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What is the Dogs of The Dow Strategy?

Dogs Of The Dow

When it comes to investing there are many strategies, views, and opinions. In many ways none of these are wrong, they are just different. It is important to find investments that are aligned with your views, time horizon, and risk tolerance while remaining committed to your process and making adjustments as needed.

One such strategy that has been around for roughly thirty years now is the Dogs of the Dow. The process around this strategy is to invest in the ten highest yielding stocks of the Dow Jones Industrial Average (DJIA) at the beginning of the year and then rebalancing at the beginning of the following calendar year. One key consideration is to make sure you are rebalancing after you have held the group of stocks for twelve months and one day so any gains will be considered long term in nature, rather than short term if you are using this in a non-qualified account.

When owning stocks your total return comes from a combination of the income received from dividends (yield) and any capital appreciation/depreciation. As an example, if you buy a company that provides a dividend yield but its price is flat for the year you still will experience a positive overall return because of the yield. The dividend (yield) will provide you with a potential cushion should the price of the stock decrease as well.

The Dogs of The Dow is a strategy that attempts to take advantage of the yields of the companies in the Dow by buying the highest-paying dividend stocks available. This is by no means a strategy that works every year. It is a way to buy blue-chip companies that may not be trading at their highs but provide an attractive yield. This strategy is one that can be considered for investors that have the tolerance for monies being invested equally across ten equities. In most cases, this would not make sense for all assets in your portfolio because of it being heavily concentrated in ten securities. It could make sense for a portion of your investable assets.

We would be happy to discuss the Dogs of The Dow Strategy and how it may fit into your portfolio. Just contact us, Mitlin Financial, at (844) 4-MITLIN x112 to schedule a time to discuss. Be sure to share this article with friends, family, and business acquaintances who might be interested too. We look forward to helping you, and them, get on the right path and stay there.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

What Is A Financial Plan?

 What Is A Financial Plan

 

A financial plan is paramount to a family’s financial success. During periods of volatility we often hear that investors should “stay the course”, but what does that mean? Is there a course to stay without having a financial plan? We feel that there seems to be a misconception that having an investment game plan is synonymous with a financial plan, and it is not.

Financial planning, having a plan, is so much more than investments and should address areas such as retirement planning, estate planning, education planning, risk management, asset allocation review and cash flow planning. This is by no means an exhaustive list or one that everyone needs to use. The areas covered within the plan will differ from one to another depending on what is important to them and what they need to address. The plan will help you navigate financial events and evaluate how those events may impact your financial situation.

The plan is based upon your goals and dreams for the future, short and long term. These will most likely change over time as your personal situation changes. This means that putting a plan together today and not reviewing and updating it from time to time will do you no good. The plan is simply a snapshot of how things look for you at the point in time it is completed. This is why it is important to consistently update and review your progress towards your goals, are you on or off track.

We often see people who have embarked on the financial planning process at some point in their life but they never take the time to review and update their progress or find someone to help. This merely creates a stale plan that does not help you make decisions over time. Having a plan that is up to date and reflective of your current situation will allow you to evaluate financial decisions and see the impact, positive or negative, they will have on reaching your goals and dreams. This is what having a plan is all about.

Utilizing a financial plan that outlines your goals and dreams, tracks your progress and adjusts for changes in your life and circumstances is invaluable. This is the equivalent to having a GPS or Waze in your car. The plan will assist you in making decisions that without a plan they would be difficult to make or see the impact. The plan will also allow you to easily evaluate how short term, or longer-term volatility, will impact your ability to reach your dreams and goals. This is the true way to see if adjustments should or need to be considered for your portfolio. Assuming your risk tolerance, time horizon and other variables remain constant this will be the true test of the impact the volatility has had on your goals.

Planning is a roadmap for your financial future and it should provide a guide for how you invest. Keep in mind, investments are simply one component of the plan. It is time to prepare for the next time volatility enters the markets and put a plan in place to evaluate your ability to successfully reach your goals. Just contact us, Mitlin Financial, at (844) 4-MITLIN x112 to schedule a time to discuss this for you. Be sure to share this article with friends, family, and business acquaintances who might be interested too. We look forward to helping you, and them, get on the right path and stay there.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

How Much Do I need For Retirement?

 retireclock 2015

One of the most searched phrases on search engines today is “How Much Do I Need For Retirement?”.  I recall people when I was growing up saying that you need $1MM saved in order to live comfortably in retirement, was that true and/or is there a new number today?
 
