Author Archives: Opinicus

Market Landscape Post Midterm Elections

The months of pools, punditry, and posturing are finally over.  After months of uncertainty and waiting, the midterm elections are done, and we now have resolution.

The Republican Party made major gains in the midterm elections.  They regained control of the U.S. Senate and the House of Representatives has not been so dominated by one party since 1946.  This is an interesting development, but does it mean that significant changes are on the horizon?  Does change in the Congress mean change for you?  Not really.  The business environment might be slightly friendlier after the midterms, but we do not expect significant changes.

The next key date in Washington, D.C. comes in mid-December 2014, when the continuing resolution to fund the government expires.  The subsequent key date will be mid-March 2015, when the U.S. Treasury will hit the debt ceiling once again.  At the margin, the Republicans’ control of Congress raises the risk they will demand concessions for passing a funding resolution for next year, or for raising the debt limit.  However, given the backlash following last year’s government shutdown, as well as initial comments from likely Senate Majority Leader Mitch McConnell (R-KY), we believe Congress is likely to avoid such a standoff.

Although we do not expect major changes from the new Congress, we are watching possible movement on several key legislative issues.  Republican control of the Senate and House could have positive implications for energy and financial services companies by easing the regulatory landscape.  For the energy sector, Republicans may be able to speed up permits for Oil and gas exploration and gain approval for the construction of the Keystone XL pipeline, providing a potential boost to energy and industrial sector growth.  Regulatory pressures on banks, including capital requirements, may be eased.  Tax reform is possible, although more likely to happen at the corporate level than an individual level.  And although Republicans will not be able to repeal the Affordable Care Act, changes to the law are likely, including the probable elimination of the medical device tax.

Clearly, elections have implications for policy and the direction of the country.  Ultimately, however, we believe stock market performance will depend more heavily on economic growth, corporate earnings, and valuations in the months ahead.  In the end, these factors will weight more heavily on the direction of stock prices than modest legislative changes.  And we continue to believe these factors may support further stock market gains.

Article contributor: John Canally, CFA

Photo by: The Library of Congress

Opinicus Announces Hire of Chelsea Ross

Opinicus® Wealth Management has recently welcomed Chelsea Ross as their new Marketing and Finance Associate. Ms. Ross will manage the design, implementation and tracking of an integrated communications strategy to better serve our valued clients. Prior to joining the Opinicus team, she worked in marketing for a large international brand, as well as various small businesses.

“Chelsea brings an exciting and unique mix of talents to the Opinicus team,” said Chief Investment Officer Griffin Dalrymple. “Her depth of knowledge across media platforms, business acumen and emphasis on results make her an ideal fit for our team as we continue to strive towards delivering superior service to our clients.”

Chelsea graduated from the University of Louisiana at Lafayette and is currently pursuing a dual-graduate degree at the University of Tampa in finance and business administration.

Opinicus Wealth Management is a Registered Investment Advisor located in Bradenton & Tampa, FL offering financial planning and investment management services focused on small business owners and professionals pursuing wealth accumulation.

4 Ways to Handle Money God’s Way

Ever feel like your life is stuck in fast-forward? From the moment our feet hit the floor in the morning, it seems like we never let up on life’s gas pedal.

When we finally sit down to look at bills, we are exhausted and just want to pay them as quickly as possible and move on. Even some of us avoid logging in to our bank accounts all together because it is just too painful to really see what our current balance is.

Is this how God intended for us to live?

The definition of insanity is doing the same thing that you have always done and expecting a different result.

1. Choose To Be Faithful In The Little Things

You don’t need to wait until Aunt Matilda dies and leaves you her fortune before you start handling your money seriously. Decide to be faithful in the little things that you have.

It is easy to live above your means. Most Americans live that way.

Why not instead choose to be different? Decide today that you are going to be more intentional with your money and empower yourself to say no.

One of the great lessons in life is learning to be content with whatever condition you are currently in.

