Got Your Refund, Now What?

Do you want to start investing but fear you will be buying in at the top of the market? Well, what if I told you there was a way to invest in which you could take emotion out of the equation altogether, not only banishing market anxiety but actually taking advantage of dreaded market volatility? Too good to be true? Far from it. The panacea exists, and it’s called dollar cost averaging or, as we call it in the finance world: DCA.

Dollar Cost Averaging is a pretty simple financial strategy: you purchase a set dollar amount (say $300) of securities (stocks, mutual funds, etfs, bonds…you get the idea) on the same day each month. Because you are committed to a set dollar investment the total number of shares purchased will vary from month to month based on the market. In months where prices are increasing you receive fewer shares; however, in months with falling prices your money buys MORE shares.

How does this benefit you? It removes emotion from the investment equation by keeping you from attempting to “time the market” (which has been proven to be impossible) and helps establish the saving behavior necessary for long term financial success. You are not waiting for a certain price to be reached before buying and when markets are experiencing volatility you are not selling and sitting on the sidelines waiting for things to settle down and then attempting to determine when to buy back into the market. Rather, you are using a disciplined strategy to steadily contribute to your long term goals and when the market is on sale, prices are declining, your monthly contribution has more buying power.

Here’s what’s even better: you are most likely already taking advantage of DCA as part of your financial plan, without even realizing it! If you are contributing to an employer sponsored retirement plan like a 401(k) (which you should be!), you are taking advantage of Dollar Cost Averaging by setting aside a certain percentage of your pay and investing it on set days each month. But why limit a DCA strategy to just one segment of your financial portfolio? You can leverage Dollar Cost Averaging to efficiently build individual accounts for shorter or medium term priorities such as travel, a new car, or purchasing a house. It’s not magic or rocket science, but Dollar Cost Averaging can help take advantage of volatility in markets, remove emotion from investing, and establish a beneficial pattern of saving for future priorities.

While dollar cost averaging is a powerful financial tool it is only one component of a full financial plan. If you would like to talk more about the impact of dollar cost averaging on your personal financial plan please contact me at zach.swaffer@trilogyfs.com.

When you put the words, “retirement,” “investments” and “risk” in the same sentence, most of us will automatically think about market risk, you know, the possibility for an investor to experience losses due to overall performance of financial markets1.  According to the 2014 Annual Retirement Confidence survey, 88% of retirees are worried about maintaining the same standard of living.  While Market Risk is a very real reason to worry, there are other risks that may throw a wrench into your financial plan. This time we will discuss the possible need for Advance medical care, how much it could cost, and how to be ready for it.

The Risk: There is a 50% chance that any of us will need some form of Advance Medical Care2.  In other words you or your spouse WILL need Advance Medical Care. The risks are so high and yet most investors don’t prepare of it.

The Cost: Know the potential damage. The numbers don’t lie. The average cost of long term care in the US for Nursing Home Care for a Semi -Private room is a whopping $225 per day3.  The average stay in a Nursing home is 892 days.  For easy math you are looking at a $200,000+ cost above and beyond your living expenses.

The Solution: Use small dollars to cover big expenses. Get life insurance with living benefits.

One solution that is becoming more and more popular is getting a life insurance plan that can be used to cover Advanced Medical Care. Some insurance companies offer something called Living Benefits Riders. These riders allow you to “advance” a portion of your death benefit if certain conditions are met, such as Terminal illness, problems with the Activities of Daily Living  and life threatening conditions.

Building a Financial Plan that can withstand the risks of life is complicated.  Make sure you hire a Financial Coach to help you prepare for the unknown. Thinking outside the box may be a way to protect your golden years.

[1] www.investopedia.com/terms/m/marketrisk.asp

[2] http://www.aaltci.org/long-term-care-insurance/learning-center/probability-long-term-care.php

[3] www.genworth.com/about-us/industry-expertise/cost-of-care.html#