Total Eclipse of Your Investments?

Unless you are living under a rock, literally, you probably know that there is an eclipse across a wide swath of the United States today. It’s a biggie. We haven’t had one so clearly visible in the United States in a while and it looks like it will be 2024 until we’ll see another one. Solar eclipses, along with lunar and planetary eclipses are actually fairly common across the planet, with an eclipse of some celestial body or a partial eclipse generally happening a couple of times every year.

So, cosmically speaking, we have a fair amount of astronomical obstruction and you need special glasses to see it. Similarly, there may be a total eclipse obscuring the fees in your investment portfolio and you may need the investing equivalent of eclipse glasses with a solar filter to see those high and onerous fees!

It shouldn’t be difficult to understand how much you are paying for investment management and financial advising services, but with many providers, it can be. If you feel confident that all of your fees are on your statement, you may be surprised to learn that in many cases, they aren’t.

Many fees do make it onto statements, but with some, such as deferred sales loads, you may not realize that you are paying them until after you’ve made a decision to sell. Or, you may not remember an unusually high sales load that you paid up front. On top of that, most fees in mutual funds and ETFs aren’t usually explicitly called out on statements. To understand what you are really paying, you have to go research the fees on a site like Morningstar and then add in those management fees to determine your full fee picture. You’ll also have to dig pretty deep to determine if your broker is getting any sort of kick-back or commission on the products that they invested in on your behalf.

To help you got to the bottom of your fees, here are 5 questions to ask the person or firm helping you with your investments:

1) Are you a fiduciary and do you have to act in my best interest when making investments? If not, why not?

2) When you make an investment in my account, do you receive a commission, compensation or kick-back of any kind, if so, how much and how does it work.

3) What are the management fees of the products that I’m invested in and how do those fees compare to index funds and ETF or other similar products?

4) Did I pay any up front sales loads and are there any back end sales charges if I sell something? (Ouch if they get you both coming and going...)

5) When you add all the fees that I pay (or have paid) to you and to any other investment company or product that I am invested in, are my total fees under 1%? If not, why not.

Working with a fee only advisor and a company that generally uses low cost products and individual securities, such as J. Bradford Investment Management, can help you achieve a more transparent fee structure into your portfolio.

If you’d like a free evaluation of the fees you are currently paying, we provide free portfolio reviews so everyone can understand and evaluate the fees paid to their advisor or manager. With your solar filter glasses and your portfolio review, you’ll be glad neither your retina nor your portfolio get burned.

PLEASE REMEMBER:

- INVESTING AND INVESTMENT MANAGEMENT INVOLVES RISK, INCLUDING THE LOSS OF YOUR INITIAL INVESTMENT OR ANY INVESTMENT GAINS.

- PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.

- THIS GENERIC INFORMATION IS PROVIDED FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION FOR ANY INDIVIDUAL TO TAKE A SPECIFIC ACTION.

- PLEASE INVEST PRUDENTLY AND SEEK PROFESSIONAL HELP FROM A FINANCIAL ADVISOR, INVESTMENT MANAGER, ACCOUNTANT, LAWYER OR OTHER PROFESSIONAL ON MATTERS THAT YOU ARE UNSURE OF OR THAT ARE UNIQUE TO YOUR PERSONAL CIRCUMSTANCES.

- FINANCIAL PLANNING AND INVESTMENT MANAGEMENT SERVICES PROVIDED BY J. BRADFORD INVESTMENT MANAGEMENT, NASHUA NH.

Confused by the “Covfefe” Tweet? Try understanding the Fiduciary Rule.

Maybe it was spell check gone wrong, maybe he was just too quick to hit send or maybe it was just another idea on how to stoke the flames of the buzz machine. Whatever the reason, yet another POTUS Tweet has captured the attention of the nonstop media and news cycle. It almost certainly won’t be the last.

We may never know what he intended, but there are actually many things coming out of Washington that do merit some paying attention to.

One such item worthy of a few brain cells is the Fiduciary Rule, which is now scheduled to go into effect on June 9th, 2017. It’s quite possible that there may be twists and turns along the way, but holding financial advisors to the fiduciary standard is likely a long term trend that is here to stay.

