Will The U.S. Impose Sanctions On Russia? Relationships between Russia, Europe and the U.S. are simmering after a strong disagreement over Russia’s imposing military presence in Ukraine and their unwillingness to back down and move their military personnel back to Russian bases. Ukraine is
Has The Fed Hurt Your Ability To Retire? Saving for retirement and planning ahead, is difficult for most Americans, even when the markets and typical retirement investment vehicles are conducive to helping create a substantial retirement nest egg. The day to day expenses and other
Nasdaq Performance Is Turning Heads, Up 200% Since 2009 Lows For investors who got over their fears of the tech bubble and put their assets into the Nasdaq taking advantage of Tech, healthcare and retail stocks, their endeavor did not return void. After Tuesday’s rally
Will The U.S. Impose Sanctions On Russia?
Relationships between Russia, Europe and the U.S. are simmering after a strong disagreement over Russia’s imposing military presence in Ukraine and their unwillingness to back down and move their military personnel back to Russian bases. Ukraine is viewing Russia’s military aggression as an act of war, and the west has threatened to impose military sanctions on Russia unless Putin backs down and pulls out of the Ukraine. Although Russia has agreed to resolve these issues using diplomacy, the meeting that was to occur Wednesday in Paris including foreign ministers from the U.S. and the U.K. was unattended by Russia’s top diplomat who refused to make an appearance. Russia has also threatened to retaliate against any measures the U.S. and Europe takes to impose sanctions on trade with Russia. At this point there is much uncertainty surrounding the situation, no one knows for sure if things will progress to the point of imposing economic sanctions or not. However, one thing is certain; if economic sanctions are imposed on Russia, there is much at stake for Russia, the U.S. and the Eurozone.
Who Suffers The Most If Sanctions Are Imposed On Russia?
Although each of the major nations involved will feel the impact of economic sanctions on Russia, Europe will probably be hit the hardest. Currently, Russia is the EU’s third largest trading partner just after the U.S. and China. Additionally about 75% of all foreign direct investment in Russia comes from EU countries. To further complicate the matter for Europe, if sanctions are imposed on Russia, Europe may experience an energy crisis and a spike in the prices of oil and natural gas since Russia is the largest supplier of energy to the EU. Beyond energy, other sectors that will be impacted in the EU if economic sanctions are imposed on Russia include retail sales, car making, and brewing industries that are often outsourced to Russia.
Here in the U.S., our trading relationship with Russia is much smaller than the Eurozone. However, there are still many countries that will be hurt if sanctions are imposed on Russia, including: McDonalds, Exxon Mobil and Pepsi.
Russia Will Be Hit The Hardest By Economic Sanctions
Although things may be difficult for the Eurzone, the country hit the hardest by sanctions is Russia itself. This is actually very important, because in order for sanctions to be successful against Russia, the west needs to have the means and ability to see it through. According to Berenberg economist Christian Schulz; “The damage Russia would do to itself with sanctions would exceed the damage to the West by far. That makes them difficult to sustain over a longer period for Russia.”
Certainly investors and economies everywhere will feel the impact should things escalate in Ukraine enough to impose sanctions on Russia. As an investor it is absolutely imperative you make certain your assets are properly positioned and safe guarded against economic problems around the globe. Even during tough economic times there is profitable investments, it is only a matter of making sure you are properly positioned for what’s to come. For more information on how to position your portfolio given the current turmoil around the world, speak to a Redhawk Wealth Advisor near you today.
Saving for retirement and planning ahead, is difficult for most Americans, even when the markets and typical retirement investment vehicles are conducive to helping create a substantial retirement nest egg. The day to day expenses and other financial obligations too often get in the way with saving and investing. To make matters worse, the Fed’s monetary policies over the last several years, has almost made it possible for those nearing retirement to successfully complete their retirement savings. By favoring “too big to fail banks” and the stock market, the older American has been left hung out to dry in regard to retirement savings and typical safe haven retirement vehicles.
