Monday, November 24, 2014

Office Holiday Hours

The Pathways Advisory Group, Inc. office will be closed for the following holidays:

Thursday, November 27th, 2014

Friday, November 28th, 2014

Wednesday, December 24th, 2014

Thursday, December 25th, 2014

Thursday, January 1st, 2015

Monday, January 19th, 2015

Monday, February 16th, 2015

Friday, April 3rd, 2015

Monday, May 25th, 2015

Friday, July 3rd, 2015

Monday, September 7th, 2015

In case of an emergency, please contact Schwab at 1-800-435-4000.

Happy Holidays!

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Friday, November 21, 2014

It's a Boy!

Pathways Advisory Group, Inc.
David Williamson, CFP®

 We are proud to announce the birth of David's grandson, Ezra Booth Straley, born to Leah and Brenda Straley. He was born on October 19, 2014; he weighed in at 7 lbs 3 oz. Congratulations to the family on the birth of their baby boy!

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Wednesday, November 19, 2014


Pathways Advisory Group. Inc.
Michelle Carter, CFP®

We are proud to announce the birth of Madelyn Richelle and Jack Dwayne, born to Michelle and Ryan Carter. They were born on October 27th, 2014. Madelyn weighed in at 5 lbs 8 oz and was 19 inches long. Jack weighed in at 5 lbs 12 oz and was 18 inches long.  They and their proud parents and big sisters are doing well. Congratulations to them on the birth of their twins!

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Monday, November 17, 2014

Double Barrel!

Pathways Advisory Group, Inc.

We are almost through with our food drive and want to offer a quick update:

With your help, we were able to fill the 55-gallon drum located in our lobby area, and are working towards a second barrel. It is a quarter full at this time. We have also received enough financial donations to provide 4,545 meals.

After November 20th, the Community Food Bank will pick up the two drums and any final donations. Your generosity will help feed the 220,000 residents they serve each month, including 90,000 children.

We are excited about making a difference and helping the community. Thank you so much for your contributions to the first ever Pathways Food Drive!


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Friday, November 7, 2014

Living with Volatility, Again

Jim Parker
Outside the Flags
Vice President

Volatility is back. Just as many people were starting to think markets only ever move in one direction, the pendulum has swung the other way. Anxiety is a completely natural response to these events. Acting on those emotions, though, can end up doing us more harm than good.

There are a number of tidy-sounding theories about why markets have become more volatile. Among the issues frequently splashed across newspaper front pages: global growth fears, policy uncertainty, geopolitical risk, and even the Ebola virus.
In many cases, these issues are not new. The US Federal Reserve gave notice last year it was contemplating its exit from quantitative easing (an unconventional monetary policy used by central banks to stimulate the economy when standard monetary policy has become ineffective). Much of Europe has been struggling with sluggish growth or recession for years, and there are always geopolitical tensions somewhere.

In some ways, the increase in volatility in recent weeks could be just as much a reflection of the fact that volatility has been very low for some time. Investors in aggregate were satisfied earlier this year with a low price on risk, but now they are applying a higher discount rate to risky assets. So the increase in market volatility is an expression of uncertainty. Markets do not move in one direction. If they did, there would be no return from investing in stocks and bonds. And if volatility remained low forever, there would probably be more reason to worry.

As to what happens next, no one knows for sure. That is the nature of risk. In the meantime, investors can help manage their risk by diversifying broadly across and within asset classes. We have seen the benefit of that in recent weeks as bonds have rallied strongly.

For those still anxious, here are seven simple truths to help you live with volatility:

1. Don’t make presumptions.
Remember that markets are unpredictable and do not always react the way the experts predict they will. When central banks relaxed monetary policy during the crisis of 2008-09, many analysts warned of an inflation breakout. If anything, the reverse has been the case with central banks fretting about deflation.

2. Someone is buying.
Quitting the equity market when prices are falling is like running away from a sale. While prices have been discounted to reflect higher risk, that’s another way of saying expected returns are higher. And while the media headlines proclaim that “investors are dumping stocks,” remember someone is buying them. Those people are often the long-term investors.

