Investments - Whole Hearted Way https://www.wholeheartedway.com Meditation instruction for those who cannot meditate Thu, 25 Nov 2021 02:42:00 +0000 en-US hourly 1 https://wordpress.org/?v=6.4.4 https://i0.wp.com/www.wholeheartedway.com/wp-content/uploads/2021/07/cropped-Fern.jpg?fit=32%2C32&ssl=1 Investments - Whole Hearted Way https://www.wholeheartedway.com 32 32 195550711 What You Need to Know to Invest in Peer-to-Peer Lending https://www.wholeheartedway.com/invest-in-peer-to-peer-lending/?utm_source=rss&utm_medium=rss&utm_campaign=invest-in-peer-to-peer-lending Tue, 30 Jun 2015 03:49:05 +0000 https://www.wholeheartedway.com/?p=1681 This article was contributed by Hemila Pedram-Parsi, who is a copywriter and author. You can contact her at hemilapedram@gmail.com Peer-to-Peer Lending, commonly referred to as P2PL, is exactly what it is: a person-to-person lending. It is an alternative to traditional credit lending for small loans. Peer-to-Peer has become a great option for people who need a personal loan and people who want to lend it to them. Peer-to-Peer Lending is a type of micro lending. P2PL companies, such as Lending Club and Prosper, manage peer-to-peer lending online in these major three steps: Check the borrower’s credit to make sure they are eligible for a loan Assist investors to lend money to the borrowers Help borrowers to pay their loans back to the investors The reason for the growth of the peer-to-peer lending’s popularity for both consumers and the lenders are these major reasons: The interest rates are generally low for consumers who want to get a small loan The loans are term-based, generally 2-5 years versus traditional bank loans The Investors get a better return on their investments. Even though the interest rates are low, they might be higher depending on the risk involved and that has to do with the borrower’s credit score. The better your credit score is the better are your chances of getting lower interest rates, because of the lower risk for the lenders. Who is P2PL for? It is for anyone who needs to get a small personal loan. Generally people who want to consolidate their debt, like credit card bills or for a person who might have an unexpected expense. What are the advantages of getting P2P loan? Lowest interest rates Fixed rates that would not go up Fast and simple applications process Low late fees No prepayment penalty. For example, Prosper offers unsecured loans from $2000 to 35,000. Their interest rates are from 6.6% to 35%. The loan average is about 13000 with 13.9%. The investors earn in average between 5%-9.5% depending on the risk involved. Lending Club: Their personal loans are from $1000 to $35,000 with interest rates from 6.6% to 29.9%. Average loan is about 15,000 with a 13.4% APR. Do these companies have any fees for their services? Yes, both Prosper and Lending Club have a fee for new loans. Lending Club has a 1.11% – 5% fee of the total loan amount. And Prosper has 1-5% fee. It varies based on the size of the loan. The origination fee is included in your APR and then subtracted from your total loan balance before you receive your loan. On late payment fees both Prosper and Lending Club have a low fee of $15.00 charge for the bound check or 5%, depending on whichever is greater for over 15 days late payments. Why can these Peer-to-Peer Lending companies offer low interest rates and fees? All the process is done online, unlike other finance institutions that have lots of overhead expenses; the P2PL companies have fewer expenses so they can pass on their savings to the consumers. What are some of the drawbacks of Peer-to-Peer Lending? You must have a good credit score Fees to pay If you default on your loan, it will have an adverse effect on your credit score rating Higher Payments Higher interest rate based on your credit score Note: Always research to understand the risks, conditions and terms of each company’s loan terms. How does it work? Each P2PL has a quick online step-by-step process for you to follow. First step is to fill out the online application. You also need to have a good credit score to be eligible. The process usually can be as fast as seven days. Are there other P2PL Companies that offer different types of loans? Here is the list of some P2PL companies, which offer different types of loans: Funding Circle offers business loans Lending Club also offers small business loans beside personal loans SoFi for refinancing student loans Kiva is a non-profit that helps alleviate poverty in other countries by lending them money Other Peer-to-Peer Lending companies for personal loans beside, Lending Club and Prosper: Upstart offers personal loans Zopa offers personal loan (a UK-based company) You also want to be aware of scams – Read this article for what to look for here. Finally, before you get any loan, make sure that you do your own thorough research and find the best alternative that works for you and your situation.

The post What You Need to Know to Invest in Peer-to-Peer Lending first appeared on Whole Hearted Way.

]]> WomanPayingBillThis article was contributed by Hemila Pedram-Parsi, who is a copywriter and author. You can contact her at hemilapedram@gmail.com

Peer-to-Peer Lending, commonly referred to as P2PL, is exactly what it is: a person-to-person lending. It is an alternative to traditional credit lending for small loans.

Peer-to-Peer has become a great option for people who need a personal loan and people who want to lend it to them. Peer-to-Peer Lending is a type of micro lending.

P2PL companies, such as Lending Club and Prosper, manage peer-to-peer lending online in these major three steps:

Check the borrower’s credit to make sure they are eligible for a loan

Assist investors to lend money to the borrowers

Help borrowers to pay their loans back to the investors

The reason for the growth of the peer-to-peer lending’s popularity for both consumers and the lenders are these major reasons:

The interest rates are generally low for consumers who want to get a small loan

The loans are term-based, generally 2-5 years versus traditional bank loans

The Investors get a better return on their investments.

