Financial Fears to Forget This Halloween

October 30, 2015 by admin

One of the common investor concerns that Orange Capital Management Inc. have encountered lately includes apprehension over the Federal Reserve’s impending decision to raise interest rates. If rates increase this could impact everything from your savings account to credit card fees. With the ghouls and goblins of the Halloween holiday around the corner, now is an ideal time to put the reins on these common financial concerns, especially as we anticipate a potential rate hike:

• Fear of not saving enough. Here’s a frightening fact: 60 percent of Americans don’t have enough rainy-day funds to pay for a minor emergency, like a car accident. Avoid being one financial emergency away from a downward spiral. When you have a budget, you know how much cash you’ll have to sock away in a savings or retirement account after expenses are paid.
• Fear of debt. If you are drowning in debt it can be downright scary! Don’t let those fears control you — know where you are spending. Create a budget and use it as a framework to spend with purpose. Understand your interest rates for credit cards and loans. Set realistic goals to pay down debt, step by step.
• Fear of checking your credit. A best practice is to check your credit every year, however many are afraid to check it and find out they have a less than ideal score. Knowledge is power — it’s important to know your score and responsibly work to improve your credit. A poor credit score can make it challenging to be approved for a good loan or loan rate and impact other aspects of life.
• Fear of outliving your savings in retirement. Planning ahead is the best way to conquer your fear of not having enough money for retirement. If you are within 10 years or less of retiring, it’s time to shift your financial priorities, if you haven’t already done so. Focus more on your future, rather than immediate wants and needs. Start putting away more money in a retirement fund. Aim to meet contribution limits for your designated retirement account (especially where there are potential tax benefits). If you have a workplace sponsored plan, get the employer match (if available) — that’s free cash waiting for you!

Want to share your financial fears with an expert on our team? Please give us a call today at (714) 634-8051 to schedule a time to speak with one of our Certified Financial Planners.

Filed Under: Orange Capital Management, Retirement Planning, Time Segmentation

Don’t Be Your Own Worst Enemy

September 9, 2015 by admin

Here’s a quick look at how psychology may play into your investment decisions.  We thought you might find it interesting.

One of the most well-known investors of the 20th Century, Benjamin Graham, said that “the investor’s chief problem—and even his worst enemy—is likely to be himself.”¹

What Graham understood—and modern research is catching up to—is the idea that we all have emotions and biases that affect our decision-making. The innate wiring built to survive pre-modern times can be counterproductive in our modern world, especially when it comes to investing.

Let’s take a quick look at a few of the human emotions and biases that can adversely impact sound investment decision-making.

Fear and Greed — These are the two most powerful emotions that move investors and investment markets. Each emotion clouds our capability for rational and dispassionate decision-making. They are the emotions that lead us to believe that prices may continue to rise (think the Tulip price bubble of 1636) or that everything has gone so wrong that prices may not recover (think Credit Crisis of 2008-2009).

Some investors have found a way to conquer these emotions and be brave when everyone else is fearful and resist the temptations of a too-exuberant market.

Overconfidence — Peter Bernstein, a noted economic historian, argued that the riskiest moment may be when we feel that we are right.² It is at that precise moment that we tend to disregard all information that may conflict with our beliefs, setting ourselves up for investment surprise.

Selective Memory — Human nature is such that we tend to recast history in the manner that emphasizes our successes and downplay our failures. As a result, we may not benefit from the valuable lessons failure can teach. Indeed, failure may be your most valuable investment.

Prediction Fallacy — Humans have an innate desire to recognize patterns and apply these patterns to predicting the future. We erroneously believe that because “A” occurred and “B” happened that if “A” happens again, we can profit by anticipating that “B” will repeat. Market history is littered with examples of “rules of thumb” that have worked, until they no longer worked.

Financial markets are complex and unpredictable. Our endeavors to tap their opportunities to pursue our financial goals are best realized when we don’t burden the enterprise by blindness to the inherent behavioral obstacles we all share.

1. Quotation Collection, 2014

1. Strategy in Practice, George Tovstiga. 2103, John Wiley & Sons, Ltd.

Filed Under: Orange Capital Management, Retirement Planning, Time Segmentation

The Importance of “Time-In”

August 26, 2015 by admin

  Despite evidence to the contrary, many people believe that investment success is dependent upon their ability to outguess the markets—entering and exiting at the most opportune times. However, history paints a different picture. Investing is a long-term process that has historically paid the greatest rewards to those adhering to a consistent and disciplined approach to investing.

In fact, according to a recent report on investor behavior by a leading financial services market research firm, the largest investor losses occur after a market decline. Investors tend to sell after experiencing a paper loss and don’t begin investing again until after the markets have recovered their value. The result of this behavior is that investors participate in the downside of the market and are out of the market during its subsequent rise.

For investors pursuing long-term goals, a well-diversified portfolio with investments allocated across different asset classes can help reduce the risk of a downturn in any one investment or asset class. That can potentially help you stay on track toward your goals while continuing to benefit from the power of compounded earnings over time as you remain invested through different market cycles.

If you have questions about your current portfolio, please give us a call at (714) 634-8051. We’re also happy to meet with any friends or family members you feel would benefit from our assistance.

Filed Under: Orange Capital Management, Time Segmentation

Benefits Of A Financial Plan

February 17, 2015 by admin

Developing a financial plan allows you to take control of your money, assess your current financial situation, set goals and prepare a strategy to achieve those goals. Bryan Sudweeks, associate teaching professor of finance at BYU, explains, “A long-term plan is not just your budget. It’s debt, it’s housing, it’s retirement planning, it’s estate planning.” By better understanding your finances, setting goals and creating a strategy, you will live more comfortably and with greater confidence.

