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How It Works/Example:

Active management is the opposite of passive management (also known as buy-and-hold investing). Instead of dismissing short-term trends and focusing on long-term profits, active managers believe short-term price movements are important and often predictable. In this vein, active managers often refer to statistical anomalies, recurring patterns, and other data that supports a correlation between certain information and stock prices.

The active manager, however, seeks to detect and exploit short-term trends in a security. This often involves quantitative and technical analyses, including ratio analysis, stock chart analysis, and other mathematical measures that have less to do with the nature of the company and more to do with trading patterns, news, and other market factors. An active manager’s investment horizon can be months, days, or even hours or minutes.

Active managers are more likely to use leverage than passive managers because they are as concerned with mitigating short-term risk as they are about exploiting short-term gains. This in turn introduces more risk into an active portfolio but may also provide higher returns.

Why It Matters:

In general, the constant analysis associated with active management involves more trading activity than passive management. Active trading thus also generally requires more time and education than passive management, and it is important to note that the higher trading commissions and capital gains taxes may translate to higher management fees and return requirements.

The idea of active management is not immune from controversy. Passive managers note that active managers frequently fail to match or beat their benchmarks, and they question the reliability of active managers’ methods for recognizing and predicting trends. But the most notable areas of disagreement between active and passive managers are theoretical rather than mechanical.

Many passive managers espouse the efficient market hypothesis, which says that stock prices are random and already reflect all available information. A cousin of this hypothesis, the random walk theory, also claims it is impossible to consistently outperform the market, particularly in the short term, because it is impossible to predict stock prices. 

Regardless, active management enjoys a large and loyal following among investors, and many active managers have posted returns well above market benchmarks. However, consistently providing above-average returns remains a big challenge.

No matter where they rest on the issue, most analysts encourage even the most passive investor to learn about and understand active management methods, stay current on their investments, and know how to read stock charts.

What does Paragon think?

While it is true that some active money managers use very short-term time frames, Paragon Wealth Management leans towards an intermediate to long-term time frame. Investment positions are held from three to 18 months, depending on how long the position maintains a positive trend. Paragon does not use leverage.

There is a debate as to which is better, passive or active money management. We hold our track record out for inspection and as evidence that active management strategies can be significantly more effective than passive strategies. See Paragon’s complete track record and disclaimers at www.paragonwealth.com.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

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Determine  your risk tolerance to enjoy a low stress investment experience.

Written by Dave Young, President of Paragon Wealth Management

Recently, my wife and I returned from a vacation to Maui. Each day we sat on the beach, listened to our ipods, and watched the waves roll in over and over again. We saw children playing in the sand, people strolling along the beach, sunbathers soaking in the sun and palm trees blowing in the breeze. It was relaxation at its best.

This stress free picture describes what an ideal investment program would be like. It would be a low stress, methodical strategy that allows you to reach your long-term goals. Is it possible to have this type of experience?

Over the past 10 years many investors’ experiences have been more like riding a roller coaster in the dark with no brakes, which is completely opposite of low stress.

While it is impossible to have a completely stress free experience, it is possible to reduce stress significantly by building a portfolio that is aligned with your specific risk tolerance. Your risk tolerance determines how aggressive or conservative you are invested. Your particular mix might be 20 percent conservative and 80 percent growth, 50/50, 70/30 or some other combination. It is different for each person. It depends on your individual goals and objectives, and what you can handle.

Every investor has an amount of risk they are comfortable to take. If your risk level is set too high, you will most likely have a hard time every time your account value declines. If your risk level is set too low, your returns may be inadequate, and you will never reach your goals. Basically, when it is not set right, you will worry every time the market drops, and become euphoric every time it goes up.

Why is this so important? Because many investors do not consider how much risk they are signing up for when they initially invest. It might be invested in a way that you will lose everything when something goes wrong. For long-term success, it is critical that you have a very good idea of exactly how much risk you are exposed to. Otherwise,  your chances of success are slim.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

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A few years ago I was fishing with my daughter at a Strawberry Reservoir in Utah. The snowcapped mountains surrounded us, and the sun was shining. It was so beautiful and peaceful there.