Even though the interest rates are low, they might be higher depending on the risk involved and that has to do with the borrower’s credit score.

The better your credit score is the better are your chances of getting lower interest rates, because of the lower risk for the lenders.

Who is P2PL for?

It is for anyone who needs to get a small personal loan. Generally people who want to consolidate their debt, like credit card bills or for a person who might have an unexpected expense.

What are the advantages of getting P2P loan?

Lowest interest rates

Fixed rates that would not go up

Fast and simple applications process

Low late fees

No prepayment penalty.

For example, Prosper offers unsecured loans from $2000 to 35,000. Their interest rates are from 6.6% to 35%. The loan average is about 13000 with 13.9%. The investors earn in average between 5%-9.5% depending on the risk involved.

Lending Club: Their personal loans are from $1000 to $35,000 with interest rates from 6.6% to 29.9%. Average loan is about 15,000 with a 13.4% APR.

Do these companies have any fees for their services?

Yes, both Prosper and Lending Club have a fee for new loans. Lending Club has a 1.11% – 5% fee of the total loan amount. And Prosper has 1-5% fee. It varies based on the size of the loan. The origination fee is included in your APR and then subtracted from your total loan balance before you receive your loan.

On late payment fees both Prosper and Lending Club have a low fee of $15.00 charge for the bound check or 5%, depending on whichever is greater for over 15 days late payments.

Why can these Peer-to-Peer Lending companies offer low interest rates and fees?

All the process is done online, unlike other finance institutions that have lots of overhead expenses; the P2PL companies have fewer expenses so they can pass on their savings to the consumers.

What are some of the drawbacks of Peer-to-Peer Lending?

You must have a good credit score

Fees to pay

If you default on your loan, it will have an adverse effect on your credit score rating

Higher Payments

Higher interest rate based on your credit score

Note: Always research to understand the risks, conditions and terms of each company’s loan terms.

How does it work?

Each P2PL has a quick online step-by-step process for you to follow. First step is to fill out the online application. You also need to have a good credit score to be eligible. The process usually can be as fast as seven days.

Are there other P2PL Companies that offer different types of loans? Here is the list of some P2PL companies, which offer different types of loans:

Funding Circle offers business loans

Lending Club also offers small business loans beside personal loans

SoFi for refinancing student loans

Kiva is a non-profit that helps alleviate poverty in other countries by lending them money

Other Peer-to-Peer Lending companies for personal loans beside, Lending Club and Prosper:

Upstart offers personal loans

Zopa offers personal loan (a UK-based company)

You also want to be aware of scams – Read this article for what to look for here.

Finally, before you get any loan, make sure that you do your own thorough research and find the best alternative that works for you and your situation.

The post What You Need to Know to Invest in Peer-to-Peer Lending first appeared on Whole Hearted Way.

]]> 1681 Love and Investments https://www.wholeheartedway.com/love-and-investments/?utm_source=rss&utm_medium=rss&utm_campaign=love-and-investments Wed, 15 Feb 2012 00:22:32 +0000 http://wholeheartedway.com/blog/?p=102 I’ve always talked about the problem of falling in love with your investments and I’ve seen it all over the 20 plus years in my office – tears, marital fights, family arguments, etc. As a Wealth Coach it is my job to be objective and impartial. I’m the number cruncher who can show you the decisions that need to be made and explain the consequences. I can even make a list of the non-financial pros and cons of whether to buy or sell. However, I now find myself facing the same dilemma as I oversee a team of professional cleaners – cleaning what was once my home in San Francisco. A hasty move happened due to a lengthy hospital stay. As my husband and I try to make sense of whether we should sell or rent it, I feel my objectiveness go out the window. I crunch spreadsheets to no obvious answer. I resort to a simple list of pros and cons which brings me to 50% sell /50% rent. It occurs to me that no number can make you unravel the college fund of a deceased son, or sell the family summer cottage, or as in my case, sell my former home that I now stand in after a long medical journey. There’s a lot more there than numbers in personal finance and I feel like that’s why I so eagerly embraced the coaching profession. When people think of a coach, they think of a coach of an athletic team. But a professional life coach is not like that. Unlike my Financial Advisor career, I don’t try to “fix” the client but rather work with what they have and where they are at. I also do a lot more listening – deep listening, since most of my clients I have never met in person. All of my coaching sessions are over the phone. The coaching conversation model has the client talking most of the time and it generally follows these 5 components: Focus the conversation on what the ideal outcome would be like Discover the possibilities Plan the action Remove the barriers, and identify support and resources. Review and set the stage for next steps More well known companies (Google, Kaiser, Dell, and Motorola) are embracing the coaching experience for their executives and the general public is catching the wave, too. The cleaners are gone now. I think I will call my Coach.

The post Love and Investments first appeared on Whole Hearted Way.

