photo by { nic }

Written by Nathan White, CFA, Paragon Wealth Management

INDUSTRY BARRIERS

The financial services industry exists to assist people with investing by facilitating trades, providing advice, and investment management. It is a multi-billion dollar industry.

Unfortunately, much of what the industry does actually hinders investors rather than help them. Here’s how (source:  SecondeOpinions.ca):

Conflict of Interest- Most advisors and brokers provide advice to investors and get paid on the basis of selling certain investment products rather than the quality of the advice they provide.

Commissions- Most advisors and brokers are compensated by selling products. Often the riskier a product, the higher the commission.

Fees- High fees can impede investor performance. Many fees are built in or hidden making it difficult to determine the true cost and their effect on performance.

Poor Knowlege- Many advisors and brokers are professional sales people and do not have the necessary understanding of basic principles of investment and risk management.

No Performance Measurement- Most financial advisors have no record of their actual performance for client accounts. Without measurement, it is impossible to compare against alternatives such as other investment managers or a benchmark. Performance measurement determines the quality of the advice.

Lack of Accountability- Most financial advisors and brokers do not accept fiduciary responsibility over their clients. They are not accountable for the quality of advice provided or to the adherence of proper investment management principles.

MARKET MOVEMENT

The stock market is an uncertain and volatile place. Recent market activity has reinforced that view. Due to the uncertainty, many people think that investing in the markets is a no win game and either refrain from investing altogether or place their money in low yielding instruments such as savings accounts, money markets, or CD’s which don’t provide them the return needed to attain their financial goals.

People also tend to refrain from investing or sell their investments during extended down periods in the market — right at the wrong time!

The best defense against a bad market is to hire a good active manager or change to a more conservative allocation that will keep you invested through the difficult times.

Don’t be discouraged by the barriers to investing. If you are aware and understand, you will overcome them. Those who can successfully navigate them will succeed financially and set themselves apart from the masses!

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.

photo by schwong

Written by Nathan White, CFA, Paragon Wealth Management

People often wonder how they can be successful investors and build wealth.

To reach these goals we have outlined seven steps (also known as the Seven Steps to Building Wealth):

1. Start investing now

2. Spend less than you earn

3. Avoid unnecessary debt

4. Hire a competent financial advisor

5. Follow a sound, long-term strategy

6. Avoid large losses

7. Be patient

These steps can help you avoid and overcome the multitude of barriers that prevent people from becoming successful investors. In fact, these barriers are so significant they prevent most people from investing profitable or deter them from investing altogether.

My goal is to help you recognize and understand these barriers in order to beat them.

Consider the following quote attributed to Alexander Graham Bell,

“The most successful men in the end are those whose success is the result of steady accretion. It is the man who carefully advances step by step, with his mind becoming wider and wider — and progressively better able to grasp any theme or situation — preserving in what he knows to be practical, and concentrating his thought upon it, who is bound to succeed in the greatest degree.”

In order to assist you in your investing endeavors, I would like to identify three main barriers to successful investing:

1. Behavioral barriers

2. Industry barriers

3. Market movement

BEHAVIORAL BARRIERS

Psychological and behavioral traits affect individuals’ investment decisions. Unrecognized, these behaviors can lead to poor investment performance and/or financial disaster. The following are some behavioral barriers that individuals create (source: SecondOpinions.ca):

Expectations- Many individual investors have unrealistic expectations about returns in the market and long and short term risk.

Emotional- The fear and greed many investors experience often clouds their judgment and leads to poor investment decisions. Many investors sell when or after the market has gone down and only buy after or when it is moving up (Does buy high, sell low sound familiar?).

Overconfidence- Many investors overestimate their ability to outperform the market and thereby take on too much risk.

Lack of Knowledge- Many investors believe the key to successful investing is simply buying and selling the right stock or mutual fund. This demonstrates a lack of basic understanding of investment and risk management techniques.

To be continued next week…

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.

photo by Shabby Chic

This Thursday is the deadline to file your taxes. If you have put it off until now, here is some last minute advice to keep in mind.

Last Minute Tax Tips

Article taken from cbsnews.com

April 15th is quickly approaching. Do you have your taxes done? Nearly half of all tax returns are filed after April 1st. If you are one of the last-minute filers, here are five tips to maximize refunds, avoid errors and get a little something extra back.

First be sure to sign your 1040. It’s a silly mistake, but one plenty of people make - especially if you’re filling out forms online and then printing them to mail. Review page-by-page to make sure your signature is in all the right places.

Next, review tax changes. There were plenty, especially for homeowners. If you made energy-efficient upgrades to your home, check to see if you qualify for a tax credit of up to $1,500. Non-itemizing homeowners are allowed to deduct an extra $1,000 in property taxes, and anyone who bought a car after February 16th of 2009 can deduct sales tax paid up to a certain extent.

Be sure to e-file. If you’re owed a refund, filing electronically can get you your check up to a week sooner. Many taxpayers can also e-file for free. Go to IRS.gov for details on the free-file program.

If for whatever reason you just can’t file by April 15 file an extension. Make sure you send in a Form 4868, which requests an automatic six-month extension. That gives you until October to get your paperwork in order. Just remember to pay now what you owe or face penalties and interest down the line.

Hunt for freebies because they are out there. Cinnabon, Maggie Moo’s and Taco del Mar are among the businesses offering consumers a little tax relief, in the form of free food. Check the websites of your favorite chains to see if any are offering tax day promotions. Keep in mind it’s participating locations only, and while supplies last.

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.

photo by Avery Products

With less than 10 days until the tax deadline for 2009, its not too late to trim your tax bill. One way to do this is by making sure you have fully funded your IRA.

The IRS has provided the following tips for those contributing to an IRA. 

Ten Tips for Taxpayers Contributing to an Individual Retirement Plan

Taken from irs.gov

1. You may be able to deduct some or all of your contributions to your IRA. You may also be eligible for the Savers Credit formally known as the Retirement Savings Contributions Credit.

2. Contributions can be made to your traditional IRA at any time during the year or by the due date for filing your return for that year, not including extensions. For most people, this means contributions for 2009 must be made by April 15, 2010. Additionally, if you make a contribution between Jan. 1 and April 15, you should designate the year targeted for that contribution.

3. The funds in your IRA are generally not taxed until you receive distributions from that IRA.

4. Use the worksheets in the instructions for either Form 1040A or Form 1040 to figure your deduction for IRA contributions.

5. For 2009, the most that can be contributed to your traditional IRA is generally the smaller of the following amounts: $5,000 or $6,000 for taxpayers who are 50 or older or the amount of your taxable compensation for the year.

6. Use Form 8880, Credit for Qualified Retirement Savings Contributions, to determine whether you are also eligible for a tax credit equal to a percentage of your contribution.

7. You must use either Form 1040A or Form 1040 to claim the Credit for Qualified Retirement Savings Contribution or if you deduct an IRA contribution.

8. You must be under age 70 1/2 at the end of the tax year in order to contribute to a traditional IRA.

9. You must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment to contribute to an IRA. If you file a joint return, generally only one of you needs to have taxable compensation, however, see Spousal IRA Limits in IRS Publication 590, Individual Retirement Arrangements for additional rules.

10. Refer to IRS Publication 590, for more information on contributing to your IRA account.

If you have additional questions, or would like to make your 2009 IRA contribution, please contact an advisor at Paragon Wealth Management at 800-748-4451.

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.