Money Talk Blog

The Biggest Struggle Financial Clients Are Having Today

I think that clients today are expecting different things from their financial advisors than they had before. So before or they just managed they just managed their money. But nowadays they need us to manage their emotions as well and to also give them some foundation for what they could possibly expect. Right now, it’s a very difficult time for everyone, but especially for our clients.

I think the biggest challenge right now is that we have to be there for them, for them, and we have to be there for us. So we have to do what it takes to build us up and be knowledgeable and efficient so that we can be there for our clients. Right now is a very precarious time. I think a lot of financial advisors believe and think that they are financial advocates as well and in that sense, we’re no different.

What I do see as different with us and hopefully more and more financial advisors also become this, is that we are financial concierge. We actually fulfill any kind of need that that client has for financial services and wealth management and an ear. Because right now people just don’t know where to go to, to seek advice. Not just advice about their investment, but advice about their life.

How much is it going to cost for their kids to go to college? Can they afford that? What college should they go to and look at from a financial perspective, even when that child graduates, what major should that child have that can really help them moving forward? That’s going to be practical for them, but not just for their kids.

Also, should they buy that second home now or should they wait? Should they upgrade their home or should they sell and buy another one? All these are questions that a lot of people have right now because it is a different era. It’s not just about financial advising. Financial advising has evolved in so many different ways and we have to evolve with them. So I really consider our company and myself a financial concierge to our clients.

I think the biggest struggle that clients are having nowadays is that they’re afraid and they’re even afraid to ask their financial advisor for that emotional guidance. They’re afraid to call us. And so I think it’s really important now for us to be proactive as financial advisors and reach out to our clients, anticipate their concerns. And hopefully we’ve been proactive and we asked clients before they were even clients what were their greatest financial fears and that we evolved with them so that we can answer and be there for our clients the way they want us to be there for them, not the way we think that we should be there for them.

Disclosures:The opinions voiced in this blog are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.

Sandra Cho is a registered representative with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Pointwealth Capital Management, a Registered Investment Advisor and separate entity from LPL Financial. Riskalyze, Advisorpedia and LPL Financial are separate entities.

November 2022 in Review

I’m going to be going over November 2022 in review. This month, global equities fell slightly. The Fed has been raising rates higher, faster since inflation remains stubbornly high and unemployment actually went down from 4.8% in September to 4.6% in October, which was the last reading. The Fed raised rates 0.75% this month.

Now it’s good that unemployment is down, but unfortunately, unemployment has got to go up in order for us to tame inflation. That’s because when people lose their jobs, they don’t spend as much, and that means that demand is lower. So inflation actually goes down or the price of things tend to go down. I’ve been hearing that the number for unemployment has to go up to 6% or even higher.

In some cases, I’m hearing 8%. Let’s hope that’s not the case and we just get scared enough to stop spending so much. Except for me. If you have a lot of tech stocks, you might have noticed your portfolio looks grim. That’s because while the S&P 500 is actually up two and a half percent for the month of November. Tech stocks are down about two and a half percent.

If you have FAANG, which is Facebook, Alphabet, Amazon, Netflix and Google, now that Facebook has changed their name to Meta, that would be MAANG stocks. The Nasdaq as a whole is flat. Simultaneously, there’s been a huge rally in international developed country stocks, which are up 10% for the month of November.

Now let’s address the elephant in the room. Republicans didn’t win as many seats in Congress. They have a narrow majority in both the Senate and House and with a Dem as president that means we won’t be getting much done per usual. Black Friday and Cyber Monday this year seem to indicate that sales were pretty much the same as last year, maybe even a little bit better.

Once again, bringing it back to Meta. Meta is down 67 and a half percent year to date, but it’s up over 17% for the month of November. Unfortunately, it just got fined $276 million US in Europe because it didn’t keep users information safer. Thank you so much. Have a great December and I’ll see you then.

Disclosures:

Sandra Cho is a registered representative with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Pointwealth Capital Management, a Registered Investment Advisor and separate entity from LPL Financial.

The opinions voiced in this recording are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

All investing involves risk including loss of principal.

No strategy assures success or protects against loss.

Stock investing includes risks, including fluctuating prices and loss of principal. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

The Standard & Poors 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

October 2022 in Review

October was absolutely crazy even by 2022 standards. But the good news is the stock market is up. Dow is up about 14% in October, logging its best October since 1976 S&P500 is also up almost 8% and the Nasdaq is up almost 4% for October alone. The rising US dollar has created havoc globally. Japan has spent more than 40 billion in October alone to prop up the yen, according to the Wall Street Journal.

In India, the strong US dollar has caused the goods and services tax, a.k.a. GST, to go up the second highest in history. The first highest was April of this year in the UK. The Bank of England bailed out pension funds reminiscent of the 2008 financial crisis. Kwasi Kwarteng The UK short lived chancellor. Chancellor is like the CFO of England, announced what we now know was an awful plan for a preliminary budget that caused a run on pension funds, which almost led to a financial system collapse.

