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ISSUE 200 - 8/29/05
ALICE IN WALL STREET Do you remember reading the passage in Lewis Carroll’s “Alice In Wonderland & Through The Looking Glass” when Alice came across the Cheshire Cat sitting in the tree? (I only ask because during a recent lecture to high school students, I was asked if this had been released on video yet.) Briefly, during Alice’s conversation with the Cat, she asked: “Would you tell me, please, which way I ought to go from here?” “That depends a good deal on where you want to get to,” said the Cat. “I don’t much care where—” said Alice. “Then it doesn’t matter which way you go,” said the Cat. “—so long as I get somewhere,” Alice added as an explanation “Oh, you’re sure to do that,” said the Cat, “if you only walk long enough.” And so it seems, all too often, this same attitude is the basis for planning our investment strategies. Investors know when they want to retire. They also know they need to develop a financial strategy. It even goes without saying that most people know the importance of securing their financial independence because they generally won’t be able to depend on government services. But why is it that investors don’t know where they are going to achieve their financial security? It really is as if the passage is true that “if you only walk long enough” you will eventually get somewhere! I truly believe the average investor’s ultimate goal can generally be expressed as wanting to maintain their current lifestyle, in good health, without becoming a burden to their family or friends while they enjoy their “Golden Years.” But without a proper road map, those “Golden Years” may be spent at the “Golden Arches.” By deciding your financial path early, you can calmly navigate through any short-term obstacles. These obstacles may include: a variety of geopolitical issues, the uncertainty of a Presidential election, the prolonged overseas military action, or the FED’s intent to make adjustments interest rates. But with having an existing course of-action, these issues can be addressed in advance and their degree of impact lessened through logical evaluation rather than emotional reaction. For example, let’s assume that you want to retire in 15 years. Does it make sense to adjust your investment strategy based on the current Presidential election results? Especially when you consider that you will probably see two more elections before you retire? Without a sense of direction (a plan), you could easily make numerous decisions that may ultimately decide whether your retirement date is actually in 15 years—or whether it has to be extended to 20 years to recover from some bad short-term choices. Bottom Line: The moral of this story is really very simple—without a plan you will eventually get somewhere, but will it be the place you originally had in mind? Plan today, for tomorrow is coming soon enough. And as we all know, procrastination is the #1 reason why people fail in retirement planning (but that’s another story). Scott H. Fortney is President of Independent Financial Solutions, L.L.C. in Colorado Springs, Colorado. He helps investors understand investment strategies and develops personalized financial plans. Mr. Fortney serves as Financial Advisor to twenty Investment Clubs, the majority of which limit their membership to women. This role contributes to his insight and expertise when relating to the unique needs of women who are building a secure financial future. Mr. Fortney also frequently speaks at financial education seminars. ISSUE 202 - 9/12/05
COWS AND DOLLAR COST AVERAGING Several people have approached me lately expressing their concern regarding the future of their retirement funds. After witnessing devastating declines in their portfolio values over the first three years of the new millennium, 2003 was a refreshing change. But people often become anxious and fearful when they hear the media shouting about “The Dow” going up and down. Have you ever wondered how important that number really is? The Dow Jones Industrial Average (or “The Dow”) is representative of only 30 stocks from more than 35,000 stocks that trade on the various exchanges in America every day. The Dow represents only about .08% of all the stocks traded. The number the media shouts about excludes what is happening to the other 99.92% of all stocks. Even when the Dow is going down or on its weekly roller coaster, there is good investment opportunity in the other 99.92% of the stocks out there. Don’t let the headlines about the Dow average seem any more significant than they really are. Rather, focus on the journey. Like any trip, there are turns, hills, valleys, detours and construction that give you options. Take advantage of these situations—and capitalize on the temporary market swings. Let’s look at another example. Suppose we wanted to invest in cows. Each month, we have decided our budget will permit us to invest $100 in cows at whatever the market price is at the time. Eventually we would sell, but let’s see what happens over the long-term. First Month—we buy one cow at $100. Second Month—bad news. The price of cattle falls by half to $50. So we buy 2 cows for our $100. Third Month—more bad news. The price of cattle falls by half again to $25. So we buy 4 cows with our $100. Fourth Month—(this is getting a little embarrassing)—the price of cattle falls to just $10. So we buy 10 cows that month. Fifth Month—finally—a rebound. The cost of cattle is back to $25. So we buy 4 more cows with our $100. Sixth Month—the cost has rebounded even more to $50. We only buy 2 cows that month. Seventh Month—at last the price has returned to the point where we break even. And you say, “Let’s bail out and get our money back!” But here’s the thing. Instead of owning only 6 cows, which is what we would have owned if the market had stayed even at $100 per cow, our profit is: Revenue Received: Sold 23 cows @ $100 = $2,300 Cost Invested: $600 over 6 months PROFIT: $1,700 Bottom Line: As a long-term investor, you want to have an occasional market decline. What you don’t want is to focus on the media’s day-to-day shouting about short-term issues. Instead, focus on the journey (and buy more cows). Scott H. Fortney is President of Independent Financial Solutions, L.L.C. in Colorado Springs, Colorado. He helps investors understand investment strategies and develops personalized financial plans. Mr. Fortney serves as Financial Advisor to twenty Investment Clubs, the majority of which limit their membership to women. This role contributes to his insight and expertise when relating to the unique needs of women who are building a secure financial future. Mr. Fortney also frequently speaks at financial education seminars. ISSUE 203 - 9/19/05