]]>

I’ve always talked about the problem of falling in love with your investments and I’ve seen it all over the 20 plus years in my office – tears, marital fights, family arguments, etc. As a Wealth Coach it is my job to be objective and impartial. I’m the number cruncher who can show you the decisions that need to be made and explain the consequences. I can even make a list of the non-financial pros and cons of whether to buy or sell.

However, I now find myself facing the same dilemma as I oversee a team of professional cleaners – cleaning what was once my home in San Francisco. A hasty move happened due to a lengthy hospital stay. As my husband and I try to make sense of whether we should sell or rent it, I feel my objectiveness go out the window. I crunch spreadsheets to no obvious answer. I resort to a simple list of pros and cons which brings me to 50% sell /50% rent.

It occurs to me that no number can make you unravel the college fund of a deceased son, or sell the family summer cottage, or as in my case, sell my former home that I now stand in after a long medical journey. There’s a lot more there than numbers in personal finance and I feel like that’s why I so eagerly embraced the coaching profession. When people think of a coach, they think of a coach of an athletic team. But a professional life coach is not like that. Unlike my Financial Advisor career, I don’t try to “fix” the client but rather work with what they have and where they are at. I also do a lot more listening – deep listening, since most of my clients I have never met in person. All of my coaching sessions are over the phone. The coaching conversation model has the client talking most of the time and it generally follows these 5 components:

  1. Focus the conversation on what the ideal outcome would be like
  2. Discover the possibilities
  3. Plan the action
  4. Remove the barriers, and identify support and resources.
  5. Review and set the stage for next steps

More well known companies (Google, Kaiser, Dell, and Motorola) are embracing the coaching experience for their executives and the general public is catching the wave, too. The cleaners are gone now. I think I will call my Coach.

The post Love and Investments first appeared on Whole Hearted Way.

]]> 102 Are You or Your Broker In Charge of Your Wealth? https://www.wholeheartedway.com/are-you-or-broker-in-charge/?utm_source=rss&utm_medium=rss&utm_campaign=are-you-or-broker-in-charge Sat, 10 Dec 2011 23:23:16 +0000 https://www.wholeheartedway.com/?p=1227 In order to build wealth you need a good financial plan. Most people start by talking with a Financial Advisor or a Stock Broker.  The most unfortunate thing that happens is that they ask for advice right away without even considering what it is that they want.  A financial professional can guide you to what to do with your money to make the best of it, but only you can decide on how those  funds will come about. Will it come from wages, self-employment income, inheritance, other investments? Many people will just say that they want to make money. That’s a little like saying I want to be rich. Yeah, well that is nice but the  next step is what you are willing to do to get there. If you don’t have any idea of how much you can save or what action you can take to meet your goals, you will likely be disappointment. Why? Because you are counting on someone telling you what to do and right away you will say that you don’t want to do that. So before you even discuss personal finance with a professional and I hope it is a fee-only professional, you and your partner should have an idea of actions steps that you would be willing to take to build wealth.  A good wealth coach can help you come to some conclusions about that. Options may be reducing debt, moving to a smaller home or less expensive one, saving more, sacrificing education plans for more retirement money, reduce spending on vacations, etc. All of the above may sound difficult but let’s consider the alternative. You do nothing. That is a choice in itself. By doing nothing you are insuring that you will lose. It takes action to get ahead of taxes and inflation in order to build wealth. Are you ready to take action? Don’t let a Financial Professional  tell you what action to take. They are there to guide you and a Wealth Coach can mentor you into the minefield of personal finance but only you can decide to take the actions to build wealth that will help them do a good job for you.

The post Are You or Your Broker In Charge of Your Wealth? first appeared on Whole Hearted Way.

]]>

In order to build wealth you need a good financial plan. Most people start by talking with a Financial Advisor or a Stock Broker.  The most unfortunate thing that happens is that they ask for advice right away without even considering what it is that they want.  A financial professional can guide you to what to do with your money to make the best of it, but only you can decide on how those  funds will come about. Will it come from wages, self-employment income, inheritance, other investments?

Many people will just say that they want to make money. That’s a little like saying I want to be rich. Yeah, well that is nice but the  next step is what you are willing to do to get there. If you don’t have any idea of how much you can save or what action you can take to meet your goals, you will likely be disappointment. Why? Because you are counting on someone telling you what to do and right away you will say that you don’t want to do that.

So before you even discuss personal finance with a professional and I hope it is a fee-only professional, you and your partner should have an idea of actions steps that you would be willing to take to build wealth.  A good wealth coach can help you come to some conclusions about that. Options may be reducing debt, moving to a smaller home or less expensive one, saving more, sacrificing education plans for more retirement money, reduce spending on vacations, etc.

All of the above may sound difficult but let’s consider the alternative. You do nothing. That is a choice in itself. By doing nothing you are insuring that you will lose. It takes action to get ahead of taxes and inflation in order to build wealth. Are you ready to take action?

Don’t let a Financial Professional  tell you what action to take. They are there to guide you and a Wealth Coach can mentor you into the minefield of personal finance but only you can decide to take the actions to build wealth that will help them do a good job for you.

The post Are You or Your Broker In Charge of Your Wealth? first appeared on Whole Hearted Way.