Facebook is down 29 to $29.20 as of today, November 1st, 2022. It hasn’t been this low since 2015. The peak was over $378 a share. What? In other news, Elon Musk finally owns Twitter.

Disclosures:

Sandra Cho is a registered representative with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Pointwealth Capital Management, a Registered Investment Advisor and separate entity from LPL Financial.

The opinions voiced in this recording are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

September 2022 in Review

Today I’m going to be talking about September of 2022. This month has been extremely volatile, like this entire year as of this recording September 21st. The S&P 500 is down 20.5% The Dow is down 17% and the Nasdaq is down a whopping almost 28 and a quarter percent.

Part of this volatility is inflation. We’re just trying to get a grasp on it at this point. And the federal government has raised interest rates 0.75% today alone so far this year. The FOMC, the Federal Open Market Committee, has raised interest rates a total of three full percentage points, bringing the Fed funds rate up to 3 to 3 and a quarter percent.

That has had a drag on the stock market in general, but not all stocks are created equal. Growth stocks have been dragged down even more than value. Stocks. Why is that? First of all, growth stocks have more debt, typically speaking, and they reinvest in the company more because they have more debt. As interest rates go up. They have to pay more to service their debt.

So a company such as Amazon who has done amazing last year, has gone down over 30% year to date. Meanwhile, you have a stock like Procter & Gamble, which is a value stock, and that’s gone down about 17%. Part of that reason is because it’s a value stock and value stocks don’t generally have as much debt. Likewise, Procter & Gamble pays a dividend of over 2.6%.

So you’re earning income from dividends until that stock price comes back up. And likewise, as I mentioned, the stock does not have as much debt. So value stocks have definitely been more of a bellwether year to date, as has commodities. Commodities are actually up and that’s amazing considering that everything’s down. U.S. stocks, international stocks both developed and emerging, as well as U.S. bonds, which are down about 11 and a half percent year to date.

That’s practically unheard of. Now we come to inflation. Inflation has been a huge headwind year to date. We’re just trying to get a hold of inflation at this point. And that’s why the FOMC has been raising interest rates. We do see glimmers of hope in inflation and you can see that by gas prices which have come down in the last few months.

Housing has softened and even rental, the cost of rent has gone down as well. But inflation is still high. And you can see that in food prices. Gas is still quite high and the labor market is so strong, which is generally a good thing. We don’t want employment to be high, but there might be no other way because we do have to get a grip on inflation and that is definitely a concern.

Only time will tell whether we have a soft landing, a hard landing or a landing that just is prolonged over a year. Thank you so much for your time and I look forward to seeing you on the next monthly recap.

Disclosures:

Sandra Cho is a registered representative with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Pointwealth Capital Management, a Registered Investment Advisor and separate entity from LPL Financial.

The opinions voiced in this recording are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

Recession

Today I’m going to be talking about a possible recession in 2022. Some people think we’re already in a recession because we’ve had 2 quarters of negative GDP. The first quarter came in at -1.4, at least preliminarily, and the second quarter came in at -0.9. Now that might not seem like a lot. It might not seem like a big drop, but technically it is 2 quarters of negative GDP.

A lot of economists don’t just use 2 quarters of negative GDP as a barometer of whether we’re in a recession. They also look at whether we’ve been spending, like consumer spending, whether, you know we have high unemployment, and whether we’ve had wage growth. Now we have had wage growth, but as we all know, inflation has ticked up, higher, and inflation has actually ticked up higher than the wage growth. So, the real money that we’re taking home isn’t as much. Even if the dollar amount is bigger.

Another question that I’m getting right now from a lot of my clients is, “Market’s down, is it good right now to put more money in?” or “Should I make changes right now? Should anything be changed?” Well, the answer to the first question is Maybe. It’s not a definitive yes. Yes, the market is lower right now than it was January 1st, but we also have to look at earnings.

Another question that I’m getting right now from a lot of my clients is, “Market’s down, is it good right now to put more money in?” or “Should I make changes right now? Should anything be changed?” Well, the answer to the first question is Maybe. It’s not a definitive yes. Yes, the market is lower right now than it was January 1st, but we also have to look at earnings.

The stock market is dependent on corporate earnings. Are those earnings projected to be good? Well, not really, and it does depend. I highly recommend that you speak to your investment professional as to whether you should contribute to your portfolio or investment portfolio right now, now that the market is lower.

By the way, the US stock market isn’t just lower, pretty much everything is lower. You’ve got international stocks lower, you’ve got US bonds lower, you’ve got US stocks lower, and we’re not just talking about large S&P500 blue chip companies that are lower. We’re talking about smaller companies that are publicly traded; mid-size companies. We’re talking about growth, we’re talking about value. Pretty much everything is lower.