Small things are small things, but faithfulness with a small thing is a big thing. – Hudson Taylor

2. Learn The Value Of Contentment

Contentment can do so much good for your soul. In fact, if you have kids then it is absolutely essential that you teach them this virtue. The challenge is that we want to bless our kids, make them happy, and give them a good childhood. What we often forget are the great lessons that we lose along the way.

For awhile, we had an extremely basic TV cable package. We have made a choice to live frugal and in the state of contentment that God currently has us in. This was a real challenge for my two kids as they had become accustomed to watching all their favorite television programs in the evening. While initially they voted us the “Lamest Parents in the World,” a strange thing began to happen. We suddenly had more time for conversation, bike rides around the neighborhood, and sitting on the front porch swing at sunset just enjoying one another’s presence. The kids began to make up silly games for us to play and we had our fair share of freeze tag in the front yard. Your life is as rich as you want to make it. Contentment is a choice.

3. Hold Loosely To Everything

In the book of Ecclesiastes, King Solomon mentions several times how stressful life can be for those whose life’s goal is the pursuit of wealth or riches. Is it wrong to have nice things? Certainly not. But those that are consumed with wanting more live a stress-filled life.

Solomon talks about how the poor man has peaceful sleep after spending his day laboring in the field, while the rich man tosses and turns worrying about how to hold onto all his wealth. If you can learn the value of holding loosely to what you have, the pressure will begin to roll off your shoulders. Holding loosely does not mean you live flippantly and do not take careful consideration for what you have. It means that you recognize that it is all God’s to begin with anyway.

4. Be Faithful With All 100%

Most Christians have been trained to handle 10% of their money God’s way through giving a tithe, but they are clueless with what to do with the other 90%. One powerful principle to remember is that all 100% of it was given to you by God.

Some of you might be saying, “Wait a minute, I earned that money by using my knowledge, skill and ability.”

Wasn’t it God who gave you that knowledge, skill, and ability to begin with? Does not God give us the power to create wealth? There is a wonderful mental shift that can take place when you recognize that you and I are just merely managers of the wealth God gives us.


If you are living above your means and constantly worried or stressed about your money situation, I have one simple question for you: Why? Don’t you realize that you are choosing to live that way? There is another way.

Simplify your life by learning the value of contentment. Start being faithful in the little things. Hold loosely to what you have and give 100% of it over to God. Once you arrive at that place, you can close your eyes at night and sleep peacefully. Why not start handling money God’s way today?

Article contributed by: Jon at Christian Personal Finance

Photo by: Waiting for the Word

A Written Retirement Plan Can Double Your Savings

Middle-class Americans with a written financial retirement plan are saving more than twice as much as people without one, according to a new Wells Fargo Retirement survey.

“People who have a written plan for retirement are helping themselves create a future on their own terms, with a foundation built on saving, and hopefully investing,” Joe Ready, Wells Fargo’s director of Institutional Retirement, said in a statement.

The study found that middle-class investors with a written plan are saving a median of $250 per month for retirement, versus just $100 for those without one. The study polled Americans with less than $100,000 in household income and investible assets of less than $100,000.

A third of the people surveyed aren’t currently contributing anything to retirement savings (though they may have some savings already), while 19 percent said they have no retirement savings at all.

Nearly 70 percent of those surveyed said that saving for retirement is harder than they anticipated. More than half the people plan on saving “later” for retirement in order to make up for not saving now.

Broken down by age, the median amount saved by middle-class savers in their 40s is $40,000 – but those in their 50s who answered this survey said they had only $20,000 in savings.

A majority of respondents said they’re not sacrificing a lot to save for retirement, but 72 percent said they should have started saving for retirement earlier.

Among those with access to a workplace retirement plan, two-thirds contribute enough toward the plan to get an employer match, with a median contribution rate of 7 percent.

Here are some wise retirement savings tips:

Make it automatic: The beauty of a 401(k) plan is that once it’s set up, it automatically deducts the cash from your paycheck so you can’t forget to save. Even if you don’t have access to a workplace retirement plan, you can set up auto-deposits into an IRA account.

Ramp it up: The number-one factor in saving for retirement is your contribution rate and regular contribution rate increases. See if your employer offers an option in which you can automatically increase your contribution on a regular basis, or set a reminder to do so on your own.