]]> 1227 Municipal Bonds-Safe Haven or Risky Business? https://www.wholeheartedway.com/municipal-bonds-safe-haven-or-risky-business/?utm_source=rss&utm_medium=rss&utm_campaign=municipal-bonds-safe-haven-or-risky-business Wed, 12 Jan 2011 21:44:48 +0000 https://www.wholeheartedway.com/build-wealth/?p=906 I once practiced in an office building where a large legal firm was right next door.  A few times I would have casual conversation with the attorneys. I remember one in particular who was wary of investing in the stock market.  He had amassed a large portfolio of municipal bonds that he boasted about. He thought he had a secure financial future, and a guaranteed income tax free income stream from those bonds. I guess he never got the memo about being diversified to build wealth because his secure financial future is about to come apart. JPMorgan Chase & Co. CEO Jamie Dimon announced today that there have been six or seven municipal bankrupties and more are on the way. That means more defaults on municipal bond income. Diversification, folks- it’s for low risk not no risk.

The post Municipal Bonds-Safe Haven or Risky Business? first appeared on Whole Hearted Way.

]]> I once practiced in an office building where a large legal firm was right next door.  A few times I would have casual conversation with the attorneys. I remember one in particular who was wary of investing in the stock market.  He had amassed a large portfolio of municipal bonds that he boasted about. He thought he had a secure financial future, and a guaranteed income tax free income stream from those bonds. I guess he never got the memo about being diversified to build wealth because his secure financial future is about to come apart.
JPMorgan Chase & Co. CEO Jamie Dimon announced today that there have been six or seven municipal bankrupties and more are on the way. That means more defaults on municipal bond income. Diversification, folks- it’s for low risk not no risk.

The post Municipal Bonds-Safe Haven or Risky Business? first appeared on Whole Hearted Way.

]]> 906 To Build Wealth You Need to get Returns that will Meet your Goals https://www.wholeheartedway.com/to-build-wealth-you-need-to-get-returns-that-will-meet-your-goals/?utm_source=rss&utm_medium=rss&utm_campaign=to-build-wealth-you-need-to-get-returns-that-will-meet-your-goals Wed, 13 Oct 2010 06:37:53 +0000 https://www.wholeheartedway.com/build-wealth/?p=817 To build wealth you need to get the real return that you need to meet your goals. If you have done a capital needs analysis to figure out what rate of return you will need on your money to meet your future income goals, you may be panicking right now because you aren’t getting the returns you need because of the economic downturn, or maybe you panicked and sold positions and have large losses and feel like you will never get ahead. Let me address both. All of us have learned that you must invest for the long term. Long term is now longer than 5 years. There will always be short term (3 years or less) swings in the market down and up and I am asking you to ignore that. I want you to focus on the return you need to meet your goals. Coming up short? Well you have a couple of options. First is to change your contribution level.  Add more money gradually over time to make up the shortfall. This may mean more monthly contributions to savings or retirement plans or it may mean just putting all of your bonus or extra savings into equities to meet your goal. Second is – change the timing. Let’s say you are coming up short including additional money contributed. Let’s say your goal was to stop working entirely at 65. You may have to change that to 67 or you may have to work part-time for a couple of years after 65 to make up the short fall. That’s really not that hard when you look at the big picture. Third is- Change the goal. Let’s say you wanted to stop working to be able to live on 70% of your salary now. If you change your goal to 60%, you may still be able to stop working in the year that you set your original time goal. So don’t freak out that you may have to work the rest of your life because you are only getting 4% return on your investments. Think long term, think about your options above, run the numbers and you will find that you all have a lot of great options available to still meet your goals. Investing to meet your goals is wise. Investing to beat the markets is foolish. Don’t gamble with your hard earned money. Just like saving for your future, you need to keep investing for your future,  no matter what the markets are doing.

The post To Build Wealth You Need to get Returns that will Meet your Goals first appeared on Whole Hearted Way.

]]> To build wealth you need to get the real return that you need to meet your goals. If you have done a capital needs analysis to figure out what rate of return you will need on your money to meet your future income goals, you may be panicking right now because you aren’t getting the returns you need because of the economic downturn, or maybe you panicked and sold positions and have large losses and feel like you will never get ahead. Let me address both.
All of us have learned that you must invest for the long term. Long term is now longer than 5 years. There will always be short term (3 years or less) swings in the market down and up and I am asking you to ignore that. I want you to focus on the return you need to meet your goals. Coming up short? Well you have a couple of options.
First is to change your contribution level.  Add more money gradually over time to make up the shortfall. This may mean more monthly contributions to savings or retirement plans or it may mean just putting all of your bonus or extra savings into equities to meet your goal.
Second is – change the timing. Let’s say you are coming up short including additional money contributed. Let’s say your goal was to stop working entirely at 65. You may have to change that to 67 or you may have to work part-time for a couple of years after 65 to make up the short fall. That’s really not that hard when you look at the big picture.
Third is- Change the goal. Let’s say you wanted to stop working to be able to live on 70% of your salary now. If you change your goal to 60%, you may still be able to stop working in the year that you set your original time goal.
So don’t freak out that you may have to work the rest of your life because you are only getting 4% return on your investments. Think long term, think about your options above, run the numbers and you will find that you all have a lot of great options available to still meet your goals.
Investing to meet your goals is wise. Investing to beat the markets is foolish. Don’t gamble with your hard earned money. Just like saving for your future, you need to keep investing for your future,  no matter what the markets are doing.

