Financial Pain Relief

The following may surprise you. But it's true.

A recent national survey found that the two primary concerns for individuals over the age of 45 are their health and their wealth. But, that's not the surprise.

The same survey discovered that although we do give a lot of thought and attention to our health, the same cannot be said of our other primary area of concern. Most people spend more time planning a vacation than planning for their lifetime financial security.

And, that's not the only difference. If we have a persistent health problem, we often seek a second medical opinion. But, even when facing serious financial security challenges, few of us bother to get a second opinion regarding our financial goals and how we hope to reach those goals.

So, ask yourself, "If I am willing to get a second opinion for a serious health issue, doesn't it make sense to get a second opinion for my serious wealth challenges?"

Of course it does. A second opinion will either validate your existing strategies or provide other possible remedies to consider. Either way you can't lose. It's a win-win situation.

I would welcome the opportunity to tell you how easy and painless our "second opinion process" can be. And best of all, it will cost you nothing . . . other than a little time spent thinking about one of the most important aspects of your life.

I look forward to helping you understand how easy and painless our "second opinion process" can be. Best of all, it won't cost you anything but a little time.

-Bill Spiropoulos
President & CEO
CoreStates Capital Advisors

Top 10 Investing Mistakes

Once you've made it... Mistakes can still take it!

We all know the formula for investment success is to invest early, invest often and invest broadly. These are the core principles of achieving wealth through saving and investing. Do this diligently over an entire working career and you are virtually assured of a lifetime of financial security. But, for those who have already done this, or who for any other reason find themselves responsible for a substantial sum of money, the rules are a little different. The focus must change from accumulating assets to protecting wealth and preserving purchasing power. And, the mentality of the investor must change. Investing “right” still matters, but the greater concern must be not investing “wrong.” At this stage, mistakes can be lethal to your financial security, largely because the time needed for recovery from any setbacks is limited.

So, what are the most common miscues investors make in this wealth preservation stage?

1. Maintaining insufficient liquidity
This is the big one. You must never have to sell an investment to raise needed spending money. All spending should come from stable value investments and accounts – like short-term fixed income securities and checking, savings, or money market accounts. You want to sell investments (stocks, bonds, real estate, commodities, etc.) to fund the stable accounts only when the investments are trading at favorable prices. Second best (and more practical for most of us) is to liquidate investments only on a regular, periodic basis – the opposite of dollar cost averaging in. Neither approach can be achieved if your checking account is empty and bills are due.

2. Ignoring inflation
The end of the accumulation phase of an investment program is not the end of the investment program. Tempting as it may be to seek the “safety” of stable investments with all of your investment dollars, this safety comes only at the expense of significant risk to your purchasing power. If your future spending needs extend five or more years into the future, it is simply not prudent to expect to fund those future needs with current dollars. This is especially true with today’s rampant Federal spending, which almost assures significant inflation in the years ahead.

3. Forgetting your legacy
Investors with the good fortune to have assets well in excess of their personal or immediate family needs may be able to ignore inflation. They have virtually no risk of running out of money. But, based on our many years of experience working with such people, even those who start out with a strong preservation focus often begin to see their role not as owner, but as temporary custodian of their assets. They come to realize that they have the ability to favorably influence the lives of others, now and well beyond the end of their own lives. This sometimes encourages immediate gifting and donations. Or, it may introduce a much longer investment time horizon within their own portfolio, which warrants a much different investment approach with that portion of their net worth that exceeds their personal lifetime financial needs.

4. Carelessly selecting an advisor
The Bernard Madoff scandal provides a vivid warning to all investors not to pick their advisor based on image, reputation, or social standing. Some homework is required. Visit the CoreStates website at www.corestates.us and see our “Qualifications of a Financial Advisor” and “Commitment to Fiduciary Responsibility” (both located under the “Learning” tab) for our list of the key criteria that every investor can and should look for before entrusting assets to any financial advisor.

5. Settling for hazy investment objectives
Risk tolerance, time horizon, return objectives – these are important concepts. But, they are only concepts. It is important for you and your advisor to have a clear, mutual understanding of your current and anticipated financial resources, expected additions to your investment account, expected needs to be funded from your investment account, and how much flexibility you have in how and when these needs are met. And then, keep your advisor updated. Only by discussing your particular situation in these very tangible terms can you maximize your chances of long-term financial security.

6. Pursuing investment fads and fashions
Besides their financial aspects, investments can serve a valuable recreational purpose. Investing can be fun and exciting, and can convey intellectual and emotional prestige. To capitalize on this, financial product marketers provide a constant flow of new investment ideas. Most are merely the old standards repackaged, but many are much more insidious, and some, as we just learned, are downright toxic. All investments differ in only two meaningful respects – the expected amount and timing of cash returns to be provided, and the certainty (or potential variability) of those future cash returns. If you don’t understand how these two variables compare to more straightforward investments like CDs, bonds, and stocks, don’t buy them. And, if you do understand the differences, make sure they add value. In most cases, they won’t.

