Investment Review & Commentary 2019 Q1

The following presents a brief description of our Investment Review & Commentary 2019 Q1 developed in-house by our firm. CLICK HERE to read the full report. Please CONTACT US directly to request a copy of our current Investment Outlook & Strategy Updates.   

Investment Review & Commentary 2019 Q1 ~ Highlights

Benchmark Performance index data for the past time periods QTR, YTD, 1-YR, 5-YRS, and 10-YRS can be found on page one.

Market Recap review and commentary on page two discusses three factors behind the global market rebound from its nosedive in 2018 Q4 and the best performing sectors.  Learn how the market notched its best first-quarter performance in over 30 years.

Market Outlook on pages 3-4 includes review and commentary on the continued slowing of the US Economy with one major economic index noting that the pace of growth could decelerate by the end of the year.  The further commentary discusses the state of growth for the world’s leading developing countries, inflation, oil prices, emerging markets, and interest rates.

Investment Strategy & Portfolio Update In this section pages 4-5, are updates on Asset Class Model, Stock Valuation & Strategy and Fixed Income Strategy as well as a Long-term Perspective.

In PSFI News on page six are Retirement Bits and Pieces with checklists on “Ready to Retire (or Not)” and “Top Financial Concerns for New Retirees.”

To read the comprehensive investment report CLICK HERE.

Standard Disclaimer 

Disclosure: The Quarterly Investment Review of Parr Financial Solutions, Inc. (PFSI) expresses the views of the firm as of the date indicated.  Our views are subject to change without notice. Past performance is not an indication of future results. This commentary is being made available for educational purposes only.  The information should not be construed as an offering of advisory services or an offer to buy any securities. Certain information concerning economic trends and performance is based on information provided by independent third-party sources.  Parr Financial Solutions, Inc. believes these sources to be reliable, but cannot guarantee the accuracy of this information, or the assumptions on which the information is based. This publication may not be copied, reproduced, republished, or posted in whole or in part without prior written consent.

Investment Review & Commentary 2018 Q4

The following presents a brief description of our Investment Review & Commentary 2018 Q4 developed in-house by our firm. CLICK HERE to read the full report. Please CONTACT US directly to request a copy of our current Investment Outlook & Strategy Updates.   

Investment Review & Commentary 2018 Q4 ~ Highlights

Benchmark Performance index data for the past time periods QTR, YTD, 1-YR, 5-YRS, and 10-YRS can be found on page one. 

Market Recap on page two provides review and commentary on the factors behind the global market downturn for the quarter, the one sector providing a positive return, and other noteworthy commentaries on the Fed’s continued rate increases and oil prices tanking.  

Market Outlook on pages 3-4 includes review and commentary on the Global Economy slowing, US Expansion cooling off, the Trade Tug O’war continuing, the direction of corporate earning slowing and an outlook on the  US Dollar as well as an Inflation update, plus some thoughts from Janet Yellen.

Investment Strategy & Portfolio Update In this section pages 4-5, you’ll get an update on the PSFI Asset Class Model, Stock Valuation, Cresmont’s view of P/E ratio and recent Portfolio Changes, including Small-cap, Trade, and Tariff-related Positioning, and Strategic Year-end Tax-loss Selling as well as Fixed Income Strategy.  

In PSFI News on page six are Highlights of Selected Tax Items for 2019, Charitable Giving and IRA RMD, Schwab Annual Notification of Electronic  Money Movement Authorizations on File and Changes to Personal Financial Situation.

To read the comprehensive investment report CLICK HERE.

Standard Disclaimer 

Disclosure: The Quarterly Investment Review of Parr Financial Solutions, Inc. (PFSI) expresses the views of the firm as of the date indicated.  Our views are subject to change without notice. Past performance is not an indication of future results. This commentary is being made available for educational purposes only.  The information should not be construed as an offering of advisory services or an offer to buy any securities. Certain information concerning economic trends and performance is based on information provided by independent third-party sources.  Parr Financial Solutions, Inc. believes these sources to be reliable, but cannot guarantee the accuracy of this information, or the assumptions on which the information is based. This publication may not be copied, reproduced, republished, or posted in whole or in part without prior written consent.