DIFFERENT PIECES -ONE QUILT During a recent visit to the fabric store with my wife, I found myself mysteriously drawn to the aisles containing brightly colored, camouflage-printed and silver, stretch polyester materials. Though she expressed surprise when I volunteered to tag along, I reminded her that it’s unfair when women cling to the belief that the male creative senses were only slightly awakened with the recent introduction of multicolored duct tape. As I wandered about the store, a hand_made quilt caught my attention. The work of art was well over 4 feet by 6 feet and must have contained a “gazillion” pieces of variegated and intricate fabric bits and pieces. Whether as a result of my inferior DNA or because I lacked any artistic expression, I was unable to determine a visible pattern. No matter how hard I focused or by which angle I gazed, I was positive that although this creation appeared to be a hodgepodge conglomeration of many years’ worth of remnants, it had to be purposely and tediously crafted with distinctive artistic flare. And while I continued to gaze I suddenly realized that regardless of simplicity or complexity, there was a supreme purpose! As a quilt, it provides protection and warmth for the owner against the cold, wintry nights. I now use this analogy when discussing the investment strategy of “Asset Allocations” because it helps simplify an extremely complex concept. With 13,000-plus mutual funds and countless individual stocks and bonds available today, these investments can all be placed in 43 categories–or asset classes. An asset class contains securities having similar features (for example; growth and income, international, or bonds). An asset class can be general in nature (growth and income) or very specific (state municipal bonds). It is a widely held belief that assigning your assets “efficiently” among a broad range of classes is much more important to the portfolio performance than individual security selection. This form of diversification is also known as the time-honored “don't place all your eggs in one basket” theory. Though it sounds simple enough, questions always arise regarding which classes, how much and at what time to invest. Over the past three years most investors have witnessed a significant decline in their portfolio values. The “greed” mentality of the late1990s when the inter_net.com explosion was at its peak has been replaced by the “fear” factor of the 2000s with lower money market rates and unac_ceptable Certificates of Deposit yields. To help combat their fears and increase their returns, investors should A.I.M. their portfolios (A.I.M. = Always In the Market). After determining your risk toler_ance levels, specific goals and objectives, you develop a plan. By proportioning percent_ages across several asset classes rather than focusing on specific dollar amounts, you can actively participate in a holistic approach to retirement planning. Most people would think that with more intelligent computers, smarter analysts and better research you could forecast the future of the financial markets with a little more accuracy. In reality, no one can predict the future of the stock market any more than you can predict next week's weather. All you can do is prepare for both the good and the bad, and then act accordingly when either happens. And so it is with my portfolio. It is comprised of many remnants, which may not make a lot sense to the untrained eye at first. But the warmth and security it will provide on those cold retirement nights is well worth the effort. So build your portfolio to last through all the seasons . . . you won't regret it. Scott H. Fortney is President of Independent Financial Solutions, L.L.C. in Colorado Springs, Colorado. He helps investors understand investment strategies and develops personalized financial plans. Mr. Fortney serves as Financial Advisor to twenty Investment Clubs, the majority of which limit their membership to women. This role contributes to his insight and expertise when relating to the unique needs of women who are building a secure financial future. Mr. Fortney also frequently speaks at financial education seminars. ISSUE 204 - 9/26/05
A HOUSE TO STAND ALL TIME On a recent cross-country trip, I had the opportunity to enjoy the vast expanses of South Dakota from behind the wheel of my car. As I turned north, leaving Sioux Falls heading toward Fargo, I realized that, if I squinted my eyes and looked real close, I could almost see the Canadian border over the hundreds of flat, wide open highway miles ahead. I resigned myself to focusing on shorter goals— say the next five miles. My attention was drawn to the many abandoned buildings that appeared every few miles. I assumed they were old homesteads built by brave pioneers to withstand the hostilities of their time and safely house their families while they work ed to tame the land. As an investment professional I immediately recalled an analogy about the "old four-story houses" and a correlation to sound, fundamental investing strategies. The basement of your investment house should be built on a solid, safe foundation, as those old houses were. Their two-ton boilers provided pioneer families comfort on cold Dakota winter nights. So should your basic investments provide you com fort so that you sleep at night. Your financial house must be built on a firm rock of cash, certificates of deposit, Treasury bonds or money markets. These are the necessary building blocks to support the other three floors. The main floor of your financial house is where you conduct day-to-day activities. It is from the comfort of your living room (stocks), in the kitchen (mutual funds), or in the den (exchange-traded funds), that you make plans for your child's college