JDS May 2012 Newsletter

May 2012

Greetings!

Hey, guys!

We're keeping busy here at the office, as always. Actually, it's just me keeping busy at the office right now. Jim's taking a much needed break in the Virgin Islands right now and will be for the next few days. It's a little trip that one of his marketing organzations put together to reward all the hard work advisors like Jim do for their clients, so it's very well-deserved!

This month I have the article Jim wrote for the June issue of Lake Norman Magazine. I literally just got the proof back today, so it's super exclusive this time instead of just exclusive. In the article, Jim covers the pros and cons of the various kinds of annuities that are out there.

In addition to Jim's article, he gave me a couple Thoughts for the Week to include. They discuss stock market trends and government bonds.

We have workshops next week at Bravo at Northlake, so if you'd like to attend or know anyone who does, visit the events section of our website and sign up!

-- Tyler Stillman

Annuities: The Good, the
Bad, and the Misunderstood

Lake Norman Magazine, May 2012

Do you have an annuity? Do you understand what kind it is, and how it really works? Who did you buy if from, and for what specific reason? If there's one investment or saving vehicle that's misunderstood, it's annuities! Some financial advisors love them, some hate them. So, why?

What is the definition of an annuity? Basically, an annuity is a guaranteed income stream for a specific period of time (or life). Annuities are insurance-only products, and are backed by the financial strength of the issuing insurance company. There are also "State Guarantee Associations/Funds" that back the consumer to certain limits in case of default ($300,000 in NC). Annuities insure income, period.

Market Participation

Thought for the Week, April 2, 2012

Many investors naturally think of financial markets and indices as Homogenous. Homogenous would mean the components which make up a specific market all behave in roughly the same manner. For example, if the media announces that GDP numbers are lower than expected - the market index goes down. Unemployment numbers are lower than expected - the market goes up.

In reality, this is not the case. For example, the S&P 500 stock index comprises ten standard sectors, each of which is composed of sub-sectors. The price movement of these individual sectors is added up to produce the price movement of the overall S&P 500. But not all sectors act in the same way.

This basic fact is extremely important as our equity investment discipline focuses on the prospects for each sector more than it does the prospects for the overall index. We believe one of the most effective ways to deliver outperformance is to weight our sector allocations differently to the index.

Government Bond Direction & Volatility

Thought for the Week, March 26, 2012

The price movements of Stocks are closely followed and well understood by many investors. As new economic or company-specific information becomes available, its impact on a stock is evaluated by all and the price moves accordingly.

The price movement of Bonds, on the other hand, is not so easily followed or readily understood. Firstly, bond yields, and not prices, are more commonly quoted. Even when the concept of yields moving inversely to prices (when yields go up - prices come down and vice versa) becomes second nature, the complexities of yield curves, maturities and duration still have to be deciphered before a true understanding of bond prices can be declared.

It's therefore easy to see why most investors follow the stock market's fortunes in greater numbers than those who closely monitor bond markets, even when they are more exposed to bond price fluctuations.