The post To Build Wealth You Need to get Returns that will Meet your Goals first appeared on Whole Hearted Way.

]]> 817 Fee-Based Advisors Use ETFs to Build Wealth https://www.wholeheartedway.com/etfs-to-build-wealth/?utm_source=rss&utm_medium=rss&utm_campaign=etfs-to-build-wealth Sat, 18 Sep 2010 00:09:45 +0000 https://www.wholeheartedway.com/build-wealth/?p=811 Here is a great article on the rationale for why fee-based advisors use ETFs (Exchange Traded Funds) to build wealth for their clients. I started in the business using load mutual funds in the eighties and then low-load and then no-load. Just in the last five years, ETFs have exploded. You still have to watch your trading costs though. I highly recommend them and also no load index mutual funds for everyone’s portfolio to keep costs down and get good diversification. Advisers, Moving to Fee-Based Models, Turn to ETFS

The post Fee-Based Advisors Use ETFs to Build Wealth first appeared on Whole Hearted Way.

]]> Here is a great article on the rationale for why fee-based advisors use ETFs (Exchange Traded Funds) to build wealth for their clients. I started in the business using load mutual funds in the eighties and then low-load and then no-load. Just in the last five years, ETFs have exploded. You still have to watch your trading costs though. I highly recommend them and also no load index mutual funds for everyone’s portfolio to keep costs down and get good diversification.

Advisers, Moving to Fee-Based Models, Turn to ETFS

The post Fee-Based Advisors Use ETFs to Build Wealth first appeared on Whole Hearted Way.

]]> 811 Women and Money-You Weren’t Born to Shop; How Your Money Personality affects Your Bank Account https://www.wholeheartedway.com/women-and-money-you-werent-born-to-shop-how-your-money-personality-affects-your-bank-account/?utm_source=rss&utm_medium=rss&utm_campaign=women-and-money-you-werent-born-to-shop-how-your-money-personality-affects-your-bank-account Fri, 21 May 2010 18:47:01 +0000 https://www.wholeheartedway.com/?p=541 Here is an interview with Cathy Curtis CFP of Curtis Financial Planning in Oakland, CA. Cathy is a fellow NAPFA member, and fee-only financial advisor who specializes in helping women with their finances. WomenandMoney051910 80% of American women will find themselves the sole keepers of their personal finances at some point during their lives, however, most of those women feel financially insecure, despite controlling more wealth, having more education and being more involved in financial decisions. What you will learn from this audio file: • How your money personality affects your money behavior • 3 simple money truths that every woman needs to know • How comprehensive financial planning helps women. Cathy Curtis CFP also tells you where to get her free 10 Simple Money Truths eBook.

The post Women and Money-You Weren’t Born to Shop; How Your Money Personality affects Your Bank Account first appeared on Whole Hearted Way.

]]> Here is an interview with Cathy Curtis CFP of Curtis Financial Planning in Oakland, CA. Cathy is a fellow NAPFA member, and fee-only financial advisor who specializes in helping women with their finances.

WomenandMoney051910

80% of American women will find themselves the sole keepers of their personal finances at some point during their lives, however, most of those women feel financially insecure, despite controlling more wealth, having more education and being more involved in financial decisions.

What you will learn from this audio file:

• How your money personality affects your money behavior

• 3 simple money truths that every woman needs to know

• How comprehensive financial planning helps women.

Cathy Curtis CFP also tells you where to get her free 10 Simple Money Truths eBook.

The post Women and Money-You Weren’t Born to Shop; How Your Money Personality affects Your Bank Account first appeared on Whole Hearted Way.

]]> 541 Do-It-Yourself Financial Plan Step#5 Investing https://www.wholeheartedway.com/do-it-yourself-financial-plan-step5-investing/?utm_source=rss&utm_medium=rss&utm_campaign=do-it-yourself-financial-plan-step5-investing https://www.wholeheartedway.com/do-it-yourself-financial-plan-step5-investing/#comments Mon, 10 May 2010 07:02:20 +0000 https://www.wholeheartedway.com/?p=535 Investing is the 5th step of 7 in a do it yourself financial plan. Most people don’t understand that to build wealth you have to invest. A combination of saving and investing is important to your successful do it yourself financial plan. By doing both, you automatically lower your risk, increase your potential return and save on taxes. Many people are frustrated by the fact that they can never get ahead just by saving their money. They are correct. Everyone should invest and not keep all of their money in cash and cash equivalents for these 2 reasons: 1. Taxes. Every dollar earned or every dividend distribution you receive is taxed at some tax rate. If your cash is not getting enough return to replace the loss from taxation, then you are not making money but losing it. Every dollar that you own must replace the loss from taxation in order to grow. 2. Inflation. The CPI (Consumer Price Index) gives us an overall idea of how much goods and services go up every year. For instance, if you put $1.00 in your piggybank in 1980, it would have had to increase to $2.66 (or 5.58% average annual return) in 2008 to be able to buy the same amount of goods and services that it could in 1980. You can find the current inflation rate at the Bureau of Labor Statistics website. Inflation and taxes are very scary to those on a fixed income. People can get the illusion that they are taking very little risk as they receive a known amount each month. The reality is that they are receiving a guaranteed loss since each year it will purchase a lesser amount of goods and services. This is why everyone needs some funds that are invested for growth. We need the opportunity to keep up with taxes and inflation even if loss of principal is a potential or else we are assured of a loss. Having a mix of some money in a safe account and some invested for long term growth can help investors feel comfortable with risk while being able to keep up with taxes and inflation. -Fern Alix LaRocca CFP® Wealth Coach