education, the purchase of your new car and repairs to the water heater. On the second story of the house you found the comfort of your bedrooms where you rest and dream of what the future holds. It is here that you plan for your future, deferring the anxiety of daily life for those anticipated adventures (variable annuities, tax-advantaged products, traditional and Roth IRAs). And finally, you climbed the staircase to the attic — the place of greatest adventure. Sometimes you only uncover boxes of outdated clothes or long-forgotten toys. But occasionally, there in the corner, is a family heirloom of great value. In your investment house attic is the small percentage of aggressive, volatile portion of your portfolio that holds the greatest hopes and chance for the highest returns. These are the potential treasures shrouded in the dark, unknown mystery of risk. I take great comfort in my house today. I rely on the strong foundation to support what I have built. Yes, I need the day-to-day activities to survive, but I still dream of the future, and enjoy the mysteries yet to unfold. Like the pioneers who built those lasting homesteads, I didn't build a lop-sided house. Nor do I add rooms that aren't needed. I take a little pride in the fact that my house doesn't look like my neighbor's. I built my house to suit my needs, to last the test of time. And so should you! Scott H. Fortney is President of Independent Financial Solutions, L.L.C. in Colorado Springs, Colorado. He helps investors understand investment strategies and develops personalized financial plans. Mr. Fortney serves as Financial Advisor to twenty Investment Clubs, the majority of which limit their membership to women. This role contributes to his insight and expertise when relating to the unique needs of women who are building a secure financial future. Mr. Fortney also frequently speaks at financial education seminars. ISSUE 205 - 10/3/05
EENIE, MEENIE, MINIE, MOE Do you remember when the results of your major decision-making processes were based on the outcome of this rhyme? The fate of backyard baseball teams, school recess soccer team selections, and even the Coke versus Pepsi wars, were all decided in a matter of seconds, with the final "I pick you." I would personally like to believe that Mary's decision to accompany me to my High School Senior Prom was the result of more than this simple fifteen second rhyme (though I will never know for sure). and then - we grew up. Our decision-making processes evolved overtime and eventually they became based on the virtues of right and wrong, persona l preferences, morality, legal issues and logic. Some decisions would require days and even weeks instead of seconds and minutes. The final result of a few of those decisions may even still impact our persona l lives today, decades after we first encountered them. And now— though it may be over four decades later, we might occasionally make a few of our daily choices based on that old rhyme. Eenie, Meenie (Coke versus Pepsi), Minie, Moe (McDonald’s versus Burger King) . . . and the practice continues. One would suppose that in the Grand Scheme of Life a few decisions could be resolved this way without major consequences. But what about those really BIG decisions? Did you know it has been estimated that people will spend 7 times more effort in selecting their vacation spot— than they will spend selecting their financial advisor? How did you select your Financial Advisor? From a classified ad listed in this month’s Financial Magazine? Through the recommendation of a coworker about their daughter-in-law’s auto mechanic boyfriend who recently graduated from community college? Overheard during a conversation on the 4th hole of the local golf course from your boss? Or as a result of questions and careful research? Although personal rec ommendations are highly regarded as the “ crème of referrals,” you should still spend a few minutes to ask questions about the individual you expect to trust with your retirement years. 1. Is the Advisor properly licensed and registered? As a general rule, securities firms and representatives are required to be registered with the Securities Division in order to be able to offer and sell securities in a given state. Registrations are recorded on a Central Registration Depository (CRD) operated by the National Association of Securities Dealers (NASD). Y ou will find instructions on how to search the CRD records on the NASD website at www.nasdr.com. 2 . What do all the numbers mean? A Series 7 denotes a General S ecurities Representative who can offer an almost unlimited array of investment choices. A Series 6, or Investment Company/Variable Contracts Limited Representative, is limited in the investment products they may sell. Someone with a Series 6 can be considered a Registered Investment Advisor or Investment Advisor Representative. 3 . What about fees? Surprise! Cheaper is not always better. (But you already knew that, didn’t you? ) But the price you pay per trade may also indicate the level of customer service you can expect to receive. And bewa re of other fees, for example, transfer fees, closing fees, wire transfer fees, inactivity fees, annual fees or fees for not maintaining a minimum balance. 4 . What level of service can you expect? If talking to a live human is important to you, test their phone service. Are telephone calls returned within a reasonable period of time? Do you actually talk to your advisor, or a different agent when you c all? Do they have a user-friendly website? Do they provide brokerage research? 5 . Is the advisor easy to talk to? Selecting an advisor is a two-wa y decision— you select them, and they select you. Communication between you and your advisor is vital, and the level of communication will ultimately determine your success. 6 . Can the advisor explain things until you fully understand them? All investors want an educated and professional advisor. In the ever-changing, complex financial arena, you should expect your advisor to have the ability to explain those complex strategies so that you completely understand them before you invest. 7 . Does the advisor pay attention and act on what you say? The ultimate fiduciary decision rests with you, not your advisor. Therefore, you should expect your a dvisor to listen and act as a partner in all your financial matters. So, the next time you are ready to make a financial decision, don’t reduce it to a rhyme. Take a minute— and decide with maturity! Scott H. Fortney is President of Independent Financial Solutions, L.L.C. in Colorado Springs, Colorado. He helps investors understand investment strategies and develops personalized financial plans. Mr. Fortney serves as Financial Advisor to twenty Investment Clubs, the majority of which limit their membership to women. This role contributes to his insight and expertise when relating to the unique needs of women who are building a secure financial future. Mr. Fortney also frequently speaks at financial education seminars. ISSUE 206 - 10/10/05
