10 Tips From The SEC's Office of Investor Education and Advocacy

Whether you are a first-time investor or have been investing for years, here are 10 tips from the SEC’s Office of Investor Education and Advocacy to help you in 2019.

  1. Check out your investment professional.

It is free and easy to check the background of an investment professional.  You can find details about an investment professional’s qualifications through the search tool on Investor.gov, the SEC’s website for individual investors.  Also, make sure to ask SALI whether your investment professional has been named in an SEC action.  If you need help, you can call our toll-free investor assistance line at (800) 732-0330 for help.

  1. Understand the power of saving and investing early by taking advantage of our tools.

If you are investing or saving toward a goal, or just want to learn about how your money can grow under various hypothetical scenarios, take advantage of our compound interest and savings goal calculators.  These calculators are great tools to help inform any decisions you make about your investing and saving.

  1. Know how to be a better investor.

Did you know that active trading and some other very common investing behaviors actually can undermine investment performance?  According to researchers, other common investing mistakes include focusing on past performance, favoring investments from your own country, region, state, or company, and holding on to losing investments too long and selling winning investments too soon.

  1. Diversify.

Diversification can help reduce the overall risk of an investment portfolio.  By picking the right mix of investments, you may be able to limit your losses and reduce the fluctuations of your investment returns without sacrificing too much in potential gains.  Some investors find that it is easier to achieve diversification through ownership of mutual funds or exchange-traded funds (ETFs) rather than through ownership of individual stocks or bonds.

  1. Consider fees.

It can be costly to ignore fees associated with buying, owning, and selling an investment product.  Expenses vary from product to product, and even small differences in costs can mean large differences in earnings over time.  An investment with high costs must perform better than a low-cost investment to generate the same return.  Read our bulletin on How Fees and Expenses Affect Your Investment Portfolio to learn more.

  1. Watch out for guaranteed high returns.

Promises of high returns with little or no risk are classic warning signs of fraud.  Every investment carries some degree of risk, and the potential for greater returns usually means greater risk.  Ignore so-called “can’t miss” and “guaranteed risk-free” investment opportunities –even if they involve HoweyCoins!  Better yet, report them to the SEC. 

  1. Be alert to affinity fraud and celebrity endorsements.

Affinity frauds target members of identifiable groups, such as the elderly, religious, or ethnic communities, or the military.  Even if you know the person making the investment offer, be sure to check out the investment and the person’s background—no matter how trustworthy the person seems.  You should also watch out for celebrity endorsements.  Just because you know the celebrity, doesn’t automatically make the investment opportunity being endorsed worthwhile. 

  1. Be careful when using social media as an investment tool.

Social media has become an important tool for investors, but also present opportunities for fraudsters to lure investors into a wide range of scams.  For additional information on ways to avoid fraud through social media, please read our bulletin on Social Media and Investing.

  1. Is the securities offering registered or exempt?

Any offer or sale of securities must be either registered with the SEC or exempt from registration.  Otherwise, it is illegal.  This has taken heightened importance with the advent of initial coin offerings as many of these offerings may involve securities.  Registration is important because it provides investors access to key information about the company’s management, products, services, and finances.  Always check whether an offering is registered with the SEC by using the SEC’s EDGAR database or contacting the SEC’s toll-free investor assistance line at (800) 732-0330.

  1.  Don’t forget about the world.

Events around the world may have a material impact on your investments.  For example, the United Kingdom is currently negotiating its exit from the European Union (often referred to as “Brexit”).  Brexit may have significant effects on the markets and companies in which you invest.  Please stay informed about Brexit and other world events as you consider your investment strategy.
 

If you have questions about your investments, your investment account or a financial professional, don’t hesitate to contact the SEC’s Office of Investor Education and Advocacy online or on our toll-free investor assistance line at (800) 732-0330.
 

The Office of Investor Education and Advocacy has provided this information as a service to investors.  It is neither a legal interpretation nor a statement of SEC policy.  If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.

The Super Rich Stress Test Their Financial Plans-and So Should You!

The Super Rich (those with a net worth of $500 million or more) who have family offices typically engage a sizable lineup of professional advisors to help them create and implement financial plans. To help ensure those plans are both state-of-the-art as well as in line with their needs and wants, many of them regularly “stress test” these plans.

 

Here’s why you should join them in that effort—even if you’re not nearly as wealthy.

Asking “What if?”

Stress testing financial plans can be a very smart way to help make certain that the plan will deliver as promised. The fact is, financial plans that might look great on paper all too often prove to be much less impactful once they are implemented. It is not uncommon for there to be unintended consequences that can even derail one’s agenda.

