am grateful to everyone who reads my musings.

“Thanksgiving, man.  Not a good day to be my pants”

– Kevin James

“It took me weeks to stuff my Thanksgiving turkey.  I stuffed it through the beak”

– Phyllis Diller

 

“I come from a family where gravy is considered a beverage.”

—Erma Bombeck

“Vegetables are a must on a diet. I suggest carrot cake, zucchini bread, and pumpkin pie.”

—Jim Davis

 

“Last Thanksgiving I shot my own turkey. It was fun. That shotgun going, Blam! Everybody at the supermarket just staring. Why track them when I know where they are?”

—Kenny Rogerson

“You can tell you ate too much for Thanksgiving when you have to let your bathrobe out.”

—Jay Leno

 

Source

 

Don’t Fall for These Stinkers: The 4 Turkeys of Personal Finance

personal finance

One year at Thanksgiving my mom had the flu, so my grandmother and I went out to buy ingredients for Thanksgiving.  This was about 5 days before the big event and we really didn’t know what we were doing (I think I was about 13).  So, Thanksgiving Day rolls around and we opened our turkey and the most horrible smell filled the kitchen.  Turns out we had bought a fresh turkey too early and it had spoiled in the refrigerator.

 

Note to self – buy frozen and thaw yourself.

 

Anyway, these four financial instruments often smell to me the way that spoiled turkey did all those years ago.

 

Whole Life Insurance

 

Okay, this can be useful if you need life insurance for the rest of your life to help offset estate taxes or support beneficiaries, but most people don’t.  Generally, the need for life insurance diminishes as your wealth grows and your kids grow up.  Whole life insurance can cost 5-10 times more in premiums than term life insurance with the same benefit.  Sales people will tout the tax deferred cash value build up, but the returns have historically been horrendous on the cash value and the products are loaded with fees and commissions.  You can invest tax-deferred elsewhere for less cost and better potential growth.

 

Equity Indexed Annuities

 

These insurance products promise to give you stock-market growth with a minimum floor of ever-increasing returns.  Sound too good to be true?  It is!  The growth is not really based on stock market returns, but on options purchased by the insurance company betting on stock market performance.  That results in growth that is really not that close to actual market returns.  Plus, in up years, you only get a percentage of those increases because the insurance company needs to save those earnings for years when stocks or down, but they promised you a minimum return no matter what.  Very high sales commissions and annual fees are a common feature of these products.  Sales people do not have to be securities licensed or act as a fiduciary in their clients’ best interest.

Investment Advisers Who are Not Fiduciaries

 

Speaking of fiduciaries, you want one!  A financial adviser who is a fiduciary is required to put clients’ interest first when giving investment or financial advice.  Seems obvious, right?  Well, many in the industry only must meet what’s called the Suitability Standard.  This is a much lower standard of advice that says if the investment sold was “suitable” it can benefit the adviser as much or more than the client.  Not sure which standard your adviser uses?  Just ask!  “Are you a fiduciary?”  If the answer is a simple yes, great!  Anything else, consider shopping for someone new.

Investment Managers Who Don’t Offer Holistic Financial Plans

 

If a financial adviser immediately presents you his best mutual fund/limited partnership/REIT/insurance product that is a red flag.  Without finding more about your situation and modeling your savings and retirement outcomes, how does the adviser know what product is best for you?  Having a financial plan done first (even if you pay for it out of pocket) is a way for you and the adviser to know how much risk to take with your investments and how to invest for the income you will need in retirement.

 

Well, that’s it for my soapbox today.  I hope I’ve given you some warnings and help when evaluating the investment advice and products that are presented to you!

Getting Through the Holidays with your Health and Wealth Intact!

health

Readers of this blog know I love to draw parallels between personal finance and food.

Example:  Target Date Funds = Crock Pot meals. 

Not gourmet, but consistent, easy, low cost, and usually a decent result at the end.

Imagine my delight when I met Certified Nutritionist Tamara John and she was willing to contribute to my blog.  Here are some strategies to keep your health and wealth on track during the holidays!

Plan to Choose Wisely.

 

Health:  At that holiday shindig, look for ingredients that come from nature such as veggies, eggs, beef, poultry, fish, whole grains, olive oil, real butter, and coconut oil to satisfy you.  At the store, avoid long un-prounceable ingredients and high wheat and sugar. Fructose, mannitol, sorbitol, corn syrup, maltodextrin are highly processed forms of sugar that promote chaos.