Top 5 Financial Need-To-Knows for Young Adults

Financial Planning for Young Adults

           Anne Rogers

I think we can all agree that transitioning from childhood and our teenage years to adulthood is definitely not easy. To say that there’s a lot you need to know in order to successfully navigate those treacherous waters, especially if your parental or educational experiences have left you lacking in that department is an understatement, so here’s a crash course in your top 5 need-to-knows for setting yourself up for financial success in adulthood.

 

Setting up a Checking (Debit) & Savings Account

Getting this account set up is the basis for everything else financial you will be doing in the future.  Make sure to be educated on any monthly or yearly service fees, minimum balance requirements, and overdraft fees that may be applicable to your account and ask about student accounts if you are currently enrolled.  Just visit your local bank and ask to open an account.

Do you need a credit card?

If you are approaching or already in your early 20’s now is the time to look into getting a credit card. The thought can be intimidating, but if you don’t have any other lines of credit (student/ car/ housing loans, debit accounts, etc.) then you will need a credit card to help build a credit score.  Your ability to buy a car, get approved for housing loans or apartments can be dependent on this.  Compare card benefits (sign up bonuses, cash back rates, interest rates, yearly fees, etc.) before you sign up and know that for every credit card you open or close will cause a short term dip in your credit score.  This dip will recover with on time payments and low usage, so make sure you don’t go off the deep end with your new plastic and know your card’s limit!

Build Your Budget!

First and foremost, you need to know what ALL your monthly income and financial responsibilities are. Covering all your bills is first and foremost, then with the money left over there are a few things you need to consider: an emergency fund (try to aim for $30-50 per paycheck), money to save (10% is a good place to start if your income is low), any things you are trying to save for (this amount is personally set), and last but not least, your fun money will be what’s left at the end.

Create a Bill Calendar

Due DateOnce you know what all your bills are, now you need to set up a calendar with reminders to pay or that the payment is being collected out of your account.  Let’s say you get paid on the 15th and 29th of every month and you have 7 different bills that are collected monthly.  Depending on how much your two paychecks are, you may need to ask the entities to which you owe money to move your billing date for 3 of your bills to the 17th and keep the rest on the 1st so that that way you don’t end up in a situation where you need money, but your account was just cleaned out because of your bills.  If possible, try to keep a minimum of $500 in one of your accounts for your emergency fund.  You never know what could happen!

Maintaining Your Files/ Staying up to date on your spending

Finally, make sure you have a safe box that is both fire retardant and waterproof to keep all of your important financial and personal documents (think bills from the mail, credit and debit card account informational packets, birth certificates, social security cards etc.) because you never know when you may need the official document.  Also, look into apps like Mint that help you to track your spending habits so you know where your money is going and in what areas you can cut back if you need to save for something!

Once you have all this down and maintained, you will have set yourself up to be able to be financially stable!  You’ve got this!

 Anne Rogers collaborated with Parr Financial Solutions for a first-hand view of the world of personal finance from a young adult’s perspective.

Parr Financial Solutions Inc. Named A Top Financial Advisor in Baltimore for 2nd Consecutive Year by Expertise.com

PRWeb Release – Columbia MD March 1, 2018 Parr Financial Solutions Inc., an independent, fee-only,wealth management firm serving clients nationwide, was named a Top Financial Advisor in Baltimore for the 2nd year running. Christopher P. Parr CFP®, PFSI President/CEO and owner of an independent financial advisory firm for over 25 years, said: “it is gratifying to receive recognition as Top Financial Advisor in Baltimore again in 2018.” PFSI is among the 18 selected, of 163 judged, for the merit-based Expertise.com award.

merit-based Expertise award badgeBest Financial
Advisors in
Baltimore
2018

“Parr Financial Solutions is dedicated to providing objective, unbiased advice as fiduciaries in the best interest of its clients,” says Parr. “We specialize in managing investment risk, developing customized retirement plans with income distribution strategies, and in estate planning helping clients manage generational transfers of wealth.”

The merit-based award process is conducted by Expertise via a proprietary research and selection process. Only publicly available data is analyzed. Key factors weighed include reputation, credibility, experience, professionalism and availability. The goal is to connect people with the best local experts. Unlike the many ‘pay-for-play’ awards, an Expertise award is based purely on merit.

About Parr Financial Solutions, Inc.

