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.

At Paragon Wealth Management we believe that active management strategies can be significantly more effective than passive strategies. The following video summarizes Paragon’s views on the benefits of active wealth management. We invite you to compare our track record to the S&P 500 which is one of the most common passive management strategies used by other financial advisors.

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.

The past few months we have been working on some new videos about Paragon Wealth Management to help investors understand who we are and what we are all about. This short video is an introduction our company. It also shares our views on active money management vs. buy and hold. This video was created for our website. If you would like to see steps 1, 2, and 3 mentioned at the end of the video, visit 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.

photo by istock

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.

The Paragon Team:  Trudy, Shannon, David, Nathan, and Elizabeth

Paragon Wealth Management celebrated 23 years of business this month.

The beginning of Paragon

David Young started his career as an entrepreneur. He opened over a dozen successful businesses in the early 1980’s. In 1985, he sold his businesses and wanted to invest the proceeds, but was unable to find an investment firm to meet his needs.

David began conducting extensive research to find the best ways to invest. After a year of research and trial and error, he opened Paragon Wealth Management for business. At first he managed his money and his friends’ and family’s. When he avoided the 1987 crash, his methods sparked a lot of interest from investors, and his company began to grow.

In the early years of David’s business, while managing his own money, he built and tested basic quantitative models that determined when to be in or out of the equity markets. The models measured, monitored, adjusted and changed the investments as market conditions changed.

David said the largest obstacle he faces in the investment industry is a bear bear market. He displays a 9 1/2 foot grizzly bear in his office that he hunted in Alaska to show he “killed” the bear. As an avid hunter and outdoorsman, David stared risk and uncertainty in the face many times while harvesting some world record book animals. At Paragon, in a similar way, he has survived three major bear markets and many mini bears over the past 23 years.

Today, David continues to research to find ways to improve Paragon’s portfolios. Paragon is known for its flagship portfolio called Top Flight. It has generated a total return of 323.01% versus 30.82% for the S&P 500 from its inception on January 1, 1998 through October 31, 2009. Its compound annual return is 13. 16% versus 2.33% for the S&P 500. (Visit www.paragonwealth.com to see complete track record and full disclosures.)

When it comes to investing, there are many options. If you decide to invest in the stock market, you could do it yourself, talk to a financial planner or let a wealth manager manage your money.

Most people think wealth managers, financial planners, money managers, brokers, etc. are all the same. Part of the problem is that titles for financial sales reps are completely unregulated. This means that brokers, annuity salesmen and insurance agents are all free to call themselves advisors, financial consultants, financial planners or whatever they want.

Listen to this short video presented by wealth managers at Paragon Wealth Management about how to find the best financial advisor to manage your money.

photo by nicholas_T

Written by Scott Morrison, Dow Jones 

SAN FRANCISCO (Dow Jones)–Dave Young readily admits his investment philosophy is squarely at odds with mainstream practice.

Rather than buy a security and hold it in expectation it will rise in value, Young times the market. His firm, Paragon Wealth Management, jumps in and out of exchange-traded funds, trying to catch market swings at just the right moments. He trades so frequently that Paragon’s flagship Top Flight growth fund routinely turns over its entire portfolio every year.

“I just don’t trust buying and holding and hoping it works out,” says Young.

A former magician who once owned a llama farm, Young began managing his own money in 1986 as part of an effort to scale back his life. His friends saw he had a knack for it and quickly asked if he would manage their money too. In 1992, he set up Provo, Utah-based Paragon as a full-fledged money-management operation.

Paragon remains a small firm with just $90 million under management. Young says that small size is an advantage, allowing him to be nimble in a way that Wall Street titans can’t be. Young, who holds a bachelor’s degree in business management from Brigham Young University, invests his own money alongside the assets entrusted to him by institutional and individual clients.

Young’s $35 million Top Flight Portfolio focuses on the best-performing sectors within global stock markets. He moves in and out of a range of ETFs, which typically track market indices, using two groups of proprietary quantitative models as his guides.

The first group of models crunch sentiment and momentum indicators, value ratios, volume measurements and other data to identify the best-performing industries, currencies and country markets.

These models typically pick up trends that are only three or four months old. That lets Paragon lock on to the trends while they are still active. Young says he doesn’t set target prices, but reacts after a monthly review examines whether trends are breaking down.

Paragon also uses a second set of risk models that helps the firm decide how much of the portfolio should be invested in stocks at any given time.

So far, the models appear to be working well. According to Young, Top Flight has averaged a 15.75% return over its 10-year history, compared with a 4.37% average return for the S&P 500. The fund generated a 17% return in 2007 and is down 9% through the end of August this year. That compares with a 5.5% gain in the S&P 500 in 2007 and an 11% decline this year.