3. Market timing is hard.

Recoveries can come just as quickly and just as violently as the prior correction. For instance, in March 2009—when market sentiment was at its worst—the S&P 500 turned and put in seven consecutive months of gains totalling almost 80%. This is not to predict that a similarly vertically shaped recovery is in the cards, but it is a reminder of the dangers for long-term investors of turning paper losses into real ones and paying for the risk without waiting around for the recovery.

4. Never forget the power of diversification.
While equity markets have turned rocky again, highly rated government bonds have flourished. This helps limit the damage to balanced fund investors. So diversification spreads risk and can lessen the bumps in the road.

5. Markets and economies are different things.
The world economy is forever changing, and new forces are replacing old ones. This applies both between and within economies. For instance, falling oil prices can be bad for the energy sector but good for consumers. New economic forces are emerging as global measures of poverty, education, and health improve. A recent OECD study shows how far the world has come in the past 200 years.1

6. Nothing lasts forever.

Just as smart investors temper their enthusiasm in booms, they keep a reserve of optimism during busts. And just as loading up on risk when prices are high can leave you exposed to a correction, dumping risk altogether when prices are low means you can miss the turn when it comes. As always in life, moderation is a good policy.

7. Discipline is rewarded.
The market volatility is worrisome, no doubt. The feelings being generated are completely understandable and familiar to those who have seen this before. But through discipline, diversification, and understanding how markets work, the ride can be made bearable. At some point, value re-emerges, risk appetites reawaken, and for those who acknowledged their emotions without acting on them, relief replaces anxiety.

1. “How Was Life? Global Well-Being since 1820,” OECD, October 2, 2014.
 For more articles, visit Dimensional’s client site at

All expressions of opinion are subject to change without notice. This article is distributed for informational purposes, and it is not to
be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products or services.

Diversification does not eliminate the risk of market loss. There is no guarantee investment strategies will be successful.

The S&P 500 Index is not available for direct investment and does not reflect the expenses associated with the management of an
actual portfolio. Past performance is no guarantee of future results.

Dimensional Fund Advisors LP is an investment advisor registered with the US Securities and Exchange Commission.

 © 2014 Dimensional Fund Advisors LP. All rights reserved. Unauthorized copying, reproducing, duplicating, or transmitting of this material is prohibited.

Friday, October 3, 2014

To Your Health

Pathways Advisory Group, Inc.
Michelle Carter, CFP®

In case you missed it from the March 2011 Newsletter...

Completing your estate planning can be quite an adventure… Do I need a Trust, or can a Will suffice?  What about a Community Property agreement?  Should I name a person or my Trust as the beneficiary on retirement accounts?  These are some of the questions you and your attorney may work through.

Some people will have Simple Trusts, others may have Complex Trusts, and still others don’t need a Trust at all.  However, there is one important topic I have seen addressed in virtually every estate planning package I’ve reviewed…Healthcare.

I’ve heard attorneys mention several times that everyone needs to address healthcare in their estate plan.  Whether you are a college student just starting out, or a financially independent retiree, planning ahead for health-related issues seems to be of great importance. 

It can be a bit intimidating…Directives, HIPPA, Power of Attorney…what does all that mean? 

I present to you, Healthcare Planning 101:

Advance Healthcare Directive:

An "advance health care directive" lets your physician, family and friends know your health care preferences, including the types of special treatment you want or don't want at the end of life, your desire for diagnostic testing, surgical procedures, cardiopulmonary resuscitation and organ donation.

By considering your options early, you can ensure the quality of life that is important to you and avoid having your family "guess" your wishes or having to make critical medical care decisions for you under stress or in emotional turmoil.

Durable Power of Attorney for Healthcare:

A Durable Power of Attorney for Healthcare is a legal document that allows an individual to appoint someone else (proxy or agent) to make medical or health care decisions, in the event the individual becomes unable to make and/or communicate such decisions personally.

Durable refers to a power of attorney that remains in effect if the individual becomes incapacitated. If a power of attorney is not specifically made durable, it automatically expires if the principal becomes incapacitated.