Most simply, someone acting to the fiduciary standard must give advice and take action solely in your best interest. Practically speaking that means that I cannot recommend products and services to you so that I can draw a high commission, win a sales contest, meet a corporate profit directive or enjoy a lavish perk. Fiduciary advice has to be in your best interest.

It is surprising to many people to learn that the person giving them advice or selling them a product does not necessarily need to meet the fiduciary standard. Which to many, seems crazy. Why shouldn’t the person who you have entrusted with your life savings, do everything in your best interest? They should right?

And many in our Federal Government regulatory agencies also believe that financial advisors should act and be held to the Fiduciary standard. So on June 9th, a set of rules and guidelines will go into place for advisors helping individuals with retirement accounts, such as 401(k)s , ROTHs and IRAs. Those areas will have some amount of fiduciary protection.

Over time, many believe that all financial advice will eventually need to be given at, and held to, the fiduciary standard. In the meantime, you can ask your advisor if some or all of their business operates to the fiduciary standard, and if not, why not. You may be satisfied with the answer, you may not.

As you may have guessed, J. Bradford Investment Management embraces and operates to the fiduciary standard. We are a fee only practice and we do not sell any products on commission. Our recommendations are an unbiased view of our professional judgment.

If you would like help unpacking the meaning of “Covfefe”, try Buzzfeed. If you would like help unpacking the commissions, hidden fees and other potential pitfalls in your portfolio, please schedule time with us, we would be happy to conduct a free portfolio review.

PLEASE REMEMBER:

- INVESTING AND INVESTMENT MANAGEMENT INVOLVES RISK, INCLUDING THE LOSS OF YOUR INITIAL INVESTMENT OR ANY INVESTMENT GAINS.

- PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.

- THIS GENERIC INFORMATION IS PROVIDED FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION FOR ANY INDIVIDUAL TO TAKE A SPECIFIC ACTION.

- PLEASE INVEST PRUDENTLY AND SEEK PROFESSIONAL HELP FROM A FINANCIAL ADVISOR, INVESTMENT MANAGER, ACCOUNTANT, LAWYER OR OTHER PROFESSIONAL ON MATTERS THAT YOU ARE UNSURE OF OR THAT ARE UNIQUE TO YOUR PERSONAL CIRCUMSTANCES.

- FINANCIAL PLANNING AND INVESTMENT MANAGEMENT SERVICES PROVIDED BY J. BRADFORD INVESTMENT MANAGEMENT, NASHUA NH.

What's Going on in the World, Economically.

Periodically, J. Bradford Investment Management publishes updated commentary, research, analysis and economic viewpoints. This work represents the views, insights and analysis of Jason Haviland, President and Chief Investment Officer at J. Bradford Investment Management.

We'll dig into all the details below, but here is a summary:

The disclosures at the bottom of this blog post are particularly relevant for this material. Let us know if you have any questions.

O.K. Let's jump in!

First, let's look at our domestic stock markets. The Dow Jones Industrial Average, the S&P 500 and the NASDAQ are all at or near record highs and have generally been on an upward trend for nearly eight years.

Assuming no major swings, March 9th 2017 will be the eighth year anniversary of this bull market. If you have a 401(k) and have been invested for the last decade, it’s been quite a ride. If you stayed the course, you saw your balance take quite a hit in 2008, but then it very likely came back rather nicely with the upswing in markets across the globe.

And if you're relatively young and started investing anytime after the Spring of 2009, you've only ever seen your balance climb steadily upward. Markets have been very positive for many years, but markets do not move forever upward.

So the big question on everyone’s mind is: Will the U.S. stock market climb higher yet? It might. And if it does, it will likely be driven by some combination of:

1.   The health of the U.S. economy

2.   A continued rise in corporate earnings

3.   Continued historically low interest rates

4.   The attractiveness of the U.S. market compared to other developed markets.

Let's look at how these factors may impact the market and the likelihood that their impact will be a positive one.