The only things that aren’t lower right now are commodities really. Gas for example, is definitely not lower. Energy is definitely up double digits this year, and you’ve gold and precious metals, also up. There are certain things that are up, once again it’s a good time to get a portfolio review to see whether you are well-diversified and to see whether it’s a good time to add more money. Over the long term, I don’t think it hurts to ever get an investment portfolio review or a second pair of eyes to take a look at your portfolio to see how resilient it is during these difficult times.

Disclosures:
Sandra Cho is a registered representative with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Pointwealth Capital Management, a Registered  Investment Advisor and separate entity from LPL Financial.
The opinions voiced in this blog are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

Diversification

Today we’re going to be talking about diversification and asset allocation. And some people get diversification and asset allocation mixed up. Diversification is simply having stocks, bonds and cash. If you have these three elements, then you are technically diversified. How much stocks, bonds and cash you have really depends on whether you are a growth investor, a middle of the road moderate investor, or whether you’re a conservative investor.

That really depends on how much up and down volatility and risk you personally can take on without stressing out too much. So if you’re a growth investor, you might have more stocks than you have bonds. If you’re a middle of the road investor, you might have what we call a 60/40 portfolio, which is about 60% stocks, 40% bonds.

If you are a conservative investor, then you might have more of a 50% stock, 50% bond mix, or you might even have more bonds than you have stock. Now, we come to what’s known as asset allocation. Asset allocation is when you have a mixture of stocks and when you have a mixture of bonds. So, for example, if you have asset allocation, you’re going to have big mega conglomerate US stocks, mid-sized company stocks, small company stocks, but you’re also going to have international developed country stocks, for example, stocks from Europe, from Japan, Australia.

You’re even going to have emerging market stocks from countries like Russia, Brazil, India and China. You’re also going to have international bonds as well as U.S. bonds. And if you are broadly diversified, you are also going to have some alternative investments. Alternative investments is anything other than just playing stocks and bonds. So, for example, energy commodities like gold and precious metals and alternative investments such as structured notes that are indexed CDs, maybe tied to equities or stocks.

So once again, you can see now how diversification and asset allocation are a bit different. Then we come to cash. With cash, you generally want to keep 3 to 6 months worth of living expenses in the bank in a savings account and hopefully a higher yielding one. I personally don’t recommend locking up the money that you might need in CDs, because generally you get a penalty if you access that money before the term is up, and that’s something that you don’t want.

That’s why you keep it in cash. So it’s very important that before you decide how much stocks, bonds and cash you have, how much diversification asset allocation you have, how much you keep in cash that you speak to your investment professionals so that you can get a customized portfolio analysis and assessment of what you personally need. Thank you so much and have a great day.

Disclosures:
Sandra Cho is a registered representative with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Pointwealth Capital Management, a Registered  Investment Advisor and separate entity from LPL Financial.The opinions voiced in this blog are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a nondiversified portfolio. Diversification does not protect against market risk.Asset allocation does not ensure a profit or protect against a loss.

Educational Accounts

Today we’re going to be talking about educational accounts. So the first account that I’m going to be talking about are 529 plans and 529 plans are wonderful saving vehicle, especially when you’re saving for higher education. 529 plans are named after the IRS code 529, and you put in money after tax. Then if your child is young, that money has a long time to grow. When you take out that money, it’s all tax free.

It sounds really great. Well, it gets even better in certain states. You get a state tax deduction for the money that you put in to save for your child’s education. Unfortunately, not for California, where I live, but there are definitely quite a few states that do give a state tax deduction.

Now, some points about 529 plans are that it must be used for higher education, otherwise you get a 10% federal withholding penalty. Do be aware of that. And the money, like I mentioned before, grows and grows and grows because you can invest it in different investment options. You can be as conservative, moderate or aggressive as you want to be.

You can also even do age based investment options so that the money’s invested very aggressively when they’re younger and gets more and more conservative as they near the age where they’re going to start college. So that that’s one way to go with 529 plans. Now, you can be the owner as a parent of a 529 plan, but really anyone can be the owner, so a grandparent can be the owner of a 529 plan.

You can also even do age based investment options so that the money’s invested very aggressively when they’re younger and gets more and more conservative as they near the age where they’re going to start college. So that that’s one way to go with 529 plans. Now, you can be the owner as a parent of a 529 plan, but really anyone can be the owner, so a grandparent can be the owner of a 529 plan.

The nice thing is, starting from October 20, 22, a grandparent can be the owner and none of the money is considered against the child when determining whether they qualify for financial aid, unlike a parent. So if a parent is the owner of a 529 plan, then 5.64% of the money held in that 529 plan will be considered when determining financial aid. Let me give you an example. Let’s say I putting money into my child’s 529 plan right when they’re born and you do have to wait until they’re born.