HIPAA Release:

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) is designed to protect your medical privacy.  Unfortunately, it can also restrict your spouse, children, or appointed agents from accessing any information on your health care condition.  The trustees of your trust or agents under your Power of Attorney for Health Care may find it difficult to access the information they need to prove your incapacity in order to take over your financial decisions or health care decisions.  Additionally, once they are serving as your agents, they may have trouble gathering the information needed to process your health insurance or Medicare claims.

To avoid this situation, you may have your Power of Attorney or Advance Health Care Directive updated to include the “HIPAA Release” information.  This will allow your family members and/or trustees and agents to obtain the necessary information on your health care condition, and to take over your finances in the event you are unable to do so yourself.

These important documents can bring some security, not only if an unexpected crisis occurs, but beforehand as well.  There is peace of mind in knowing your loved ones will have the forms and guidance needed during a difficult time.

Find Michelle on


This article is for information purposes.  We are not attorneys and do not give legal advice.

Friday, September 19, 2014

The Power of Markets

Pathways Advisory Group, Inc.

In a complex world, simplicity can be refreshing.  This is certainly true with financial planning.  Sorting through the complexity is an important step.  It’s a necessary evil.  However, the real trick is translating that complexity into elegant simplicity.  Carl Richards’s financial sketches are great examples of this.  Although we cover markets from many angles on this blog; fundamentally, investing is simple – a lifelong commitment to a well-built portfolio yields better results than a lifelong search for a “free-lunch”.  As the following video so elegantly states, it’s much like changing lanes in rush hour traffic – you are better off staying in your own lane!

video platformvideo managementvideo solutionsvideo player

Have a great weekend!

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Tuesday, September 16, 2014

It’s a Girl!

Pathways Advisory Group, Inc.
David Williamson, CFP®

We are proud to announce the birth of David's granddaughter, Keira Giselle Doyle, born to Megan and Eamonn Doyle. She was born on September 6, 2014; she weighed in at 8 lbs. Congratulations to the family on the birth of their baby girl!

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Friday, September 5, 2014

Do Your Investments Cause You Stress?

Pathways Advisory Group, Inc.
Jeff Karst, CFP®

I have two rental properties as investments (I didn’t set out to own rental properties but that’s how they evolved).  One is pretty easy.  The renter pays the rent on time every month and I almost never hear from him.  Once, the main water line was leaking so he wrote me a note.  The other rental property is a different story.

With my second rental property, it seems like there is always something going wrong.  It could be late rent, a broken kitchen faucet, or a water leak that destroys the flooring.  (These things all happened recently which is why I wrote this blog.)  Anytime I see the renter’s name pop up on my phone, my stress level instantly doubles.

I could have a management company to help take care of these things, but that cuts into cash flow and I’m not sure how much stress it relieves when they would call for permission to replace the faucet or flooring.

My other investment is my well-diversified portfolio of mutual funds.  These mutual funds never call me.  They don’t cause me any stress.  True, there is a lot of volatility.  However, I don’t really see a lot of volatility.  I look at my portfolio once a month (but that’s only so I know where to invest my retirement plan contribution).  My mutual funds are (relatively) stress-free, whereas my other investments only add to my stress.  If you’ve ever owned rental property, you probably know what I’m talking about.  If you don’t, consider yourself lucky.

If you are considering a rental property as an alternative to investing in a well-diversified portfolio of mutual funds, you should first ask yourself a few questions:
  • Who will manage the property?  If it’s a management company, what’s the negative impact on cash flow?
  • Will this endeavor really cause me less stress than watching my portfolio daily (if you do, indeed, watch it daily)?
  •  How will I handle the stress of a deadbeat tenant who trashes the place?
  •  Do I really expect a greater return on investment than my portfolio?
Investing in rental properties can be a great investment.  But it may require much more work than a diversified portfolio.  Will you be compensated for that extra work?

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Friday, August 22, 2014

An Exciting Project!

Pathways Advisory Group, Inc.

Pathways, in association with the Community Food Bank of Fresno, is hosting a food drive.