As we sat on the fishing boat, I thought about my company, Paragon Wealth Management. Our office is different than most financial advisors. It is decorated with beautiful outdoor pictures and leaves are painted on the walls. We also have a nine and a half foot grizzly bear, a bobcat and a leopard. We brought part of the outdoors inside.

While we were fishing, I thought about the “Paragon Experience.” Our fishing trip reminded me of the experience we hope to provide our clients. It is not the typical financial advisor/Wall Street type of experience. It is something very different. We do our best to make their experience enjoyable and worry free. We treat their money as if it were our own. We treat our clients like family.

Our clients can talk to our exceptional client service team at any time if they have questions about their accounts or they need anything. Our team is always there for our clients’ needs.

We invite you to discover the “Paragon Experience” if you have not already. Visit our blog, www.moneymanagerslive.com to see photos of Paragon’s office. To learn more about Paragon and the “Paragon Experience,” visit our website, www.paragonwealth.com, or call 800-748-4451 to speak with a financial advisor for a complimentary portfolio review.

written by David Young, President of Paragon. You can contact him directly via email, dave@paragonwealth.com.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

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One of the changes President Obama is proposing is automatically enroll workers into a retirement savings plan. The article below from www.financial-planning.com explains more.

Examining the Impact of Obama’s IRA Plan

Written by Ruthie Ackerman
Taken from Financial-Planning.com

With retirement savings dwindling President Obama has proposed as part of the 2011 budget proposal for workers to be automatically enrolled in individual retirement accounts.

The proposal would automatically deduct up to 3% of an employee’s salary straight from their paycheck and invest it in Roth IRAs, unless the employee chose to opt out, or chose to invest in a traditional IRA. This plan would be for employees who don’t have other types of pensions or retirement savings plans, about 80 million workers in all.

With the Auto IRA, employees would still have the opportunity to opt out of the program, but most don’t. The National Council of La Raza, the largest national Hispanic civil rights and advocacy organization in the United States, published a report in December revealing that when employees are automatically enrolled in retirement accounts, their savings rates jump to 80% from 20%.

This is especially important at a time when savings rates have tumbled. Last month Cogent Research released its 2010 Investor Brandscape report, which showed that the proportion of investors that hold a 401(k) plan has gone down significantly.

As of October, she said, only 59% of investors’ surveyed hold an employee-sponsored retirement account, down from 70% in October 2008. At the same time, younger investors are more likely to start their own businesses or freelance and aren’t necessarily working in traditional full-time jobs that offer employee-sponsored retirement plans. In addition, high unemployment is also cutting into contributions.

Employers with more than 10 employees, who have been in business for at least two years, would be required to participate in the automatic-IRA program.

David John, a senior fellow at the Heritage Foundation and managing director at the Retirement Security Project, said when he helped to write the proposal for the auto-IRA four years ago, he was open to auto-enrolling employees in either a traditional or Roth IRA. But “it turns out that the Roth is actually better for moderate and lower income workers because they may or may not have the sufficient tax liability to take full advantage of the deductibility of the traditional IRA,” John said in a phone interview on Tuesday.

The reality, he said, is for most families who earn around $35,000, they don’t owe much tax anyway so they don’t get much benefit from the traditional IRA given the fact that when they withdraw they would have to pay income tax on that money. On the other hand, he said, if they take a Roth when they retire they end up with tax-free income.

John said the auto-IRA isn’t only for new savers, but also for rollover savers who have lost their jobs and taken new jobs at smaller companies. The proposal would allow them to rollover their 401(k) into an auto-IRA and continue to save. Freelancers would also have the opportunity to enroll if they were part of an independent group which sponsored an auto-IRA program.

