Money Managers Live

Paragon's Summer BBQ

Thank you to everyone who came to Paragon's summer BBQ. We had a great turn out and a lot of fun watching Dave perform his magic - literally!

If you missed it we certainly hope you will join us next year!

The following article provides a good explanation on the risks inherent with owning US Treasuries at this time.

Treasuries & The Retirement Crisis

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I'm shocked to see how many average individual investors are still clinging to bonds. For many older investors, 50%-plus of their assets are in low-yielding US Treasuries. My jaw hit the floor when I heard this.

The common rationale goes something like this:

"Yes, government bonds provide very low yields but at least my capital is safe."

Unfortunately, nothing could be further from the truth and this way of thinking is going to lead to a retirement crisis. Let me explain:

1. Income is at risk: First of all, it is wrong to simply dismiss the impact low yields can have on an investor's portfolio and lifestyle. Today, if an investor wishes to live off coupons from 10-year US Treasuries, he'll need a $3-million-plus portfolio to generate about $50,000 in annual income. This is simply not realistic, considering the average portfolio size.

2. Capital is at risk: While 30-year Treasuries could rally to a sub-2% yield (perhaps when EU crisis 4.0 hits), the risk-return profile doesn't justify the opportunity. The 'rallying room' - that is the gap between current yields and the theoretical floor of 0% - is the smallest it has been over much of history. So to place so much faith in the continued flight to safety is to make an ill-balanced bet. The upside to yields is far greater than the downside.

True, investors holding US Treasuries to maturity will get their principal back. But you have to remember that when you're dealing with a super-low yield to maturity the real return is often negative to begin with. Buy-and-hold Treasury investors are facing major headwinds even if yields don't change.

But someday yields will normalize. That day may not happen in the next couple years, but it could. The markets are unpredictable. Did anyone five years ago forecast that US Treasury yields would be as low as they are today?

If yields continue to drop, Treasuries would rally, but I think investors should save the rate squeezing for the speculators. And that's okay. In fact, for the more sophisticated Seeking Alpha readers, this might be a viable trade. But it takes a lot of time, effort and intestinal fortitude to profit from the last 100 basis points of a 30-year bond bull market. So be warned.

However, for the average retiree looking to preserve their nest egg, it's time to dial down the exposure to US Treasuries. This doesn't necessarily mean reducing the allocation to 0%. But it is imperative that investors evaluate their vulnerability to a single market factor - interest rate risk - and diversify accordingly.

Disclaimer
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.

A Quiet Comeback

Written by Nathan White, Chief Investment Officer, Paragon Wealth Management

The markets have quietly snuck back close to their highs for the year.  I say quietly because the volume of transactions has been extremely low due to summer vacations (especially in Europe!), decent earnings, and it’s just plain hot.  Recent economic data has been a bit stronger suggesting that the economy could be turning up and that the second quarter weakness was mostly due to seasonal factors.  As we approach the highs, around 1420-1425 area in S&P, there is bound to be some resistance and what determines whether a breakout above this level can be made will probably rest upon events that will unfold over the next four weeks. 

On the domestic front is Mr. Bernanke speaking at Jackson Hole on August 31 and whether there will be more QE.  The employment report then comes out on the first Friday of September.  The European situation, which has been quiet the last few weeks, comes back to the forefront with ECB meetings, Spanish meetings (and whether they will “formally” request aid), and German court rulings of the legality of the ESM.

All of these events, along with people coming back from “summer”, will put volume and potential volatility back into the market ahead of the election season going into full steam.  For now we view any weakness caused by these events to be buying opportunities.  

Disclaimer
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.

Olympic Investment Advisors

Written by Dave Young, President of Paragon Wealth Management

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.  

Our performance numbers  are on our website and are updated regularly.

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.

Disclaimer
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.

Financial Basics: Building a Financial Reserve

Written by Dave Young, President

We have 24 hours in a day to do whatever we want with our time and money. No matter what we do, the clock keeps ticking.

In order to make the best decisions with our time and money, we need to make goals and have a plan.

In order to build a reserve of money for the future, I suggest making these four goals.

1- Manage & Reduce Debt

Debt can get out of control and we need to make sure we manage our
current debt. Make sure you know exactly how much debt you have and take
steps to reduce it.

2- Get out of Debt

It will take time to get out of debt, but it is possible. Take small steps to reach your overall goal.

3- Build a three month reserve

You never know what will happen. I suggest building a three month
reserve. Don't live pay check to pay check. Put money aside so that you
could live for three months if something were to happen.

4- Invest for the future

Start investing for the future today. Open a savings account, add to your retirement plan through your work, open an IRA, etc.

Budgets may not seem exciting or even interesting, but they are the key to making your finances work.

A good example is when you make a goal to stay in shape.

You can't get anywhere unless you start with a goal to know where you  are going. Then, you must have structure in your eating and exercise. You can't just do whatever you want and hope you will get in better shape. Finally, you must exercise a lot of patience and persistence.

Do you realize how much money will go through your hands over the next 40 years?

$20,000 a year= $800,000 (save 10% and invest at 10% return, you will have $885,000 saved)

$40,000 a year= $1,600,000 (save 10%  and invest at 10% return, you will have $1,770,000 saved)

$60,000 a year= $2,400,000 (save 10% and invest at 10% return, you will have $2,656,000 saved)

Those numbers are hard to believe when we only see the numbers on our pay checks every two weeks. Over time what seems like a little, adds up to a huge amount.

It is important to take notice of where our money is going on a regular basis. Is it going to provide for our wants or our needs?

Teeter Totter Example

If you put your income on one side of a teeter totter and your needs (groceries, utility bills, mortgage, etc.) and wants (dining out, entertainment, new clothes, etc.) would the teeter totter be balanced? If not, it's time to reevaluate.

Money doesn't make you happy, but it sure helps your
situation if you stay within your means and don't go into excessive debt. People are happy at all levels of income. If a person makes $40,000 a year and saves $5,000 they are probably happier than a person
that makes $250,000 and spends $300,000. It is all relative.

The level of control over the resources (or money) that a person has does have a direct impact on happiness. The key to that control is developing and following a budget. This will help you build wealth over time.

Visit our website, www.paragonwealth.com, for more information.