 

Wealth:  When shopping, use a list and purchase intentionally.  Online shopping can be helpful because you search exactly what you are looking for and are maybe not as tempted by the end-aisle impulse buys.  Once you have bought that tea kettle cozy for Aunt Delilah, do not buy anything more for her, even if you see the perfect quilting stand later.

Start off Right.

 

Health:  Eat a good breakfast.  Hard boiled eggs, grass fed plain full fat yogurt with a small handful of walnuts or almonds, baked sweet potato with butter, overnight slow cooker steel cut oats and apples with milk (cow, goat, almond, coconut), wild salmon with cream cheese, and seasonal fresh whole fruit are easy choices to fuel you with long burning energy. Avoiding ‘treats’ at the office and gatherings will be easier.  Mood and sleep will improve.

 

Wealth:  Pay yourself first thing.  Treat your savings as they are a bill like rent and do not skip months.  Set your savings on auto-pilot. Many 401(k) plans offer the option to increase your contribution by 1%/year automatically.  If you are in your 20s, you should be paying yourself 10% in savings.  If you are just starting off saving in your 40s, that number jumps to 20% of earnings.

Think Long Term about Your Health.

 

Health:  Support your body.  Be honest about how much sleep you need and get it.  Avoid late night eating.  Giving yourself 12 – 14 hours without food from dinner to breakfast supports digestion and natural detoxification.  Turn off devices at least an hour before bedtime to sleep better. You’ll accomplish more with good sleep.

 

Wealth:  Don’t let the pressure of keeping up with your family and friends’ consumption derail you from your long term financial goals.  Financial security feels so much better than the temporary high of buying something at the store or driving a newer car than Cousin Esther to the Christmas reunion.

 

Practicing these strategies daily will help you and your family feel better now & enjoy the holidays more.

 

Tam JohnTam John is a certified Nutritionist with EatRight-LiveWell  specializing in Personalized Wellness Coaching.  Tam will give you complimentary 15 minutes on the phone to explore the fit for you.  Mention Sullivan Financial Planning and receive 10% off services!

 

 

 

This article is for informational purposes only. It is not intended to treat, diagnose, cure, or prevent disease. This article has not been reviewed by the FDA. Always consult with your primary care Physician or Naturopathic Doctor before making any significant changes to your health and wellness routine.

 

Required Minimum Distribution: Make a tax-savvy charitable donation.

charitable donation

It’s that time of year again.

Year-end is coming up and many of my readers will be moving money out of their Individual Retirement Accounts (IRAs) to satisfy the IRS Required Minimum Distribution (RMD).  Whether you need the money to spend or not, the IRS makes those who are age 70 ½ and older take a portion of IRAs out every year and pay income taxes on the withdrawal.

 

The amount is based on your account balance on December 31st of the prior year divided by the years left of your life expectancy.  Who decides how many years you have left?  That’s right, the IRS!

Here’s an example.

 

Take, for example, Bathsheba, a 78-year-old retired nurse from Kansas City.  Bathsheba had $150,000 in her IRA account on December 13, 2016. According to the IRS, her remaining life expectancy is 20.3 years.  Her RMD is $150,000 divided by 20.3, or $7,389 that must be taken out by December 31, 2017.

 

Bathsheba gives $100/month to her church, or $1,200/year.  She could take a tax write off on these donations, or, even better, direct $1,200 of her RMD directly to the church as a charitable donation.  The IRS allows up to $100,000 in charitable gifts to 501(c)(3) organizations per year direct from RMD distributions.  To clear up confusion, this would not include your chronically unemployed grandson under an approved charity.

 

The advantage to this is the IRA distribution that goes to charity never even hits your taxes as income in the first place.  This is even better than a write-off.

 

The bottom line.

 

If you are over aged 70 ½, consider this strategy as a tax-savvy way to make the most of your charitable donations.  Ask your financial adviser for details on how to process the RMD and direct all or part of the proceeds to your charity.

 

Happy gifting!

Five Funny Quotes About Halloween – and One Sweet Financial Tip

halloween

I learned something the other day. I learned that Jehovah’s Witnesses do not celebrate Halloween. I guess they don’t like strangers going up to their door and annoying them.

              – Bruce Clark

 

If I’m lazy and I can’t come up with a costume, I would just wear a slip and write ‘Freudian’ on it.
                – Julia Stiles

 

Aren’t we clever, making the kids go door to door collecting candy for us?