Let’s start with the first two factors, the U.S. economy as measured by GDP and corporate earnings. These two elements have been very impactful historically in driving stock market performance.

I can absolutely envision a scenario where the U.S. economy continues to grow and potentially even breaks out of the slow growth cycle that it has been in for many years. Some combination of the momentum already underway in the economy and pro growth policies in Washington could set the stage for this to happen.

But the other side of that coin, limits on growth (such as restrictions to selling in international markets) and weakness or very tepid growth in the U.S. economy, are not unrealistic outcomes either. There is some risk that the incoming administration may take an action with unintended consequences that negatively impacts growth and earnings in certain sectors or even across the board.

Investment markets are often driven by expectations of what will happen in the future, and so far, the stock market believes that the grass is greener and that a negative, economic contraction scenario won't happen, which is probably a good thing. We'll be watching this closely.

And it's also possible that we could see more of what we've seen for the last several years. That is, things are generally pretty good for most, but some sectors that don’t perform well, particularly those in political cross hairs. Overall, we may see conditions not really deteriorating, but not really improving either. Things are just good.

Whatever happens, we believe that it is important to assess if there is a commensurate and appropriate reaction and absorption of that information in the stock market, which gets reflected in pricing. If the market is priced as if we are on a high growth path (which you could argue that it is now), but we are actually on a slow growth, neutral or downward path, that could be problematic. We're watching that balance closely.

Next, item #3, our low interest rate environment. We have had low, very low, zero and in some parts of the world, negative interest rates for an extended period of time. Such a long period in this low interest rate environment is relatively unprecedented in financial history. So, when we look at historical valuation measures for insight, the interest rate regime at the time of the analysis is an important factor for comparison. One problem we have now is that we don't have many equivalent historicalperiods like the one we are in now to analyze for comparison.

So how might this low interest rate environment be distorting prices? One simple explanation of the increased inflow of capital to the stock market over the last several years is that because interest rates are so low it just doesn't make any sense to earn half or a quarter of a percent in a CD or 1% on a bond, so investors are investing in stocks instead. Instead of bonds, they are buying stocks that are perceived to be safer (such as utilities) and that generate income (such as dividend stocks). I believe that there is some truth to that assertation and that if interest rates remain abnormally low, the stock market will be seen as an alternative, even if it is a quite imperfect and much, much more risky one.

Lastly, #4, our relative position to the rest of the developed world. In some sense, all stock markets worldwide compete for investment dollars, with investors making determinations as to where they can achieve the best return. If the world economy remains generally stagnant or certain key areas such as Europe start to experience contraction or even just very slow growth without full-blown recessions, it might be the case that the U.S. benefits from simply being the most attractive choice against a backdrop of mediocre choices.

Similar to individual winners and losers in the U.S. markets, there will be individual winners and losers in international markets as well. Most immediately, we’ll face the implications of Brexit, OPEC price controls, the delicate Chinese economy and potential fall-out from the financially troubled members of the Eurozone. As those implications unfold, international investors may judge the U.S. markets to be a better option in the short to medium term.

I believe that all four of these factors have been contributors to our current sustained bull market and some combination of them may drive the market higher, but it's not entirely clear that they will all be pushing upwards as they have been recently, especially interest rates.

So let’s dive a little deeper into interest rates. The Federal Reserve has recently signaled a willingness to raise interest rates. In addition, economic conditions also support increasing rates. As such, interest rate increases from the Federal Reserve in the short to medium term seems very, very likely.

Since bond prices move inversely to bond rates, that means that the prices and values of all our bond holdings in mutual funds and ETFs will likely decrease.

We are likely entering a tough stretch for bonds. However, we should not lose sight of the strategic reasons we hold bonds in the first place – income, diversification, reduced volatility and over the long term -- better risk adjusted portfolio returns. In this environment, individual bonds and bullet maturity shares have some advantages. Here too, we will be monitoring the markets closely.

We would be remiss if we didn’t also consider the political implications of the recent election.

