Greetings!
Everybody loves to receive a little Inside information and that's what you'll receive from the Inside Information e-zine periodically from CTL Financial, LLC. Of course our Inside Information is LEGAL but it will be just as valuable as the other kind, we just won't land you behind bars. The Inside Information newsletter will give you valuable insights on current happenings in the tax, investment, insurance and estate planning worlds. Our mission at CTL Financial, LLC is to help Individuals, families and businesses achieve their financial goals with education, communication and personal service in a tax efficient way, please let us know if we can help you. Take a 10 second quick poll below! Past Issues of Inside Information now archived see link below! |
Yes, you may lose money in bonds! When interest rates rise, outstanding bond values go down |
Many people believe that bonds and more specifically bond mutual funds can never go down in value, this is not true! Bond funds can be made up of different types of bonds, review your funds prospectus to understand which type of bond it holds. Most bonds funds have two parts to the investment, the stated yield you receive while invested in the bond fund and the principal amount you originally invested in the bond fund. The yield is the amount of distribution you receive while invested and can be paid monthly, quarterly or annually. The yield can move up and down. We want to focus on the possible loss of value of your original principle investment. Click here to see how rising interest rates may affect bond values. Quite simply, when interest rates go up, the value of outstanding bonds go down. The longer the term of the bond the more sensitive your principal investment will be to interest movements. Bonds may be an important part to your portfolio and there are some moves that may lessen the affect of rising interest rates on your bond holdings. First review your current asset allocation, with the major moves recently in the stock and bond markets your bond holdings may be higher or lower than your risk tolerance and investment goals warrant, rebalance your holdings to the correct percentage for your portfolio. Next shorten the duration of some bond funds in your portfolio, you can find the average duration of the bond held in your fund by looking at the fund prospectus or researching the fund online. The names of the funds can guide you, such as 'Total return' bond funds, 'short term' bond funds and 'low duration' bond funds but always double check for the duration of the bonds in the fund. At a minimum the bond portion of your portfolio should be diversified by duration which may lessen the impact of rising interest rates.
Action Steps you can take today:
1. Review your current asset allocation
2. Watch 'What happens to bonds when interest rates rise'
3. Review the duration of current bond holdings
4. Shorten the duration of current bond holdings
5. Contact CTL Financial to review diversification in your bonds holdings! |
You may not be as diversified as you think...
Mutual funds from different fund companies don't guarantee diversification |
Just holding mutual funds from different fund companies isn't enough to ensure a diversified portfolio.. Checking the 'overlap', the same stock holding across your mutual funds is important when reviewing your portfolio. Many funds have an overlap in their holdings that may leave you over concentrated in a few stocks, even though you have funds from different fund companies. Though you can use the mutual fund names as a guide you always need to look at the holdings of the fund. Terms like 'Growth', 'Value' and 'Blend' are not standard in the industry and different fund companies can have different definitions to meet each objective. Fund companies also have different definitions of large cap, mid cap and small cap which can lead to a portfolio overweight in the size of companies held. At least once a year your portfolio should be reviewed to check for an overlap in holdings. We'd be happy to review your current portfolio to ensure you're properly diversified, just give us a call.
Action Steps you can take today:
1. Gather all your different account statements
2. Review each fund's holdings to check for overlap
3. Contact CTL Financial to see what amount of overlap is too much! |
You may want to consolidate your old 401k's and IRA's
Several custodial fees, limited investment choices, receiving many different statements.... |
Keeping an old 401k may be costing you money! Your old 401k could have more internal charges than you realized. When a company installs a 401k plan it has the choice of who will shoulder the load when it comes to the expenses of the 401k plan. Most companies, not all, choose to have the participants pay the expenses with higher internal expenses in the plan. Compare the expense you're paying in your old 401k to expenses you would pay in an IRA and you may be surprised. Also, when you keep an old 401k your investment choices are limited to what your ex-employer offers in the plan and they can change the offerings at their discretion, leaving your retirement at the mercy of their investment choices. We feel you and your Certified Financial Planner practitioner should decide on the investments best suited for you to reach your personal financial goals, not your ex- employer. Most IRA custodians charge at a minimum an annual fee; we've seen this range from $10 to $100. If you have 3 different IRA's then you may be paying 3 different Custodian Fees. Also check your statements for inactively fees, fees for falling below account minimums or any other additional charges. Some of these fees are just the normal cost of doing business but why pay the same fee several times when you could be charged once if you consolidate your accounts. Additional charges eat away the long term rate of return in your IRA's, so why pay out more of your hard earned money in fees then you have to pay. As mentioned above in 'you may not be as diversified as you think' just because you hold mutual funds from different fund companies doesn't mean you're diversified. You may be paying higher fees and expenses then necessary, you may be limited in your investment chooses and you may not be properly diversified, that's not a formula to reach your financial goals. Last, there's no need to receive several different statements, simplify your financial life by consolidating your 401k's and IRA's. Receive one statement to view and track all your IRA assets.
Action Steps you can take today:
1. Gather all your different IRA and 401k account statements
2. Review all fees associated with the accounts
3. Review investment choices currently offered in 401k
4. Review your funds to check for holdings overlap
5. Contact CTL Financial to help choose the right consolidated IRA for you or for help with any of these Action Steps!
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Securities & Investment Advisory Services offered through H. Beck Inc Member FINRA, SIPC 11140 Rockville Pike 4th Floor Rockville, MD 20852 301-468-0100. H.Beck and CTL Financial, LLC are not affiliated.
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| Inside Information now archived on CTL Financial's website!
| | Visit archived Inside Information issues HERE | |
| | Your opinion matters to us, please let us know what you think by taking a 10 second poll! | |
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| | Contact CTL Financial, LLC | | I truly appreciate all the positive feedback from the Inside Information readers. Please let me know if you have questions about anything in this or previous issues of Inside Information and
what topics you would like covered in future issues.
Please let me know at 443-274-6089
or
I'd love to hear from you!
Chris Locher, CFP
Owner of CTL Financial |
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