EXCUSES... EXCUSES... EXCUSES! Procrastination—defined as “to put off intentionally or habitually something that should be done.” Derived from “pro-” (forward) and “crastinus” (of tomorrow), some potentially successful investors have made the process of procrastination an art form. In fact, I have noticed that of the seven most common explanations, procrastination leads any bad investment choices, the failure to set goals, federal tax implications, consumer debt issues, investor lack of know ledge and inflationary impact as the Number # 1 reason that most retirees fail to succeed in their retirement financial planning. But before you assume that this reason for failure is unique only to our retirees, let me point out that like any art form, procrastination must be mastered after a lifetime of development, refinement and practice. For those members of the X - and Y -generation who may be beginning their “early procrastinational-development stage,” let me save some time and provide you with some excuses: 25 YEARS OLD? ...we just got married and don’t have any extra cash right now ...we have a new job ...at this age we are still having fun ...anyway, we have years yet... 35 YEARS OLD? ...we are starting a family ...we will start once the children cost less ... the house payments are really high ... we just don’t have any extra cash right now ... 45 YEARS OLD? ...we have two kids in college and one graduating high school next year—we can barely afford their tuition ...we have never seen a more expensive time in our lives 55 YEARS OLD? ...we know we should be investing—but things just aren’t going as planned ...we just started a new career and had to start at the bottom ...we’ll just sit tight for now... 65 YEARS OLD? ...who us? ...investing would be a great idea if we weren’t on social security...it’s too late now ...we should have started years ago... And just in case you think that procrastination only occurs in five-year cycles, here are your annual excuses: JANUARY? ...you can’t be serious—we just celebrated our most expensive holidays ... the bills are just now coming in ... FEBRUARY/MARCH? ...we are calculating our taxes—give us a call when the refund check arrives ... APRIL? ...sorry, there wasn’t a refund . . . we have to find the money to pay our taxes ... MAY/JUNE? ...school’s out ..we are planning our summer vacation . ..give us a call in the fall ... AUGUST/SEPTEMBER? ...school’s just about to start—w e hav e tw o children to get ready ... NOVEMBER/DECEMBER? ... the holidays are coming—we have to prepare for family visits ... But beware! Actuaries currently estimate that for every couple celebrating their 65th birthday, the odds are extremely high that at least one of them will celebrate their 90th birthday. U.S. C ensus Bureau statistics reflect that in 2000 there were over 45,000 people over the age of 100 years old. (Note: It would have taken Willard Scott over 123 years to name them all on his show at a rate of one per day.) Every day 6,000 Americans celebrate their 65th birthday. 3,000 Americans celebrate their 70th birthday. 83% of every 1,000 households with two senior citizens will still need income 10 years later. And of those 1,000 households, 700 of them will still require income 20 years later. Ernest Hemingway once said that “Now is no time to think of what you do not have; think of what you can do with what there is.” Continuing the practice of procrastination into your early retirement years will define the quality of your standard of living in your last 25 years. Scott H. Fortney is President of Independent Financial Solutions, L.L.C. in Colorado Springs, Colorado. He helps investors understand investment strategies and develops personalized financial plans. Mr. Fortney serves as Financial Advisor to twenty Investment Clubs, the majority of which limit their membership to women. This role contributes to his insight and expertise when relating to the unique needs of women who are building a secure financial future. Mr. Fortney also frequently speaks at financial education seminars. ISSUE 207 - 10/17/05
THE ROAD TRIP It’s finally here—SUMMER! Schools are out and vacations are being planned. Whether it’s only a short one-day trip or a longer two-week excursion, the family plans are made, hours and hours are spent as the decisions are finalized, and our anticipation is high for another memorable summertime event. But what if this year as you were preparing for that long car trip I had asked you to measure how far it would be from here to there using only a 12-inch ruler instead of your car odometer? Or what if as you traveled on your journey you found yourself face-to-face with some detours or road construction not reported on your map, and your only option was to turn around and go home? I have just identified three issues that, when witnessed in the financial arena, can result in major disasters to your “road trip” to retirement. First, studies show the overwhelming majority of investors spend substantially more time planning for their summer vacations than planning for their retirement? Even though the U.S. Census Bureau reports that approximately 3,000 Americans celebrate their 70th birthday every day, and we know that long-term financial planning is vitally more important —there is more energy focused on our fifteen-day trip than on our fifteen-year retirement. Secondly, remember my apparently absurd request to measure your trip using a 12-inch ruler rather than your car’s odometer? Yet every