PARR Financial Solutions, Inc. is independent Fee-Only Financial Advisor and Wealth Management firm helping clients define and achieve their long-term financial goals with a customized investment management strategy and a pro-active financial planning approach. Based in Columbia, Maryland, in the heart of the Baltimore – Washington corridor, PFSI serves clients across the country.

President and CEO Christopher P. Parr, CFP® has been an owner of an independent financial advisory firm for over 25 years. He is past chair of the Howard County Pension Oversight Commission where he was appointed by successive County Executives, approved by the County Council, and served 2 voluntary 5-year terms from 2004 -2013 with responsibility for overseeing over $650 million of county pension assets.

Parr is a Certified Financial Planner and a member of the National Association for Personal Financial Advisors (NAPFA), the leading professional association for fee-only financial advisors. Worth magazine chose him as one of the country’s 250 Best Financial Advisors four times. Parr has written articles for national publications, the Baltimore Business Monthly and has been quoted in the Wall Street Journal, the Washington Post, Baltimore Sun, Forbes, Bloomberg, Investor’s Business Daily and other major publications.

 

#####

Understanding Investment Risk: Impact of Individual Stocks

This article was originally published in River Hill Magazine.

The fastest way to accumulate wealth is to buy the stock of the best company you can find, invest all of your available cash, and sit tight until you eventually need the money.  Most people do not follow this approach because they realize no one is able to predict the future with any degree of certainty, and they are uncomfortable with the investment risk. This concentrated strategy can be the fastest way to lose all of your wealth if you place a bad bet.

It is possible to reduce overall portfolio risk and volatility by creating a diversified portfolio.  From the chart below, total investment risk can be divided into unsystematic risk and systematic risk.

Unsystematic Risk

A truly diversified portfolio eliminates unsystematic risk. The first component of unsystematic risk is business risk.  Business risk is risk that is attributed to a particular industry, competitive threats, and regulatory constraints.  The second component of unsystematic risk is financial risk.  Financial risk is related to the financial health of the company itself, its level of debt, its cash flow, earnings, and profits.

When you purchase the stock or bond of a single company, unsystematic risk is an additional risk that you incur. The professional investment community generally agrees that a basket of at least 25 – 30 different stocks must be held in order to minimize or perhaps virtually eliminate unsystematic risk from a portfolio.  Keep in mind, however, that risk and volatility is the investor’s friend in a rising bull market.  Some investors are perfectly willing to take on higher risk with the hope of achieving higher returns.  A diversified portfolio will generally not lead to the highest returns over time, but should offer more stable and consistent returns than a portfolio that is not adequately diversified.

Systematic Risk

The second major category for investment risk is systematic risk.  The four types of systematic risk are purchasing power risk, interest rate risk, market risk, and exchange rate risk.  Purchasing power risk refers to the risk of inflation.  Stocks have proven to be a good long-term hedge against inflation.  It is prudent therefore for most investors to have at least some portion of stocks or stock funds in their portfolio.  Interest rate risk refers to changes in market interest rates.  When interest rates rise, bonds lose market value, and stocks quite often perform poorly as well.

Market risk is related to the behavior of the market in general.  In the long-run, the stock market is driven primarily by the growth of earnings.  In the short-run, the market can be driven by irrational and emotional factors.  Many individual investors do not realize how much the performance of a company’s stock is dependent with the behavior of the general market.  The statistical term for this is beta.  The best way to diversify against market risk is to hold different asset classes in your portfolio that behave differently (not highly correlated).  This strategy involves using a combination of cash, bonds, stocks and even other asset classes.  Within the major category of stocks, an investor can further diversify by choosing among small, large, growth, and value stocks.

The last type of systematic risk is exchange rate risk.  Exchange rate risk results from adding international investments to a portfolio.  It is impossible to eliminate systematic risk completely from a portfolio, but it can be reduced.

If your investment goal is to implement a strategy of lower volatility and reduce risk, then avoiding individual stocks in favor of using more broadly diversified funds should provide a smoother ride.


Christopher P. Parr CFPTM is a River Hill resident and President of Parr Financial Solutions Inc.- an independent, fee-only financial advisory firm:  www.ParrFinancialSolutions.com

News and Insights

Business Monthly: Ten Common Investment Mistakes to Avoid

  1. Taking Excessive Risk

Many investors gravitate toward investments offering the highest potential returns while ignoring the associated risks.  If your investment loses 50% of its value during a bear market, it will take a gain of 100% just to return to break-even status.  The goal of a well-diversified, balanced portfolio is to reduce market risk while earning steady, consistent returns over a long time horizon.  Minimizing losses during downturns generally produces higher average compounded returns over a long time horizon. Read more

Financial Planning: the right target-date funds strategy for clients

Christopher Parr was quoted extensively in this article by Donald J. Korn on target-date funds strategy (or TDFs) in the September, 2016 issue of Financial Planning Magazine.