I put in money. I put in money, put in money and it grew. It grew and grew. The child turned 18. The child’s about to go to college, I saved a whopping $100,000.

Sounds fantastic, but even better than that is they might qualify for financial aid, depending on how much I make. And if that’s the case, out of the $100,000, only $5,640 is counted when determining financial aid. And if instead of me being the owner, if their grand parent is the owner, then none of it is considered against them when determining financial aid.

The nice thing about a 529 plan is that you have higher limits of contribution. In fact, you can contribute $16,000 into a 529 plan per child per year without ever having to declare that on your tax return. And that can be very significant, especially, say, for example, if other people contribute. So let’s say I can only contribute $5,000 a year, but maybe their grandparents contribute six are able to contribute 16,000 and maybe my other contribute some money maybe on their birthdays or Christmas instead of birthday gifts or Christmas gifts, I ask them to contribute to the 529 plan and then they’re able to accumulate so much faster.

Also that 16,000, let’s say I have a windfall inheritance and I want to contribute more than that. 16,000. Well, you can contribute up to five years ahead of time and then just not contribute for the next four years. That means 16,000 times five. And then I can put that into that money has more time to grow for them.

Another thing is that 529 plans are pretty flexible. Not only can they be used for tuition, but also housing books. They can be used for technology like a laptop and let’s see, that child wants to study abroad and use that money for a university in another country. They can do that a trade school, as long as it’s accredited.

So there’s lots of lots of different ways that it can be used. If it’s not used for that. And let’s say the child and, you know, they get a scholarship, they’re so smart that they don’t need that 529 plan money. Well, guess what? You can change a beneficiary on that 529 plan to your grandchild, your great grandchild and so on and so on and so on.

In fact, you can go up to five generations of tax deferral. So it is amazing. It’s not the only educational account that exists. So you can have also a UTMA or UGMA account, which is a custodial account. So let’s say for example, you know you want to give money to your child or your grandchild, but you want them to be able to use it for anything, not just education, but maybe to buy a car or buy a house in their future.

Well, you can you can do that. Just know that it’ll count more against them when financial aid is being determined. So it can affect financial aid up to 20, 25%. So it’s just a good thing to be aware of. Also, the great thing is that you can have a Roth IRA, you, you yourself can have a Roth IRA, and you can use that money for your education, your kid’s education, your grandchild’s education or your spouse’s education.

So some people use a Roth IRA or Roth 401k as an alternative to an educational account. So there are lots of different ways you can save for education for your child. But also, don’t forget to save for yourself. Retirement is also very important and you don’t want to save for your child’s education, only leave yourself behind and then become a burden to your children later on in life.

Thank you so much. I strongly encourage you to talk to your investment professional when considering different educational accounts and which one might be right for you. Have a great day.

Disclosures:
Sandra Cho is a registered representative with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Pointwealth Capital Management, a Registered  Investment Advisor and separate entity from LPL Financial.The opinions voiced in this blog are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.Prior to investing in a 529 plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

Fixed-Indexed Annuities

Fixed-indexed annuities are a hybrid between fixed annuities and variable annuities. They blend the growth potential of a variable annuity and the guarantees of a fixed annuity. The great thing about fixed-indexed annuities is like fixed-annuities, they do not have a fee. Whereas variable annuities often have fees associated with them.

Fixed-indexed annuities also are tied to an ETF. For example, the S&P500, so that you can go up with the S&P500 if it goes up, but if it goes down, you do not go down. Seems like an ideal investment, however there’s always some catches. One of those is that because the annuity carrier or life insurance company is guaranteeing your principal in a fixed-indexed annuity, your upside for your potential growth is capped.

One way that it could be capped is it could be monthly capped. Your performance per month might be limited, or it could annually capped. You also generally have investment options with fixed-indexed annuities. You can choose which ETF you are invested in. Sometimes they give you the option to invest in the S&P500, which is generally the 500 largest publicly traded companies in America, the Russel 2000, which are small US publicly traded companies, or maybe even some lesser-known ETF’s or investments such as European stocks, or international developed stock indexes.

Another nice thing about fixed-indexed annuities is that like fixed annuities you generally have access to some of the principal on an annual basis without a penalty. A lot of fixed-indexed annuities allow you to take out 10% for example, per year. You might have to wait 1 full year before you have access to that fixed-indexed annuity. As a client if you have money in a fixed-indexed annuity you generally are only credited on your anniversary date which is one year after you put the money in. If you take the money out early before that anniversary date for that portion of money you took out, you might not get credited for.