“For better or worse the traditional pension system is disappearing,” he said. “Unless you’re a career minimum wage worker social security doesn’t provide a level of income that’s sufficient. So either we can make it easier for people to save for retirement from the day they start to work until the day they retire or we’ll have millions of Americans who are poverty stricken in retirement.”

David Wray, president of the Profit Sharing/401k Council of America, a Chicago-based association of providers of 401(k)s and other profit-sharing plans, said in an interview in December that auto-enrollment only works when the participant views the plan as aligned with their own goals. Just having a default, auto-enrollment retirement savings plan is not sufficient. If it’s not coupled with “an aggressive education effort where the company goes and explains to participants in advance how important it is to save and why it is in their best interest,” Wray said.

When participants don’t understand why they should enroll, or in some cases, don’t even know they are enrolled in retirement savings plans, the result can be ineffective and costly.

Nonetheless, Obama has made auto-IRA and retirement savings an important focus of his administration and even mentioned it in his State of the Union address.

photo by Mike Baird

If you are thinking about a tax delayed savings plan, there are some things to consider. Below is an article taken from the Money Wise Blog with some information about tax delayed savings. Feel free to leave comments or questions.

Tax Delayed Savings
Written by Money Wise Blog

As you approach your golden years, you may be wondering about the various advantages and disadvantages of tax delayed savings plans. Although the idea not to pay taxes on their savings may seem attractive, there are fees to consider.

Another difficulty lies in determining which tax delayed savings plans your family is entitled to receive. Before you decide, you should carefully examine all options to determine which screen saver you.

There are many types of tax delayed savings. The most common is 401k. 401k employee pension plan offers a high maximum contribution limit and the ability to maintain interest over time. Just follow the 401k withdrawal rules and I understand that you have to pay taxes on the lump sum you take.

If you leave your place of work to the appropriate age for retirement, you will need to pay taxes and a penalty at the time - or roll your money into a IRA.

Individual retirement accounts (IRA or, for short), allows you to make thousands of dollars for your retirement, even though less than 401k. You do not have to pay taxes on income only after age 59 1 / 2.

You can see all the different types of MDR to see what you are entitled to, including: marital Pension IRA Deductible IRA or Roth IRA. In both 401ks and Franchise MRK, you only pay taxes when you begin withdrawing retirement.

Most people are not encouraged to go with their employers sponsoring retirement savings plan, if the company agrees to match your contributions.

Further, analysts recommend that you get into the money into your account IRA Roth; but you still pay taxes on your contributions, as usual, you can withdraw money at any time without penalty and your withdrawal will be tax-free from age 59 1/2 .

Tax delayed repayment of trust funds, consisting of various bonds, stocks and cash, are a good, low-maintenance place to invest your money.

To understand the difference between savings and taxed delayed tax savings, let’s look at some specific figures. If your monthly retirement savings contribution is $250, in 20 years you could save $81,897 after taxes.

Investing in a tax delayed savings plan, you would save $106,753, even after tax lump! Are you interested in the establishment must provide a significant cushion for your retirement.

You can jump for joy, that Uncle Sam’s cut you break. This, of course the generous thing, but as with anything, there are potential pitfalls. You may find that the administration, management, insurance and annual maintenance fees of records exceed the tax delayed savings you would get - especially if you are tempted to use your funds before you turn 60.

Many early retirees have been saddled with 10% fine or get stuck paying hefty tax when they prefer to take all their money in a lump-sum retirement benefits.

If you worry about your money and take advantage of any protection plan at your disposal, you can feel that hard FDIC does not cover tax delayed retirement, leaving you to pay for a separate defense.

Financial representative can help you determine if the tax delayed savings may be very suitable for your lifestyle. If you have some financial planning for retirement now, you can pave the way to your golden years with ease.

photo by thefuturistics

This article gives several good tips to help you save money and plan for an enjoyable retirement. Feel free to leave your comments and thoughts on the subject.

