Quote of the Week
“Happiness is a place between too little and too much” – Finnish Proverb
The markets closed last week with a whimper. This is common for the last week in the year with many investors selling stocks in which they have a loss to capture the tax loss to offset taxable gains they might have accumulated during the year. The Dow was off 0.14%, the S&P 500 was off 0.36% and the Nasdaq was off 0.81%.
As most of you are aware, we changed our investment software at the beginning of 2017. We are overjoyed and overwhelmed with its success. The new software is much more robust than the old software we used.
There are two distinct advantages to the new software. First, the new software seemed to take into consideration the longer-term trend plus the short-term trend. The old software seemed to place a higher priority on the short-term trend, which made us more susceptible to short term drops, and thus we got out of the market when we should not have exited.
The second and most important advantage to the new software is that it identifies the investments that show the most potential for appreciation. With the old software, it was up to us to pick the investments and then the software would track the investments we picked.
We started out the year with an allocation of 65% equites, 0% bonds, 30% alternatives, and 5% cash for most investors. We felt that with a new administration coming into office we were unsure of the effect it might have on the markets. We re-allocated to 85% equities, 0% bonds, 10% alternatives, and 5% cash in September. That re-allocation turned out to be a good decision. We were especially pleased last year with our 0% allocation to bonds for the entire year, as it would have lowered overall portfolio returns substantially.
The UPI for the S&P 500 remains the same as last week at 24 out of 100. Our allocation for most clients remains the same: 85% equities, 0% bonds, 10% alternatives, and 5% cash.
Happy New Year! What better time than the present to become more organized.
Maintaining Your Financial Records: The Importance of Being Organized
An important part of managing your personal finances is keeping your financial records organized. Whether it’s a utility bill to show proof of residency or a Social Security card for wage reporting purposes, there may be times when you need to locate a financial record or document–and you’ll need to locate it relatively quickly.
By taking the time to clear out and organize your financial records, you’ll be able to find what you need exactly when you need it.
What should you keep?
If you tend to keep stuff because you “might need it someday,” your desk or home office is probably overflowing with nonessential documents. One of the first steps in determining what records to keep is to ask yourself, “Why do I need to keep this?”
Documents you should keep are likely to be those that are difficult to obtain, such as:
- Tax returns
- Legal contracts
- Insurance claims
- Proof of identity
On the other hand, if you have documents and records that are easily duplicated elsewhere, such as online banking and credit-card statements, you probably do not need to keep paper copies of the same information.
How long should you keep your records?
Generally, a good rule of thumb is to keep financial records and documents only as long as necessary. For example, you may want to keep ATM and credit-card receipts only temporarily, until you’ve reconciled them with your bank and/or credit-card statement. On the other hand, if a document is legal in nature and/or difficult to replace, you’ll want to keep it for a longer period or even indefinitely.
Some financial records may have more specific timetables. For example, the IRS generally recommends that taxpayers keep federal tax returns and supporting documents for a minimum of three years up to seven years after the date of filing. Certain circumstances may even warrant keeping your tax records indefinitely.
Listed below are some recommendations on how long to keep specific documents:
Records to keep for one year or less:
- Bank or credit union statements
- Credit-card statements
- Utility bills
- Auto and homeowners Insurance policies
Records to keep for more than a year:
- Tax returns and supporting documentation
- Mortgage contracts
- Property appraisals
- Annual retirement and investment statements
- Receipts for major purchases and home improvements
Records to keep indefinitely:
- Birth, death, and marriage certificates
- Adoption records
- Citizenship and military discharge papers
- Social Security card
Keep in mind that the above recommendations are general guidelines, and your personal circumstances may warrant keeping these documents for shorter or longer periods of time.
Out with the old, in with the new
An easy way to prevent paperwork from piling up is to remember the phrase “out with the old, in with the new.” For example, when you receive this year’s auto insurance policy, discard the one from last year. When you receive your annual investment statement, discard the monthly or quarterly statements you’ve been keeping. In addition, review your files at least once a year to keep your filing system on the right track.
Finally, when you are ready to get rid of certain records and documents, don’t just throw them in the garbage. To protect sensitive information, you should invest in a good quality shredder to destroy your documents, especially if they contain Social Security numbers, account numbers, or other personal information.
Where should you keep your records?
You could go the traditional route and use a simple set of labeled folders in a file drawer. More important documents should be kept in a fire-resistant file cabinet, safe, or safe-deposit box.
If space is tight and you need to reduce clutter, you might consider electronic storage for some of your financial records. You can save copies of online documents or scan documents and convert them to electronic form. You’ll want to keep backup copies on a portable storage device or hard drive and make sure that your computer files are secure.
You could also use a cloud storage service that encrypts your uploaded information and stores it remotely. If you use cloud storage, make sure to use a reliable company that has a good reputation and offers automatic backup and technical support.
Once you’ve found a place to keep your records, it may be helpful to organize and store them according to specific categories (e.g., banking, insurance, proof of identity), which will make it even easier to access what you might need.
Consider creating a personal document locator
Another option for organizing your financial records is to create a personal document locator, which is simply a detailed list of where you have stored your financial records. This list can be helpful whenever you are trying to locate a specific document and can also assist your loved ones in locating your financial records in the event of an emergency. Typically, a personal document locator will include the following information:
- Personal information
- Personal contacts (e.g., attorney, tax preparer, financial advisor)
- Online accounts with username and passwords
- List of specific locations of important documents (e.g., home, office, safe)
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018
By the Numbers
THE LONG-TERM AVERAGE – The S&P 500 stock index has gained an average of +10.1% per year (total return) over the last 50 years (i.e., the years 1968-2017). The index has been positive for each of the last 9 years (tying the record for consecutive “up” years set previously between 1991-99) and in 14 of the last 15 calendar years. The S&P 500 has been up during 40 of the last 50 years, i.e., 80% of the time (source: BTN Research). Michael A. Higley, BTN 01-01-2018
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These are the opinions of Larry Lof and Stephanie Mayoral and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs. The S&P 500 is an index of stocks compiled by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. The index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Indices mentioned are unmanaged and cannot be invested into directly. Technical analysis represents an observation of past performance and trend, and past performance and trend are no guarantee of future performance, price, or trend. The price movements within capital markets cannot be guaranteed and always remain uncertain. The allocation discussed herein is not designed based on the individual needs of any one specific client or investor. In other words, it is not a customized strategy designed on the specific financial circumstances of the client. Please consult an advisor to discuss your individual situation before making any investments decision. Investing in securities involves risk of loss. Further, depending on the different types of investments, there may be varying degrees of risk including loss of original principal.