Wealth Management

Our philosophy is simple, but our solutions complex. Your Wealth Alliance Advisor will tailor a strategy based your personal goals and focusing on certain universal principals such as:

  • Risk Reduction
  • Tax Minimization
  • Lower Fees

Tax minimization strategies often include utilization of accounts such as:

  • Traditional IRAs
  • Roth IRAs
  • 401(k) Retirement Accounts

Utilizing proprietary knowledge, we tailor a customized strategy for each client utilizing a diverse array of investments choices, which may include:

  •  Stocks 
    • US and International
  •  Fixed Income Investments
    • Tax-advantaged bonds
    • Taxable Bonds
    • Certificates of Deposit
  • Exchange Traded Products (including ETFs)
  • Mutual Funds (open and closed-end)
  • Options

INVESTMENTS

You’ve made investments your whole life. Work with us to help make the most of them.

5 SMART INVESTING PRINCIPLES


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5 SMART INVESTING STRATEGIES


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ASSET ALLOCATION

If you live in or have visited a big city, you’ve probably run into street vendors—people who sell everything from hot dogs to umbrellas in carts—on the streets and sidewalks. Many of these entrepreneurs sell completely unrelated products, such as coffee and ice cream.

At first glance, this approach seems a bit odd, but it turns out to be quite clever. When the weather is cold, it’s easier to sell hot cups of coffee. When the weather is hot, it’s easier to sell ice cream. By selling both, vendors reduce the risk of losing money on any given day.

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Asset Allocation

Fast Fact: Importance of Allocation. A landmark study found that asset allocation accounted for 91.5% of portfolio returns. Only 8.5% of portfolio returns could be attributed to the selection of specific securities.
Source: Brinson, Singer, and Beebower, “Determinants of Portfolio Performance II: An Update,” Financial Analysts Journal, May/June 1991.

Asset allocation applies this same concept to managing investment risk. Under this approach, investors divide their money among different asset classes, such as stocks, bonds, and cash alternatives, like money market accounts. These asset classes have different risk profiles and potential returns.1

The idea behind asset allocation is to offset any losses in one class with gains in another, and thus reduce the overall risk of the portfolio. It’s important to remember that asset allocation is an approach to help manage investment risk. It does not guarantee against investment loss.2

Determining the Most Appropriate Mix

The most appropriate asset allocation will depend on an individual’s situation. Among other considerations, it may be determined by two broad factors.

  1. Time. Investors with longer time frames may be comfortable with investments that offer higher potential returns but also carry higher risk. A longer time frame may allow individuals to ride out the market’s ups and downs. An investor with a shorter time frame may need to consider market volatility when evaluating various investment choices.
  2. Risk tolerance. An investor with high risk tolerance may be more willing to accept greater market volatility in the pursuit of potential returns. An investor with a low risk tolerance may be willing to forego some potential return in favor of investments that attempt to limit price swings.

Asset allocation is a critical building block when creating a portfolio. Having a strong knowledge of the concept may help as you consider which investments may be appropriate for your long-term strategy.

Asset Classes

Here’s a quick look at how the three main asset classes have performed during the past 20 years.

Asset Classes

Chart Source: Thomson Reuters, 2017. For the period January 1, 1997 to December 31, 2016.

Stocks are represented by the S&P 500 Composite Index (total return), an unmanaged index that is generally considered representative of the U.S. stock market. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.

Bonds are represented by the Citigroup Corporate Bond Composite Index, an unmanaged index that is generally considered representative of the U.S. bond market. The market value of a bond will fluctuate with changes in interest rates. As rates rise, the value of existing bonds typically falls. If an investor sells a bond before maturity, it may be worth more or less that the initial purchase price. By holding a bond to maturity investors will receive the interest payments due plus their original principal, barring default by the issuer.

Cash is represented by the Citigroup 3-Month Treasury-Bill Index, an unmanaged index that is generally considered representative of short-term cash alternatives. U.S. Treasury bills are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury bill prior to maturity, it could be worth more or less that the original price paid.

Investments seeking to achieve higher potential returns also involve a higher degree of risk. Past performance does not guarantee future results. Actual results will vary.

  1. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost. The market value of a bond will fluctuate with changes in interest rates. As rates rise, the value of existing bonds typically falls. If an investor sells a bond before maturity, it may be worth more or less that the initial purchase price. By holding a bond to maturity investors will receive the interest payments due plus their original principal, barring default by the issuer. Money market funds seek to preserve the value of your investment at $1.00 a share. Money held in money market funds is not insured or guaranteed by the FDIC or any other government agency. It’s possible to lose money by investing in a money market fund. Mutual funds are sold by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.
  2. Investments seeking to achieve higher potential returns also involve a higher degree of risk. Past performance does not guarantee future results. Actual results will vary.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2017 FMG Suite.


A LOOK AT DIVERSIFICATION

Tip: Correlation. To adequately diversify, it’s important to select securities that have a low correlation — that is, securities that don’t tend to track each other’s movements up and down. Securities with a high correlation may tend to fail together — defeating the purpose of diversification.
Source: Investopedia, 2016

Ancient Chinese merchants are said to have developed a unique way to reduce their risk. They would divide their shipments among several different vessels. That way, if one ship were to sink or be attacked by pirates, the rest stood a good chance of getting through and the majority of the shipment could be saved.

Your investment portfolio may benefit from that same logic.

Diversification is an investment principle designed to manage risk. However, diversification does not guarantee against a loss. The key to diversification is to identify investments that may perform differently under various market conditions.

On one level, a diversified portfolio should be diversified between asset classes, such as stocks, bonds, and cash alternatives. On another level, a diversified portfolio also should be diversified within asset classes, such as a diverse basket of stocks.

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A Diversified Approach

Arrows

For example, say a stock portfolio included a computer company, a software developer, and an internet service provider. Although the portfolio has spread its risk among three companies, it may not be considered well diversified since all the firms are connected to the technology industry. A portfolio that includes a computer company, a drug manufacturer, and an oil service firm may be considered more diversified.

Similarly, a bond portfolio that invests exclusively in long-term U.S. Treasuries may have limited diversification. A bond fund that invests in short- and long-term U.S. Treasuries as well as a variety of corporate bonds may offer more diversification.

Mutual Funds and ETFs

Fast Fact: Only One? One landmark study of more than 40,000 equity investment accounts found that about 25% of accounts held only one stock, and about half held only one or two stocks.
Source: National Bureau of Economic Research, 2001

The concept of diversification is one reason why mutual funds and Exchange Traded Funds (ETFs) are so popular among investors. Mutual funds accumulate a pool of money that is invested to pursue the objectives stated in the fund’s prospectus. The fund may have a narrow objective, such as the auto sector, or it may have a broader objective, such as large-cap stocks. ETFs also can have a narrow or broader investment objective. Keep in mind, however, the more narrow an investment objective, the more limited the diversification.

The concept of diversification is critical to understand when you are evaluating a portfolio. If you want more information on diversification, or have questions about how your money is invested, please call so we can review your situation. Shares, when redeemed, may be worth more or less than their original cost.

Mutual funds and exchange-traded funds are sold only by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2017 FMG Suite.