Category Archives: Financial Planning

Marketing Timing Pros and Cons

January 1, 2018

Marketing Timing Pros and Cons, Marketing TimingThe S&P 500 has enjoyed an eight-year bull market with an average annual return of 19.4 percent. Starting in 2019, U.S. companies will benefit from a massive cut in the corporate tax rate from 35 percent to 21 percent. This provides them with the opportunity to make significant investments in expansion, perhaps extending the investment growth rate even further.

On the other hand, with partisan politics as divided as ever and the presidential administration under investigation for collusion with a foreign adversary, a single bad news day has the power to sink stock markets across the globe. Thus, the current scenario presents quite a conundrum for investors.

Even without the new tax reform bill, some analysts have cautioned that the markets are overdue for a correction. However, if investors heed this call and sell, they could miss out on substantial growth opportunity in the coming year. There is a term for contemplating investment changes based on economic and political events – it’s called market timing – and is usually deployed by investors willing to take significant risks.

Market timing is the opposite of the buy and hold investment strategy. It involves buying and selling stocks based on market, economic or specific company fundamentals that have the power to influence stock prices over a short period of time. Investors may take advantage of gains derived from rising prices and avoid losses when they decline by basically jumping in and out of the market at will.

Unfortunately, a severe disadvantage to this strategy is that no one – not even experienced wealth managers, stock brokers or market analysts – can accurately predict when prices will rise or fall. Moreover, security prices do not always move in tandem, so while an investor might correctly predict a trend, he might not select the stocks that benefit from sudden, dramatic movements.

While market timing is considered a risky strategy, there are cues investors can use to help guide their decisions. For example, historically markets have often climbed to their greatest heights just before a fall. But again, no one knows when this will happen. If market timer sells too soon, he would miss out on the greatest gains. If he waits too late, he could see his potential earnings decline. Then there’s the recovery period. In the past, the worst bear markets fell quickly but then recovered just as fast. A market timer will want to buy back into the market at the right time or risk losing out on opportunities as stock prices begin their ascent again.

There are several caveats associated with market timing. First of all, it is more appropriate for investors with a high-tolerance for risk. It requires considerable research and continuous monitoring of the overall markets and specific securities of interest. Tactically, it can increase investment expenses – such as trading fees and capital gains taxes. And finally, be aware of the types of assets best suited for timing. For example, it may not be wise to drop dividend-paying stocks precipitously, since many continue to pay out and even increase dividends over time regardless of market declines.

Market timers also should be cautious about their financial situation and stage of life. In other words, if nearing retirement it might not be wise to use retirement assets for a market timing strategy. In fact, it’s a good idea to segment a portion of an investment portfolio for timing strategies so as not to impact assets designated for other goals, such as saving for a home or college expenses.

On a final note, recognize that market corrections are inevitable whether engaged in market timing or not. The potential for loss is an inherent consequence of investing. Rather than try to time the market, another way to offset losses is to invest automatically. By investing regularly over time, investors can take advantage of buying more shares when prices are low and simply buy fewer shares when prices rise. Either way, automatic investing gives you a way to continue increasing market value without having to engage in timing strategies.

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High Concept Strategies: Socially Responsible Investing

December 1, 2017

Socially Responsible Investing This is the third in a series of articles discussing various types of high-concept investment styles. This month we tackle socially responsible investing.

Socially Responsible Investing (SRI) is just what it sounds like – putting your money where your mouth is. If you are concerned about environmental issues, healthcare, debilitating diseases, labor abuses or even buying domestically manufactured products, SRI identifies companies that align with an investor’s values.

Also referred to as sustainable, responsible and impact investing, this approach seeks more than just a monetary return on investment; it promotes investment in companies that take a proactive stance on environmental, social and corporate governance issues. This includes companies in the following types of industries:

  • Clean technology
  • Green building construction
  • Sustainable agriculture
  • Water conservation

In addition, SRI extends to companies in other industries that employ strict operational practices with regard to diversity, transparency, workplace benefits and/or safety.

Today in the United States, more than 20 percent of professionally managed money is invested in SRI strategies. In recent years, this charge has been driven largely by members of the millennial generation, which has been quick to identify long-overlooked issues that are beginning to have a direct effect on their own lives and careers.

A new survey revealed that nearly 50 percent of recent graduates from the Wharton School of Business who went on to start their own businesses have implemented various forms of social benefit as part of their business model.

Socially Responsible Yardstick

To identify socially responsible companies, the industry has developed guidelines for various Environmental, Social and Governance (ESG) Criteria. For example, if an investor is focused on environmental concerns, he would review a company’s policies for energy use, waste, pollution, natural resource conservation and animal treatment. It is also prudent to evaluate how various environmental risks could impact the company’s revenues and explore the strategies the company uses to mitigate those risks.

For an investor with more societal concerns, it is important to investigate the business relationships of each prospective company. For example, what types of companies comprise its supply chain, and do those companies possess the same values? Find out if the company donates any of its profits to certain causes or the local community, and does it encourage employees to engage in volunteer work? Also investigate whether or not the company itself values its employee’s health and well-being with regard to workplace conditions, health insurance and other benefits, and competitive wages. Does it make a special effort to hire less-attractive job candidates, such as ex-convicts, people with disabilities or immigrants? And finally, the marketing of the product or service it provides may offer societal benefits. For example, perhaps it is priced for low-income accessibility.

Governance is relatively easy to gauge because it will be evident if the company practices transparency and accessibility with regard to accounting methodologies. Inquire as to what types of issues common stockholders are permitted to vote on, and research members of the board of directors to see if any have potential conflicts of interest. And finally, find out if the company uses political contributions to lobby for favorable treatment.

SRI Vehicles

The sustainable and responsible investment approach spans a variety of products and asset classes, including stocks, fixed income, private equity, venture capital and real estate. Fortunately, for investors who want to be socially responsible but do not want to have to conduct due diligence on every investment, there are SRI mutual funds that do the work for them. Presently, there are more than 200 SRI funds available to investors. To learn more about investment options, check out the Forum for Sustainable and Responsible Investment (


Another advantage to socially responsible investing is that performance is not generally sacrificed to meet SRI goals. Over the past one-year, three-year, five-year and 10-year timeframes, the KLD 400 Social Index has kept pace with the MSCI USA Investable Market Index. Over the past 10 years, research has shown no negative correlation between a company adopting a socially responsible management approach and its stock performance.

With no notable difference in performance emanating from SRI standards, it is easy to imagine these companies will attract more investors moving forward. We could even reach a point where not adapting a socially responsible corporate strategy could actually become a deterrent for investors. But for now, SRI is enjoying a healthy growth rate with a more than 33 percent increase from 2014 to 2016.

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