 

At heart, stress testing is when you ask, “What if …?” about a variety of areas of a financial plan you have or are considering. When it comes to estate planning, for instance, a wealthy individual might ask questions like:

 

·         What will actually happen to my assets when I pass on?

·         How will my family be affected, precisely?

·         Who will be tracking the hard assets such as artwork and jewelry to make sure they go to the designated heirs—as opposed to vanishing?

·         Who is going to make sure my estate plan is being executed as it’s supposed to be?

 

To be effective and informative, stress testing should be done in a systematic manner. While there are some variations, the basic process starts by determining your goals. Your goals, any problems to be addressed and opportunities to benefit should be the driving forces behind the financial and legal solutions you employ.

 

 

STRESS TESTING FOR EVERYONE

 

Once you clearly understand your goals, you can evaluate the specific existing or proposed financial services or products. There are numerous ways to dissect and critically assess financial services and products:

 

·         Work the assumptions. A plethora of assumptions underlie all services and products. In stress testing, these assumptions are modified to determine how the solutions will work when a given scenario changes.

·         Evaluate alignment with goals and objectives. A solution might prove to work extremely well, but still not achieve the desired results. It’s essential to help ensure that the services and products will accomplish your goals.

·         Calculate cost structure. The intent here is to identify the best and most cost-effective solution possible. When calculating cost structures, all the expenses should be specified—including long-term costs.

 

Based on the stress test’s evaluation of the existing or proposed solutions, you might consider alternative products or services. It can be very useful to do side-by-side comparisons between the solutions being considered or currently used and such alternatives, asking questions like:

 

·         How do the assumptions compare?

·         How do the alternatives rate when it comes to potentially achieving my goals?

·         Which solutions are more cost-effective?

 

The end result of the process: recommendations. Based on those recommendations, there are five courses of action to consider taking:

 

  1. Stay the course. If the stress testing found the solutions being used or proposed to be on target and of high quality, the recommended action is to stay the course.

 

  1. Choose different solutions. If the stress testing finds what may be described as a system failure—the financial products being used are not going to achieve the desired results and might even blow up, for instance—the right move is to take a different course of action.

 

  1. Choose a different professional. If the solutions are appropriate but the professionals involved are really not up to the task of implementing them (or they charge too much money), it will usually make sense to switch to more capable and/or cost-effective experts.

 

  1. Modify the approach with the original professional. If the solutions can be made more powerful with only slight modifications, the best route is often to stick with the original professionals and have them make the minor changes needed.

 

  1. Continue stress testing. There are occasions when the individual or family chooses a professional to conduct a stress test and that professional is not up to the task. This comes out often clearly in the process or results of the stress testing. The only viable course of action is to select a different professional to conduct the stress testing.

 

Although stress tests are commonly used among the Super Rich, they should be a part of most people’s due diligence process when vetting financial plans, financial products and financial services. Frequently, stress tests uncover flaws in financial plans as well as better ways to achieve desired outcomes. For those reasons, stress tests will likely benefit a great number of people—especially business owners and their families, who generally have so much of their future financial security riding on one asset: their business.

 

Certainly there is a cost to stress testing estate, asset protection and income tax plans. That cost will depend greatly on the complexity of the testing involved and your situation. However, a stress test fee can be a whole lot cheaper than the costs—financially but also emotionally and psychologically—of a plan or solution that is fundamentally flawed or in conflict with your goals.

 

ACKNOWLEDGMENT: This article was published by the BSW Inner Circle, a global financial concierge group working with affluent individuals and families and is distributed with its permission. Copyright 2018 by AES Nation, LLC.

 

 

If this message was sent in error, please notify the sender, delete it, and do not use any part of this message. Email contents are not to be construed as investment, tax, accounting or legal advice. Views expressed in this message are of the sender, expect where stated otherwise. Past Performance is not indicative of future returns. ALL INVESTMENTS INVOLVE THE RISK OF LOSS. Accounts managed by A.G. Campbell Advisory, LLC may involve above-average portfolio turnover, which may reduce an investor’s after-tax returns. The contents of this message are not to be construed as an offer, or solicitation of an offer, to purchase securities. Such an offer may only be made by means of delivery of appropriate offering documents, which must be carefully reviewed by a prospective investor before making an investment decision. Performance numbers have not necessarily been independently reviewed or audited and we make no representation as to its accuracy. The information and statistics in this report have been obtained from sources we believe to be reliable but are not guaranteed by us to be accurate or complete. A.G. Campbell Advisory, LLC, its principals, directors, research analysts and other employees may hold or take significant positions in the securities mentioned. Any reference to contracts are subject to written confirmation. Do not send any personal information through email. All emails are subject to review by A.G. Campbell Advisory, LLC.