day across America, investors will read the mutual fund prices in their local papers, or watch CNBC, and worry. Rather than focusing their attention on the miles, they remain focused on the inches. I don’t want you to make that mistake. The day-to-day geopolitical issues and media reporting are short-term annoyances and should NOT be the center of your decision making processes. If your time horizon is ten years, should you make potentially life-altering decisions based on who the President might be next year? And finally, when you are driving, do you turn around and go home when confronted with those unknown detours or construction obstacles? Of course not! You can continue. You have the same options with your investments. You can “pull over” into a money market fund, or you can try diversifying among different investments and find an alternative route to your original destination. As the 2nd quarter of this year draws to a close and we enter lazy days of summer in the 3rd quarter, the long-term investors may occasionally find these three months to be dull, resulting in lackluster portfolio performances. As some corporations may use this quarter to adjust their inventories or prepare for their fiscal year-end reports in September, their employees take advantage of this time to relax with family and friends. I would prefer to recommend that you use this time for the reexamination of investment strategies and make minor portfolio adjustments only if and when necessary. Bottom Line: You should have a memorable trip, whether it’s on this year’s vacation or on your journey to retirement and beyond. Don’t waste any of your valuable time and energy focusing on the short-term issues. And keep all of your long-term choices open. Above all, enjoy the experience— and have a prosperous trip Scott H. Fortney is President of Independent Financial Solutions, L.L.C. in Colorado Springs, Colorado. He helps investors understand investment strategies and develops personalized financial plans. Mr. Fortney serves as Financial Advisor to twenty Investment Clubs, the majority of which limit their membership to women. This role contributes to his insight and expertise when relating to the unique needs of women who are building a secure financial future. Mr. Fortney also frequently speaks at financial education seminars. ISSUE 208 - 10/24/05
FINANCIAL ROAD RAGE It was relatively early as I eased the car out of the garage and began my daily commute to the office. Not only was I mentally reviewing the week ahead in general; but more specifically, I was trying to focus on the immediate tasks that usually await me on a Monday morning. Although the traffic was no more or less congested than usual, today’s experience presented a new “player” in the game of commuter survival. I’m sure you’ve met him, or someone like him, on your daily travels. Today he embodied the soul of a young man whom I was sure was about twelve years old (but that could be because I have become really bad at guessing the ages of our younger generation. I still believe my doctor is a sixteen-year-old Doogie Howser clone—but I digress.) Right in front of me was Doogie driving a small, compact Honda Accord. He was swerving from lane to lane in attempting to jockey for a better position between each traffic light. Once in the lead, he quickly accelerated only to catch the next group of vehicles and again begin his “left-lane … no middle-lane … maybe right-lane … no back to middle-lane” dance. Apparently he was totally oblivious to the several dozen other drivers braking to avoid a collision with him. But after witnessing several miles of this behavior, we stopped at a long red light and I noticed that he was right in front of me! Not several miles away, not a few traffic lights away, not even a couple of cars way, but right in front of me! And then—my epiphany! After all of his struggles, the heightened reflexes, his wasted energy and his hazardous behavior—he was no better off than if he had just patiently waited along with the rest of us. Eureka! This young man was very similar to the numerous investors that travel the highways of life towards retirement (I know, that was a really corny analogy). These financial drivers blaze forward making minute-by-minute, short-term decisions with their focus solely on today’s immediate returns. They are oblivious to the other factors in the world that surround them. You have probably met many of these folks every day. All too often, after listening to a few weekend talk show hosts and reviewing the latest monthly financial magazines with the myriad of countless recommendations for overnight fortunes, they buy a fund, sell a fund, buy back into the fund; purchase XYZ stock only to sell at a loss so they can repurchase ABC stock. But then— after a year of this flurry of activity, they are no better off than if they had just patiently waited along with the rest of us. One of the problems with this story is that it fails to address the possible peripheral damages. Unlike the impatient driver whose actions only resulted in a temporary increase in the anxiety levels of his fellow travelers; erratic behavior in the financial marketplace has more far reaching ramifications. An impetuous desire to sell may cause a mutual fund portfolio manager to initiate a sale of stocks to cover expenses when the markets are declining. This ultimately hurts the investors who chose to remain calmly in the fund. Or with enough “crazy” drivers selling their positions, it may give the perception of negative market behavior and inadvertently cause other investors to sell on the fears of a prolonged declination. For whatever reason, more than just one investor can be affected … and aren’t we all sharing the same financial roadway? Have some patience; it may just be the most profitable decision you make today. Scott H. Fortney is President of Independent Financial Solutions, L.L.C. in Colorado Springs, Colorado. He helps investors understand investment strategies and develops personalized financial plans. Mr. Fortney serves as Financial Advisor to twenty Investment Clubs, the majority of which limit their membership to women. This role contributes to his insight and expertise when relating to the unique needs of women who are building a secure financial future. Mr. Fortney also frequently speaks at financial education seminars. ISSUE 209 - 10/31/05
