Category Archives: Exchange Traded Funds

The New “MyRA” … A Direct Route To Retirement Or A Bad Detour?

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Dear Mr. Market:

MyRA#7

If you ask the average hard working American what their top financial concern is, it’s that that they won’t be able to retire.  We could certainly go on and on about different solutions and how people can get on track to make their dreams a reality but today we will focus on a new program offered from the government.  On January 29th President Obama delivered his State of the Union address.  One of the takeaways from this speech was a new retirement account called MyRA (short for My Retirement Account).

Currently over half of the U.S. workforce is not covered by a retirement plan through their employer.  MyRA is targeted at low to middle-income workers, encouraging them to save for their own retirement.  Contributions will be funded through automatic payroll deductions where individuals can start with as little as $25 and contribute amounts as small as $5.  Individuals would be guaranteed that their account would never go down and they will not pay any fees on the accounts.  Sounds like a great product doesn’t it?!  Well let’s take a step back and dig a bit deeper to really explore what the MyRA is all about….

The MyRA can essentially be viewed as a way to introduce individuals that have not saved or funded a retirement account to the many long-term benefits of doing so. At this point companies are not required to be involved in the program, if President Obama wants to force employers to participate a vote from Congress would be required.  The accounts would be funded with after tax dollars much like a Roth IRA.  While it will be funded with payroll deductions individuals will be able to keep their accounts when they change jobs.  MyRA is subject to Roth IRA income and contributions limits.  Individuals can invest up to $5.500 per year (or $6,500 for investors 50 or older); once the owner reaches the age of 59 ½ they can make withdrawals tax-free.  There are also no required minimum distributions (R.M.D.’s). Continue reading →

How did your Portfolio do in January of 2014?

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Dear Mr. Market:

Apparently you’re kicking off February much like you wrapped up January; in correction mode.

A stock market correction is actually not a bad thing and in this case it’s actually a MUCH needed one. If you’re anything close to being a long-term investor you should be hoping for at least a 10% haircut at some point before 2014 wraps up. Without a breather or some form of consolidation this market has no chance to build a base and move to higher levels by year-end.

If you had a fairly well balanced and allocated portfolio in 2013 you probably looked at your statements and saw that bonds were not just dead weight but rather a huge drag on performance. Not only did the overall bond market lose at least -2% for the year, the proverbial “writing on the wall” was being etched in permanent ink ; bonds had zero upside and only risk associated with them. If rates are to rise, as so many speculate they will, we could see bonds sting investors worse than any other time in history. Bottom line: That’s scary stuff for anyone in the typical 60 / 40 model…

The place to be in 2013 was stocks, but let’s be honest… Did you really trust them to keep going higher and higher? Did a +32% return for the S&P 500 feel “real” to you? Most people we talk to still don’t trust stocks but they ironically weren’t invested in them as much as they would’ve liked. Those that couldn’t resist a record breaking stock market finally cut bait on their bonds. Unfortunately, the reality is that our 5 year stock market party is possibly coming to an end…or at least a healthy pause. Continue reading →

Windhaven Portfolios: Is Schwab just blowing hot air?

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Dear Mr. Market:

The investment industry is notorious for not being transparent with investors.  The industry tends to be a shade of grey as opposed to being black and white. There are often hidden agendas or conflicts of interest that the average investor is never aware of or informed about.  Think back to some of the situations that have negatively impacted investors in just the last few years: Bernie Madoff, Insider Trading, the Mortgage Industry debacle and the meltdown of Enron!  Conflict of interest is essentially why the Sarbanes-Oxley Act is now in existence.

Conflict of Interest – Occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation. (from Wikipedia).

WindhavenToday we will take a look at an investment firm that has had incredible growth over the last several years: Windhaven Investments.

schwabIn 2010 Charles Schwab & Company (SCHW) purchased a small investment advisory firm in Boston named Winward Investments.  The firm’s strategies had posted impressive results for several years and didn’t use the industry standard ‘buy and hold’ type of approach.  They used primarily ETF’s (Exchange Traded Funds) and claim to invest in over 40 different sectors, participating in positive markets and protecting in downturns.  Schwab paid a hefty price for the firm, paying $150 million in cash and stock (source: WSJ). Continue reading →