February 2019 Report

Sudden Wealth
What Should You Do If You Strike It Rich?

 

If a few million dollars—or more—fell into your lap tomorrow, what would you do?

 

Sudden wealth isn’t a common or reliable way to get rich, but it can and does happen. Some big drivers of sudden wealth include:

 

·         Receiving a substantial inheritance

·         Getting a major settlement in a divorce or a lawsuit

·         Receiving a big payout because of stock options or the sale of your company

·         Winning the lottery

 

But while sudden wealth may sound like a dream come true, it’s often accompanied by serious challenges resulting from the “sudden” aspect of that money. With sudden wealth, everything about being rich—the good and the bad—happens all at once. In contrast, most people who build wealth slowly are able to address issues and concerns incrementally over time.

 

The result: Sudden wealth can be an emotionally charged and overwhelming experience. Sometimes there are emotional challenges because of the source of the money—a relative who died, for example. Feelings of panic or guilt can go hand in hand with the feelings of excitement. All those swirling emotions can cause recipients of sudden wealth to make bad—sometimes exceptionally bad—decisions about the money and about their lives.

 

Here’s a look at how you—or someone you care about, such as your children—can prepare to deal with sudden wealth effectively to realize amazing opportunities while avoiding the many pitfalls of “striking it rich.”

 

Relationship challenges of sudden wealth

 

To be sure, getting rich quickly can solve many financial problems. At the same time, getting rich quickly can create big problems in your relationships with other people—including the people in your life you care about most.

 

Some examples: Family and friends may knock on your door looking for funds from someone they now see as a financial “white knight.” A sibling might be looking for an investor in her new business, or a distant relative might ask for help paying medical bills. A friend might hit you up for a loan.

 

Your marriage can be impacted, too. Shared decisions about how to spend, save and invest the new wealth can create friction. Before you got rich, your money was used largely to pay the bills. Now, with a lot more money, the myriad possibilities can create a wedge between spouses.

 

Sudden wealth can also impact new relationships. Are new friends—and, especially, new potential romantic partners—interested in you, or your money?

 

 

FOUR WAYS SUDDEN WEALTH CAN BE RUINED

 

People who experience sudden wealth can also fall into several traps that can quickly erode or eliminate those assets. These wealth destroyers can impact anyone, of course, but we see them hit the suddenly wealthy especially often.

 

  1. Giving away too much money. If you give too much of your wealth away, you can end up in your own precarious financial position faster than you might imagine. Even loaning money can prove problematic and occasionally disastrous.

 

  1. Extravagant spending. There is nothing wrong with treating yourself well and enjoying a good life. But if the money needs to last a long time, excessive spending can jeopardize your financial future. The key is to identify the necessities, the “nice to haves” and the “not that importants” and balance them.

 

  1. Poor investing and planning. If you receive a windfall, there may be a lot of professionals seeking to help you manage your money and address your planning needs. There is a high probability that many of these professionals are going to be “Pretenders” who aim to do a good job but are simply not talented enough to help you.

 

  1. Lawsuits. Your sudden wealth can make you a target for unscrupulous litigants. One way to address this possibility is by safeguarding your assets. By working with a wealth manager who is well-versed in asset protection planning, you can potentially insulate yourself from prospective deceitful and ruthless litigants—legally.

Take responsibility

 

If you or a loved one is fortunate enough to become suddenly wealthy, here’s a process we recommend that can help you or the other person get prepared and set up for success.

 

  • Assess your situation. You need a solid understanding of how much money there really is, and what you need and want to do with it. Often that requires slowing down and working through some of the emotions that accompany sudden wealth in order to think rationally about the windfall and its impact. A wish list, a balance sheet and a cash flow statement can all play a part in evaluating where you are and what you are considering.

 

  • Rely on consummate professionals. You want to work with true experts—recognized authorities who understand the difficulties you face due to becoming suddenly wealthy, and who are able to help you chart a financial course that matches your needs and wants. Consummate professionals can also act as a sounding board when it comes to most aspects of dealing with your newfound wealth. Their extensive experience, expertise and ability to see your situation rationally rather than emotionally can be useful in helping you think through different matters and plans.  

 

  • Make reasoned decisions. To make a windfall work best for you, you need to make intelligent and informed decisions, such as avoiding impulse buying and suffering buyer’s regret. Moreover, it is crucial to always recognize that you are in charge and to take responsibility.

 

 

 

ACKNOWLEDGMENT: This article was published by the VFO Inner Circle, a global financial concierge group working with affluent individuals and families and is distributed with its permission. Copyright 2019 by AES Nation, LLC.

