Paragon Wealth Management was included on Wealth Manager Magazine’s “Top Advisory Firms in the United States” list in their 2008 July/August issue. A press release about the results is below.

FOR IMMEDIATE RELEASE

Wealth Manager Announces the 2008 Top Dog Rankings
Largest wealth managers by average AUM per client

Hoben, NJ- Wealth Managermagazine has released its 8th annual ranking of wealth managers by average asets under management per client, Wealth Manager’s 2008 Top Dogs Ranking.

Wealth Manager’s 2008 Top Dogs survey found that, in spite of difficult market and economic conditions, the overall amount of assets under management has continued to grow, along with the number of investment firms managing that wealth. The 478 firms that participated in the 2008 survey manage an impressive $302 billion in total assets. Overall, these firms manage an average $3.33 million per client.

“After a year as unpredictable as this one, it’s to their credit that wealth managers have been able to keep clients focused on the long term and that they continue to uncover the opportunities that this market uncertainty presents,” said Wealth Manager’s Editor in Chief, Kathleen M. McBride.

The top 20 firms by average assets under management per client include a wide distribution of average client assets from the top firm, Boston-based Federal Street Advisors whose clients have an average of $66.9 million in assets under management, to $15.2 million per client at Manchester Capital Management in Manchester, Vt.

A total of 478 wealth managers from 44 states are included in the 2008 rankings and they have a total of $302 billion in assets under management. Within individual firms, total assets under management for the 2008 Top Dogs ranges from $14.4 billion at the largest firm in total assets to $36 million at the smallest firm, the average for all the wealth management firms in the rankings for total assets under management is $632.6 million, while the median is $256.3 million-up 8.4 percent from $236.5 million in 2007, and up 28.8 percent from the $199 million reported in 2006.

Rankings include registered investment advisors; no banks, broker/dealers and trust companies are included in their rankings. (For the full story and the complete list of Wealth Manager’s 2008 Top Dogs Rankings please go to www.wealthmangermag.com).

About Wealth Manager Magazine
The redesigned and refocused Wealth Manager magazine provides authoritative, unique, sophisticated content that wealth managers can find only in the magazine named after them. Now in its 9th year, Wealth Manager’s mission is to provide knowledge and information tools to a readership focused on building, preserving, and endowing wealth. Wealth Manager presents dialogue from innovative and respected thinkers on topics ranging from investments, entrepreneurship, and private banking to legacy and philanthropy, and is designed to provide readers with best practices and winning strategies from across the industry. Wealth Manager also focuses on the key relationships that make up modern wealth management:  not only between wealth managers and their wealthy clients, but also between wealth managers and the attorneys, accountants, trustees, and other corporate and individual partners who are collectively engaged in managing significant wealth today.

Over the last three or four days, I’ve received a bunch of emails from readers asking me why I’m not talking breathlessly about the chaos at Freddie Mac, Fannie Mae, and IndyMac. I’ve read dozens of long explanations of why this is disastrous and why it’s the worst thing people have ever seen, and I’ve read many, many people shouting that they should completely get out of all investments right now and put their cash in a little green box buried in their back yard (or some similar crazy scheme).

Here’s my take: I think there’s almost nothing to worry about, and if you’re actively selling any broad investments right now, you’re actually making a giant mistake.

Here are five reasons why you shouldn’t be panicking right now.

One: Panics happen every few years

Right now, we’re having panics in the banking and housing sectors. A few years ago, corporate accounting was destroying everything. Remember the tech sector collapse of half a decade ago? The savings and loan failures before that?

These booms and busts happen for one reason and one reason alone: most investors are sheep. They follow whatever has been hot lately, and they run away whenever there’s a bad sign. These processes are rarely rational - in the 1630s, people bet their entire life fortunes on tulips.

It took only a glance at housing prices over the last decade or so to see that there was a big bubble going on. This bubble turned out to be mixed in with the banking industry which was funding this bubble. Now we’re seeing that bubble collapse. In a few years, when all of those ARMs adjust, people will be running around yelling “PANIC” about some other sector.