Top Flight Portfolio is a not a mutual fund product and so it isn’t tracked by Morningstar Inc. Investors must rely on Paragon’s self-reported results.

Until last year, Top Flight traded mutual funds and used contra funds, funds that focus on contrarian views to prevailing market sentiment, to hedge positions. But Young shifted to ETFs after mutual fund managers began to discourage frequent trading.

   ‘Dialing In’ On Asset Classes

ETFs also enable Paragon to “dial in” on a specific asset class. Top Flight typically holds on average of 13 ETFs at any one time and as a rule won’t invest more than 9% of total assets in any single ETF.

“We can get exposure anywhere we want it and we are completely liquid,” Young says, adding that Flight typically holds positions for between three and 18 months.

The downside of Top Flight’s active trading: a turnover rate that typically tops 100% a year, which causes higher tax liabilities for investors.

Nathan White, Paragon’s chief investment officer, says trading gains almost always offset any tax obligations. “I’ve never seen that be an issue for any of our clients,” he says.

Paragon’s technique has helped the firm identify opportunities that might have been missed by funds that use a more fundamentals-based approach to investing. Last year, Paragon’s models pointed out increasing momentum in the Brazilian stock market, which soared on the back of rising prices for minerals, agricultural commodities and oil. In April 2007, Top Flight bought shares of the iShares MSCI Brazil Index ETF (EWZ), a stake it sold this August when its models told Young Brazilian stocks were losing steam. Paragon reported a 43% gain from EWZ, which has subsequently fallen by about 23%.

Paragon similarly took advantage of momentum in South Korea last year by investing in iShares MSCI South Korea Index Fund ETF (EWY), which mirrors the performance of publicly traded securities in that Asian market. Paragon bought on a dip in mid-August last year and sold less than three months later, posting a 26% return. Paragon’s timing was prescient: EWY has subsequently plunged about 40% as rising fuel costs, weaker exports and record household debt squeezed South Korean economic growth.

But Paragon doesn’t just pick rising indices. The firm’s mean reversion models prompted the Paragon team in July to invest 4.5% of Top Flight’s assets in the SPDR KBW Regional Banking ETF (KRE), which tracks regional banking institutions listed on U.S. markets. White says the models indicated that regional bank stocks had fallen so dramatically that they were poised to rebound. The ETF has since gained more than 32%.

Despite such bets, Young acknowledges that Top Flight has not significantly outperformed the S&P so far this year, but he says that’s because the market has not fallen far enough to trigger Paragon’s risk models and take the firm’s assets out of the market.

But however the financial turmoil unfolds, Young insists that Paragon is nimble enough to move quickly once the market begins to rebound.

“There are huge bargains, such as financials,” he says.

(Scott Morrison covers technology, focusing on the Internet, for Dow Jones Newswires. He can be reached at 415-765-6118 or by email at scott.morrison@dowjones.com.)

(TALK BACK: We invite readers to send us comments on this or other financial news topics. Please email us at TalkbackAmericas@dowjones.com. Readers should include their full names, work or home addresses and telephone numbers for verification purposes. We reserve the right to edit and publish your comments along with your name; we reserve the right not to publish reader comments.)

Copyright (c) 2008 Dow Jones & Company, Inc.

photo by mickeylieu

When I think of olympians, I think of the best of the best. The best track stars, the best gymnasts, the best swimmers (Michael Phelps), etc. To become the best it takes a lot of training, dedication and motivation.

Most people don’t see what these athletes experience behind the scenes to become olympians. They only see the result of what they’ve become.

This is true with investing. To become an “olympic” investment advisor, it takes a lot of training, dedication,  motivation, and years of experience. A person can invest in the stock market on their own, but usually they won’t get the “olympic” results they are looking for unless they put in an “olympic” type of effort. 

That’s why most investors who want “olympic” results hire a professional or an “olympic” advisor to manage their funds. It’s important to find someone who is capable of managing your funds to receive the best performance results. There are many advisors that you can trust and become friends with, but they may not be the best people to manage your life savings.

It is uncommon for an Registered Investment Advisor to post their performance results, especially online. There are many reasons for this, but poor performance is the primary one.

Simply posting our performance numbers is one area that sets us apart from other advisors. Posting our performance numbers “net of all fees” is another way in which we are unique. We post our portfolio performance numbers, net of all fees” on our website each month. That way an investor can see our actual net results generated on an ongoing basis.  

We updated our performance numbers  through July 30, 2008, on our website today.

Next time you think about investing, and hiring an investment advisor, look at their performance record, net of all fees, to see if it is “olympic” material.

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.