What Would Happen If You Lost Half of Your Wealth

April 29, 2014

pic_integrated_wealth_managementThere’s always one major goal in investment planning. For both financial advisors and their clients, the main goal is to watch the net worth of their clients increase gradually over time. However, the most worrying aspect of investment is the risk of losing a significant portion of the portfolio due to unforeseen events. Regardless of meticulous planning, there are situations that can severely damage the portfolio. Some of such financial catastrophes are:

Unpredictable Swings in the Stock Market
As per the Dow Joes 30 Industrial Average, the greatest single day decline in the stock market value happened on October 19, 1987; when the US Equity markets lost 22.61 percent of market capitalization. The dreadful loss of paper value could have been avoided if investors kept an eye on the long term goals, and refused to sell. Same thing happened during the recent financial crisis, as well. (more…)

Most Retirement Plans are Not Realistic

April 23, 2014

Since the recent financial meltdown, people are increasingly talking about retirement planning. However, most of them are not discussing the real issues. Some of the worst mistakes that the current generation is making are as follows:

Not Taking Life Expectancy into Account
April Blog 2 - Image-7ol5gPeople will live longer than previous generations. Usually life insurance companies have the best idea about life expectancy, since their balance sheet is directly correlated to this issue. According to the Central Intelligence Agency, the life expectancy at birth for United States citizens is currently 79.55. And, this number is expected to go much higher in coming decades as advancements in terminal disease treatment are progressing.

If someone is expecting to retire at 65, they may only plan to live for another 15 years (on average). But, by the time he turns 65, his life expectancy may have increased to 100. This will create an additional burden on the retirement portfolio that was planned decades ago. Hence, many financial advisors suggest that you add a “buffer expectancy” of at least 15-20 years on top of your life expectancy. (more…)

How to Ensure Sustainable Return on Investment

March 31, 2014

March+Blog+4+-+Image+-+ROI-ol8tiFor the typical investor, generating a sustainable return on investment (ROI) that meets the investor’s needs, without withdrawing from the principle is considered good enough. Regrettably, under today’s economic climate that can be a challenge. As interest rates have been historically low since the Global Financial Crisis (GFC), the typical investor is likely meeting his or her needs from a mixture of capital gain income from interests and dividends, as well as liquidating some of the assets from the existing portfolio.

Therefore, the key question now is how to ensure a sustainable income from investments that will not deplete the portfolio. In order to find out how much an investor can withdraw over a sustained period, several factors need to be considered. Such as the current interest rate environment, portfolio volatility, and the time horizon of periodic withdrawals. Investors, who would like to maintain the value of their portfolio and earn a reasonable return, have only two viable options, investing in bonds or dividend paying stocks. (more…)

Trust is Key to Financial Advisor-Client Relationships

March 28, 2014

March Blog 3 - Trust Image-m90hrWhen a client chooses any provider, whether a family doctor or nanny, trust plays a key role in founding the rapport.  The same trust is even more important in choosing a provider when financial matters are involved.

In a Wharton School of the University of Pennsylvania study, it was revealed that clients consider trustworthiness as the most important characteristic of a financial advisor. According to the same study, there are three levels of trust that clients consider before choosing their financial advisor. (more…)

Small Savings Can Lead to Big Payoffs

March 20, 2014

MarchBlog2ImageWhen budgeting for the month, people often keep enough money to pay the regular bills–the mortgage, car payment, phone bill, etc. However, most people often forget about the most important check that should be written first. Regardless of profession or earning capability, the first check should always be written to yourself!

It is often said, “It’s not how much you make that matters; It’s how much you save.” Paying yourself first helps to squeeze the budget within the remaining funds. Most people in our society think that it’s the big purchases they should plan for, but they often forget to plan for the most important thing, securing their own future. Financial professionals suggest that setting up a monthly automatic transfer from your checking account to your retirement account is the best way to save for the future. (more…)

Understanding Risk Is Key to Investing

March 14, 2014

risk toleranceEach individual has a distinct risk tolerance level. Unfortunately, the standard questionnaire from financial planners may not paint an accurate picture of one’s risk preferences as it is not tailored to reflect every aspect of an individual’s financial life. While words like “tolerance” and “capacity” are used reciprocally by financial planners, the fact is that these words have different meanings to different people.

The term “risk capacity” is used to measure one’s financial ability to sustain risk. In the context of a practical financial arrangement, risk capacity considers one’s asset base, withdrawal, and liquidity needs in a given time period. An example of a very high risk capacity portfolio would be withdrawing $30,000 annually from an asset base of $1 million starting 15 years from now to fund periodic retirement payments. In this scenario, the portfolio will have sufficient means to sustain the retirement goals even if it experiences consecutive years of underperformance with the designated investment vehicle. (more…)

HFG Perspectives: March

March 6, 2014

“We all know by now that bull markets tend to take a few steps forward and then give a bit back. While it’s never enjoyable to watch our account balances decline over the shorter term, stock markets gave back a bit in January. While the talking heads on TV might attempt to make us think that the next crisis is at our doorstep—that’s just how the media business works—the decline we’ve been witnessing for the last month has been, if anything, average.”

We opened last month’s letter with the paragraph above, and we think it applies nicely today as well. After all, after having a rough go of things in January, the S&P 500 closed out February at all-time highs. Two steps forward and one step back, indeed. (more…)

How Expenses Change After Retirement?

February 27, 2014

One of the fundamental aspects of retirement planning is estimating how expenses change after someone retires. Since every individual is unique, and their spending patterns are different from  one another, financial planners have very little consensus regarding spending behaviors of people who are about to retire.

retirement-yachtAccording to some financial advisors, expenses during retirement actually increase because their health care expenses rise due to their age. On the other hand, some financial advisors assume that the expenses during retirement decreases because retired people cut their spending related to lifestyle changes, such as travel and entertainment. However, there is a third group of financial advisors who think that spending during retirement years remain the same and only rise with adjusted inflation levels. (more…)

Understanding the Impact of The New Estate and Gift Tax Laws

February 21, 2014

monetarygiftAn important aspect of our childhood development revolved around playing various sports and games. We learned to properly understand the rules of those games and formulated strategies to win. We also learned to adapt to the ever changing dynamics of the games we played. When it comes to estate planning, things aren’t much different. As the President signed the latest changes regarding estate and gift tax laws named “American Taxpayer Relief Act” on January 2, 2013; it is important to understand and review the impact of those changes in order to make adjustments to our existing estate plans and gifting strategies. (more…)

Good Money Values for Children

February 10, 2014

The first steps of family asset management start at home, as children are the greatest assets one can have. If children are not given the proper education for handling their financial affairs, the family will not survive beyond a generation. The “riches to rags” stories are all too common because, in general, very few parents communicated to their children the true value of wealth.

Feb+Blog+1+ImageEileen and Jon Gallo wrote The Financially Intelligent Parent: 8 Steps to Raising Successful, Generous, Responsible Children, which focused on the notion that spending patterns of parents and their own values regarding money have a profound impact on the values and priorities of their children. In fact, it helps to become more aware of the values that are being communicated to children by observing one’s spending. The spending patterns provide some splendid ideas about how to give children the message one wants them to receive. (more…)


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Copyright © 2017. HFG Wealth Management, LLC. Investment advisory services offered through HFG Wealth Management, LLC – An independent Registered Investment Advisory firm registered with the SEC. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Therefore, any information presented here should only be relied upon when coordinated with individual professional advice. [ more disclosures ]