Another nice thing about fixed-indexed annuities is that they are tax deferred. If you put in non-qualified aka non-IRA money into a fixed-indexed annuity It can grow tax deferred until you take it out. Please be aware that with any annuities including fixed-indexed you can’t take out the money until you are 59 and 1/2. If you do, you will be penalized by the IRS 10% federal withholding. Plus, you will be taxed ordinary income tax rates. Please be aware I’m not a tax advisor, I don’t give tax advice, and I highly recommend you speak to your CPA or tax advisor.

Disclosures:
Sandra Cho is a registered representative with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Pointwealth Capital Management, a Registered  Investment Advisor and separate entity from LPL Financial.
The opinions voiced in this blog are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
Fixed Indexed Annuities (FIA) are not suitable for all investors. FIAs permit investors to participate in only a stated percentage of an increase in an index (participation rate) and may impose a maximum annual account value percentage increase. FIAs typically do not allow for participation in dividends accumulated on the securities represented by the index. Annuities are long-term, tax-deferred investment vehicles designed for retirement purposes. Withdrawals prior to 59 ½ may result in an IRS penalty, and surrender charges may apply. Guarantees are based on the claims-paying ability of the issuing insurance company.
This material contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent. This content is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state’s insurance department for more information.
Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value.

Fixed Annuities

I just want to mention that fixed annuities are one of the most plain, vanilla, conservative investments that you can get. They’re actually fairly simple as far as investments go. You get a fixed interest rate which is why it’s called fixed annuity. That interest rate can vary. For example, right now it’s a low interest rate environment.

Fairly low, but interest rates are coming up as of August 24th, 2022. Right now, one of the interest rates for example that we can get is a 3-year at 3.4% or a 5-year at close to 4%. Now interest rates do depend on the products, the company, and the timing of when you get that annuity. However, that interest rate is fixed, and it compounds daily. That’s one of the nice things about a fixed annuity.

Generally, don’t expect a lot of statements because it does not fluctuate, so in all probability you’re going to get one statement a year. Some people worry about that, but it’s only because this just a conservative investment and you’re not going to see fluctuations. One thing about fixed annuities is that it is not FDIC insured. Even though it is guaranteed by the issuer. It is principal protected but not by the FDIC.

For example, if you get a fixed annuity by AIG, that annuity is going to be guaranteed by AIG. If AIG goes under, then you might be in a bit of trouble. However, unlike other investments where there is not a guarantee, fixed annuities are not only guaranteed by the issuer, but they have a second layer called the state guarantee fund for fixed annuities. Every state is different but in the state of California the state guarantee fund will guarantee you 80% up to $250,000.

One strategy that I use for some conservative clients is I might ladder fixed annuities. I might put some money in a 3-year fixed annuity, some in a 5-year fixed annuity, and some in a 7-year fixed annuity. That way every 2 years, some money is maturing from a fixed annuity, and they have access to it. Now most fixed annuities allow you to take some money without any penalty at all. Generally, that amount is about 10%.

Some carriers allow you to take out more. Say for example 15% another thing that you want to be aware of with fixed annuities is that it doesn’t necessarily go by calendar years. For example, if you invest in a fixed annuity and let’s say you put the money in on May 1st, that annuity anniversary date is going to be May 1st. You then would wait 1 full year and that would be that first year.

Let’s say you go into a 5-year fixed annuity, you have to stay in that annuity for 5 years in order to not get a penalty when you take everything out. That said, if you remember that you can usually take out 10% every year, then you do have access to some of that money before that 5-year term is up. You also want to be aware that the devil is in the details with fixed annuities. Make sure you understand the contract. Make sure that you understand if there is a penalty-free withdrawal meaning you can take out money every year.

Also, can you take out that 10% or 15%, or whatever it is within that first year? Some allow you to, or do you have to wait 1 full year before you can even take out a withdrawal. One thing about fixed annuities is that because it is guaranteed by the issuer AKA the life insurance company, you want to make sure that, that company is strong. Now while credit agencies and credit ratings aren’t the end all be all, one good place to start is to make sure that, that company has a good credit rating.

Another very important detail about fixed annuities is whether you have a free withdrawal or not. You cannot take out money from a fixed annuity or any annuity for that matter until you are 59 and 1/2 without getting a 10% federal withholding penalty and being taxed ordinary income tax rates. This type of investment is generally good for people who want to set aside this money for retirement specifically, or for older people that are near or over 59 and 1/2. Also be aware of the tax consequences of having an annuity.

If you put non-qualified or non-IRA money into an annuity and that money grows and grows, and you haven’t paid taxes on that growth, when you take out that money you will be paying taxes on that growth first. The IRS makes sure about that. So, make sure you understand the terms and the conditions of your annuity. Please be aware I’m not a tax advisor, I don’t give tax advice and I highly recommend you speak to your CPA or tax advisor.