This is a very complex question and not one that can be answered simply by asking Alexa or Siri.  I would also argue that many “rules of thumb” cannot be used either.  There are many variables that contribute to determining an individual/family need for retirement savings.  Let’s just give you two different scenarios to see how widely this retirement amount can vacillate.
 
Family A:  They plan on retiring at the age of sixty-five and downsizing somewhere that the cost of living will be significantly lower than where they live now.  Family A expects that they will need around $50,000 per year in order to live the lifestyle they want to live in retirement.  Based upon their respective families they expect to live until their mid-nineties and this would mean they would need this income stream for the next thirty years.  A rough back of the napkin calculation would tell you that they will need at least $1.5 MM in assets to fund their retirement. 
 
Family B:  They plan on retiring at the age of sixty-five and remaining where they live now so they can be close to their children and grandkids.  Family B expects that they will need around $100,000 per year in order to live the lifestyle they want to live in retirement.  They really enjoy traveling and do not want to give that up in retirement, but want to increase their budget for it.  There is longevity in their family too and expect to live until their mid-nineties and this would mean they would need this income stream for the next thirty years.  A rough back of the napkin calculation would tell you that they will need at least $3.0 MM in assets to fund their retirement.
 
In full disclosure, the above examples are missing a number of components.  To name a few, they are not taking into account inflation, return on their investments, health care expenses, and potential long term care issues and/or the death or disability of an income earner prior to retirement.  These are just a shortlist of many variables that can take place pre and post-retirement which could impact the amount you will need.
 
As you can see, using a rule of thumb may work for one of these families and not the other.  Clearly this is not an ideal way to plan for your retirement unless you are comfortable with a potentially huge margin of error.  The reality is that you will never be able to plan the exact amount you will need, but the idea is to get as close as you can.
 
Determining how much you need in retirement is a very personal thing and not something that should be left to general rules.  It would be advisable that you go through the planning process, the earlier the better, to determine what the appropriate amount you would need for retirement.  In addition to clarifying the amount, you should also walk away with a game plan on how to get there.  The process does not end here.  In fact, this is where the heavy lifting begins and you must begin to implement the strategies determined in the plan to get you the retirement amount you will need. 
 
At this point, you cannot simply put the plan on cruise control and forget about it.  You must monitor the plan and your progress over time.  The outside forces we discussed earlier could have an impact on your success towards your goal and you will want to know that in real-time.  This will allow you to make adjustments and changes to the plan over time in order to maintain you on your path.  There may be lifestyle adjustments needed along the way too.  Maybe when you began the planning process you were most like Family A and as time went one your goals adjusted to look more like Family B.  It would be important at this point to adjust your plan to get you on the different track and keep you on target.
 
Retirement planning is not something you can simply set and forget, wait until you are five years away from retirement to start planning or simply use a rule of thumb and expect to live the retirement lifestyle you want.  It is important to work with a fiduciary advisor, as early as possible, to develop a personalized financial plan to your specific facts and circumstances.  
 
Your retirement is not something you want to leave to a rule of thumb.  This is an area of your life that you want to be as precise as possible, so you can live the life you want in retirement.  Be sure to contact us, Mitlin Financial, at (844) 4-MITLIN x112 to schedule a time if you would like to discuss a personalized financial plan for you.  Be sure to share this article with friends, family and business acquaintances who might be interested too.  We look forward to helping you, and them, get on the right path and stay there. 
 

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Stay the Course, What Does That Mean?

Roadmap

Volatility has been consistent throughout the COVID-19 pandemic. One other constant I have heard is, stay the course. Staying the course during an event like this may very well be the right advice, but I think there is another variable that needs to be looked at to help confirm that this is the right choice. Reviewing how the volatility has affected your plan is an additional component that needs to be reviewed. The plan is paramount in deciding to stay or abandon the course.

Investors mistake making buy/sell decisions for their investments with having a plan for their financial future that will dictate how the investments should be handled. This may seem like semantics, but it is not and there are definitive differences in the way you look at your portfolio and judge when to stay or change your course.