In this area we have a tempered and measured view. Until we get back into the full legislative session, the market is reacting to what it thinks the current administration will do. Ultimately the market will move based on what the administration actually does vs. what they’ve said they would do during the campaign.

Yes, they have a legislative plan, but legislation is complicated and special interests are as powerful as ever in DC, so we’ll know a lot more in the Spring once we see how all the competing interests line-up and after the early executive orders actually get issued. That is, we’ll see what actually happens.

Whew, that was a lot. Or maybe you just jumped here to the bottom line...fair enough. So what does all that mean for our investment portfolios?

Here are our five key takeaways:

• U.S. stock market performance and portfolio performance may be mixed and even diversified portfolios may see more volatility than usual. However, we still believe that it will be more important than ever to hold a diversified portfolio that is periodically rebalanced and potentially tilted towards investments that will perform well in the more likely scenarios.

• We believe that an increased cash holding is warranted. We believe that the market forces discussed here will push and pull against each other over the course of 2017, more so than in 2016, and when combined with potential for geo political instability and less ability to use bonds as a cushion, we’ll want higher cash holdings.

• Sector, smart beta and individual security selection will be important investment lenses for 2017, which we intend to use and pursue.

• We expect increased volatility for the short to medium term that may create opportunities for long-term value buys.

• Interest rates will likely rise in the short to medium term and inflation may follow. Investments that move inversely to rates will be under pressure in the short to medium term and investments that rise during periods of inflation may be warranted.

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PLEASE REMEMBER:

- This material is provided as of December 2nd, 2016 and readers should bear in mind that investment and economic conditions can change very rapidly and that changes or developments subsequent to that date may drastically alter the validity of this analysis.

- There are forward looking statements in this analysis and these statements should not be construed as a prediction or guarantee of what will happen.

- Investing and investment management involves risk, including the loss of your initial investment or any investment gains.

- Past performance is no guarantee of future results.

- This generic information is provided for educational purposes only and should not be construed as a recommendation for any individual to take a specific action.

- Please invest prudently and seek professional help from a financial advisor, investment manager, accountant, lawyer or other professional on matters that you are unsure of or that are unique to your personal circumstances.

- Financial planning and investment management services provided by J. Bradford Investment Management, Nashua NH.

On This, We Can Actually Agree

There wasn't much agreement between or even within the political parties leading up to the election and I suspect that the deep disagreements will continue well past the election. I'll let the political pundits blog and pontificate on that.

Likewise, there is much disagreement in Financial Services and Investment Management, but there are also some broadly accepted principles and strategies.

One in particular.

J. Bradford Investment Management thinks it's a good idea

Forbes thinks it's a good idea

Morningstar thinks it's a good idea

NASDAQ thinks it's a good idea

CNBC thinks it's a good idea

In fact, just about every major financial institution and publication will espouse the virtues of this fundamental investment activity – rebalancing.

There aren't many universal truths in the investment management industry, and even rebalancing has some detractors, but the importance of periodically rebalancing your portfolio is probably one of the few things that the investment community is largely in agreement with. Sometimes you'll hear it referred to as a “free lunch”.

There has been a significant amount of institutional and academic research on the topic and generally speaking, over time, investment outcomes improve through periodic rebalancing. You'll find different opinions on how often to rebalance, the tax considerations of rebalancing and how wide to cast your asset allocation net, but there is broad and general consensus on the need to diversify and rebalance.

If you are working with an investment manger or financial planner, it is likely that rebalancing is one of the specific tasks that they are working on for you. They'll determine what is the right mix of asset classes and how often should they be rebalanced.

If you own a target date mutual fund or are part of a robo-advisor platform, there too, one of the key tasks of the portfolio manager undertakes is to ensure that the portfolio assets are closely aligned with the fund's objective and periodically rebalanced. That task is covered by the management fee you pay.

But what if you are in “do-it-yourself” financial planning mode? What are the steps to rebalancing?

Very generically the steps would be:

1) Determine an appropriate level of risk and your individual risk tolerance – your willingness and ability to take risk. This on-line tool from Vanguard can help you get started.

