june in review

07/12/10 | alexah strongheart | what just happened?

To follow is a brief look at the month, quarter or the year-to-date ending June 2010… and a little commentary as well.

equity markets
According to Lipper, Inc., in the second quarter of 2010, the average US stock fund dropped 10.3%; the average fund was down 5.3% year-to-date.

The Wall Street Journal (7/1/10), noted that on 6/30/10, the Dow Jones Industrial Average (DJIA) was:
• thirty-one percent (31%) below the October 2007 record close of 14264.53
• up 49.3% from its 12-year low of 6547.05 hit on March 9, 2009.

I like to remind people that the first rule of investing is “Buy Low, Sell High.” Market drops are the time to buy, not run for cover. If you are concerned about your investments, call me and we can talk. That is why I am here.

bond markets
The most common type of investment-grade bond fund, the intermediate-term bond fund, on average returned 2.9% in the second quarter, or 5.4% for the first half of the year. This, according to a story in The Wall Street Journal (7/6/10.)

savings
The Bureau of Economic Analysis reports that the US savings rate (personal savings as a percentage of disposable personal income) for May 2010 (released on June 28th) was 4%. This is a large improvement over the 76-year low US savings rate of -1% for all of 2006, but a far cry from the 11% average household savings rate of 1982 (Associated Press 2/1/07.)

As a general rule, I suggest a minimum of three months cost of living sitting in savings for emergencies and opportunities. If there is the possibility of losing a job in the future, or if you are retired, I recommend a minimum of six months cost of living sitting in savings. If you are unsure of your cost of living, download the (pdf) cost of living sheet found in the general data sheets located here.

economy
According to the Bureau of Labor Statistics (7/2/2010), nonfarm payroll declined approximately 125,000, and the unemployment rate is currently at 9.5%.

According to The Wall Street Journal (7/1/10):
• Oil closed at $75.63 per barrel
• Gold closed at $1,245.50 per ounce, just shy of its record high of $1,257.20

world
According to The Wall Street Journal (7/1/10):
• London FTSE 100 Index was down 13% for the quarter
• Paris CAC-40 Index was down 13% for the quarter
• Frankurt DAX Composite Index was down 3.1% for the quarter
• Japanese stocks fell to a yearly low, down 15% for the quarter.
• The Chinese Shanghai Composite Index was down 27% year-to-date. Its lowest point in nearly 15 months.

The MSCI World Index (an important benchmark of global stock markets) fell 11% the first half of the year.

However, a number of the world’s stock markets were above their highs of 2007, according to a report by The Wall Street Journal (7/6/10). These are: Tunisia, Sri Lanka, Venezuela, Columbia, Chili and Indonesia. What do these markets have in common? They are considered “emerging markets.” Now, before running to invest in emerging market stocks or mutual funds, it is important to realize that these are considered much higher risk investments, and suitable for only a small percentage of a diversified portfolio if the portfolio owner is not risk-adverse.

From a June 15th Bureau of Labor Statistics New Release, US import prices declined 0.6% in May, and the price index for US exports increased by 0.7% in May.

editorial
Now after looking at all that data, one might get a little troubled. The news is depressing, and the short-term outlook is of concern to many. Notice I said “short-term.” One issue facing many – especially in the US – is the difficulty in looking beyond the end of the month or year to the future.

I am a financial professional who looks at investments as a means for achieving long-term goals.

So, if the long-term trend in the stock market is up over the next 10, 20 or 30 years, does it really matter how much it dropped one year and how much it gained the next? What matters is whether you as an investor can achieve your goals.

Contact me and let’s work together to see about achieving your long-term goals.

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do-it-yourself financial planning

05/24/10 | alexah strongheart | financial planning

I am a do-it-yourselfer.  I admit it.  If there is a task I think I can tackle, I will do it.

There are many like me out there, those who try and save money by doing many things by themselves.  I applaud them (and myself) for taking on the skills needed to do some of these things.  We are an industrious group!

However, I have learned from my many years of DIY projects that sometimes it can be more dangerous and more costly to do some things on my own… larger plumbing, electrical and tree work comes to mind… one wrong move could destroy a home.  I think anyone would be foolish to try some of these things on their own without proper training and equipment.