Disclosures:
Sandra Cho is a registered representative with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Pointwealth Capital Management, a Registered  Investment Advisor and separate entity from LPL Financial.
The opinions voiced in this blog are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value.

Life Insurance Part 1: Universal Life (UL)

Universal life insurance, otherwise known as UL, is a permanent life insurance policy like whole life. Unlike whole life, a UL does not have a fixed guaranteed growth rate, fixed premiums, and a fixed death benefit. In fact, the death benefit premiums and cash value can be changed to some extent with a UL. Now with a UL, you can invest in variable options like mutual funds, and when you do so that’s known as a VUL, or variable universal life.

It’s called variable because the investment varies, and they do fluctuate. There is no guarantee that they will make money, but they do have greater growth potential. If you’re more conservative and you want to invest in something that you can’t lose money in, you might want to try a universal life fixed-indexed policy. Those types of policies are invested in ETF’s and they cannot lose money, but you generally have limited upside potential as well. There’s also no guarantee you are going to make money in a fixed-indexed UL policy.

One use of universal life insurance policies is to do what’s called, “a second to die.” A second to die policy pays out to the beneficiary when two people pass away. The two people can be married, or could be a father and daughter, or any combination. Universal life second to die policies are generally cheaper than if you just insure one person, and it can be a great way to leave grandchildren, or children money after both parents pass.

As with all life insurance, the proceeds of universal life policies are generally tax free as long as the estate is under the approximate $12,000,000 estate tax limit, as of this recording. Contact your investment professional so that you can get customized investment advice particular to your situation. I’m not a tax advisor, and I do not give tax advice.

 

Disclosures:
Sandra Cho is a registered representative with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Pointwealth Capital Management, a Registered  Investment Advisor and separate entity from LPL Financial.
The opinions voiced in this blog are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
This material contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent. This content is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state’s insurance department for more information.
Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value.
Fixed Indexed Annuities (FIA) are not suitable for all investors. FIAs permit investors to participate in only a stated percentage of an increase in an index (participation rate) and may impose a maximum annual account value percentage increase. FIAs typically do not allow for participation in dividends accumulated on the securities represented by the index. Annuities are long-term, tax-deferred investment vehicles designed for retirement purposes. Withdrawals prior to 59 ½ may result in an IRS penalty, and surrender charges may apply. Guarantees are based on the claims-paying ability of the issuing insurance company.
Variable Universal Life Insurance/Variable Life Insurance policies are subject to substantial fees and charges. Policy values will fluctuate and are subject to market risk and to possible loss of principal. Guarantees are based on the claims paying ability of the issuer.

Life Insurance Part 2

There are 3 main types of life insurance. The first is whole life, the second is permanent life insurance, otherwise known as universal life, and the last is term insurance. Now term insurance is the least expensive type of insurance, and it generally fulfills a need. For example, let’s say you have a child, and you want to make sure that, that child is taken care of until they reach adulthood. You might want to take out a 20-year term life insurance policy, and that way, if anything happens to you, knock on wood and God-forbid, you know that child is going to be financially okay until they get old enough to take care of themselves.

Another reason might be maybe you bought a house with your spouse, and you can’t afford to take care of the entire mortgage if anything happens to your spouse and vice versa. Then you both might want to get a 30-year term life insurance policy and that way if anything happens to you, either the house is partially or completely paid off and your spouse can then afford the payments that they’re going to have to make on that remaining mortgage. So that way you know they’re going to be okay and vice versa. You might want to take a life insurance policy out on them if something happens to them and you can’t afford those mortgage payments.

Disclosures:
Sandra Cho is a registered representative with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Pointwealth Capital Management, a Registered  Investment Advisor and separate entity from LPL Financial.
The opinions voiced in this blog are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.

Estate Planning

Today we’re gonna be talking about estate planning. Now I am not a tax advisor or legal advisor, and I do not give tax or legal advice. So please do talk with your CPA and/or your estate planning attorney for more information. So first of all let me begin with, why do any estate planning? Well, I know no one plans to die, but no one makes it out of life alive I heard.

So it’s good to be proactive about that. Especially if you have a family, and a family can really be anyone, right? It can be like if you have a mother, siblings, kids, a wife, or husband, or significant other. The reason why it’s so important is you want to make sure that your wishes really come through if anything happens to you. It’s not just about how you want to be buried, if you want to be cremated or whatnot, or where you want to be buried, but also what you want your existing money, if there’s any left, to do for your beneficiaries and who you want it to go to.

So the main considerations with estate planning are: having a trust, a medical directive, a power of attorney, and a will. These elements are part of a general package If you have a spouse or significant other you might want to have one or two separate trusts. You might want to have a will for each of you. A power of attorney for each of you, and a medical directive for each of you.