The post Do-It-Yourself Financial Plan Step#5 Investing first appeared on Whole Hearted Way.

]]> Investing is the 5th step of 7 in a do it yourself financial plan. Most people don’t understand that to build wealth you have to invest. A combination of saving and investing is important to your successful do it yourself financial plan. By doing both, you automatically lower your risk, increase your potential return and save on taxes.

Many people are frustrated by the fact that they can never get ahead just by saving their money. They are correct. Everyone should invest and not keep all of their money in cash and cash equivalents for these 2 reasons:

1. Taxes. Every dollar earned or every dividend distribution you receive is taxed at some tax rate. If your cash is not getting enough return to replace the loss from taxation, then you are not making money but losing it. Every dollar that you own must replace the loss from taxation in order to grow.

2. Inflation. The CPI (Consumer Price Index) gives us an overall idea of how much goods and services go up every year. For instance, if you put $1.00 in your piggybank in 1980, it would have had to increase to $2.66 (or 5.58% average annual return) in 2008 to be able to buy the same amount of goods and services that it could in 1980. You can find the current inflation rate at the Bureau of Labor Statistics website.

Inflation and taxes are very scary to those on a fixed income. People can get the illusion that they are taking very little risk as they receive a known amount each month. The reality is that they are receiving a guaranteed loss since each year it will purchase a lesser amount of goods and services. This is why everyone needs some funds that are invested for growth. We need the opportunity to keep up with taxes and inflation even if loss of principal is a potential or else we are assured of a loss. Having a mix of some money in a safe account and some invested for long term growth can help investors feel comfortable with risk while being able to keep up with taxes and inflation. -Fern Alix LaRocca CFP® Wealth Coach

The post Do-It-Yourself Financial Plan Step#5 Investing first appeared on Whole Hearted Way.

]]> https://www.wholeheartedway.com/do-it-yourself-financial-plan-step5-investing/feed/ 4 535 Target Date Funds-Why Invest in Them? https://www.wholeheartedway.com/target-date-funds-why-invest-in-them/?utm_source=rss&utm_medium=rss&utm_campaign=target-date-funds-why-invest-in-them Wed, 21 Apr 2010 00:28:32 +0000 https://www.wholeheartedway.com/?p=429 I am not a big fan of target date funds. But my colleague, Roger Wohlner,  has done a great job of discussing them here: Fidelity is one of the largest providers of 401(k) plans and like many fund company platforms it is common for their plan sponsor clients to offer several or all of Fidelity’s Target Date funds known as the Fidelity Freedom funds. These funds have target dates from 2005 every five years out to 2050 with an even shorter-term Retirement Income fund. The premise behind these and other Target Date funds is that a plan participant will choose a fund with a date close to when he or she might retire, invest their contributions and let the fund manager do the rest. The funds typically lighten up on equity investments as the target date draws nearer, at some point they go to a “glide path” into retirement typically at the target year. This means the fund at that point is geared to the typical life expectancy of someone retiring in that year, the allocation allows the fund shareholder to “glide” into retirement. There has been much controversy as to whether Target Date funds work as advertised. My purpose in writing this post is not to comment on these issues one way or the other. Rather I want to take a look at how the Fidelity Freedom Funds actually invest shareholder’s money. The Freedom Funds like many Target Date funds are funds of funds. Each Freedom Fund has its own mutual fund ticker symbol. Unlike many mutual funds which make direct investments into individual stocks or bonds, the Freedom Funds invest in a variety of Fidelity mutual funds. Which funds and the percentage held of each fund will vary by Freedom Fund. I made a list of their underlying holdings using Morningstar’s Advisor Workstation. I then used the Fi360 Toolkit to rate these funds based on their 11 point criteria: • Fund inception date (at least three years) • Manager Tenure (min. 2 years) • Minimum fund size • 2 measures relating to fund investment style and asset composition • Expense ratio • 2 measurements of risk-adjusted return • Trailing 1,3,5 year returns All funds are rated relative to other funds in their peer group. In looking at the 26 Fidelity mutual funds that I found as holdings of the various Freedom Funds I found the following for the ranking period ending 12/31/09: • Three of the funds received the highest ranking of 0. This means no deficiencies, they passed all criteria. • An additional four funds earned a score ranging from 1-25 indicating that they passed most of the criteria. This would indicate that these funds rank in the top 25% of all funds in their peer group with enough data to be ranked. • Four funds had scores ranging from 26-50 indicating that they did not pass in a couple of areas but these funds overall rank in the top half of their respective peer groups based upon the ranking criteria. • Five of the funds had a ranking in the 51-74 range indicating that they were deficient in several of the criteria and overall place in the lower half of their peers with enough history to be ranked. • One fund had a score of 87 meaning that it was deficient in most areas and ranked in the bottom 13% of its peers. A ranking in this range indicates that strong consideration should be given to replacing such a fund. • Nine of the funds did not have enough history to be ranked. These funds are all Fidelity Series funds. This appears to be a new group of funds that Fidelity has designed for use in their Freedom Funds. The funds all have anywhere from a month’s worth of history out to about a year. They would flunk the inception date test for the amount of time the fund has been around. These may ultimately prove to be good funds over time, but as an advisor I am generally loath to invest client money in new, untested funds unless there is a compelling reason to do so. • Noticeably absent from the underlying funds within the Freedom Funds are any of Fidelity’s low cost core index funds covering areas such as the S&P 500; total domestic stock market; international equities; or their total bond market index fund. These are by and large solid, low cost holdings. Also absent are several top Fidelity funds such as Contra, Low-Priced Stock, and others. In their defense of the 11 numbered Freedom Funds, 10 earned a score of 0 for the most recent ranking period and the other one earned a top quartile score of 20. Keep in mind; however, these rankings are within the target date peer groups via Morningstar. All of these groupings have a small number of funds and there is not a lot of history in some cases. A really good or really bad quarter or two can skew a target fund’s relative ranking. Additionally the peer groupings have changed and been revamped at least twice in the past several years. Should you invest in these funds? As a plan participant you need to understand the fund’s investment philosophy, the glide path concept, and the fund’s underlying investments. Remember just because a particular fund has a target date closest to when you might retire, you can go with a closer date fund if you want to be a little less aggressive or a longer-dated fund if you want to be a bit more aggressive. Plan sponsors it is incumbent upon you to monitor the Target Date funds in your plan as closely as you would review any plan investment choice. In the case of a Fidelity plan you may or may not be limited to the Freedom Funds. Again I am not saying the Freedom funds are good or bad. Clearly they did well relative to their peers in 2009. Participants and Sponsors need to understand these funds and what they can and cannot offer. Posted by Roger Wohlner, CFP®