Financial Tips for a Better Future

Taken from the Article Directory Online

In this era of credit crunch, people are going through tough time of their lives, as it is driving people out of their jobs, and causing the businesses to shutdown. People are now using their saved up money, which is consuming their savings, which they have accumulated over the years.

Saving money should be your lifestyle, but not everyone is good at it. There are ways to stretch your money and to save them in the bank accounts. First of all, we have to stop the extravagant spending and should start using our money wisely. If we start from today, we will be able to save a lot, and ultimately it will pay us back in huge dividends. Let us have a look at certain tips which can help us getting grip on our bank balance.

For a start, one must have a planned budget, which must be followed, people do not have such habits, and in this time of credit crunch, it is important to do so. When one sticks to plans, which will eventually lead to better debts payments, and savings for holidays, educational purposes, and for emergencies, and above all for carefree life after retirement.

If you keep track of your spending you would know where your money is going, and when you know where your money goes, you know where you are spending. If you limit the purchase of luxury items, which includes your usual morning coffee, you would definitely save a lot of money by the end of every month. By knowing your spending, you would avoid late or overdraft fees and interest payments on your account. Following this method with your budget will be a dynamic duo!

You can get membership of local area library to have access to movies, and DVDs at much lesser cost as compared to the video rental stores, which will help you a lot in saving. Moreover, you can also borrow books of your interest instead of buying them from bookstores.

Getting rid of the TV cable connection can be very useful in different ways. First, it will be a way to save. Secondly, people think that TV cable is one of the major ways to get cheap entertainment, and to remain informed about the happenings of the outside world. In fact, without cable TV, you can give more time to your family, and can spend holidays with them. Moreover, you can do some constructive household project to keep yourself busy . Thirdly, when there is no cable TV, one will have free mind with respect to its bill payment.

The struggling class of the society is usually the one who cannot pay their bills on time. Late payment of the bill will lead to credit payments, which will keep increasing your debt, this may lead to worsen financial standing then before. Thus, one should pay the bills on time to stay out of trouble.

By limiting the spending on luxury, you would have more money in the pocket at the end of each month. Moderation is what is required in the first place. Do not go for brand names; purchase what looks good on you. Do not waste your money on cigarettes and tobacco stuff. This will not do well but will only damage your health.

A Roth IRA (individual retirement account) is one of the most exiting retirement planning opportunities currently available. Tax-free growth is a Roth IRA’s most important benefit. Roth IRA considerations include:

Who Should Open a Roth IRA

A Roth IRA is particularly attractive to

• those not eligible to receive a 401(k) employer matching contribution
• those able to save more for retirement than the amount that their employer matches

With opportunities for tax-advantaged growth limited, a Roth IRA is a great way to become financially independent by retirement.

How and Where to Open a Roth IRA

You can open a Roth IRA at nearly any bank or brokerage house, either in-person or online. Opening a Roth IRA is a very simple process, typically with help readily available. Often, there are just a few forms for you to complete. Bring your Social Security number with you as well as the Social Security numbers and addresses of any potential beneficiaries of your account.

Earned Income and a Roth IRA

The amount you are permitted to contribute to a Roth IRA is limited to your earned income. Earned income includes wages and self-employment earnings, but does not include interest or dividends. If you are married, your combined contribution limit is restricted to the total of your combined earned income.

Contribution Limits for Roth IRAs

For the year 2008, the most you can contribute to a Roth IRA is $5,000. If you are 50 or over, you may contribute a total of $6,000. If you have earned income, you can contribute to both a traditional IRA and a Roth IRA, but the combination of your contributions cannot exceed $5,000 ($6,000 if 50 or over).

Roth IRA Contribution Deadline

Each Roth IRA contribution relates to a specific calendar year. You can make a contribution from January 1 of that year until the filing deadline of your tax return.

No Tax Deduction for Roth IRA Contributions

No tax deduction is available for a Roth IRA contribution. (Many individuals receive a tax deduction for their traditional IRA contributions, however.)