Why? Hunger should not be an issue in the 21st Century, but it is a daily struggle for 1 in 6 Americans. The Community Food Bank is helping 220,000 residents each month, including 90,000 children in the Central Valley area. We would like to raise awareness of this issue and support our local community.

This is our first ever food drive. Our goal is to fill a 55-gallon drum located in our lobby. Feel free to tell your friends and family!

 We will post updates on the blog throughout the drive. Our deadline is November 20.

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Friday, July 11, 2014

Client Adventures

Pathways Advisory Group, Inc.

What does “retirement” mean to you? What will it look like? What will you do? We encourage clients to come up with their own definition. To ponder life today and tomorrow. To choose the “special balance” that works for both. It’s not easy. There is much to consider, but it’s worth it! After all, without purpose – it’s just money!

What does this have to do with the title “Client Adventures”? Many of you have considered these questions. Many of you have come up with your own definition. Some of you have even shared your stories through our “Client Adventures”.

Within the last year Carol Ede cruised the Baltics.  Leslie Williams toured France. The Comellis rafted the wet, wild, and gorgeous Colorado River. And the Smiths took on Ireland and the UK.

We love these stories. We love these adventures. We love these pictures. It reminds us why we do what we do. It reminds us why we seek “clarity” in our meetings.

To surf these stories and others, visit the Client Adventure section of our website. Thank you for sharing these experiences with all of us. Keep them coming...

Do you have a client adventure you would like to share? If so, please email Leslie at

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Friday, June 27, 2014

A Nobel Prize in Economics

Pathways Advisory Group, Inc.
David Williamson, CFP®

As an office, we like to keep everyone informed.  It’s an important part of our culture.  One method, we call “cycle articles”, is to share articles of interest (by the end, a cycle article should have everyone’s initials on it).  Recently, a cycle article about three recipients of the Nobel Prize in Economics came across everyone’s desk:

"David, who was awarded the Nobel Prize for Economics in 2013?  And why did you cycle the article?"

Eugene Fama (of the University of Chicago), Lars Hansen (also of the University of Chicago) and Robert Shiller (of Yale University) were recognized together. I cycled the article because I believe Eugene Fama deserves recognition at the Nobel Prize level.  The robust efficiency of markets is the cornerstone of our investment philosophy.  Markets work extremely well.  Those investors who try to “beat the market” do so at their own peril!

"When were you first introduced to the work of Eugene Fama?  And what was your initial reaction?"

About 1992.  The idea of market efficiency was beginning to appear on the radar of investment advisors. By 1994, I was convinced that picking the top (mutual) fund manager or trying to “time” the market was an inappropriate approach to building portfolios for our clients.

"Why should we care?  How has Eugene Fama’s work affected the average investor?"

Unfortunately, his work has probably influenced less than half of investors.  Most still believe in forecasting, timing and trying to identify tomorrow’s winners.  However, I suppose, just as the joint award suggests, the collective efforts of all three recipients raised the bar in economics.  This should impact all of us on some level. 

Why should we care?  Fama’s work lays the groundwork for a scientific, well-researched approach to investing that allows markets to work for the investor.  This evidence-based approach has been and will continue to be fundamental to the (efficient) success of our portfolios. 

Thanks David.  Congratulations Professor Fama on the recognition of your life’s work! 

Please enjoy a short video about the evolution of modern finance throughout Professor Fama’s distinguished career at the University of Chicago.

video platformvideo managementvideo solutionsvideo player

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Eugene Fama has been and continues to be an integral part of the academic engine that fuels Dimensional Fund Advisors (DFA). For the curious, here are a few additional links about Professor Fama’s work and Nobel recognition.

Tufts Magazine Article.
Eugene Fama and Robert Shiller discuss “bubbles” on NPR.
New York Times article regarding Fama’s Nobel recognition.

Friday, June 13, 2014

Bolts of Clarity

Pathways Advisory Group, Inc.
David Williamson, CFP®

In case you missed it from the September 2010 Newsletter…

Most clients, at one time or another, have experienced our Retirement Projection.  Dream a little, list all the goals, prioritize, figure out the future income, add in the assets, drum roll please…

At the drumroll, you may experience a catch in your throat, a flutter in your heart.  We sure do.  Suddenly, there’s that spreadsheet.  How much money is there at the “End of Your Plan”? 