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]]> I am not a big fan of target date funds. But my colleague, Roger Wohlner,  has done a great job of discussing them here:

Fidelity is one of the largest providers of 401(k) plans and like many fund company platforms it is common for their plan sponsor clients to offer several or all of Fidelity’s Target Date funds known as the Fidelity Freedom funds. These funds have target dates from 2005 every five years out to 2050 with an even shorter-term Retirement Income fund. The premise behind these and other Target Date funds is that a plan participant will choose a fund with a date close to when he or she might retire, invest their contributions and let the fund manager do the rest. The funds typically lighten up on equity investments as the target date draws nearer, at some point they go to a “glide path” into retirement typically at the target year. This means the fund at that point is geared to the typical life expectancy of someone retiring in that year, the allocation allows the fund shareholder to “glide” into retirement.

There has been much controversy as to whether Target Date funds work as advertised. My purpose in writing this post is not to comment on these issues one way or the other. Rather I want to take a look at how the Fidelity Freedom Funds actually invest shareholder’s money.

The Freedom Funds like many Target Date funds are funds of funds. Each Freedom Fund has its own mutual fund ticker symbol. Unlike many mutual funds which make direct investments into individual stocks or bonds, the Freedom Funds invest in a variety of Fidelity mutual funds. Which funds and the percentage held of each fund will vary by Freedom Fund. I made a list of their underlying holdings using Morningstar’s Advisor Workstation. I then used the Fi360 Toolkit to rate these funds based on their 11 point criteria:

• Fund inception date (at least three years)
• Manager Tenure (min. 2 years)
• Minimum fund size
• 2 measures relating to fund investment style and asset composition
• Expense ratio
• 2 measurements of risk-adjusted return
• Trailing 1,3,5 year returns

All funds are rated relative to other funds in their peer group.

In looking at the 26 Fidelity mutual funds that I found as holdings of the various Freedom Funds I found the following for the ranking period ending 12/31/09:

• Three of the funds received the highest ranking of 0. This means no deficiencies, they passed all criteria.
• An additional four funds earned a score ranging from 1-25 indicating that they passed most of the criteria. This would indicate that these funds rank in the top 25% of all funds in their peer group with enough data to be ranked.
• Four funds had scores ranging from 26-50 indicating that they did not pass in a couple of areas but these funds overall rank in the top half of their respective peer groups based upon the ranking criteria.
• Five of the funds had a ranking in the 51-74 range indicating that they were deficient in several of the criteria and overall place in the lower half of their peers with enough history to be ranked.
• One fund had a score of 87 meaning that it was deficient in most areas and ranked in the bottom 13% of its peers. A ranking in this range indicates that strong consideration should be given to replacing such a fund.
• Nine of the funds did not have enough history to be ranked. These funds are all Fidelity Series funds. This appears to be a new group of funds that Fidelity has designed for use in their Freedom Funds. The funds all have anywhere from a month’s worth of history out to about a year. They would flunk the inception date test for the amount of time the fund has been around. These may ultimately prove to be good funds over time, but as an advisor I am generally loath to invest client money in new, untested funds unless there is a compelling reason to do so.
• Noticeably absent from the underlying funds within the Freedom Funds are any of Fidelity’s low cost core index funds covering areas such as the S&P 500; total domestic stock market; international equities; or their total bond market index fund. These are by and large solid, low cost holdings. Also absent are several top Fidelity funds such as Contra, Low-Priced Stock, and others.