This reminds me of a quote by John F. Kennedy, “The time to repair the roof is when the sun is shining.”. This rings true with your investments and too. Typically, volatile times do not present an ideal time to change or amend your investment strategy or financial plan, you want to address these items when the sun is shining.

You should have a plan in place for your financial future. This plan will act as a roadmap, a guiding light to help you make decisions about your financial life including your investments. Investments are simply one component of your financial plan. The plan will help you make the decisions you need to reach the goals you are aiming towards. Whether you have a plan in place or not, now is the time to look at it or get one in place. This will ultimately provide you with the assurance of staying the course or the suggestion that you should consider adjusting your overall plan

Staying the course, without knowing what the course is, is simply looking at your investments and making an educated guess on where you believe asset prices will be soon. Making decisions based simply on market prices, and not your plan, can cause you to make a bad or wrong short-term decision that can harm you in the long-term.

To effectively determine if and adjustment needs to be made to your portfolio, you want to evaluate market fluctuations in terms of your financial plan and whether your plan is on or off track. This is what will indicate if the fluctuations have caused your plan to veer off course. Making decisions simply about your investments is like driving to a far destination, getting off the highway, and taking local roads the rest of the way because there was a small traffic jam. This may help you avoid five minutes of traffic but will add hours to your trip.

In my work with clients over the last 20 plus years, I have come to realize that most people are not concerned about the change in the value of their portfolios when markets fluctuate, and they see market declines. They are nervous about what it may mean to their overall financial plan and their ability to reach their goals and dreams. Essentially it is not the loss of the money, but what the money will ultimately be able to “buy” them. To be able to evaluate the impact the market fluctuation has on their ability to reach their goals, clients would need to have a financial plan. This would provide them with a clear view of how they will be impacted in both the short and long term.

We would be happy to discuss the recent volatility and how it may be having an impact on your plan. We can also help you get a plan in place so the next time volatility arises you will be prepared. Just contact us, Mitlin Financial, at (844) 4-MITLIN x12 to schedule a time for this review. Be sure to share this article with friends, family, and business acquaintances who might be interested too. We look forward to helping you, and them, get on the right path and stay there.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

RMD Alert! Did You Take One?

 

Alert

Required Minimum Distributions (RMDs) have been suspended for the tax year 2020. This was originally announced as part of the Cares Act when the pandemic first hit and was signed into law on March 27, 2020. There was a provision in the act that suspended all required minimum distributions for those of RMD age and those required to take them from beneficiary designated accounts.

Suspending RMD’s would provide individuals with the ability to skip taking monies from their retirement accounts while the markets were impacted by COVID-19 and also allow them to not incur the tax associated with the withdrawal. The Act provided straight forward guidance to those that did not take an RMD yet, but it was a bit unclear how it would affect those that may have already taken an RMD earlier in the year. This caused a bit of confusion and uncertainty on how to handle those particular situations.

Luckily, on June 23, 2020, the IRS announced that anyone who fell into the group who took their RMD in 2020 from certain retirement accounts would have the opportunity to roll those funds back into a retirement account following the Cares ACT RMD waiver for 2020. This announcement effectively extended the 60-day rollover period, for any RMD already taken, to August 31, 2020.

This gives everyone eligible the ability to take advantage of RMDs being suspended for 2020, whether they already took it or not. The IRS also clarified that this rollover would not count against the taxpayers' ability to only make one rollover every 12 months and the restriction on rollovers for inherited IRAs. We discussed this on a recent Mitlin Minute too.

This could provide significant help to those that may have large RMDs who have taken them earlier in the year. It will be important that this is handled correctly and documented properly. Those that have taken an RMD in 2020 should consult with their advisors (financial advisor and tax advisor) to consider whether it would make sense to return the RMD as if it was never taken.

We would be happy to assist you in determining whether returning or not taking your required minimum distribution in 2020 is right for you. Keep in mind that if you have already taken the RMD you only have until August 31, 2020 to return it and roll it back into your retirement account. Just contact us, Mitlin Financial, at (844) 4-MITLIN x112 to schedule a time for this review. Be sure to share this article with friends, family, and business acquaintances who might be interested too. We look forward to helping you, and them, get on the right path and stay there.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

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