2) Build an asset allocation model that aligns with your level of risk – this on-line tool from investor junkie can help you work through some of the individual considerations

3) You can also inform your asset allocation by understanding how institutional managers allocate their portfolios and why.

4) Determine what your existing asset allocation is. Sometimes you can find this information on-
line or on a recent statement, but sometimes you'll have to ask the company you are doing business with for this info.

5) Then you can compare your existing asset allocation with your desired asset allocation, given your level of risk, and determine the magnitude of the gaps. The bigger the gaps, the more important it is to consider rebalancing. One strategy is to establish "bands" and when one asset class moves outside an established band, it triggers a rebalance.

This whole process can be confusing and overwhelming, so    J. Bradford Investment Management does offer very targeted services for investors who want an assessment of their portfolio positions and detailed insights that may help them bring their portfolios back into their desired alignment.

You can use the link below to schedule a free consultation.

PLEASE REMEMBER:

- Investing and investment management involves risk, including the loss of your initial investment or any investment gains.

- Past performance is no guarantee of future results.

- This generic information is provided for educational purposes only and should not be construed as a recommendation for any individual to take a specific action.

- Please invest prudently and seek professional help from a financial advisor, investment manager, accountant, lawyer or other professional on matters that you are unsure of or that are unique to your personal circumstances.

- Financial Planning and Investment Management Services provided by J. Bradford Investment Management, Nashua NH.

If You've Been Procrastinating All Summer, CLICK HERE

Labor Day weekend is upon us. It’s the unofficial end of summer and a great time to fire up the BBQ one last time, have one more gathering with the crew and squeeze in those final items from the summer to-do list. We crossed off surfing last weekend, which was the last item on our family list, so we’re good!

Other signs that summer is over will be all too evident. The kids will be back in school if they aren’t already. When we drive into work on Tuesday the roads will be jam-packed as if everyone is suddenly working again and life will return to its normal, hectic pace.

The "it’s summer, I'm relaxing, I'll get to it in September" excuse ends this weekend. We've all been procrastinating something, but now is the time for all of us to get on it!

Investment Managers and Financial Planners typically see a spike in the fall as all those life tasks that are so easy to put off for a few weeks during the summer finally come back to the forefront. And for good reason. The fall is an excellent time to engage with your financial planner and investment manager because:

•   There’s still time in the year to make beneficial tax moves in your investment accounts and make tax saving contributions to your IRAs.
•   There’s still time to make beneficial moves in your 401(k) or 403(b) to ensure you maximize your benefits and have made investment choices appropriate for your level of risk.
•   If you have kids in college or nearing college, this is a great time to revisit, enhance, update or even make a college funding plan. It’s expensive.
•   A good investment manager and financial advisor can help you significantly reduce your investment expenses so you have more money for other priorities.

No one knows for sure where the stock market is headed or what the next interest rate move will be or how some international crisis will impact the markets, but things are relatively calm right now and it’s always better to have an investment strategy BEFORE any market turmoil starts to unfold, rather than being reactive once it starts.

Navigating you through uncertain and tumultuous times is one of the most important roles an investment manager can play for you.

So if you’ve been procrastinating, this is the week to get after it. Everyone deserves a great financial plan and taking the time to work through a holistic and comprehensive financial plan can help address issues across all of those dimensions, plus any other unique or individual circumstances you may face.

Enjoy this Labor Day weekend with family and friends and remember that if your don’t have a great plan for what you want your hard earned money to do for you, it very well may do something else...

Get over your procrastination and book a free consultation now (after Labor Day weekend of course)

Or at the very least, bookmark this page :-)

PLEASE REMEMBER:

- Investing and investment management involves risk, including the loss of your initial investment or any investment gains.

- Past performance is no guarantee of future results.

- This generic information is provided for educational purposes only and should not be construed as a recommendation for any individual to take a specific action.

- Please invest prudently and seek professional help from a financial advisor, investment manager, accountant, lawyer or other professional on matters that you are unsure of or that are unique to your personal circumstances.

- Financial Planning and Investment Management Services provided by J. Bradford Investment Management, Nashua NH.