Common Sense Strategies for
Successful Equity Management
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As you saw from my last blog – computers trading with one another accounts for half the volume of market. For the most part, nothing “real” is being traded and this creates the incredible volatility we see every other day.

That’s ok because we can use this to our advantage and create a fortune in retirement income.  Over the last 12-18 months many of my clients have seen permanent gains in the 20% to 50% range because of a built in strategy that allows you to capture market rebounds while the funds are guaranteed against market losses.

This is achieved by a special feature called “Annual Reset”.  Here’s how it works:

Example – You start with $100,000 in 2008.  The Dow is at 10,000.

From 2008 to 2009 the Dow drops 40% to 6,000.  You still have $100,000. 

Now from 2009 to 2010 the Dow shoots back up 40% to 8400. You net $138,000. (Insurance company takes 2% of the gain.)

While most people are still trying to get back to even, you pocketed a big gain. This gain is permanent and cannot be lost in future years due to market downturns.

It is important to do this as soon as possible. If the market was bad for you over the last 10 years, just wait until the next 10 years. Protection is common sense.

If you have sat down with a financial planner in Phoenix or anywhere in Arizona, the financial planner has proabaly told you about all the sophisticated computer modeling they use that is supposed to make you lots of money.  As it turns out, all the computerized financial planning strategies may make you much worse off.  If you have money in the market this could be the most alarming article you will read this year.  Please take a few minutes to read this article and share it with those you care about.  This could help you make a decision on protecting your life savings or the savings of someone close to you.

 The article is titled “Computerized stock trading leaves investors vulnerable”.  As you’ll see “vulnerable” is an understatement. Here is the full article as well as some highlights below:

http://www.azcentral.com/business/articles/2010/07/09/20100709computerized-stock-trading-leaves-investors-vulnerable.html

Highlights: 

• The day the Dow Jones industrials plunged nearly 1,000 points and then recovered in Wall Street’s most volatile half-hour ever, more than 19 billion transactions moved according to regulators.
• The time it takes to read this sentence is all it takes for nearly 2 million stock trades to flash through the stock market.
• Trades are coming from an army of computers programmed to obey complicated algorithms that are hyperactively buying and selling.
• These machines see stocks not as securities used by companies to raise money, but rather, symbols, numbers and bits that are traded, swapped and exchanged. 
• More than half of the market’s volume is churned by computers programmed to spot certain patterns in trading. 
• And now, traders say, humans are responding to machines rather than the other way around. 
• More and more the machines are reacting to each other, trying to second-guess what their next moves might be on how to take advantage of an edge that might be gone in milliseconds. 
• “There are no real buyers or sellers,” says Joe Saluzzi, trader at Themis Trading. ”
  It’s all about the machines.” 
•   Perhaps most troubling is how computers are giving sophisticated investors with the best digital access to the markets a leg up over regular investors in ways modernization was supposed to do away with. Meanwhile, technological advances are making it nearly impossible for regulators, who play a critical role in maintaining a fair market, to monitor the system that by its very nature has no paper trail and buries transactions in mountains of data.

After you read this, you’ll see why it is so important to have your money guaranteed against market losses.  I can set this up for you. Call me directly at 480-970-5663.

I have been getting a lot of financial planning questions from the Phoenix area about IRA to Roth conversion.

Beginning in 2010, you can convert a traditional IRA to a Roth IRA regardless of income level or filing status. With a Roth conversion, the taxable portion of your traditional IRA (deductible contributions and earnings) is normally subject to tax in the year of conversion. However, a special rule applies to Roth conversions in 2010: half of the resulting taxable income is reported on your 2011 federal income tax return, and the other half on your 2012 federal income tax return, unless you elect otherwise.

Consider a husband and wife both 45 years old with 2 kids ages 12 and 14. They have an old 401k valued at $100,000. By converting it to a ROTH they would pay around $25k in taxes over the next 3 years to convert. Now the money is tax free for life.

Without converting and retiring at 65, the total taxes you will have paid by age 80 is projected to be $315,240.
$25,000 now or $315,240 later. There are of course other consideration and we have other ways to get your money tax free as well.

If you live in Phoenix or anywhere in Arizona call me and I can run this calculator and do the basic financial plan over the phone. We can also show you how to set up an unlimited ROTH regardless of the income you make. Denver Nowicz 480-970-5663

Check out the statistical probabilities that an event is likely to happen in an average year:

Loss of life: 0.9%
Loss of car due to auto accident: 1.2%
Loss of home due to fire, weather, etc: 1.3%
Loss of market value in retirement accounts: 28%

As you can see the loss of market value is the biggest risk. This statistic is based on the S&P 500 from 1959-2008.
Common sense would suggest you have a built in floor to protect you from market losses using the insurance products we suggest on my radio show.