Parr discusses two approaches advisers can take when using TDFs in client portfolios.

  • “Some funds have a glide path to the date of retirement, gradually reducing exposure to stocks until the specified year of retirement and then leveling off,” says Christopher Parr, CEO of Parr Financial Solutions in Columbia, Maryland.
  • Alternatively, a TDF on a glide path through the targeted year typically has a higher allocation to stocks at that date, but decreases equities afterward.

While real life might throw a curveball to advisers who see themselves on the “through” side, Parr says, “My preference is to keep reducing equity allocations as retirees grow older.” He tells of a client who is in his 90s with a moderate-risk portfolio. “He’s comfortable,” Parr says, “so he’s not changing his allocation.

Thus, the portfolio brought to retirement may be fine all the way through. Or, as Parr observes, some clients are reluctant to adopt a more conservative stance because “nobody wants to face up to getting older.”

River Hill Magazine: Five Common Investment Mistakes to Avoid

 

  1. Taking Excessive Risk

Many investors gravitate toward investments offering the highest potential returns while ignoring the associated risks.  If your investment loses 50% of its value during a bear market, it will take a gain of 100% just to return to break-even status.  The goal of a well-diversified, balanced portfolio is to reduce market risk while earning steady, consistent returns over a long time horizon.  Minimizing losses during downturns generally produces higher average compounded returns over a long time horizon.

 

  1. Using Stocks to Meet Short-Term Cash Needs

Funds that are needed to meet a specific financial goal in less than a three-year period, and perhaps longer, should not be heavily invested in stocks or stock funds.  Examples of goals are a car replacement, the down payment on the purchase of a home, or even plans for a major vacation.  The logic behind this is simple.  Stocks are quite capable of losing 30% of their value or even much more in a rather short period of time.  When these periods of volatility occur, the odds are that you will not escape the carnage.  Based on historical data, it often takes 2-4 years and sometimes longer to recover from a major market setback.  When your goal is short-term, it is more important to protect your resources than to reach for higher returns.

 

  1. Lack of Diversification

Diversification is the key to managing total portfolio risk and volatility.  Reallocating funds moderately between asset classes that have a low correlation relative to the U.S. stock market can potentially reduce portfolio volatility without significantly sacrificing long-term portfolio returns.

 

  1. Concentration – Keeping Most of Your Eggs In One Basket

A concentrated investment strategy is the quickest way to accumulate wealth as long as you make the correct investment decision.  It is also the quickest way to lose wealth if you make a poor investment choice.  A general guideline is to limit any individual stock to 5% or less of the stock portion of your total portfolio.  An allocation above 5%, while carrying significant risk, could be justified if you are knowledgeable about the specific investment and are confident that this particular investment can outperform the broad market or other alternatives.

 

  1. Stretching For High-Yield At The Expense Of Quality and Stability

Income-oriented investors are frequently attracted to the promise of high-yielding investments.  It is important to mention that investment returns are comprised of two factors.  One factor is the income or yield that is generated in the form of interest or dividends.  The second factor is capital appreciation or depreciation (loss).  Total return, the sum of these two factors, is the bottom-line and all that counts.  If an investment advertises a yield that seems too good to be true, it probably is.  Interest rate or yield is irrelevant if you lose your investment.

 

*********************************

Christopher Parr is a River Hill resident and President of Parr Financial Solutions Inc.- an independent, fee-only financial advisory firm:  www.ParrFinancialSolutions.com

Vantage House Men’s Breakfast, JUL 28, 2016 | Macroeconomic Food for Thought

Chris Parr was invited to speak to an engaged and inquisitive group at Columbia’s Vantage House on the impact of Brexit and the global outlook for interest rates and the stock market.  One of the key points he made was that stock market values in the U.S. are inflated relative to economic value and that it may be a good time to invest outside of the U.S. in spite of the challenges facing Central Banks globally.

Brexit Microeconomic Impact