Earn Tax-Free Growth from a Roth IRA

The money you contribute to your Roth IRA grows tax-free. You do not have to pay any taxes on the earnings in the account. In fact, you do not even report the income to the IRS. Even in retirement, when you ideally first access your Roth IRA money, you do not owe taxes on the distribution. If you take your Roth IRA money prior to retirement, however, taxes may be due.

Income Limitations and Roth IRAs

Eligibility to contribute to a Roth IRA is restricted by your filing status and modified adjusted gross income. The Roth IRA income limitations change each year.

No Required Distributions from Roth IRAs

Unlike 401(k) plans and traditional IRAs, there is no age at which you must begin to distribute money from your Roth IRA. As a result, Roth IRAs are an excellent tool to pass along wealth to your children or grandchildren.

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Annuities are a product we rarely recommend to our clients at Paragon Wealth Management, even though they are sold extensively by financial salespeople, most of whom do not have fiduciary responsibility.

In our experience, annuities typically only meet the needs of a very small segment of the investing public.

Below are some excerpts from an article on CNNMoney.com. This is an excellent article about why you should not lock yourself into an annuity.

Retirement planning for the laid off

By Walter Updegrave, senior editor
January 7, 2010

(Money Magazine) — Question: I’m 57 and I think there’s a good chance I’ll be laid off this year. If that happens, I’ll have to move my 401(k) balance to an IRA. On the recommendation of a finance professional, many of my former co-workers have transferred their 401(k) savings into annuities. Do you think this is the way to go? – E.Z., Deer Park, N.Y.

Answer: There are lots of “finance professionals” who see annuities as the answer to almost every retirement planning situation. So I’m not surprised that many of your former colleagues ended up owning annuities.

I can’t discern other people’s motivations. So I can’t say whether the advisers who are so quick to flog annuities genuinely believe they’re the best choice or whether annuities’ generous sales commissions are a factor or whether something else makes them so eager to recommend annuities.

But I can tell you that you shouldn’t be too quick to follow your former co-workers’ example.

For starters, although rolling your savings out of your ex-employer’s 401(k) into an IRA in the wake of a layoff or job switch is often the right move, it’s not the only way to go. There are other options you may want to consider depending on your particular circumstances.

And even if you should decide that rolling your 401(k) into an IRA is the right thing to do, it doesn’t necessarily follow that an annuity is the appropriate investment for your IRA stash.

…Immediate annuities aren’t the type that are usually being touted to people who have 401(k) bucks to roll over. More likely, your former co-workers have been steered into variable annuities, and more specifically into variable annuities with a type of rider known as a guaranteed lifetime withdrawal benefit.

On the surface, such annuities look very appealing. They typically guarantee that you can withdraw a certain percentage, usually 4% or more, of your initial account value as long as you live. Some even offer a guaranteed rate of return before you start drawing income. And since your money remains invested in the annuity’s subaccounts, which operate much like mutual funds, there’s a chance your account value, and future income, might grow. Perhaps the biggest allure, though, is that your income won’t be disrupted even if the financial markets get pummeled like they did in 2008 and early 2009.

Not surprisingly, there are drawbacks. The fees can be onerous, which reduces the chances of future hikes in guaranteed income. And these annuities can get pretty complicated, making it easy for investors to misunderstand exactly what is and what isn’t being guaranteed.

My advice: Before you stick your 401(k) dough into an annuity, consider speaking with an adviser whose livelihood doesn’t depend mostly on annuity commissions. That might be a fee-only financial planner or an adviser willing to work with you on an hourly or project basis.

The conversation shouldn’t just be about the pros and cons of annuities. Rather, you and the planner should focus on the best way to handle your 401(k) money given when you want to start drawing retirement income from it and how much you’ll need. In short, you and the adviser should be thinking strategies more than just specific products.

Any number of strategies can work, including ones that involve an annuity or maybe even more than one type of annuity. But you may not hear about these alternatives if you’re dealing with someone dead set on putting you into an annuity.