Call me or email me with questions or to schedule a free consultation. My direct line is 480-970-5663.

Top 3 Mistakes in Personal FinanceHere are the top three mistakes that consistently destroy wealth in retirement accounts:

1.  Not looking at your retirement account statements.  Many people are afraid to look at their accounts because they don’t want to see how much they have lost….they also think what’s the point because they don’t know what else to do….and even if they did know what to do they are so far down they think they need to wait until the market comes back up to do anything.

 2.  Not getting educated on the options available.  This is a tough for you because most of the information given out by financial advisors it flat wrong. (Just look at your retirement accounts for evidence of this.)  For a real independent, third party look at what you can easily do to eliminate market risk from your retirement accounts and grow them dramatically read “Blind Faith: Our Misplaced Trust in the Stock Market and Smarter, Safer Ways to Invest” by Edward Winslow. It is available at Amazon.com or come into the office for a free consultation and I’ll give you a copy to read. 

3.  Not taking control.  Most people feel they are at the mercy of the market. After you get educated you began to realize you do not need to play the “hang on it will turn around game.”  The most important thing right now is not the money in your account. It is protecting that money from future losses (which will probably be bigger this year than last year) and getting that money into positions that are going to make you money when the market goes up.
 

Will conventional wisdom work for you?  The odds are about 29% that it will.  Standard conventional wisdom taught by most financial advisors is diversifying your portfolio.  As you are younger you take more risk with investing. As you grow older you move more into safe investing. 

Unfortunately the odds of this strategy succeeding in building you a large nest egg is about 29%.  (I think the actual success rate is probably even lower because the authors don’t take into account the fact that most people sell during low periods due to the emotional factors of losing money.)

Take a few moments and read this article: The odds for a retirement nest egg, recalculated. 

The authors used 80 years of marekt data and ran thousands of simulations.  Basically the authors point out that the strategy doesn’t work due to market volatility.  If you would like to learn more about how to eliminate market risk contact us here for a free video. 

There are hundreds of equity index products on the market today.  It is important to work with experts that can recommend the right type of account for you individual financial needs. Every situation is different.  A 40 year old will have a different strategy than a 60 year old and so on.  In addition some accounts will dramatically outperform others.

Dateline NBC recently aired a program on how Senior Citizens can get taken advantage of.  You can read more about this story here.

It is safe to say that if the individuals in the show had watched our 15 minute video on equity index products they would be in a much better position.

 If you feel you may be in the wrong account feel free to call us at 480-970-5663 and we can give you some feedback. 

Is life harder for the middle class? Recent studies show 8 out of 10 Americans say yes.  Here is the just released complete study:  http://pewsocialtrends.org/pubs/706/middle-class-poll

How do you make it easier?  Warren Buffet said “Never Lose Money. Ever.”  It is a myth that you have to take risk to grow your retirement funds.

Low interest rates are good for mortgages and hopefully for credit cards (unfortunately many credit cards companies don’t tend to give us the breaks).   We can definitely use low rates to our advantage by properly setting up our finances with a good equity repositioning stategy.

But unfortunately there are also some negative consequences for people who are trying to save money in CD’s, Money Markets and Savings Account.  As interest rates fall the rates of return on these will fall as well. A CD paying 3.5% is not even keeping up with the cost of living. You are basically going broke safely. 

A better way is to use the equity index products we talk about. You get the guarantees and safety of a CD with the upside potential of the stock market.  Learn more about getting upside stock market potential without risk under the safety section of our website.

Here is a very informative article on the downside of rate cuts.

We have heard recently for 2007 inflation is up by the largest amount in 17years.  Of course we are all aware of the 29.6% increase in Gasoline prices, but some other big increases came in food price.

Raw food prices are up 24%, dairy products are up 14% and even bread is up 8.1%.  These are the type of expenses we feel in our pocket book every day. Worse, all indicators are showing that food prices will take another big jump in 2008. 

The bottom line is more strain on our pocket books which makes it harder to save for retirement. This makes it more important than ever to use your existing income and assets in the most efficient way possible. Check out our section on equity repositioning and the new home ownership accelerator.  It could help you save thousands of dollars in interest without changing your spending habits.  This could help you offset rising prices and build funds for retirement.