WHICH PIECE OF THE PUZZLE? It wasn’t that long ago when it was commonplace to spend a few lazy hours gathered around the dining room table discussing current world events, local news and the latest neighborly gossip with a few friends and family. Although the younger generations may have difficulty envisioning such live, personal interaction; we can attest that there really was sustainable life before iPods, MTV, text messaging and American Idol. But “in the old days” the central focus of our attention, strewn around on the table in complete disarray, would be the pieces of the day’s mind-numbing challenge—the 1,000-piece puzzle. Looking back, I have to wonder how many life-changing events in my youth were decided over the jumbled, mixed-up pictures of Mount Rushmore, countless city-scapes or the month-long task of reconstructing a yellow, three-foot square portrait of a Smiley Face. (Hey, it was the early sixties and Sponge Bob wasn’t born yet!) But for anyone who has spent time bent over a puzzle, the ultimate exhilaration was felt as the final piece was dropped into place and you felt a true a sense of accomplishment. But do you remember the depths of exasperation when there was just one piece missing? Have you ever asked yourself which “piece of the puzzle” is most important to you when you examine the various parts of your personal life? Mental Health? Spiritual Health? Physical Health? Relationship Health? Financial Health? Just how great is financial independence without the compliment of great physical health? Is it possible to truly enjoy a strong, healthy relationship with family members without stability in your mental health? What would be the standards of acceptance in today’s every-changing world of morals and ethics without the influence of a higher degree of spiritual health? And so it is—a holistic approach to financial planning. The understanding that must we perform a delicate balancing act each and every day of our lives with all the pieces we have to work with, remembering not to neglect one over the other. So the next time you find yourself sitting down to complete a puzzle, take a minute to ask yourself what is most important in your life. Your goals may include financial security, the freedom to live a life without worry, an ability to help others, wanting to make a difference, or just a sense of personal satisfaction. But remember there are many pieces in any puzzle—and if there is only one missing, it is always impossible to complete the picture. Scott H. Fortney is President of Independent Financial Solutions, L.L.C. in Colorado Springs, Colorado. He helps investors understand investment strategies and develops personalized financial plans. Mr. Fortney serves as Financial Advisor to twenty Investment Clubs, the majority of which limit their membership to women. This role contributes to his insight and expertise when relating to the unique needs of women who are building a secure financial future. Mr. Fortney also frequently speaks at financial education seminars. ISSUE 210 - 11/7/05
PROPHECY OR FATE? In my last submission to the “Cookie Jar,” entitled Which Piece of the Puzzle, I asked you to take a few minutes to reflect on which “piece of the puzzle” was most important when you examined the various elements that shape your personal life. But unlike the 1,000-piece puzzle, we had only five pieces to consider—Mental Health, Spiritual Health, Physical Health, Relationship Health, and Financial Health. It is an accepted fact we all acknowledge that regardless of the size of the puzzle, each individual piece has an equally vital role and value in our personal “big picture.” I have reminded clients many times that I am not a politician, or a theologian, or a doctor. And although my predominate role as an Investment Advisor is to remain focused on the Financial Health of my clients, I must occasionally step back and assist from a philosophical perspective. But, in that role I must replace my confident, logical personality traits with more emotional, uncertain, “mushy” feeling characteristics—those of which I am extremely uncomfortable and awkward in revealing. And for this I apologize to my readers in advance. However, I must revisit the “puzzle article” because less than a week after its publication, my puzzle pieces were seriously affected, and I feel it is important to add another aspect to our puzzles. Now at home and recovering well, my wife endured a thirteen-day stay in the hospital from an extremely serious viral, lung infection. Thankfully, a full recovery is expected. But even after almost six weeks, and with the best medical research and care available, the cause continues to remain, and may forever be, unknown. So what is the lesson here? I say again with the utmost confidence and logic that the five-pieces of our personal puzzle each have an equally vital role in the “big picture.” But our pieces affect and are affected by other people’s pieces as well. My wife’s Physical Health plays an integral part to our combined Mental Health, our Relationship Health, and my personal Spiritual Health. Now that may have been an easy revelation to many of you; but in my world of black-and-white, calculating, logical financial components, I sometimes find myself a few light bulbs short of a full marquee. Bottom Line? The pieces aren’t always the same size. They are ever-changing, expanding and contracting as we move through our day-to-day activities. They are not only influenced by what we do and how we act, but also by those people we come in contact with along the way. So I humbly ask you once again—the next time you find yourself sitting down to complete a puzzle, take a minute to ask yourself what is most important in your life. Your goals may include financial security, the freedom to live a life without worry, an ability to help others, wanting to make a difference, or just a sense of personal satisfaction. But remember there are many pieces in any puzzle—and if there is only one missing or the size is wrong, it may be impossible to complete the picture. P.S. Have I mentioned that I love my Mother-in-Law? But that’s another story! Scott H. Fortney is President of Independent Financial Solutions, L.L.C. in Colorado Springs, Colorado. He helps investors understand investment strategies and develops personalized financial plans. Mr. Fortney serves as Financial Advisor to twenty Investment Clubs, the majority of which limit their membership to women. This role contributes to his insight and expertise when relating to the unique needs of women who are building a secure financial future. Mr. Fortney also frequently speaks at financial education seminars. ISSUE 211 - 11/14/05