 

 

 

If this message was sent in error, please notify the sender, delete it, and do not use any part of this message. Email contents are not to be construed as investment, tax, accounting or legal advice. Views expressed in this message are of the sender, expect where stated otherwise. Past Performance is not indicative of future returns. ALL INVESTMENTS INVOLVE THE RISK OF LOSS. Accounts managed by A.G. Campbell Advisory, LLC may involve above-average portfolio turnover, which may reduce an investor’s after-tax returns. The contents of this message are not to be construed as an offer, or solicitation of an offer, to purchase securities. Such an offer may only be made by means of delivery of appropriate offering documents, which must be carefully reviewed by a prospective investor before making an investment decision. Performance numbers have not necessarily been independently reviewed or audited and we make no representation as to its accuracy. The information and statistics in this report have been obtained from sources we believe to be reliable but are not guaranteed by us to be accurate or complete. A.G. Campbell Advisory, LLC, its principals, directors, research analysts and other employees may hold or take significant positions in the securities mentioned. Any reference to contracts are subject to written confirmation. Do not send any personal information through email. All emails are subject to review by A.G. Campbell Advisory, LLC.

Year-End 2018 Commentary

Happy New Year: 2019!!! What to do?

 

·         Do anything other than sit there and listen to the national pundits tell you about the volatility in the market and how bad everything is. Don’t get caught up in the constant news cycle, as they tend to be short-term oriented, and sensationalize to enhance their ratings.

·         Remember the importance of history. History teaches us that trying to time markets is a loser’s game. No one, not even the huge institutions, do this well. The only way to make money in the market is a longer term, value oriented, buy and hold approach. As Warren Buffet says, “he tunes out the noise.”

·         Ask yourself, what is real?

·         Low unemployment

·         Slow growth economy

·         Corporate tax benefits

·         National wages are up

·         Low to no inflation

·         Cheaper Gas & Oil Prices

These are not the components of a recession that the stock market has already put into its’ lower prices and volatility.

·         What are the real negatives?

The real or perceived negatives are as follows:

·         A possible trade war with China

·         A Fed who blindly raises interest rates to drive us into recession

·         A Global Slowdown

·         Political gridlock and nothing getting done.

·         More domestic and global debt.

Of all of the above possible negatives, most of them are not nearly as likely or as ominous as some would like you to believe. And quite frankly, these risks are always inherent in the equity markets.

We believe that the Fed will only do what is necessary to keep our economy from overheating. There probably is no great time for them to be “unwinding” their balance sheet, but it will have to happen over time. Everyone is so set on their raising interest rates twice more in 2019. I am not convinced. Why? To slow down what? Either way, it neither makes nor breaks us.

Global slowing is a natural part of the business cycle, but business by no means has grinded to a halt, and I think everyone from the ECB to the Fed is conscious of the danger of stopping forward movement on the back of a slow recovery. Additionally, the Fed is aware of the higher carrying costs that will result by continuing to raise interest rates. They know that this makes it harder for us to pay our debt service, and they benefit from our survival, not our demise.

 A trade war is bad for everyone. The United States and China are so inextricably intermeshed that the leader would not let this happen. Furthermore, China’s economy is terrible, and a trade war would be a dagger in the heart of their trying to recover. Trade wars never offer the protectionist benefits that feel patriotic and get politicians elected.

Finally, the stock market generally loves political gridlock. The cynical thinking has always been that if the politicians cannot get anything done, they can’t screw anything up! The market loves predictability and hates uncertainty. This entire writing is a long way of saying that, “this too shall pass. “

With warm regards for a prosperous 2019.

Alexander (Zandy) Campbell

Third Quarter 2018 Commentary

Staying the Course and Enjoying the Ride

The third quarter proved to be good for most U.S. equities, and investors welcomed a more gentle summer. Gradually increasing U.S. interest rates are tightening financial conditions around the world. The Fed has indicated that they will be raising rates for the foreseeable future, and this will lend itself to a stronger U.S. dollar. All this having been said, we believe that the markets will push through decent returns in equities through the remainder of 2018.

We believe as we move into the fourth quarter of this year, it is okay to take some capital gains. Politics will be changing our footing with the midterm elections, and we always have the risks of the emerging markets or another country’s currency ills resounding through our markets. This is all to simply say that it is getting later in the game, and we expect volatility and probability of market corrections to increase.

The underpinnings of U.S. growth are still strong with the tax cuts and low unemployment, and we still prefer the U.S. to other markets. Now is a good time to check our portfolio resilience and be comfortable with our weightings in regard to risk tolerances. Finally, we think year end should provide a good atmosphere for retailers and the holidays, and we see a reasonable fourth quarter ahead. This is a good time to stick to our investment plan, take some gains, and stay in short maturities in our fixed income.

Happy Fall,

Zandy