Leave your savings alone: It can be tempting to pull cash out of your retirement accounts for unexpected expenses, but doing so can jeopardize your financial future.

Article contributed by: Beth Braverman

Image contributed by: Images Money

The Bucket Approach to Retirement Allocation

Those who lived through the 1970s and ’80s no doubt find their photographs from those decades to be cringe-worthy. But while few may wish to repeat a fashion era marked by pastel-colored suits and big hair, one aspect of those bygone decades is appealing–substantially higher interest rates than those that prevail today. The average interest rate on a six-month certificate of deposit was 9.1% in 1970 and 13.4% in 1980. Of course, inflation was high then, too, but those higher rates, plus the prevalence of pensions, allowed many retirees to generate livable income streams without invading their principal or taking risks in stocks.

But two decades’ worth of declining interest rates have dragged yields way down, dramatically compounding the challenge for retirees. With infinitesimal yields on money market accounts and high-quality bonds, retirees’ choices are stark: To be able to afford retirement, they can plan to delay the date, save more, reduce their standards of living, or take more risks with their portfolios.

The bucket approach to retirement-portfolio management, pioneered by financial planning guru Harold Evensky, aims to meet those challenges, effectively helping retirees create a paycheck from their investment assets. Whereas some retirees have stuck with an income-centric approach but have been forced into ever-riskier securities, the bucket concept is anchored on the basic premise that assets needed to fund near-term living expenses ought to remain in cash, dinky yields and all. Assets that won’t be needed for several years or more can be parked in a diversified pool of long-term holdings, with the cash buffer providing the peace of mind to ride out periodic downturns in the long-term portfolio.

I’ve written extensively about bucketed portfolios during the past year, and have also developed mutual fund and exchange-traded fund portfolios based on this concept.

The All-Important Bucket 1

The linchpin of any bucket framework is a highly liquid component to meet near-term living expenses for one year or more. With cash yields close to zero currently, bucket 1 is close to dead money, but the goal of this portfolio sleeve is to stabilize principal to meet income needs not covered by other income sources. To arrive at the amount of money to hold in bucket 1, start by sketching out spending needs on an annual basis. Subtract from that amount any certain, nonportfolio sources of income such as Social Security or pension payments. The amount left over is the starting point for bucket 1: That’s the amount of annual income bucket 1 will need to supply.

More conservative investors will want to multiply that figure by 2 or more to determine their cash holdings. Alternatively, investors concerned about the opportunity cost of so much cash might consider building a two-part liquidity pool–one year’s worth of living expenses in true cash and one or more year’s worth of living expenses in a slightly higher-yielding alternative holding, such as a short-term bond fund. A retiree might also consider including an emergency fund within bucket 1 to defray unanticipated expenses such as car repairs, additional health-care costs, and so on.

Bucket 2 and Beyond

Although retirees may customize different frameworks for the number of buckets they hold, and the types of assets in each, my model bucket portfolios include two additional buckets, as follows.

Bucket 2: Under my framework, this portfolio segment contains five or more years’ worth of living expenses, with a goal of income production and stability. Thus, it’s dominated by high-quality fixed-income exposure, though it might also include a small share of high-quality dividend-paying equities and other yield-rich securities such as master limited partnerships. Balanced or conservative- and moderate-allocation funds would also be appropriate in this part of the portfolio.

Income distributions from this portion of the portfolio can be used to refill bucket 1 as those assets are depleted. Why not simply spend the income proceeds directly and skip bucket 1 altogether? Because most retirees desire a reasonably consistent income stream to help meet their income needs. If yields are low–as they are now–the retiree can maintain a consistent standard of living by looking to other portfolio sources, such as rebalancing proceeds from buckets 2 and 3, to refill bucket 1.

Bucket 3: The longest-term portion of the portfolio, bucket 3 is dominated by stocks and more volatile bond types such as junk bonds. Because this portion of the portfolio is likely to deliver the best long-term performance, it will require periodic trimming to keep the total portfolio from becoming too equity-heavy. By the same token, this portion of the portfolio will also have much greater loss potential than buckets 1 and 2. Those portfolio components are in place to prevent the investor from tapping bucket 3 when it’s in a slump, which would otherwise turn paper losses into real ones.