Two: The talking heads shouting “PANIC!” make money from “PANIC!”

If you run out right now and sell your stock, guess who makes money? That’s right, brokers and fund managers. These people want churn. They want you to buy and sell so they can make profit on the buying and the selling. The people who are on CNBC and TheStreet.com shouting “PANIC!”

If I was a broker or an investment manager and I knew that if I shouted “PANIC!” I could make myself a mint, I’d be tempted to shout “PANIC!” I probably wouldn’t do that because it would actually not help my clients, but there are other philosophies out there. Some believe that alerting their clients to “PANIC!” can help them avoid losses. Others could actually care less about the clients and just want to profit.

There’s big money to be made in “PANIC!”

Three: Stocks are not short term investments

Unless you’re day trading (and thus making an effective career out of very short term movements), stock investments should never be short term investments. The stock market is extremely volatile over the short term - annual losses of 20% or more in stock investments are somewhat regular occurrences.

So why invest in stocks? Over the long run, the gains exceed the losses over the stock market as a whole. Here’s a quote from David Swenson, the author of the excellent book Unconventional Success:

To the extent that history provides a guide, the long-term returns for stocks encourage investors to own stocks. Jeremy Siegel’s two hundred years of data show U.S. stocks earning 8.3 percent per annum, while Roger Ibbotson’s seventy-eight years of data show stocks earning 10.4 percent per annum. No other asset class possesses such an impressive record of long-term performance.

The stock market returns very well on average. The only problem is that it’s an average of some very nice positive numbers and some very painful negative numbers - that’s the nature of an open market.

Why should one believe the stock market is going to go up in value? THIS IS THE END!
Stocks will continue to go up in value over the long term for one simple reason: worker productivity. Companies over time will earn more money per employee because each employee is able to produce more value. As long as humans are innovative creatures, coming up with new technologies and ideas, then companies that implement those ideas will increase in value.

Four: Down markets are never a time to sell

At some point, the stock market will return to its previous level - there has never been a twenty year period of loss in the overall stock market.

Since the stock market is down this year, and we believe that the stock market will eventually match the previous high, now is not the time to sell. Now is the time to buy.

Let’s look at it visually using the S&P 500 from about 2000 to about 2007:

Obviously, it’s great to sell at the top - you’ll make a killing. The problem is that one never knows exactly where the top is. The market will start to drift downward and many people will think it a normal fluctuation. After a while, the talking heads on CNBC and other financial papers will begin to notice that it’s going downward and start shouting “BEAR! BEAR!” to get people to “SELL! SELL!” so they can make a profit on transaction costs. Most people still don’t move right away - it takes a little while for the “panic” to build.

Eventually (as marked above), it becomes conventional wisdom that things are disastrous - that’s where we’re at now, well into the down trend. Now, if we believe that at some point in the future things will eventually return to their original level and we can clearly see that things are way down from their original level … why would you sell? Instead, it looks like a time to buy to me.

Five: If this event is making you worried about losing everything, then you’re not appropriately diversified.

My last point is for those people who have a ton of money in the damaged sectors right now. If you’re afraid that you’re going to be losing “everything” in this down situation, then the problem isn’t the stock market. It’s your investment strategy.

Diversification is what saves you from a bubble blowing up in a particular sector. Many advisors suggest having 5% of your total assets or less in any one sector simply to a void this. That way, even if one sector loses everything, you lose at most 5% of your money - a 20% drop in one sector means only an overall 1% loss for you.

In other words, don’t put all of your eggs in one basket and you won’t panic quite so much when a basket falls to the floor.

Throughout all of this tumult, I’ve lost a fair amount of money in my retirement account. Right now, I’m contributing significantly more money per week than I was three months ago. And I feel fine. I hope you do, too.

The other day, my husband, Patrick, and I were driving home on the freeway, talking about how the day went. Because I work in the field of investing, the stock market came up.

Patrick said,  “Investing in the stock market is like driving on the freeway.”

I had never heard this analogy, and asked, “What do you mean?”