PLANNING MAKES ALL THE DIFFERENCE For some it may seem like only yesterday—for others, it’s rooted in Roman mythology. And it’s still hard for many to understand the mad, uncontrollable panic that surrounded the speculation and preparation for Y2K. For those who don’t remember, there once was a time when the world’s computer technology was to have experienced the ultimate global meltdown—all electronics, from the microprocessors in our automobiles to the fail-safe systems of our military missile silos protecting the nation’s border, were to have systematically stop functioning. And at the stroke of midnight, January 31st, 1999, when Dick Clark dropped the crystal ball in Times Square and the countdown was complete, what happened? Nothing! The sun rose the next morning to over-partied heralders searching foggy memories for their parking spots, the cows came home, and my bank was able to account for every last remaining dime from my Christmas shopping. And so the question arose, “Did those people with cases of canned spam and pork-n-beans overreact?” Or were they just overly optimistic for the next year’s football season and tailgate parties? In the eyes of today’s investor, everyone was right because their basic philosophical premise is that advance planning is never wrong. The end-of-year news media will report that 2003 witnessed a myriad of economic and financial disasters—including airline bankruptcies; Martha Stewart’s demise; CEO resignations at Tyco, HealthSouth, RiteAid and Capital One; the SARS outbreak; the ‘Do-Not-Call’ List; and illegal mutual fund activities, just to name a few. They might even report good news— growing gross domestic product figures; a rise in consumer confidence numbers; an increase in personal income, higher durable orders; and lower initial jobless claims. A recent Astor Asset Management, L.L.C. Financial Professionals Survey results indicate that over 75% believe the stock market will be at least 10% higher in 6 months. It also reported that 63% of clients are more optimistic about the economy now than 6 months ago. But my clients continue to ask the proverbial question, “Is the glass half empty or half full?” And my answer remains the same. It doesn’t matter! For if we approach the future financial arena with the same attitude of the Y2K problem, we have already prepared for both sides of the equation. If the doomsayers are correct and the glass is half empty, we’ve already devised a conservative investment strategy and are ready to implement it at a moment’s notice. However, if the glass is half full, then our moderately aggressive strategy to become actively involved in the upward trend is accurate and should be implemented immediately. Bottom Line? No one can accurately predict the future of our financial markets. Neither the Fed, your investment advisor, your neighbor or your tea leaves can make the process of investing today an easy decision. But with proper, advance planning you can be ready for future possibilities and take advantage of potential situations. As always, best of luck in all of your financial endeavors and — Have A Prosperous Day! Emergency Checklist ❑ Food (7-10 day supply) ❑ Water (1 gallon per person/per day) ❑ Prescription Medications (30-day supply) ❑ Mortgage Records (six months) ❑ Bank Statements (three months) ❑ Cash (60-day living expenses) Scott H. Fortney is President of Independent Financial Solutions, L.L.C. in Colorado Springs, Colorado. He helps investors understand investment strategies and develops personalized financial plans. Mr. Fortney serves as Financial Advisor to twenty Investment Clubs, the majority of which limit their membership to women. This role contributes to his insight and expertise when relating to the unique needs of women who are building a secure financial future. Mr. Fortney also frequently speaks at financial education seminars. ISSUE 212 - 11/21/05
THE SEASON OF THANKFUL GIVING Just as the world continues to turn and the pendulum swings, the seasons will change. We now find ourselves anticipating the annual passage from fall to winter. From November’s Thanksgiving to December’s Christmas, emotions run the gambit from the Season of Thanks to the Joy of Giving. Like most grandparents today, I am not only overwhelmed by the variety of gifts available, but I have an extremely difficult time identifying with the latest fads. As a result, I therefore fail to make any decision and default to sending “the check,” ultimately letting someone else make the tough gift decisions. But thanks to recent legislation, today there is a viable alternative to “the check.” And this option benefits grandparents, parents, children and society as a whole—funding college educational plans. Today, a college degree is practically a minimum requirement, much like a high school diploma was a generation ago. It has been said that individuals with a bachelor’s degree can expect to earn at least $1 million more over their lifetime than those individuals who only have a high school diploma. College costs have been rising so fast that it’s impossible to imagine they could grow any faster. According to The College Board 2002, Public institutions are growing at an alarming 8.4% (after adjusting for inflation) for 2002-2003, the biggest increase in nearly 15 years. I can recall attending the University of Missouri in 1970 for a little over $2,000 a year. That same education has risen 398% and costs $9,966 today. At that pace, it will cost my granddaughter $26,400 a year when she is ready to attend college. The solution? A tax-advantaged college savings plan that has no age restrictions, no income phaseout limits, no residency requirements, and you can use to pay for more than just tuition—the 529 