First things first, medical directive. I can’t tell you how important that is. Right now especially when a lot of people are finding out that if their loved one gets sick or ill and they’re hospitalized that they can’t even visit them unless they’re married. What if you’re not married? Well if you’re listed in the medical directive as a first, second, third, or at all in the medical directive as someone who would make a decision in whatever order.

Maybe you’re the fourth person down the line, but if your name is on that medical directive, you get visitation rights. That’s very important especially during this time. This pandemic that is probably likely not going away. You know it can be so important to visit your loved one should you have to.

Now the second thing is a trust. For a trust, let’s say you have kids. You’re gonna want to list who you want to be the custodian of your children. That can also mean that you also list who you want to handle the financial affairs if anything happens to you. That person might not be the the same person.

So maybe someone’s very nurturing, awesome, wonderful with your kids. Maybe you want them to be the custodian of your kids. However, maybe they’re not great at finances or with money. Maybe you want to have someone totally different be the financial caretaker of the money, if anything happens to you and they can dole that out to the person taking care of the kids as need be.

Another consideration is a will. A will is extremely important even if you have a trust. That just delineates where you want the money to go. Sometimes it can be very similar to the trust as far as you know, listing out the beneficiaries and how you want things to be handled.

Then we get to power of attorney. Now power of attorney is interesting because you can have a limited power of attorney or you could be having an all-encompassing durable power of attorney. Some people feel very uncomfortable with having a power of attorney. Which is someone who basically can sign and take care of things for you and do things as if they were you.

Sometimes that person takes care of things only financially. Other times that person takes care of everything you could possibly imagine. I personally have a power of attorney that goes into effect if I’m incapacitated. Only one doctor needs to say I’m incapacitated In order for that durable power of attorney to take effect. Sometimes people have 2 doctors listed or 2 doctors that have to make sure that they sign off or write a letter saying you’re incapacitated in order for that power of attorney to take effect.

If you’re very concerned, you just don’t feel comfortable with it, you can have a limited power of attorney. Definitely talk with your estate planning attorney on what those differences are and which one is right for you. One incredibly important often missed thing that I see so often with my clients is not having beneficiaries on your account. Now I don’t care whether it’s an investment account, a little tiny savings account that you have at a bank that you forgot about, or whether it’s some other type of account, life insurance and whatnot.

You want to make sure that you have beneficiaries, and if you think you have beneficiaries just double check. Every single account. Also make sure you have a list of all those different accounts. Make sure you have the firm name, the contact person of the person who is gonna help your beneficiaries if anything happens to you. Make sure you have the account number, the account title; is it in the trust, is it just in your name, is it a joint account?

Make sure you have the beneficiaries listed. Sometimes you want to make sure you have on that list, not just big accounts and investment accounts, but life insurance policies and hard assets like jewelry. You want to have that listed. Is that jewelry in a safe deposit box? Where is it? Where’s the key to that safe deposit box?

You want to make sure that you have that person whoever you want to take care of that listed as the power of attorney or the successor trustee on your trust. Additionally, make sure you go over all of this with them, or maybe have that list available with your trust and all the other documents. Maybe even give them a copy of it if you feel comfortable, just in case anything happens to you. Also factor in tax minimization.

So for example tax minimization comes into play not just during your life, such as how much in taxes you’re paying right now and trying to minimize that, but also in retirement, and then also when you pass away. Right now the tax exemption amount, the amount of money you can pass on to your beneficiaries without having to pay a death tax or an estate tax, is a whopping over $12,000,000. $12,060,000 to be exact. That’s likely gonna be going down. It’s likely gonna be changing.

Be aware that you factor that in when say for example thinking about life insurance. So let’s say I want my kids to be rich when I pass away and let’s say I’m in pretty good health and I want to  take a huge life insurance policy out on me, but I also have a house, I’ve got investments, assets, retirement assets, everything you could imagine. That’s all great, and fine, and dandy let’s say my total estate is worth over $12,060,000 If you include the life insurance component. If that’s the case you might want to have an irrevocable life insurance trust or do some advanced estate planning that really can be done with your financial planner and your estate planning attorney.

Now all these different things are important considerations. You definitely need to do estate planning. You definitely want to think about life insurance as part of that, and a will, medical directive, power of attorney, and trust. All those things, check your beneficiaries and do all of that. And most importantly, talk to with your financial advisor for customized investment advice.

Speak with your estate planning attorney, to get all that done if you want to. If you don’t think that you have enough assets to really make it meaningful, maybe you just do it yourself. I highly recommend working with an estate planning attorney, but if you just don’t want to pay that fee there are online do it yourself (DIY) estate planning kits that you can download and use. At least that’s one option.

