Basics of Separately-Managed Investment Accounts

Wednesday, November 2, 2011
JRL-financial-group @ 01:11 PM

Back in the 1990′s, anyone and everyone could invest in a handful of individual stocks or mutual funds and easily see year after year of 20% + gains.
Over a decade (and two major recessions) later, we have all learned the hard way that those days are long gone. Successful investment portfolios now require more attention than ever, and that’s why Separately Managed Accounts (SMA’s) are more popular than ever.
This type of account used to be available only to those with $500,000 – $1 million and up in investable assets. But over the past few years more and more money managers have made themselves more available to the assets of the masses. This type of account provides the structure necessary to avoid the larger market losses, as the clients are provided the service of investment officers whose daily job is it to make sure accounts are allocated properly.
The old way of doing things, which typically meant static asset allocations with mutual fund holdings — perhaps reviewed with an advisor once or twice a year at best — led many a client to huge market losses (often 30% plus), especially in 2002 and 2008.

But now investors with as little as $50,000 – $100,000 in investable assets can be treated to the investment tools of the uber-wealthy. These tools are extremely effective at managing downside risk and maximizing the long-term dollars in the client’s pockets. And isn’t that what investing is all about?
Contact us at info@jrlfinancialgroup.com to learn more about separately managed account options that fit what you are looking for.

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Life Insurance 101 – Who and How Much

Wednesday, November 2, 2011
JRL-financial-group @ 01:11 PM

Not a whole lot of people like to talk about life insurance, and that’s completely understandable. But it’s an essential part of financial planning – if it’s not addressed and kept up with over time then it can lead to serious financial burdens for families.

Who Needs Life Insurance?
The short and easy answer is that every independent adult needs some type of life insurance coverage? Why? Because dying is expensive, no matter when it happens. The average funeral cost is somewhere in the neighborhood of $10,000, and when you add in other factors such as probate costs, various taxes, earnings lost by family members due to grieving, etc, etc – the ‘cost of dying’ factor could become considerably higher.
Two groups of people who generally need considerably more life insurance coverage are parents of dependent children and business owners. If somebody relies on your income to support them and pay the bills, you generally need at least ten times your salary or more in coverage to protect that potential cost. So if somebody has dependent kids and makes $75,000 per year in income, a good rule of thumb is that person needs at least $750,000 in life insurance coverage in order to predictably replace most of their income over an extended period of time. Of course, more precise calculations can and should be made before determining exactly how much you need.
Business owners face a different set of challenges on top of potential income replacement needs for the family. How does their business function without them? How will the family be made whole for the portion of the business that they have inherited? If there are business partners involved, what arrangements are made so that they can move forward constructively?
All of these questions should be addressed ahead of time with proper business succession planning. These plans often involve legal agreements (often called Buy-Sell Agreements) and insurance policies between co-owners that are designed to ensure that all parties (family, business, co-owners) are protected in the event of an unforeseen death or disability of an owner.
If you have any questions about any of these issues, please feel free to email us atinfo@jrlfinancialgroup.com or call us at 919-576-0609.

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The Debt Ceiling and Risk Tolerance

Wednesday, November 2, 2011
JRL-financial-group @ 01:11 PM

With the impending Debt Ceiling culmination seemingly right around the corner, people are getting more and more worried about the impact this will have on their investment portfolios.
From my many recent discussions on the subject, folks are looking to run away from their stock holdings in order to prevent potential losses. This continues to reinforce our belief that at least 75% of investors are allocated too aggressively for their own risk tolerance.
The best question for somebody who is invested in variable investments to ask him/herself is’Am I OK with my investments declining 20% in a given year?’. If the answer is a clear ‘NO’, then he/she should seriously consider something with some downside protection – a managed account w. a strong emphasis on minimizing risk, or a fixed or indexed annuity product.
We’re seeing a lot of flow towards the indexed annuity marketplace, as clients become more educated on the features and benefits of these types of products. More people (esp. those age 50+) are looking for guarantees of principal protection with higher growth potential than current fixed interest rates can offer. As long as someone can handle limited liquidity of these assets (typically 10% per year) then this type of product could be a good fit for those who can’t or don’t want to handle 20% losses.
Please feel free to contact us directly at info@jrlfinancialgroup.com or 919-576-0609 if you have any questions.

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The Emotions of Market Losses

Tuesday, November 1, 2011
JRL-financial-group @ 07:11 PM

Over my career as an Investment advisor┬áRaleigh NC, I’ve been witness to at least 2 (and maybe now 3) economic recessions. Unfortunately, every time a large market dip occurs (just as it did last week), I am reminded that investors generally react in a way that surprises me.
As last week’s market tumble occurred, I expected to be overwhelmed with client phone calls and emails expressing the need to review their existing investment accounts as soon as humanly possible. As the week moved forward I was reminded that my inital expectations were generally incorrect. It became more and more apparent to me that most investors had reached the point where fear had shut down any desire to actually look behind the curtain of their porfolios.

I constantly remind clients that ignoring a problem will not make it go away. It’s very important to have a decent understanding of the risk/reward relationship of your investments. Measuring tolerance for downside risk is especially important, and that’s the type of volatility that can keep you up at night. And once that is evaluated, it’s important to coordinate your investments with your own personal risk tolerance at least once a year.
If you’d like a free, no-obligation evaluation of your current portfolio and/or risk tolerance, please contact us at info@jrlfinancialgroup.com

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