He said, “Most people try to drive in the fast lane on the freeway, but when someone blocks them, they go to another lane even though in the long run the fast lane will get them there the fastest.

The stock market is the same way. Most people are happy when the stock market is going well and don’t want to leave, but when the market goes down they leave. In the long run, they would be better off if they stayed in the whole time instead of leaving when it got bad.”

I thought that was a good way of looking at it. It seems like it would be the right thing to pull out when things are bad in the stock market, but in reality it only hurts you.

I’ve talked to Dave Young, President of Paragon, about this a few times. He agrees and usually shows me Paragon’s numbers to illustrate this point.

Let’s look at Paragon’s Growth Portfolio called Top Flight as an example.

Top Flight Performance Numbers vs. the S&P 500

2008 (thru 2nd quarter)    -4.70%                  -11.91%
2007                           16.98%                      5.50%
2006                             5.91%                    15.79%
2005                             6.30%                      4.89%
2004                            10.15%                    10.87%
2003                            50.31%                    28.69%
2002                          -13.60%                 -22.12%
2001                              9.10%                  -11.92%
2000                            62.42%                    -8.82%
1999                            17.69%                    20.66%
1998                            31.67%                    28.58%

As you know, past performance is no guarantee of future results, but as you can see in most cases, performance went up after it went down.

Investment performance reflects time-weighted, size-weighted geometric composite returns of actual client accounts. Investment returns are net of all management fees and transaction costs, and reflect the reinvestment of all dividends and distributions. Benchmarks are used for comparative purposes only. Past performance is no guarantee of future results. Investments in securities involve the risk of loss. An investor’s actual returns may vary due to timing of withdrawals, contributions and other factors. Before investing, contact Paragon to discuss your investment objectives, risk tolerance and fees. The S&P Index is a market-value weighted index comprised of 500 stocks selected for market size, liquidity, and industry group representation. It is not possible to directly invest in this index.

photo by Philli Casablanca

As seen on Utah CEO Magazine’s Blog
Written by Dave Young, President of Paragon

Forecasts make interesting conversation and trivia. Just don’t use them to try to make money.

There’s no shortage of self-proclaimed market prophets. You can find them in the investment magazines, newspapers or on CNBC. The problem is that when investors listen to their forecasts, many believe them because they are broadcasting using national media, which is credible, right? No!

After 22 years of managing money for clients in the stock market, I have found that market forecasts continue to be false over and over. I’d like to give you three reasons why you shouldn’t listen to them:

1. Although market forecasters can be entertaining, they provide no real investment value. Market forecasters do not help anyone make money. In fact, investors who follow them are more likely to lose money than to gain it.
2. The market guru, seer, pundit or executive continually makes forecasts in an attempt to gain public attention. The way the forecasting game works is that the market guru, seer, pundit or executive continually makes forecasts in an attempt to gain public attention. By sheer luck, maybe half of these predictions are proven right — meaning that at least half of them are wrong. On the occasions when the forecast turns out to be correct, the forecaster plays it up. Those many forecasts that don’t pan out (and those many investors who are financially hurt by them) are never spoken of again.
3. You’re much more likely to get an accurate prediction of the future by listening to the weather forecasters. At least the weather forecasters inflict less damage when they’re wrong.

Ned Davis Research and InvestTech Findings

Ned Davis Research and InvestTech collaborated to analyze the forecasts of some of the most highly paid and highly regarded market forecasters in the financial industry. This is a small sampling of the findings.

In the January 14, 2008, edition of By the Numbers from Direxion Funds, they published a report showing how the forecasters did last year. The year 2007 appears to be a different year, but the same story. One thing the forecasters can claim is consistency because they are consistently WRONG!