How The Fed’s Fiscal Policy Hurts Retirees
The Fed’s zero interest rate policy, has created an investment environment that has forced interest rates so low, that individuals including seniors have had no recourse but to stray away from CDs and U.S. treasury bonds typically recognized as safe retirement investment vehicles, but due to the low interest rates are no longer able to generate a return while keeping up with inflation. In fact, the Fed has openly acknowledged that their current monetary policies have forced seniors to put their life savings on the line in an effort to seek higher yields. According to the available stats by the Employee Benefit Research Institute, 25% more baby boomers and Generation Xers will not be able to retire with a large enough nest egg because of the Fed policies; this 25% would have otherwise had the necessary funds available for a financially secure retirement if it weren’t for the Fed and its monetary policies.
Inflation Is The Stealth Tax On Your Retirement Savings
Authors of the book Code Red by John Mauldin and Jonathan Tepper have made the following statement regarding the zero interest rate policy: “Negative real rates act like a tax on savings. Inflation eats away at your money, and is, in effect, a tax by the central bankers on your hard-earned money.” They went on to say, “Negative real rates force savers and investors to seek out riskier and riskier investments merely to tread water.” In addition to forcing seniors into riskier endeavors that their financial portfolio may or may not tolerate, it also often causes people to stop saving and start spending their cash keeping their nest eggs small, but money flowing through the economy.
Who Is Benefiting From The Fed’s Zero Interest Rate Policy?
Since the Fed implemented their Zero-interest rate policy in September 2012, it has successfully managed to positively impact the following areas:
-The stock market has been artificially propped up as money has been forced from bonds into equities. The “bubble” this has created will likely be difficult to sustain as the Fed continues to taper the QE program.
-Bankers are cranking out huge profits and getting bonuses due to their performance in 2013.
-The monetary supply created by Bernanke and the Fed is enough to last for 100 years, and continues to double each and every year monetary easing is in play.
Essentially, the bankers have benefited hugely from the Fed’s monetary policy. Too big to fail banks have been rescued, bankers are pocketing their profits and getting bonuses, but the average American is struggling to find a safe place to invest for retirement savings. Bernanke actually openly admitted that the entire purpose of his monetary policy is to get Americans to take riskier ventures with their investments, in spite of the fact that this is the wrong decision for most individuals nearing retirement age.
How Does The American Retiree Get Past The Fed’s Monetary Policy?
While it can be difficult to find the retirement vehicle that will adequately protect your retirement from inflation while still generating profit, it’s also important to remember that in any investment environment there is the ability to manage risk and profit. Many economists feel that the inflation issues created by years of abusing the monetary supply have yet to fully be realized and that we may see more significant inflation in years to come. However, even in a tricky investment environment, there are ways to protect your nest egg and still generate profit. For more information on how to secure your retirement nest egg for those golden years ahead, speak to a Redhawk Wealth Advisor near you today.
Nasdaq Performance Is Turning Heads, Up 200% Since 2009 Lows
For investors who got over their fears of the tech bubble and put their assets into the Nasdaq taking advantage of Tech, healthcare and retail stocks, their endeavor did not return void. After Tuesday’s rally in tech stocks, the composite was up by 46.50 points or 1.2%, bringing the index up by 200% from its 2009 low. The 200% return makes the Nasdaq the first of the three indexes to triple from its 2009 low, beating the Dow and S&P 500, which are both up by 132% and 150% from their lows. The performances noted by the Dow and S&P 500 are still nothing to thumb your nose at, but the Nasdaq is outshining them all.
Mid-Size Stocks Responsible For The Nasdaq’s Gains
As popular as companies such as Apple, Google and Microsoft are, these tech giants are actually not the responsible parties for the huge rallies. According to the data, most of the companies responsible for the index gathering steam, are small and midsize companies, or companies with a total market value of less than 15 billion. This is largely because these smaller companies had more room for “growth” and are benefiting from the true economic growth and stability we are currently experiencing here in the U.S. Without the economic recovery, these smaller companies would be unable to flourish.