Disclosures:
Sandra Cho is a registered representative with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Pointwealth Capital Management, a Registered  Investment Advisor and separate entity from LPL Financial.
The opinions voiced in this blog are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

Financial Planning

Financial planning is different than financial advising in that financial advising is, you basically give your money to a financial advisor or an investment advisor and they invest it, hopefully, in a diversified portfolio that has stocks, bonds, alternative investments perhaps like real estate investment trusts or alternative investments such as commodities and structured notes. However, financial planning is different. Financial planning is basically a roadmap to get from point A to point B. Point B is the end of your life. Now that might sound morbid, but at the end of the day you don’t want to run out of money at the end of your life.

You want to make sure you’re living your best life. If you want to make sure that you truly are set to do that, you might want to go to a financial planner and have a financial plan done for you so that you can see that even if things get a little awry, the market goes down and whatnot, that you’re gonna be okay. Also you will have saved enough so that you can buy that dream home, or that second home, or put your kids through college, or your grandkids through college, or leave your family a legacy. If that’s what you wanna do and that’s what a financial plan is.

Some financial planners charge hourly and some charge just a flat fee. I personally build it into my managed accounts if you have an account with me you get a financial plan free of charge and the reason for that at least for me is that I don’t wanna give advice unless I truly know everything about your situation so that I can give accurate advice applicable and customized to your situation. Whether a financial plan is right for you or not please if you are gonna get one, seek professional advice. You don’t wanna get this one wrong.

A financial plan takes lots of things into consideration one of the things that I think is extremely important in a financial plan is tax minimization. So for example, if you are in a higher tax bracket now maybe you make $200,000 a year and you think you might be in a lower tax bracket when you retire. A financial plan will figure that out and if so that financial plan might say hey you might wanna contribute the maximum amount towards a retirement plan like a 401k or SEP IRA.

So that, that money that you put in for example lets say you put in $15,000 a year into a retirement plan you are gonna be paying taxes on that $15,000. In fact, that money is gonna grow and grow, so that when you are retired you’re gonna be taking $15,000 out plus all the growth at a lower tax rate. That’s just one of the considerations in a financial plan there are so many more, so definitely talk to your financial professional and do get a financial plan. They are fantastic, it’s a great roadmap make sure that financially going where you wanna be.

Disclosures:
Sandra Cho is a registered representative with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Pointwealth Capital Management, a Registered  Investment Advisor and separate entity from LPL Financial.
The opinions voiced in this blog are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
The opinions voiced in this recording are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.

Dollar Cost Averaging

Dollar cost averaging is a strategy where you invest over a certain period of time. So for example, if you have $60,000 to invest, and you want to get in over a 6 month period of time, you would invest $10,000 each month for 6 months until you were fully invested. The purpose of dollar cost averaging is to get the average price, so that you take out the ups and the downs of the market and you are able to gradually get in to the market without worrying about whether you’re getting in at exactly the right time.

There is no way to know whether you’re getting in at the absolute bottom the market. So there are pros and cons with dollar cost averaging. Obviously, if you dollar cost average and the market went up after you fully went in it would’ve been better for you to invest all the money at the very beginning, that way you would’ve gotten all the gains and appreciation during that 6 months. However, a pro is if the market went down or you think the market’s gonna go down, then it’s better that you gradually got in because your average price per share will be lower than if you bought in all at once if it was higher than at the end of the 6 months.

So say for example the $60,000 that we were talking about earlier lets say you put in $10,000 and you were getting a balanced mutual fund, and that balanced mutual fund right now is selling for $10 a share you get $10,000 at $10 a share. Then the next month maybe you get it $9 a share, $8 a share, $9 a share $10 a share, $11 a share, guess what? You just now got the average over that 6 month period of time. So investing gradually into the market using a dollar cost averaging strategy is not necessarily good for everyone in every situation. I highly recommend that you talk to your investment professional so that you can see if dollar cost averaging is right for you.

 

Disclosures:
Sandra Cho is a registered representative with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Pointwealth Capital Management, a Registered  Investment Advisor and separate entity from LPL Financial.
The opinions voiced in this blog are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.

Brokerage vs Managed Accounts

I often get asked the question whether it’s better to be in a regular brokerage account, or a fee-based managed account. The main difference is with a brokerage account you get one-time advice for a one-time commission fee. If you are going to want ongoing professional financial advice, and you want that professional to be placing trades in your account and managing the investment portfolio for you.

Generally speaking, I like the fee-based account because it allows me to give advice whenever the client needs it, and to transact on behalf of the client, and have discretion over that account, so I can place trades, and that client knows that when I’m placing a trade, I’m doing it for the best interest of the client. I’m not getting any additional commission for it, and I can buy and sell as I see fit. That financial advisor is generally, in my opinion, better able to be on the same side of the fence as you, and you know that they’re making decisions and placing trades in your best interest.

Disclosures:
Sandra Cho is a registered representative with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Pointwealth Capital Management, a Registered  Investment Advisor and separate entity from LPL Financial.
The opinions voiced in this blog are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.