WH Cornerstone Newsletter
January 2005

in this issue

Forecast Facts and Follies

A Good Sign: IPOs in Droves

Differences Between Growth and Value Funds

Adding an Immediate Annuity to Your Portfolio

How Life Insurance Fits into Your Estate Plan

TIPS for Fighting Inflation

Best Practices When Approaching Financial Planning


Forecast Facts and Follies

About this time of year, two things begin to happen. Most people review the year past and make predictions for the year ahead. Economists in particular make detailed forecasts about what they expect to see in terms of economic growth, employment, inflation, interest rates, and a host of other indicators. Government officials, corporations, small businesses, and others rely on these estimates to make their plans. As you wade through the 2005 predictions, it might help to measure how accurate forecasters were in 2004.

Economic Growth - In 2003, a panel of economists polled by The Wall Street Journal predicted that gross domestic product (GDP), a broad indicator of the U.S. economy, would grow at a 4.5 percent rate in the first quarter of 2004. The forecast was accurate: GDP actually grew at a 4.5 percent annual rate during the quarter.

Inflation - The panel was asked to predict what the inflation rate would be in May 2004. They projected that the Consumer Price Index, a commonly accepted measurement of inflation, would grow by 1.9 percent compared with a year earlier. The CPI actually grew at a higher 3.1 percent rate in May 2004 compared with May 2003.

Unemployment - When the economists were asked to predict what the unemployment rate would be in May 2004, the consensus was 5.7 percent. The actual rate was only slightly lower at 5.6 percent.

These predictions turned out to be fairly accurate, but forecasts can be wrong - sometimes by a wide margin. For example, GDP grew at a whopping 7.4 percent annual rate in the third quarter of 2003, yet in June 2003, economists had predicted a 3.5 percent growth rate for the quarter.

Forecasts can be useful for planning and goal setting, but they should be viewed as pieces of a larger picture. Making plans based on your time horizon, risk tolerance, and personal goals may help you keep your eye on the long term.

Read on...


Happy New Year! A lot of people talk about what they are going to do with their future. They often dream about it. But those people who achieve true success in their lives set S.M.A.R.T. goals. Specific Measurable Achievable Realistic Timely. Everyday we work with our clients to set these types goals. We even have developed Goal Cultivator Communities of individuals who are committed to goal setting and enjoy the energy of sharing them in an intimate setting with other like minded people. Contact us if you are interested in learning more.

Time to Share. Create a Buzz. Looking for a New Year's Resolution? How about becoming a mentor? The Center for Women's Leadership at Babson College is looking for alumnae and friends to mentor Women's Leadership Program students one-on-one at the undergraduate level. Mentors need at least five years working experience and should reside in the Boston area. For 2005 consider a resolution to become a role model or encourage a friend who you feel would make a great mentor. This a wonderful opportunity to engage directly with current students and improve your own coaching and mentoring skills in the process! To learn more, or to volunteer, please contact Danna Greenberg at dgreenberg@babson.edu.

  • A Good Sign: IPOs in Droves
  • If you keep a garden, you know that when you plant the seeds can have as much effect on success as how you care for them later on. No amount of nurture can compensate for planting at the wrong time, when a seed has little chance of germinating.

    Late in 2004, a flurry of companies that had never before issued stock flooded the market with initial public offerings (IPOs). During one week, in particular, (December 13 to 17), 21 companies made market debuts, the highest weekly total since the heady dot-com days of August 2000. All told, there were more than 250 IPOs in 2004, more than triple the rate of offerings in 2003.

    Read on...
  • Differences Between Growth and Value Funds
  • It's an impossible guessing game. Will growth mutual funds perform better in the long run, or will value funds prevail?

    Looking at average annual returns for the past decade, large-cap value stocks were ahead at 11.88 percent per year, compared with 9.21 percent for large-cap growth stocks. Of course, you should be aware that the return and principal value of stocks and stock mutual funds fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost.

    Read on...
  • Adding an Immediate Annuity to Your Portfolio
  • Throughout most of the past century, loyal employees could count on retiring with a pension that paid a set amount of income for life. But over the past two decades, the proportion of employees covered by defined benefit plans (traditional pensions) has fallen by half. At the same time, the proportion of employees participating in defined contribution plans has tripled.

    Self-directed 401(k), 403(b), and other defined contribution plans allow workers to accumulate retirement savings even if they change jobs frequently during the course of a career. But such plans also require them to contribute a portion of their salary, as well as to assume risks such as an income shortfall and market fluctuations.

    Read on...
  • How Life Insurance Fits into Your Estate Plan
  • Even with reduced estate tax rates and higher exclusion levels, Americans could still be on the hook for billions of dollars in estate taxes over the coming years. More than half a million estate tax returns were projected to be filed with the IRS in calendar years 2004 to 2010.

    Fortunately, there are strategies to help protect the legacy you intend to leave your heirs. One popular method uses life insurance to complement your estate plan and possibly help offset your estate tax liability.

    Read on...
  • TIPS for Fighting Inflation
  • Even though inflation has been relatively quiet for the past few years, there is some evidencethat it may be heating up as the economy continues to expand. The Federal Reserve has pointed to the threat of rising inflation as one reason for raising key interest rates.

    Inflation is a major concern for all investors because it reduces the value of money over time. Generally, it takes time for an investment to earn money, so it has to at least keep pace with inflation over time just to avoid a loss.

    Read on...
  • Best Practices When Approaching Financial Planning
    1. Set measurable goals.
    2. Understand the effect your financial decisions have on other financial issues.
    3. Re-evaluate your financial plan periodically.
    4. Start now-don't assume financial planning is for when you get older.
    5. Start with what you've got-don't assume financial planning is only for the wealthy.
    6. Take charge-you are in control of the financial planning engagement.
    7. Look at the big picture-financial planning is more than just retirement planning or tax planning.
    8. Don't confuse financial planning with investing.
    9. Don't expect unrealistic returns on investments.
    10. Don't wait until a money crisis to begin financial planning.

    To learn more ...
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