Healthcare Stocks Are The Big Winners In The Nasdaq Bull Run
The other big Nasdaq winner is surprisingly not a tech stock, but healthcare stocks. Two of the largest Nasdaq winners were drug companies Pharmacyclics and Jazz Pharmaceuticals. These companies are each up by more than 15,000% since 2009. This came as a surprise to some as health care stocks aren’t typically the biggest drivers of the tech heavy index. In addition to health care stocks performing well, retailers such as Lululemon Athletica, Tuesday Morning and of course Amazon and Priceline have been tearing up the markets with their great performance this year.
Nasdaq “Newbies” Contributing To The Index’s Gains
Another “helper” to the amazing recovery we have experienced with the Nasdaq, is many of the newbies that have been brought on board with the index. Social Media, for instance, have been significant contributors. Facebook, LinkedIn, and Yelp are companies whose performance has more than just contributed to the Nasdaq’s fantastic year. Yelp is up by 274% this year alone.
When many think of the Nasdaq, they fear the dotcom bubble, and wonder if some of these companies are headed for bubble territory. However, thanks to the “real” growth experienced by many of these small and midsized companies, most feel that another bubble is far from the reality. For more information about the Nasdaq and on which companies have are expected to continue to perform moving forward, speak to a Redhawk Wealth Advisor near you today.
Navigating Safety vs. Risk In Bond Investing
Historically, bonds have been noted to be the “safe haven” investment vehicle of choice for most retirees, and those approaching a time in life where a fixed income is a reality. Typically, as a person gets closer to retirement age, the risks associated with investing in the stock market are just too high, and threaten that person’s financial security in the event the market should correct or a significant loss should occur. As a result, as a person ages, most advisors recommend that a greater portion of his or her portfolio be allocated to bonds. However, with the current low-interest rate environment, that strategy has many aging Americans taking on unnecessary risk even within the bond investments.
What risks do you run in the bond market?
There is A Risk Of Default In Bond Investing
Although the risk of default is slim if you’re bonds are invested in high quality companies or U.S. Treasuries, there is always some risk that you won’t get paid back. Bonds are generally ranked in order of quality, with a AAA rating being the least risky and highest quality companies, and B- being awarded to riskier “junk bonds”. Comparatively, AAA rated corporate bonds get a slightly higher interest rate than a U.S. treasury, because theoretically, no matter how strong a company is they can’t guarantee the same risk of default as the U.S. government. A AAA rated corporate bond, generally has almost a 100% guarantee of being repaid.
The Biggest Risk To Bond Investors Is Inflation
An area that often gets over looked, but does hugely impact the purchasing power and return on your investment is the inflation rate. If, for instance, inflation increases to be higher than the interest rate, you will actually be losing money on your investment. In an investment environment like we are currently living in, this risk is much greater because interest rates are still in negative territory.
Currently, the 10-year treasury is paying roughly 2.77% and a 30-year is at around 3.8%. This is not a great return if you calculate inflation over time. Remember that bonds are only safe if they are above inflation rates. With inflation and interest rates hanging so closely together, the risk of losing purchasing power over time on your investment is much greater than it would be with an investment offering a higher return.
Bond Investors Run The Risk Of Losing Resale Value
Let’s just say that interest rates rise, which in today’s low interest rate environment is inevitable. If you desire to sell your bond prior to it’s maturity, you would have no choice but to sell it at the current market interest rate. If the rates go up, your bond purchased before the rates climbed will lose value significantly. This gives you the option to either hold it to maturity, or to sell it at a discounted rate. This is a very real concern for investors today, and could translate into a significant loss for those heavily invested in bonds.
Don’t Just Assume That Investing In Bonds Are Safe…
Not all bonds are created equal, and not all bonds are safe. When considering an investment in bonds, you have to weigh the risks of a company default, with the interest rates, and inflation rate. Just because a bond has a AAA rating doesn’t make your investment safe in today’s negative-interest rate environment. If your investment runs the risk of losing purchasing power over time, it is still a loss to your portfolio.
For more information on bond investing and on how to navigate the bond market for safe-haven investments, speak to a Redhawk Wealth Advisor near you today.