A 2013 Gallup Economy and Personal Finance Survey surveyed 1,012 adults in all 50 states and the District of Columbia and asked if they have prepared a “long-term financial plan that outlines savings and investment goals in detail.” Only thirty percent said they do have a plan. If you are among the majority of Americans without a financial plan, it is important for you to recognize how developing a plan will help you meet your financial goals.

A financial plan helps you understand your finances so you can plan for your future.

According to an infographic prepared by the National Association of Personal Financial Advisors:

• 56% of U.S. adults lack a budget
• 40% are saving less now than in past years
• 39% have ZERO non-retirement savings
• 23% of Americans are not at all confident in having a comfortable retirement

A financial plan can help you to manage what you have and where you want it to go. If you’re like many families in the U.S., you may just be living from paycheck to paycheck. Developing a strategy for savings can help you eliminate your debt and work towards gaining and building assets instead of just “scraping by.” There is no level of income that cannot benefit from even the simplest financial plan.

A financial plan helps you create attainable goals.

According to the NAPFA, 2 in 5 adults gave themselves a C, D or F on their knowledge of personal finance. If you do not feel confident in your own knowledge, do not allow this hurdle to deter you from creating goals to improve your financial situation. A financial planner can ask you a series of questions to understand what is important to you financially. Given the level of income, the information uncovered during the question and answer process will help determine if the goals you have set are realistic.

A crucial component of a comprehensive financial plan is developing standards by which you can measure your progress toward achieving the established goals. Review your financial plan on a regular basis to determine whether or not you are on course to achieving the goals and then readjust the plan to accommodate any changes in the overall financial environment.

A financial plan will help you build wealth by maximizing the money you earn.

According to Deseret News, two-thirds of Americans do not budget. The 32% of Americans that DO have a budget and primary savings in place are able to develop and implement an investment strategy for accumulating wealth based on their level of risk and lifestyle goals.

If budgeting and saving are not your strong points, an outside perspective on your financial situation may help you identify new practical ways to save more money or increase the money you earn. A financial advisor’s perspective can help you realize your saving and earning potential through investments that match your risk tolerances and goals or through employer sponsored flexible spending plans.

To be comfortable in the present and secure in the future, it is imperative for you to take the time to understand your current financial situation, identify your short- and long-term financial goals and create a plan based on these factors. If you are among the 2 in 5 Americans who give themselves a “bad grade” on their knowledge of personal finances, work with a qualified financial professional who can help you create realistic expectations and meet your financial goals in the future.

Filed Under: Orange Capital Management, Retirement Planning, Time Segmentation

Time Segmented Distribution: A Valuable Strategy You May Be Overlooking

September 9, 2014 by admin

Most retirees or pre-retirees with a wealth accumulation strategy hunger for stability and try to avoid risk. They strive to build their portfolio on investments that will provide income for their lifetime and beyond. Strategy-driven firms such as Orange Capital Management have adopted an approach to retirement planning that incorporates time segmented retirement income distribution, a reliable strategy that aims to provide investors with stability, growth and income.

A financial plan needs to focus as much attention on wealth distribution in retirement as it does on wealth accumulation during one’s working years. A successful time segmented wealth distribution plan is designed to provide confidence for retirees into their 80s, as it did in their 60s.

Advanced Time Segmentation (ATS) ™

Advanced Time Segmentation™ incorporates a “bucket” strategy that matches unique retirement income needs with time-segmented investments. This bucket strategy approach segments retirement assets into certain categories.  In the illustration below, the categories are based on the period of time in retirement when the assets are expected to generate income.

Solutions for Life’s Different Stages

In its simplest form, the strategy seeks to match your assets to your liabilities by organizing your investments into three buckets. These buckets are designed to correspond to your needs during different periods of your life. You start by spending down the first two buckets while allowing the third bucket, comprised of riskier, more volatile investments, the time it needs to potentially grow.

Bucket #1. Income Bucket

Bucket #1 is designed for income, and is where your short-term-assets are matched to your short-term liabilities. A portion of this bucket is invested in vehicles designed to provide income for life. The remainder of the bucket is invested in strategies designed to be spent over a five- to seven- year period, thus buying time for potential growth in the remaining buckets.

Bucket #2. Future Income Bucket

Bucket #2 is designed to replenish the fixed-income portion of Bucket #1, resulting in additional time for the long-term investments in Bucket #3 the potential to grow. In this bucket, mid-term assets are matched to mid-term liabilities. This helps create a bridge between income in Bucket #1 and long-term growth in Bucket #3, featuring a typical time horizon of seven to 15 years.

 Bucket#3. Long-Term Growth Bucket                                                                       

Bucket #3 is designed for long-term income and growth, with a typical time horizon of at least 15 years. In this bucket, your long-term assets are matched to long-term liabilities. By withdrawing assets from Buckets #1 and #2, Bucket #3 investments can be left untouched to satisfy your long-term retirement needs.

The Time for a New Start Is Now

If you’re like most investors thinking about your eventual retirement, you hunger for stability yet yearn for growth. If you’re like millions of Americans whose portfolios took a beating at the end of the last decade, growth isn’t just a preference but a requirement.

Advanced Time Segmentation provides a sound investment approach that aims to give you the stability and income you are looking for to provide for a secure retirement. It was designed to help mitigate the negative effects of volatility and the uncertainty permeating today’s markets.

If you would like more information on how time segmented retirement income distribution can work for you, contact Orange Capital Management.

Filed Under: Orange Capital Management, Retirement Planning, Time Segmentation