We love to see the highly successful projection.  All goals met, with plenty to spare.  But, alas!  Not all results are pretty.

Believe me, we are rooting for you.

In our minds, though, a successful projection is one that brings clarity.  If you are falling short, better to know it as early as possible.  Then, let’s consider all of your options.  What changes can be made?  What actions can you take?  Let’s grab hold of this clarity – and make the most of it.

When the results turn out quite well, we sometimes have a different sort of clarity.  The confident realization that you are financially secure.  Those wonderful travel plans that you were not sure about…? Yes! Go for it!  That and more!  Grab hold of this clarity – and make the most of it.

Please know that when the drum rolls, from our side of the desk, we’re on the edge of our seats, too.  Either way, we’re along for the ride.  Let’s keep seeking that clarity. 

And above all, let’s keep on dreaming.

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Friday, June 6, 2014

Public Awareness Video

Pathways Advisory Group, Inc.

If you haven’t already seen it, take a look at the latest public awareness ad on behalf of the CERTIFIED FINANCIAL PLANNER™ professional.


What do you think?  Does it instill confidence in the certification or make you wonder how we spend our weekends?

Happy Friday!

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For more information about the CFP® mark, take a look at this explanation from our website.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and CFP® in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Wednesday, May 28, 2014

Buying on Sale

Pathways Advisory Group, Inc.
Jeff Karst, CFP®

We all like to buy things “on sale”. There’s a psychology to it. Recently my wife bought a blender but I was pleased that she was able to find one for 30% off. Although I was still a little upset that she broke our old one. It’s the relative price change that causes us to think something is a “good deal”.

After the housing market “crashed”, how many times did you think about buying a rental property? Of course it’s a good time to buy – homes are “on sale”. You can enjoy a bit of income and the renter is paying the mortgage. And, you knew that prices would likely go up from that point.

Now consider the stock market. Did you think that March 9, 2009 was the perfect time to buy stocks? I’m guessing not. During 2008 and the beginning of 2009, nobody wanted to buy stocks even though they were “on sale”.

Unfortunately, this is common for investors. There is much research to show that equity mutual funds have the most money flowing into them when the market is going up (and near its peak). And conversely, as the market hits bottom, money is flowing out of equities. That is not the way to invest!

Our approach is to stay invested and rebalance. A disciplined investment strategy has proven time and again to yield superior investment returns. When the market dips, you should be thinking “How can I buy more stocks? They’re on sale right now!”

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Wednesday, May 21, 2014

Accumulating? Think shares, not values…

Pathways Advisory Group, Inc.
Dustin J. Smith, CFP®

Markets can be hectic, noisy and stressful.  The financial media sensationalizes everything.  Keeping market results in perspective is a constant struggle.  We don’t recommend watching on a daily, weekly or monthly basis.  It can feel much like a trip to Magic Mountain theme park.  Even watching on an annual basis can be unproductive.  However, if you insist on watching despite the perils, consider a different focus.  Consider, especially during the accumulation years, a focus on “shares” not values.

We typically focus on portfolio value (at a given point).  Portfolio value is simply each mutual fund share balance multiplied by the corresponding share price (Net Asset Value (NAV)).  The NAV itself represents the collective price of the underlying basket of securities (stocks or bonds).  What then is the primary driver of portfolio volatility?  Changes in the share price (NAV) - what someone is willing to pay for the underlying basket of securities.  The number of shares does not fluctuate with the market.  Shares do not fluctuate unless you buy, sell or reinvest dividends.    

It’s a fairly simple concept.  But a share balance focus can have a profound effect.   It helped many of us cope with the 2008 economic crisis.  A focus on shares reminded us that fluctuations in price (attached to the shares we own) aren’t realized until shares are sold.  This realization is especially powerful connected with the notion that investing is a lifelong commitment – with no specific destination.