In spite of the stereotypes that the younger generation tends to engage in “risk-taking” behavior, and be too careless when it comes to life decisions, the current millennial generation, which encompasses ages 21-36 is proving the older generation wrong when it comes to their investment risk appetite. Unlike Gen Xers and the Baby Boomers that preceded them, Millennials have a tendency to be almost too conservative in their investment decisions.
Why Are Millennials Such Conservative Investors?
Similarly to those who reached adulthood during or just after the Great Recession, Millennials had a birds-eye view of their parents losing their retirement savings with the financial crisis in 2008. They also saw housing prices drop, and have experienced the danger of asset class bubbles on investments. As a result, many millennials have a deeply ingrained fear that the stock market will cause them to lose their hard earned assets.
Millennials Do Not Have Enough Assets Allocated In The Stock Market
If you compare the average millennial investor to other generations, Millennials are putting less than 1/3rd of their assets into stocks, and they hold the remainder of their assets in cash; compared to older generations that have roughly 50% allocated in stocks, and only 20% or so in cash assets. As a result, many millennials are not generating nearly the amount of profit that they will need to develop a successful nest egg later on in life. Most financial advisors would hold to the advice that young people should maintain a long-term investment perspective, and be willing to take some risks in order to allow their investments time to grow and mature.
Why Do Young People Need To Take Risk In Investments?
Any investment that offers a decent return also carries with it a certain element of risk. However, the younger you are when you take on the added risk, the more likely you are to be financially successful. For instance, if a 25 year old Millennial bought an ETF that followed the S&P 500 at the beginning of 2013, he or she would have made a 30% gain during this last year. However, if that same individual put their money into a savings account, money market account or a CD, he or she would have actually lost money as their investment would not have been able to keep up with inflation and their principal would have lost purchasing power during that time.
In general, those in the Millennial generation are in the prime-time of their lives for retirement savings. With time on their side, good savings skills, and an efficient profit-generating portfolio, Millennials have the ability to grow their nest egg into millions by the time they retire. However, in order to do so, today’s younger generation needs to get their money out from under their mattress and be willing to step out and take a little risk. For more information about the markets and on different investment strategies that will increase your profit potential and grow your retirement fund while still keeping in mind an age appropriate risk appetite, speak to a Redhawk Wealth Advisor near you today.
The Best Time To Begin Saving For Retirement Is When You’re Young
When you are young and fresh out of college, generally the last thing on your mind is saving for retirement. If you think about it, college grads have worked so hard to get a start on their lives and careers that focusing on saving for the end of that career seems like such a far off and lofty concept. Additionally, there are just so many variables that seem to get in the way. From, paying off student loans, getting married, starting a family, and taking on your first mortgage; there are a myriad of financial roadblocks that stand in the way of retirement planning. However, in spite of the inconvenient timing, the best time to begin preparing financially for the end of your career is at the very beginning of your career when you have time on your side. By taking some small steps right at the get go, you can get way ahead on securing your financial future.
How Can I Save For Retirement When I’m Living Paycheck To Paycheck?
One of the biggest roadblocks facing young people and preventing them from saving for retirement is that the majority of Americans are living paycheck to paycheck and have very little left over to put aside for retirement savings. If this resonates with you, then have no fear, there are still options available to you that can help decrease your monthly expenses in an effort to free up cash that can then be used for retirement savings. For instance:
Refinance On Your Mortgage To Free Up Money For Retirement Savings
One option that may be available to you is, refinancing on your mortgage. With the low interest rate environment right now, refinancing can often decrease your monthly mortgage rate significantly, which would then free up some extra income that could be used for retirement savings. Additionally, refinancing can give you the option to consolidate loans, rolling high interest credit card debt into a lower interest loan. Whether or not this is beneficial to you is a very individualized decision, but with the help of your financial planner, refinancing may be a feasible option to help free up money for savings.
Address Your Budget Often To Free Up Money For Savings
Another way to try to conjure up some extra income that can then be applied to retirement savings is by addressing your budget every month to make sure it is appropriate based on cost of living and family size. Additionally, you may find areas that you are spending extra on such as restaurants, splurge shopping, and cable TV. Whatever your priorities may be, there are probably areas of “fat” in your budget that could be trimmed off to free up more cash to put towards debt and retirement.