Bucket Maintenance

The bucket structure calls for adding assets back to bucket 1 as the cash is spent down. Yet investors can exercise a lot of leeway to determine the logistics of that necessary bucket maintenance.

The following sequence will make sense in many situations:

  • Income from cash holdings in bucket 1. These will be of limited help in the current yield-starved environment, but they could become more meaningful if yields rise.
  • Income from bonds and dividend-paying stocks from buckets 2 and possibly even 3. (Income-focused investors might decide that their bucket maintenance starts and stops with these distributions.)
  • Rebalancing proceeds from buckets 2 and especially 3.
  • Principal withdrawals from bucket 2, provided the above methods have been exhausted. Such a scenario would tend to be most likely in a 2008-style environment, when bond and dividend yields dropped and equities slumped, thereby making it an inopportune time to unload equities. (Such a scenario would generally be a decent time to engage in tax-loss selling, but the proceeds from that would be best deployed back into equities.)

Article contributed by: Christine Benz

Photo courtesy of:  Dave Lawler

Borrowing From 401(k) Can Cost More Than You Think

More investors are taking out loans against their 401(k)s, and that could hurt their retirement income by hundreds of dollars a month, according to an analysis by Fidelity Investments released Wednesday. The number of investors borrowing from their 401(k)s has been steadily increasing for more than a decade. Today, more than one in five people, or 22.5% of Fidelity’s 401(k) investors, borrow against their retirement savings, up from 18.7% in 2000, according to Fidelity’s analysis of 13 million investors. More than 2 million investors have outstanding loans, and nearly 1 million took out loans in the past year.

What’s most concerning, says Jeanne Thompson, vice president of thought leadership for Fidelity, is that the analysis finds that a significant portion of those who borrow aren’t able to maintain their previous savings rate: 40% of borrowers reduce their savings rate, and of those, more than a third stop contributing to their 401(k) altogether within five years of taking a loan. Half of borrowers go on to take out another loan. Fidelity calls them “serial borrowers.”

“They’re almost treating their 401(k) like a checking account,” Thompson says. “If you’re never paying a loan off in full, you’re constantly playing catch-up.” Fidelity finds you’re also going to be way behind when it comes to how much you have to live off of during retirement. In a hypothetical analysis, Fidelity found that investors saving at a rate of 10% who fall to a rate of 5% for five years will receive nearly $200 less each month in retirement. Those who stop saving completely over 10 years will have nearly $700 less a month in retirement. Currently, 401(k) investors are contributing an average of 8% of their incomes.

“I don’t think that’s something people think about when they take out the loan,” Thompson says. “Think about what you could do with $690 a month in retirement.” While Thompson says more borrowers are taking out general loans, likely in emergencies, a small portion are taking out large home loans. Millennials are borrowing the most for homes, at an average of $17,100, or 37% of their retirement savings. But just 3.6% of Millennial investors do so.


Since 2000 there has been an increase in investors borrowing from their 401(K)s.(Photo: Janet Loerke, USA TODAY)

They may also be in the most trouble when it comes to paying the loans back. Known for only staying at companies a few years, Gen Y could be hurting their retirement savings even more when they leave a company, which is when 401(k) loans have to be paid off. Those who can’t pay off their loans in full still have to pay all taxes owed on the balance and a 10% penalty if they’re younger than 59.5, Thompson says.

She recommends taking out a 401(k) loan only if you know you can maintain your savings rate and will be at your job long enough to be able to pay the loan back. And given the number of serial borrowers, an emergency savings fund is crucial, she says. “Serial borrowers are the ones that are taking (loans) for the smallest amounts,” Thompson says, adding that even saving $10 a week will add up for borrowers typically taking out loans for $500 to $1,000. “Some people think $10 won’t make a difference. But it will over time. To some extent it’s a bit like dieting.”

Article contributed by:  Hadley Malcolm, USA Today

Photo courtesy of: Ron Reiring