• The average prediction made on January 1, 2007, by 58 Wall Street forecasters for the yield on the 10-year Treasury note as of year-end 2007 was 4.88%, an increase of +0.17% over its 4.17% level from December 31, 2006. Instead, the actual December 31, 2007 yield did not rise from a year earlier, but fell to 4.02% (source:  BusinessWeek).
• 82% of money managers believed in late December 2006 that long-term interest rates in the US would be “unchanged or higher 12 months later.” The yield on the 30-year Treasury bond was not “flat to higher” but rather declined from 4.81% to 4.45% during calendar year 2007 (source:  Merrill Lynch).
• 56 economists who were surveyed in mid-January 2007 predicted that the average price of oil would be $58 a barrel in the 4th quarter 2007, down $3 a barrel from its $61.05 price of December 31, 2006. However, the price of oil did not fall, but rather rose +57% during 2007, closing last year at $95.98 a barrel (source:  USA Today).
• The S&P 500 was up +9.2% YTD (total return) through Friday, July 20, 2007, closing at 1534. The headline in Barron’s over that weekend stated, “It’s Still Time to Buy” forecasting an additional +6% rise to 1625 by December 31, 2007. Instead, the stock index fell 4.3% to finish 2007 at 1468. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market (source:  Barron’s).

Also, from a long-term historical perspective, here is some more interesting “market forecast” trivia. This is also courtesy of Direxion’s By the Numbers publication:

• On the morning of October 19, 1987 — the trading day that ultimately resulted in the largest one-day percentage loss in the history of the S&P 500 — the Wall Street Journal ran a front-page article with the subtitle “Some Stay Bullish, Believing Downturn is Temporary.” The S&P 500 fell 20.5% that day (source:  Wall Street Journal).
• On August 13, 1979, BusinessWeek ran a cover story titled “The Death of Equities.” The S&P 500 closed at 107 on August 13, 1979. The S&P 500 closed calendar year 2007 at 1468. Apparently, equities didn’t die…(source: BusinessWeek).
• At the close of business on Wednesday, October 9, 2002, the S&P 500 bottomed at 777 before beginning a bull market run that gained +101% to peak at 1565 on October 9, 2007, exactly five years to the day after the bear market bottom. The headline in the business section of USA Today on Thursday morning October 10, 2002 was “Where’s the Bottom, No End in Sight.” (source: USA Today).

These findings may seem shocking to someone encountering them for the first time, but they are far from atypical. This is just a small snapshot of how bad the market forecasting business really is. Yet despite mountains of data that show how ineffective the celebrity market forecasters are, they continue to make their predictions and many unfortunate people continue to base their financial decisions on shoddy, unproven advice.

So, if forecasts are a waste of time then what does work? After 22 years of managing money, I am convinced that investors will only succeed when they are able to remove emotion from the investment process. Gut feelings are not a reliable investment strategy — even the gut feelings of so-called experts.

Our clients at Paragon Wealth Management can be confident that their portfolio isn’t being managed by some celebrity market fortuneteller. Our quantitative models enable us to impartially measure what is actually happening in the market and how much risk there is at any point in time. We constantly evaluate the models to determine how effectively they are working. In my opinion, this is one of the best ways to invest for long-term success.

About the Author
Dave Young started his career as an entrepreneur after graduating from Brigham Young University in 1980. He successfully started 12 businesses and decided to sell them in 1986. He wanted to invest the proceeds, but was unable to find an investment company that met his needs. As a result, he started Paragon Wealth Management later that year. Today, he has cients throughout the United States.  

To learn more about Paragon Wealth Management call 801-375-2500 or visit www.paragonwealth.com.

Paragon Wealth Management's new website

Our new blog and website are officially finished. We are excited to see everything come together.

We decided to redesign our website and marketing materials last Novemenber to give Paragon a new look. We started brainstorming ideas of ways we could improve our website and overall look. It took several months until we knew exactly what we wanted.

We hired Red Olive Design, a web design company in South Jordan, Utah, in late March 2008. They started with our new logo, next our letterhead, and now our website. We have been very impressed with their work. They have been great to work with. We still have some more print materials to finish, but most of the work is complete.

We will continue to post articles on our current blog Money Managers Live each week about investing, building wealth, and maximizing retirement income. We will also post market updates and news about Paragon. We will post information on this blog more frequently (two to three times per week).