One final note: There is absolutely no reason to hurry this process. You’re not going to miss out on some great opportunity by methodically sorting through your options. So if and when the time arrives that you must figure out what to do with the money in your 401(k), bide your time. It’s taken you an entire career to build your nest egg. The last thing you want to do is undermine all your effort with a hasty decision.

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photo by ADoseofShipBoy

No matter what stage of life you are in, or where you are at in planning your retirement,  you are about to welcome in a New Year and new resolutions.  The following article provides 10 main concepts to keep in mind when it comes to making financial resolutions for the New Year.

10 Financial Resolutions for the New Year

By Joshua Kennon, About.com Guide

Financial Resolution 1: Know What You Want

Have a clear, concise financial goal for the year. It isn’t good enough to say, “I want to have my credit card paid down and more money in the bank”. Instead, you should say, “I have the balance on my credit card paid down to $0, over $5,000 in my savings account, and a fully funded IRA.”

Financial Resolution 2: Prioritize Your Debts

Not all debt is created equal. Make a list of your liabilities and organize them by the annual interest rate. Those with the highest rates (most likely your credit card debt) should be paid off immediately. It does no good to invest money while you are paying 19%+ each year. In a lot of cases, the wisest course of action is to sell any certificate of deposits, savings bonds or other cash holdings and use them to pay the balance.

Financial Resolution 3: Open an IRA

If you haven’t done so already, open an individual retirement account (or IRA for short). Your financial planner or accountant should be able to tell you whether a Traditional or Roth IRA is better for you. Both offer important tax advantages that can add up to a significant amount money by retirement.

Financial Resolution 4: Enroll in an Automatic Savings Plan

Automatic savings plans are now offered for everything from brokerage accounts to government bonds. Simply call your broker and tell them you want a certain amount of money withdrawn from your checking or savings account each month, on a certain date, and deposited into your investment account. This way, you are forced to save because the cash is drawn directly from your bank before you can get your hands on it.

Financial Resolution 5: Close Unnecessary Accounts

Banks and financial institutions charge fees for everything under the sun. Is it really necessary to have several credit or checking accounts? Although there are exceptions, in the vast majority of cases the answer is a firm no! To put things into perspective: imagine your bank charges you $8 each month for your checking account. In thirty years, that $8 will have added up to more than $8,500 after taxes!

Financial Resolution 6: Make Money Doing What You Love

Most people can name at least one thing they are truly passionate about. One of the ways to enjoy your work is to only do the things you enjoy. Find a way to turn your passions and hobbies into profit. The world is full of amazing jobs such as full-time ice cream tasters and video game testers!

Financial Resolution 7: Collect Your Change

Any time you make purchases with cash, only spend whole dollar amounts. If you go to the grocery store and your ticket comes to $67.39, pay $70 in cash and pocket the change. The first thing you should do when you go home is throw the money in a large container (empty water jugs are perfect.) If you adhere to this policy and don’t spend any of the change, you are likely to save several thousand dollars over the course of a year.

Financial Resolution 8: Give Money

One of the most effective ways to realize the value of money is to give it. It is a powerful and effective way to change other people’s lives for the better while giving you a better sense of freedom financially. Suddenly, you realize just how much promise $20 contains.

Financial Resolution 9: Begin Using Personal Finance Software

Knowledge is power. If I asked ten people on the street how much they spent last year on books or movie tickets, nine of them probably couldn’t answer. With a few keystrokes, however, someone using personal finance software such as Microsoft Money or Quicken can find out.

Financial Resolution 10: Read a Financial Book Each Month

If you want to learn to cook, you read cookbooks. If you want to learn to fix an engine, you ask someone to show you. The printed word is amazing in that it allows you to communicate directly with the most brilliant financial minds of the past century. Consistently applying yourself to learn as much as you can about the financial markets, the nature of money and investments in general is absolutely essential to creating long-term wealth^.

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