Should I Pay Down Debt Or Save For Retirement?
Another question that must be addressed between you and your financial advisor is whether or not you should focus on paying down debt, or on saving for retirement. If your debt has a very high interest rate then it may be more worthwhile to pay down debt first. However, don’t underestimate the power of compounding interest over time and the rate or return received by the average retirement investment. You will have to weigh cost benefit to determine if debt reductions or retirement savings should be the biggest priority.
Prioritize Retirement Savings As An Important Part Of Your Budget
One mistake that many people make is putting savings towards the end of their budget. They spend what they need to during the month and “if” they have anything leftover, that is then applied to savings. This is actually the wrong approach. Your savings will be much more successful if you pay yourself first. If your prioritize savings and put it at the top of your budget, it will be much more likely to happen than if you designate leftovers to your retirement plan. One way to make yourself more successful in this area is to opt for automatic paycheck withdrawal or create an automatic sweep from your checking account to your retirement savings.
Whether you are 25 years old or 40 years old, the best time to begin saving for retirement and prioritizing savings as part of your monthly financial obligations, is right now. If you start young when you have time and compounding interest on your side, the effort and stress needed to create a reliable savings plan will be much more manageable than if you wait until you’re basically ready to retire to start thinking about retirement. For more information on how to create a successful and strong retirement savings plan, contact a Redhawk Wealth Advisor near you today.
Is Your Pension Plan Reliable For Retirement Income?
As times have changed over the years, pension plans, which had always been a major component to retirement income for individuals, have for the most part gone by the wayside. Fewer and fewer private companies are still offering pension plans to their employees as part of their retirement benefit programs. More companies have turned to 401(k) plans, and have either frozen or terminated their pension plan benefits. If you’re an employee who still has a fully-funded pension plan available to you, you should definitely consider yourself fortunate. However, before you get too excited about your guaranteed retirement income, it’s important to consider whether or not your pension plan has “staying power”, and whether or not it will remain available to you once your reach retirement age.
Low-Interest Rates Have Made It Difficult For Companies To Fund Pension Plans
One of the difficulties for companies trying to fund their employee pension plans, is the low-interest rate environment we’ve been experiencing for the past couple of years. Along with the low interest rates, companies have been finding it difficult to fund their benefit plans through investments. Depending on market performance for that year, when there is a deficit between earnings and liabilities, companies have little choice but to dump cash into the pension plans in order to keep their liabilities funded.
The cash outlay experienced by many companies is probably one of the largest contributing factors to the slow disappearance of employer sponsored pension plans. Although pensions used to be a significant component to the 3-legged retirement stool, that third leg is becoming a thing of the past. Employees should consider themselves fortunate if their employers are still offering a full-funded pension plan option.
Changes In Pension Plans Necessitate A Plan B For Retirement Savings
Like it or not, due to the lack of dependability on employer sponsored pension plans, workers have little choice but to come up with a plan b for retirement, should their employer change the terms or terminate the current pension plan. Those whose employers have well-funded pension plans are less vulnerable to losing their pension plans benefits, than those who work for companies who are constantly dumping cash to keep their pension fund in the black.
How Is Your Company’s Pension Plan Faring?
As an employee, there is little you can do to ensure the security of your pension plan. This largely is dependent on the deficit between liabilities and funds for your company. According to recent statistics in a report by Mercer, last year, the deficit between pension plans that are sponsored by the S&P 500 decreased by $75 billion, making it $482 billion. When markets perform well the deficit decreases, however when the markets do poorly the numbers can reverse just as quickly.
To be safe, it is always wise to keep a close eye on the funded status of your company’s pension plan. In the event that your employer decides to freeze or cancel the plan, it’s important that you have your personal savings up to par to make sure that you aren’t vulnerable to financial problems during retirement. One obvious solution to help increase your retirement financial stability is to up your personal savings rate and put more money either into your 401(k) plan, or into a retirement savings vehicle of your choice such as an IRA or an annuity.
For more information on how to increase your financial stability in retirement in spite of the direction your company’s pension plan takes, speak to a Redhawk Wealth Advisor near you today.