There will, of course, come a point when you sell within your portfolio.   You do, after all, save money to spend it.  But it’s not a destination.  Your shares will continue to grow in value.  Your shares will continue to generate income.  Your portfolio value will fluctuate but your shares won’t.  As long as your withdrawals are reasonable (we spend a lot of energy defining a “reasonable” withdrawal rate), the selling is modest and periodic.  The shares you accumulate will provide for you.  You will survive the downturns.

A strong faith in markets is important.  It’s one of the reasons for this blog.  But it won’t make you immune to “noise”.  If you find yourself caught up in the headlines, remember your shares.  Remember Death, Taxes and New Market Highs.  You don’t have to watch markets like your neighbor.  You might ask your neighbor a riddle instead. “How many shares did you lose during the economic crisis?”

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Monday, May 12, 2014

Tax Form 5498

Pathways Advisory Group, Inc. 

Have you received a tax form in the mail recently? If not, then disregard this post. If, however, you did receive a 2013 IRS Tax Form 5498 recently, do not panic. Form 5498 is generated by investment custodians every May for Traditional or Roth IRAs with activity during the previous tax year and usually does not lead to an amended tax filing. Tax Form 5498 is informational. The IRS reconciles this activity with your Tax Return. If you received this form, ask yourself: "Did I contribute to a Roth or Traditional IRA last year? Did I roll money into an IRA last year? Did I convert IRA money to a Roth IRA last year?" If any of this activity applies to you, you received Form 5498. Contribution information is typically requested on an accountant's questionnaire. Rollovers and conversions generate a 1099-R. Either way, your accountant should already be aware of the activity. Then what should I do with my copy? In most cases, simply add it to your freshly started tax folder for 2014. As your accountant reviews next year's tax file, he or she can confirm that the activity was addressed.

The above explanation is summarized and generic. Please consult your tax professional with any specific questions.

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Tuesday, May 6, 2014

Death, Taxes and New Market Highs

Pathways Advisory Group, Inc.
Dustin J. Smith, CFP®

A common headline in the financial media is that the market (DJIA, S&P 500 and Nasdaq) has reached an “all time high”.  Fortunately, after emerging from a deep recession in 2009, it’s been a common headline the past few years.  It happened 52 times with the DJIA last year alone. Following the headlines is always entertaining.  What I find interesting about this particular headline is the reaction.

“If we keep hitting all-time highs, the market must be over-valued”.  “We are due for a pullback”. “I think the market has topped out, don’t you?” As you know, we don’t.  We take a much different view of markets.  We prefer to look at it from a distance – sort of like viewing a neighborhood from the air.  When you look at it this way, you realize that all bear (down) markets are temporary pullbacks on a PERMANENT bull (up) market.  You look at investment decisions as a risk/return trade-off – not a timing event.  You look at investing as a permanent fixture of life.  You look at new market highs as an inevitability – as certain as death and taxes.

There are lots of details to debate.  And it’s important to debate them.  But it’s also liberating when you emerge from the “weeds”.   Short-term results are noisy.  But markets thrive.  Despite world wars, terrorism, recessions, depressions, bad government policy, bad economics and constant uncertainty, markets thrive.  They always have.  We believe they always will.  Nick Murray, who frequents our newsletter via his client corner commentary, put it best in Simple Wealth, Inevitable Wealth, stating that “the only realism is optimism.” When you take a step back, that’s what you see.

Don’t believe me?  Take a look at this chart.

1924 – 110. 
1934 – 104. 
1944 – 152. 
1954 – 387. 
1964 – 874. 
1974 – 619. 
1984 – 1211. 
1994 – 3835. 
2004 – 10,783. 
2014 – 16,512 (as of 5/2/2014). 

It’s not just about what has happened but also why it has happened.  It’s not an anomaly.  Look as far back as you can.  Look at all twenty year time periods.  Look at prosperity in general.  Look beyond our borders.  Look beyond recessions.  Look beyond pullbacks. The worldwide engine of capital markets and ingenuity is too powerful to stop - it’s a locomotive.  Punch your ticket.  Watch from the air.  Don’t sweat the headlines!

