Making Volatility Work for You

By
February 28, 2019
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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.

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By
June Adams
December 20, 2021

TSA PreCheck Scams

 

TSA PreCheck is garnering a lot of interest, from both travelers and scammers alike. In addition to pocketing your renewal/application fee, these scammers take your personal information to sell on the dark web or create false identities that can be used illegally. TSA PreCheck scam emails are quite sophisticated, lacking many of the typical red flags such as misspellings, grammatical errors, and slightly-off-looking versions of TSA logos. We recommend that you continue to check the email address and web address of the sender, as well as how they’re asking for payment.

Always verify that the TSA PreCheck web and email address ends in ‘.gov’ – not ‘.com’, ‘.org’ or anything else. If they don’t, these are not official TSA PreCheck communications and you should not provide personal information or payment information. Additionally, don’t purchase or renew a TSA PreCheck membership by clicking on a link you were sent via an email. Instead, go directly to the TSA or Homeland Security website.

The other major red flag comes when it’s time to pay for your renewal or application fees. While there are multiple ways to make a payment for government services, scammers typically only give you the option of using PayPal. If you get an email and suspect it’s a scam, or end up clicking on a bad link yourself, TSA says to do the following:

  1. Report the fraud to your local Police Department.
  2. File a report with the Federal Trade Commission website.
  3. Contact your credit card company or bank and let them know about any fraudulent charges.

In the event that your credit card information ended up in the wrong hands, you will need to work through your bank or credit card company. TSA specifically states on its website that it “will not issue a reimbursement to applicants who attempt to enroll in TSA pre-check through a fraudulent website.”

By
Jeff Motske, CFP®
June 7, 2018

Your retirement savings, which is the means to your financial freedom, should be set up in the same way. There is no way to accurately predict what life will be like during the course of your retirement. Based on the climbing US debt, it is safe to assume that tax rates may increase. Unanticipated expenses may arise. Life is never predictable. Therefore, you need your money to be ready to work for you. In my experience, one of the best ways to ensure this is by utilizing three types, or buckets, of savings.

The first bucket is comprised of your traditional retirement investments like a 401(k), 403(b), or 457 plan. These plans are very popular and easily accessible as most employers offer them. Contributions grow tax-deferred and can be automatically deducted from one’s paycheck. However, what was a tax benefit while saving becomes a tax-trap once you retire as those funds will be taxed once they are pulled out. Another thing to consider is what the tax rate will be like at that time. I always ask my clients, “Do you think taxes will have gone up or down by the time you retire?” No one ever says down. Therefore, if all your retirement funds are in this first bucket, you are suddenly at the mercy of the government on how you utilize your retirement money. This is not financial freedom.

However, more buckets mean more options. Let’s consider that you also have retirement savings invested in a second bucket containing tax-free funds. This is typically comprised of Roth IRA’s or Roth 401(k)’s. Although Roth 401(k)’s are not highly promoted or even included in a lot of employer-offered plans, they are a very powerful saving tool. Your contributions grow tax-deferred and are distributed tax-free. With the addition of this second bucket or savings, you suddenly have a little more flexibility on how you access your money.

The final bucket is one that isn’t on most people’s radar. This bucket should be comprised of the investments in your portfolio of stock equities. The gains on these investments are taxed as capital gains. Historically, capital gains tax rates are significantly lower than typical income tax rates. If these investments are sold properly, they can provide another option when trying to manage how your money works for you.

As you can see, multiple buckets of retirement savings seek to provide you with freedom and tax control. If taxes are high, utilize your second bucket. If taxes are lower, feel free to dip into your first bucket. You can work with your financial advisor on what investments belong in which bucket, as well as to dial more or less into these buckets depending on tax rates and what your needs are. This flexibility is key to securing your financial freedom in retirement.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Investing involves risk, including the risk of loss.

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