7. Obsessing over the parts while ignoring the whole
An investment’s price really matters at only two times – when you buy it and when you sell it. If that investment is part of a well-constructed portfolio, your manager will have the discretion to buy it and sell it whenever the price is deemed to be favorable. And, a well diversified portfolio will at all times have some investments at favorable prices and some . . . not so much. That’s how portfolio diversification works. So, if you see some investments that currently “aren’t working,” they may signify only that the portfolio is effectively diversified, and is behaving exactly as it should.

8. Confusing a Net Worth Statement with Cash Flow Analysis
While the net worth statement is a great way of assessing your financial well being, it captures only a single frame of your financial picture at one point in time.
Unlike your net worth statement, the cash flow analysis tracks your income/expense ratios over an extended period of time. That is like comparing the features of a picture camera and video camera.
For an individual investor, no diagnostic approach is more important than the Cash Flow Analysis. Not only will you become acutely aware of how expenses, taxes and inflation affect your lifestyle, you and your advisor will also have the proper basis for making investment decisions.
And because you are recording all your transactions, coming in or going out, this makes your cash flow analysis dynamic, allowing you to review your financial decisions from time to time.
There are many approaches to control expenses and spending habits. But the critical starting point is to generate and maintain your own Cash Flow Analysis.

9. Losing faith in your investment program
Investors must play a continuous game of emotional “chicken” with the market. Don’t let it scare you to the sidelines, or hype you into a high-risk investment position. A sound investment program will respond to the market cycles in a prudent way at the manager/investment selection level. Major revamping of the overall portfolio in response to market swings is almost always detrimental to your long-term wealth. It may help to remind your self that, by definition, the market is at its low when investor fear is greatest, and at its high when enthusiasm peaks. Acting on your emotions will almost guarantee buying high and selling low.

10. Forgetting that wealth is the means, not the end
In a capitalist economy and a culture focused on continually improving living standards, money becomes a measure of success. But, that’s not all it is. It is also a means to less tangible ends. It can support favored causes, facilitate desired change, and promote higher principles. It can allow you to accept the challenge of the great religious leader, Mahatma Gandhi: “You must be the change you want to see in the world.” Let it help you to be the person you want to be, in the country where you want to live, and in the world you want to leave to succeeding generations.

An Attorney's Advice... At NO Charge

Read this and make a copy for your files in case you need to refer to it someday. Maybe we should all take some of his advice! A corporate Attorney sent the following out to the employees in his company.

1. Do not sign the back of your credit cards. Instead, put "PHOTO ID REQUIRED..."

2. When you are writing checks to pay on your credit card Accounts, DO NOT put the complete account number on the "For" line. Instead, just put the last four numbers. The credit card company knows the rest of the number, and anyone who might be handling your check as it passes through all the check processing channels won't have access to it.

3. Put your work phone # on your checks instead of your home Phone. If you have a PO Box use that instead of your home address. If you do not have a PO Box, use your work address. Never have your SS# printed on your checks. You can add it if it is necessary, but if you have it printed, anyone can get it.

4. Place the contents of your wallet on a photocopy machine. Do both sides of each license, credit card, etc. You will know what you had in your wallet and all of the account numbers and phone numbers to Call and cancel. Keep the photocopy in a safe place. I also carry a Photocopy of my passport when I travel either here or abroad. We've all heard horror stories about fraud that's committed on us in stealing a Name, address, Social Security number, credit cards.

If you have had the unfortunate luck of having your information stolen, you know that you need to cancel your credit cards immediately. But the key is having the toll free numbers and your card Numbers handy so you know whom to call. Keep those where you can find them.

6. File a police report immediately in the jurisdiction where your credit cards, etc., were stolen. This proves to credit Providers you were diligent, and this is a first step toward an Investigation (if there ever is one).

But here's what is perhaps most important of all: (I never even thought to do this.)

7. Call the 3 national credit reporting organizations Immediately to place a fraud alert on your name and also call the Social Security fraud line number. I had never heard of doing that until advised by a bank that called to tell me an application for credit was made over The Internet in my name. The alert means any company that checks your Credit knows your information was stolen, and they have to contact you by Phone to authorize new credit.

1.) Equifax: 800-525-6285
2.) Experian (formerly TRW): 888-397-3742
3.) Trans Union : 800-6807289
4.) Social Security Administration (fraud line):800-269