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Monday, March 31, 2014

The Devil Wears Nada

Jim Parker
Outside the Flags
Vice President

The global fashion industry is fickle by nature, pushing and then pulling trends to keep hapless consumers forever turning over their wardrobes. Much of the financial services industry works the same way.

Fashion designers, manufacturers, and media operate by telling consumers what’s in vogue this year, thus artificially creating demand where none previously existed. What turns up in the boutiques is hyped as hip by the glossy magazines to make you feel like you “have” to buy it.

Likewise, much of the media and financial services industries depend on fleeting trends and built-in obsolescence to keep investors buying new “stuff.” Driving this industry aren't so much the real needs of individuals but manufactured wants with short shelf lives.

Just as in fashion, many consumers jump onto an investment trend after it’s already peaked and the market has moved onto something else. So their portfolios can end up full of mismatched, costly, impractical creations such as hybrids, capital protected products, and hedge funds.

These products tend to be created because they can sell. So in early 2005, Reuters wrote about how banks were manufacturing exotic credit derivatives (instruments designed to separate and transfer credit risk) for investors looking for ways to boost yield at a time of narrowing premiums over risk-free assets! (A credit default swap is a credit derivative. It’s an over-the-counter financial instrument whose value is determined by the default risk of an underlying asset.)

Four years later, in the midst of the crisis caused partly by those same derivatives, the shiny new things were “guaranteed” or “capital protected” products as financial institutions rolled out a new line of merchandise they thought they could sell to a ready market.

Some investors made the mistake of swinging from one trend to the other, ending up with overly concentrated portfolios—like a fashion buyer with a wardrobe full of puffy blue shirts.

While some of these investments may well have found a viable market, it’s worth asking whether the specific and long-term needs of individuals are best served by the design and mass marketing of products built around short-term trends.

Luckily, there is an alternative. Rather than investing according to what’s trendy at the moment, some people might prefer an approach based on long-term research and built upon principles that have been tried and tested in many market environments.

Instead of second guessing where the market might go next, this alternative approach involves working with the market, taking only those risks worth taking, holding a number of asset classes, keeping costs low, and managing one’s own emotions.

Instead of chasing returns like an anxious fashion victim, this approach involves investors trusting the market to offer the compensation owed to them for taking “systematic” risk—those risks in the market that can’t be diversified away.

Instead of juggling investment styles according to the fashion of the moment, this approach is based on dimensions of return in the market that have been shown by rigorous research as sensible, persistent, and pervasive. Instead of blowing the wardrobe budget on the portfolio equivalent of leg warmers, this approach spreads risk across and within many different asset classes, sectors, and countries through a technique called diversification.

And instead of paying top dollar for the popular brands at the expensive department stores, this approach focuses on securing good long-term investments at low prices relative to fundamental measures. Buying high just means your expected return is low.

Most of all, instead of focusing on off-the-rack investments created by the industry based on what it thinks it can sell this week, this approach can help deliver long-term results based on each individual’s own needs, goals, and life circumstances.

To paraphrase the legendary designer Coco Chanel, investment fashion changes, but style never goes out
of fashion.

S&P data are provided by Standard & Poor’s Index Services Group.

MSCI data copyright MSCI 2013, all rights reserved.

Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.
This information is for educational purposes only and should not be considered investment advice or an offer of any security for sale. All expressions of opinion are subject to change without notice in reaction to shifting market conditions.

Dimensional Fund Advisors LP ("Dimensional") is an investment adviser registered with the Securities and Exchange Commission.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. This article is provided for informational purposes, and it is not to be construed as an offer, solicitation, recommendation or endorsement of any particular security, products, or services. 

©2013 Dimensional Fund Advisors LP. All rights reserved. Unauthorized copying, reproducing, duplicating, or transmitting of this material is prohibited.

Wednesday, March 19, 2014

2014 IRS Refund Chart

For those of you expecting a tax refund, you should be aware the IRS is not publishing a refund chart as they have in years past. The IRS does have a new tool you can use to determine the status of your refund on their website. Click here to check where your refund is.