In their defense of the 11 numbered Freedom Funds, 10 earned a score of 0 for the most recent ranking period and the other one earned a top quartile score of 20. Keep in mind; however, these rankings are within the target date peer groups via Morningstar. All of these groupings have a small number of funds and there is not a lot of history in some cases. A really good or really bad quarter or two can skew a target fund’s relative ranking. Additionally the peer groupings have changed and been revamped at least twice in the past several years.

Should you invest in these funds? As a plan participant you need to understand the fund’s investment philosophy, the glide path concept, and the fund’s underlying investments. Remember just because a particular fund has a target date closest to when you might retire, you can go with a closer date fund if you want to be a little less aggressive or a longer-dated fund if you want to be a bit more aggressive.

Plan sponsors it is incumbent upon you to monitor the Target Date funds in your plan as closely as you would review any plan investment choice. In the case of a Fidelity plan you may or may not be limited to the Freedom Funds.

Again I am not saying the Freedom funds are good or bad. Clearly they did well relative to their peers in 2009. Participants and Sponsors need to understand these funds and what they can and cannot offer.

Posted by Roger Wohlner, CFP®

The post Target Date Funds-Why Invest in Them? first appeared on Whole Hearted Way.

]]> 429 Get High Interest on Your Cash https://www.wholeheartedway.com/get-high-interest-on-your-cash-2/?utm_source=rss&utm_medium=rss&utm_campaign=get-high-interest-on-your-cash-2 Sun, 18 Apr 2010 06:18:47 +0000 https://www.wholeheartedway.com/?p=399 Cash is king right now. With people losing their jobs and the markets in negative territory, everyone is loading up on cash and I think that is the right thing to do. If the roof leaks, or the car needs repair, you will not have to use a credit card to pay for it, you can use your cash. But what if your cash is only getting- like mine-1-2%? Yikes! As I have said before, cash needs to keep up with taxes and inflation or else you are guaranteed to lose money. Why? ? Because your cash will lose its ability to pay for items like bread, gas, etc. that keep going up in price. After reviewing www.bankrate.com, I realized that I wasn’t doing any worse than the national average on my cash which is 1-3% depending on how you have spread out the maturities. So what else can I do? Peer-to-peer lending websites such as the ones below are gaining in popularity as a place to put short term cash at work. Let’s be clear-this is extra cash that you hold -not emergency cash savings. www.prosper.com www.lendingclub.com www.virginmoneyUS.com They work in two ways- either direct person to person lending or a pool of lenders buying into a pool of borrowers. In the past 20 months, Lending Club investors have earned an average annual return of 9.05% according to their website. Please read the prospectus for detailed information about the process, risk, and fees before purchasing. I know many Financial Advisors who have used VirginMoneyUS to help families and friends provide loans for college education, or to start businesses. If you are concerned about the low rates on your cash, think about putting a small portion into one of these online social networks that connect borrowers with lenders. I think it is going to be the wave of the future as credit and capital become hard to get.

The post Get High Interest on Your Cash first appeared on Whole Hearted Way.

]]> Cash is king right now. With people losing their jobs and the markets in negative territory, everyone is loading up on cash and I think that is the right thing to do. If the roof leaks, or the car needs repair, you will not have to use a credit card to pay for it, you can use your cash. But what if your cash is only getting- like mine-1-2%?
Yikes! As I have said before, cash needs to keep up with taxes and inflation or else you are guaranteed to lose money. Why? ? Because your cash will lose its ability to pay for items like bread, gas, etc. that keep going up in price.

After reviewing www.bankrate.com, I realized that I wasn’t doing any worse than the national average on my cash which is 1-3% depending on how you have spread out the maturities. So what else can I do? Peer-to-peer lending websites such as the ones below are gaining in popularity as a place to put short term cash at work. Let’s be clear-this is extra cash that you hold -not emergency cash savings.

They work in two ways- either direct person to person lending or a pool of lenders buying into a pool of borrowers. In the past 20 months, Lending Club investors have earned an average annual return of 9.05% according to their website. Please read the prospectus for detailed information about the process, risk, and fees before purchasing.

I know many Financial Advisors who have used VirginMoneyUS to help families and friends provide loans for college education, or to start businesses.

If you are concerned about the low rates on your cash, think about putting a small portion into one of these online social networks that connect borrowers with lenders. I think it is going to be the wave of the future as credit and capital become hard to get.

The post Get High Interest on Your Cash first appeared on Whole Hearted Way.

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