I also don’t believe a person can be their own therapist, doctor, attorney or financial planner… when dealing with items like these, people are just too close to be objective, and a wrong decision or series of decisions (many times emotionally based) – could be devastating.

Now, just because a person probably shouldn’t be their own financial planner doesn’t mean that they can’t save money by doing a lot of the prep work in advance.  In fact, I tell people that the more work they do before our (phone or in-person) meeting, the less it will cost them to have a plan prepared.

  • Starting is as easy as going to client resources and clicking on “general data sheets” and “meeting checklist.”
  • Begin filling out the information.  Think about items as you walk through these sheets.  The more detailed and thoughtful, the more prepared for the meeting you will be.  If you are married or partnered, talk with one-another about your plans for retirement before the meeting.
  • When you get to the Cost of Living worksheet, don’t guess.  This is perhaps the biggest mistake made!  Go back through your checkbook and credit card statements and itemize your purchases.   This may take time – but it is important.  Fill in the worksheet.
  • Now, if you woke tomorrow and you were retired… how would you spend your time?  Volunteering?  Traveling?  Working in the Garden?  A little of this, a little of that?  Now, what will these new activities cost on an annual basis?  Write these down on the Retirement Cost of Living sheet in the general data sheets.
  • Gather all the items on the Meeting Checklist.
  • Are there areas in your finances that you and your spouse or partner argue/disagree?  We can discuss those as well.

Now you are ready to contact me to set up an appointment.  The first half hour is at no charge.

finance and chocolate

03/15/10 | alexah strongheart | compounding, investments

When I was a child, on occasion my grandmother would give me a $100,000 candy bar when I visited. I loved the candy bar (it had chocolate in it), but occasionally I remember thinking “Wow, that’s a lot of money to spend on a candy bar.” Too bad I didn’t realize it’s true value back then.

At the age of 45, I know that this $100,000 bar (renamed the 100 Grand bar, and currently costing $1.02 with tax) is not worth $100,000, it is really only worth $10.96.

Why? Well, if this $1.02 was invested, assuming an 11% average annual rate of return, paying out an income of 28 cents per year beginning at my age 65, and increasing at 4% per year until my presumed demise at 100, then added in the left over principal, I would have received $10.96.

This value decreases to $8.89 if a 9% average annual rate of return is assumed.

Too bad I didn’t discover this way back when I got the candy bar. Assuming I was 10 when I got the candy, and assuming the candy bar cost a quarter back then, using the same assumptions (11%; pmts to begin at my age 65 increasing at 4% per year until age 100) that candy bar would have had a value of $471.61 to me.

This value decreased to $137.07 if a 9% average annual rate of return is assumed.

Time and rate of return are the two key factors.

Are you ready to begin putting away money every month? Contact me to discuss how to make that happen.

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test yourself #1

03/11/10 | alexah strongheart | compounding, quizzes and "just for fun"

questions
#1
Assume you were given a choice – you could either receive $1,000,000 today, or receive 52 payments, $0.01 the first week with the amount doubling every week (i.e., $0.02 the second week; $0.04 the third; $0.08 the fourth, etc.) Which would you choose?

#2
You and your best friend are the same age. At age 25 you decided to invest $2,000 every year for the next 10 years. For illustration purposes, let’s assume your money grew at 8% per year, compounded annually. At the end of the 10 years you did not add any more money, but kept what you did have invested growing at the same rate.

At age 35, your best friend decided to start investing, and put $2,000 away for the next 30 years. Like yours, her money grew at 8% compounded annually. Who has the money at age 65?

answers
#1
If you chose the 52 payments you are correct! The compounding effect (in this case, 100% per week) would have paid you a total of $45,035,996,273,705 during the year!

#2
You would. Although you only contributed $20,000, you would have $291,546. Your best friend has invested $60,000, but would have just $226,566. TIME is the key. The earlier you start investing, the more chance your money has to grow. Start early, even with a little.