College Savings Program. According to an Alliance/Harris College Savings Poll, less than 12% of parents are even aware that 529 Plans exist, and 65% said they would invest if they knew more about them. Though plans vary from state to state, they all are based on the same underlying concepts. The newer variety of 529 Plans is a savings plan. Funds accumulate tax-deferred and withdrawals may be tax-free as long as they are used for qualified higher education expenses (including tuition, fees, books, computers, equipment and supplies, and both on- and off-campus room and board). Investments are a mix of professionally managed funds, with more investment options available today than under the previous UGMA/UTMA plans. Funds contributed to these plans are considered gifts to the beneficiary, so that anyone, even non-relatives, can contribute up to $11,000 annually without incurring gift tax consequences. And by accelerating the annual gift tax exclusion, any grandparent can elect to make a single contribution of $55,000 ($110,000 if both grandparents contribute); with the assets not being considered part of their estate for tax purposes should they pass away. As with any investment consideration, consultation with your investment advisor, your accountant and your estate lawyer is always desirable before establishing an account to take advantage of all the benefits of a 529 College Plan. The bottom line? There is finally a way for me to send “the check” that will last longer than the lifespan of a set of batteries. Not only will my granddaughter benefit—I will sleep better knowing that she and thousands of her peers will make smarter decisions that will ultimately affect the quality-of-life during my retirement years. I wish you and those you love every joy and happiness during these weeks of Thankful Giving. And let us all look forward to a prosperous New Year. Scott H. Fortney is President of Independent Financial Solutions, L.L.C. in Colorado Springs, Colorado. He helps investors understand investment strategies and develops personalized financial plans. Mr. Fortney serves as Financial Advisor to twenty Investment Clubs, the majority of which limit their membership to women. This role contributes to his insight and expertise when relating to the unique needs of women who are building a secure financial future. Mr. Fortney also frequently speaks at financial education seminars. ISSUE 217 - 12/26/05
HUMBLE RESOLUTIONS It’s that time of year again! The return of the annual “Let’s-make-some-New-Year’s Resolutions-and-see-if-we-can-keep-them at-least-through-the-end-of-the-week ” time. Oh, please don’t misunderstand me. I firmly believe that unless we make a conscious effort to think about personal self-improvement, positive changes will never occur. For me? Well, this year I am asking for a ration of humility. What? Let me pass on a story... It has been said that several years ago that a very young and successful investment advisor by the name of Duncan Mc Kenzie decided to retire early from his short, but lucrative career and return to his Scottish homeland. Up on arrival at his birthplace in a very small village on the Orkney Islands, the Head Magistrate and a couple dozen of the occupants that called the town home met Duncan. They welcomed their prodigal son back with open arms, presented him with the Key to the City, declared a proclamation in his name and provided a lavish feast in his honor. During the course of the evening’s events though, Duncan repeatedly reminded the attendees of his many successes in the financial world. He recounted his awards and articulated in great detail his countless accomplishments— most often in a pompous and condescending manner— to anyone who would politely stand and listen. After several hours, just before the end of the evening’s festivities, Duncan boldly took the podium in front of the group and proclaimed that with the help of his former friends and contacts overseas he would lead the efforts to erect a foundry in the small village that would be the envy of the whole country and would ultimately bring fame and fortune to the local community. So early the next morning, Duncan arose and assembled the town’s elite and influential partners and began a tour of the surrounding grounds in search of a location for their new establishment. As they walked through the local hills, Duncan continued his personal diatribe of seemingly, never-ending ac complishments. He reminded everyone within earshot of his vast sources of professional contacts that he could summon for help on a moment’s notice. And as Duncan and his entourage rounded the fence posts in one particularly small meadow , he was astonished to find that he had inadvertently stepped in a pile of droppings deposited by one of the local sheep. With the foul aroma rising from his feet, Duncan began to gripe and complain about the potential loss of his specially designed shoes and how their exorbitant cost easily equaled at least a month’s earnings for anyone in the town. As he continued his attempts to clean the nasty substance from his feet, he finally shouted , “What the devil is this stuff anyway? ”And from the rear of the crowd in a heavy, accented voice you heard an elderly man reply — “ Ya know laddie, I may not be as smart as you, but I think you’re melting!” So remember this as you travel down the pathway of your life — the combination of your personal experiences, vast wealth, influential contacts and countless accolades can all be overshadowed if you lack the one small trait of-- humility! On behalf of my family and myself, please accept our wishes that you enjoy the best in 2005, and have a very Prosperous New Year! Scott H. Fortney is President of Independent Financial Solutions, L.L.C. in Colorado Springs, Colorado. He helps investors understand investment strategies and develops personalized financial plans. Mr. Fortney serves as Financial Advisor to twenty Investment Clubs, the majority of which limit their membership to women. This role contributes to his insight and expertise when relating to the unique needs of women who are building a secure financial future. Mr. Fortney also frequently speaks at financial education seminars. |
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