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Thursday, March 13, 2014

The Golden Ticket Trap

Jim Parker
Outside the Flags
Vice President

In a popular children’s story, the young hero pins all his hopes on finding one of a handful of “golden tickets” hidden among millions of candy bars. It seems many people approach investing the same way.

The notion that the path to long-term wealth lies in locating secret and previously undiscovered treasures in the global marketplace of securities is one regularly featured in media and market commentary.

One magazine, for instance, runs a feature called “Fund Managers’ Secret Stocks,” referring to supposedly “bargain” stocks the pros keep hidden. (How the stocks can be secret when splashed on magazine stands nationally is not explained.)

Likewise, a popular business broadcaster regularly tells its viewers about the “under-the-radar” stocks that Wall Street analysts don’t want them to know about.

This stuff sells because it plays to a misconception about how markets work: that they are like beaches after a hot day, full of buried treasures. All you need, in this view of investing, is a virtual metal detector to find the money that people left behind.

You could get lucky this way, of course. But basing a
long-term investment strategy on stumbling across the equivalent of a mislaid trinket in the sand or a golden ticket in a chocolate wrapper is not likely to be sustainable.

It’s a haphazard approach, reliant on chance and requiring a lot of work that is unlikely to be rewarded. Worse, it means taking unnecessary risks by tying one’s fortunes to a handful of securities or to one or two sectors.

Taking big bets on a single sector or commodity is a bit like buying a chocolate bar in the hope of finding a golden ticket. There’s an element of pot luck, and you’re exposing yourself to idiosyncratic risk related to that sector or industry.

On the subject of hidden treasures, gold itself can have a special allure for investors, particularly in uncertain times. Indeed, the yellow metal has had a couple of spectacular runs, in the 1970s and in the 2000s. But there have been long lean times and significant volatility in between, which makes gold a highly speculative bet.

In early 2013, the Daily Mail in the UK carried the headline, “Gold Set to Shine Even More Brightly in 2013.” The rationale was that with investors scouring the world for “safe havens,” gold could reach as high as $2,500 an ounce by year end.

As it turned out, gold suffered its biggest annual loss in three decades last year, with its spot price falling 28% in US dollar terms. From an all-time high of $1,920 in September 2011, gold fell to just over $1,200 by the end of 2013.

Now, adopting some exposure to gold may well suit some investors as part of a broadly diversified portfolio, but taking speculative bets on a single commodity, sector, or stock is more akin to blind hope than to anything else.

The popularity of media stories about hidden bargains and undiscovered stocks is understandable. Like townsfolk in a bar overhearing the boasting of gold diggers down from the hills, we desperately want to believe in El Dorado. But this sort of speculation is really no different than gambling.

In contrast, sound investment starts with identifying the risks worth taking and minimizing the risks that don’t come with an expected reward, like taking a big bet on gold. You can help reduce risk and increase flexibility by diversifying.

It’s true that you can get lucky the other way, like the boy in the chocolate factory story. But the chances are against you.

And keep this in mind: The best investment may not be the golden ticket anyway.

S&P data are provided by Standard & Poor’s Index Services Group.

MSCI data copyright MSCI 2013, all rights reserved.

Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.
This information is for educational purposes only and should not be considered investment advice or an offer of any security for sale. All expressions of opinion are subject to change without notice in reaction to shifting market conditions.

Dimensional Fund Advisors LP ("Dimensional") is an investment adviser registered with the Securities and Exchange Commission.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. This article is provided for informational purposes, and it is not to be construed as an offer, solicitation, recommendation or endorsement of any particular security, products, or services. 

©2013 Dimensional Fund Advisors LP. All rights reserved. Unauthorized copying, reproducing, duplicating, or transmitting of this material is prohibited.

Tuesday, February 18, 2014

Tax time is here!

We have been informed that Schwab’s 1099s are in the mail. Yet again, Schwab extended their mailing date into February to reduce the number of corrected 1099's, but corrections are still a possibility. Please give our office a call if you have any questions.

Good luck with your taxes!

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