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investments – general info

03/8/10 | alexah strongheart | general information, investments

Investments are sometimes known as “wealth accumulation vehicles” and are used to accumulate capital for future needs and to help overcome the effects of long-term inflation.

The trick is to find investments that have the logical potential to meet your goals as well as the desired level of safety you require.

Before investing, you need to decide what you would like your money to do for you. There are four general investment objectives: growth of principal, high current income, tax savings, and safety of principal. No investment or savings vehicle can give all of these. Choices must be made.

If you want growth, there may be little or no current income, and the value of your principal may fluctuate.

If you desire high current income, you reduce the potential for growth and expose yourselves to possible loss of value of principal.

If tax savings is the objective, you will have to give up some current income and some safety of principal.

If you want safety of principal, growth and high current income will be given up.

Some combinations are possible such as modest income plus potential for growth of principal.

There are many forms of investments, and once you have determined your investment objective, it is time to look at the options available.

Certificates of Deposit and Money Market Mutual Funds are considered savings vehicles. They offer a low risk way to generate a cash reserve, generally at an interest rate higher than a passbook savings account.

Bonds are generally considered income vehicles. US Treasury Bonds are the more secure, followed by Municipal Bonds and then Corporate Bonds.

  • Treasuries are backed by the US Government.
  • Municipal Bonds offer some tax benefit and are backed by a city, state or local government, and the interest on these are generally exempt from federal taxes.
  • Corporate Bonds are issued by corporations, and tend to be riskier than either Treasury or Municipal Bonds, but they also, generally, provide a higher interest rate. These may be “investment grade” or “junk” depending upon the risk ratings.


Common Stocks are units of ownership of corporations. Most corporations pay out a portion of their net income each year as dividends. The value of the shares will tend to go up as the earnings of the firm increase. This combination of dividends and growth of the price of the shares often gives a “total return” greater than you can get with fixed income investments such as CD’s or bonds.

Mutual Funds offer investors a wide array of investment opportunities. There are literally thousands to choose from. Mutual funds are a way for an investor to own a diversified portfolio of government, corporate or municipal bonds, common stocks, or combinations of stocks and bonds. Mutual funds can be used to generate current income, or a combination of current income and growth, or long-term growth of principal. Mutual funds are sold by prospectus – a document that investors read before investing.

If you have questions about your current investments – contact me about an investment review.

financial planning – general info

03/3/10 | alexah strongheart | financial planning, general information

The primary objective of a financial plan should be to help you identify and meet your personal financial needs and goals.

• Cash Management: This addresses how your actual after-tax earned income is allocated for cost of living, debts, savings and investments. This initial step often involves budgeting, debt management, setting up a funding plan for major expenditures (like automobiles) and cash accumulation (savings) for emergencies and opportunities.

• Risk Management (Insurance): Life, Health, Disability, Nursing Home and Personal Property. Reviews of insurance programs frequently reveal excesses in some areas, gaps in others, and often too high a price.

• Taxes: Are you paying too much? Are you giving the government interest-free loans? Are you utilizing those provisions the government gives to reduce, defer, or even avoid some taxes? A good financial adviser will work closely with you and your tax professional, and will suggest that you seek the advice of a qualified tax professional when it comes to tax issues.

• Retirement Planning: Once retirement age is reached, if you have not yet provided adequately for retirement with dignity, it is simply too late to go back and do it right! How much income you will really need? What sources of income will you have? What will the future rates of inflation be? What rate of return can you expect to achieve? What will taxes be? Will Social Security be around when you retire?

• College Planning: For those who have children, discovering what it will cost for their child to attend college can be a traumatic experience — too often the information comes when there is very little time left to acquire the funds required.

• Investments: This is sometimes known as “wealth accumulation”. Investments are used to accumulate capital for future needs and to help overcome the effects of long-term inflation.

• Estate Planning: On the assumption that medical science cannot alter the aging process, some thought should be given to handling your affairs after death. If dependents are left behind, provisions should be made for their care. This includes plans for management of affairs in the event of mental incapacitation before death.

Contact me to create a customized financial plan for you. I can put you on the road to achieving your long-term financial goals.

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