           – snowjob ‏@canadasandra 

 

The real monsters are the people that give away little boxes of raisins instead of Halloween candy.
            – Mike Raphone

 

I’m going to be “Mom who abandoned her family and fled to Mexico with a new identity” for Halloween. Too bad my kids won’t get to see it.

             –Tara Brown ‏@Faux_Ma

 

And the financial tip

 

The best day of the year to buy candy is November 1st!  Stock up and be ready to pack lunches, be the coolest parent bringing snacks after sports games, satisfy your book club’s chocolate cravings, and so much more.  Take the savings and invest in your retirement account!

 

Source for quotes:  http://www.funny-jokes-quotes-sayings.com/funny-halloween-quotes.html

From Lattes to Private School: Five things that scare me.

scare

Fun fall facts mixed in with a few other things that scare me!

 

I. A 16-ounce Pumpkin Spice Latte from Starbucks has 450 calories and 25 grams of fat.  On the plus side, it also contains 20% of your daily calcium allowance.

 

II. If the candy corn kernels purchased each year were laid end to end, they would stretch around the world 4.25 times.

 

III. A child born today will face a first-year college cost of $41,000 for public in-state tuition.  Want to go private?  That’ll be $92,000 for one year.  That’s assuming a 5% annual inflation rate from today’s prices.

 

IV.  The world’s spider population weighs 29 million tons, as much as 478 Titanics.  Spiders eat about 10% of their body weight each day – about like a 200-pound man eating 20 pounds of meat per day.  Source:  https://www.washingtonpost.com/news/wonk/wp/2017/03/28/spiders-could-theoretically-eat-every-human-on-earth-in-one-year/?utm_term=.1b7896af84f4

 

V.  According to a March 21, 2016 article on Motley Fool, the average American has $63,000 saved for retirement.  Withdraw that at the generally “safe” rate of 4% starting in your sixties, and that gives you $210/month in retirement income plus Social Security.  It makes you envy the spiders – they have less to worry about.

Afraid You are a Bad Investor? You are!

bad investor

What have you done???

 

That’s right, I said it.  You, and you, and you, and you (picture me pointing around a crowded room) are a BAD investor.  And it isn’t your fault.  As Lady Gaga says, “Baby, you were born this way.”

 

There is good news and bad news here.  Our brains are hardwired to buy investments high and sell them low, just the opposite of how you make money.  The culprits are dopamine and the amygdala.

Stick with me.

 

Dopamine is a neurotransmitter that instructs the brain to make us feel good.  Rewards (chocolate, new shoes, investment increases) increase dopamine activity.  This can be a good thing, as dopamine regulates our risk/reward behavior.  However, when it comes to picking investments, dopamine can be blamed for some risky behavior – and some famous investment bubbles.

 

Dopamine acts in two ways.  If an investor puts 10% of his money in an investment and watches that investment rise dramatically, he feels happy.  However, he ALSO feels sad that he didn’t have more of his money in the well-performing investment.  The kids these days call this FOMO or Fear of Missing Out.

 

So, then this investor, to counteract his FOMO and feel more happy dopamine, invests more of his money in the investment that has already gone up.  Maybe all his friends are doing the same.  This influx of new dopamine-fueled money (see NASDAQ in the late 1990s) creates inflated pricing until the bubble bursts.

 

Here, in the land of falling stock prices, we meet our friend the amygdala.  We like to think of ourselves as rational beings, making decisions with our massively sophisticated, available-to-humans-only pre-frontal cortex.  Alas, most of the decisions made by the rational brain are only justifying action on the impulses of our animal brains underneath.

 

The amygdala regulates our fight-or-flight reflex.  It is also the area of the brain that lights up with the most activity when research subjects look at statements where their investments lose money.  Our visceral reaction (that is VERY hard to overcome) is to treat falling investments the same as being confronted by a lion.  Run away!

There is an answer.

 

So, if we are born to sell low and buy high, how can we ever use investments to reach our financial and life goals?  The answer is simply to invest according to a plan, ignore the news, and rebalance to your target asset mix (not panic-sell) when markets have big swings.

 

Don’t have a plan?  Don’t worry.  You can engage with a financial planner to help you, or even turn to some of the new online tools to take the investment decisions out of your hands and use the detached, non-emotional target-date funds for some investments.

 

All is not lost, and your brain is not the enemy.  After all, it told you to read this blog!

 

By the way, the source for this blog is one of my favorite books, How We Decide by Jonah Lehrer. 

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