Market Update through 9/30/2013

as of September 30, 2013        
                                       Total Return
Index 12 months YTD QTD Sept
Stocks        
Russell 3000 21.60% 21.30% 6.35% 3.72%
S&P 500 19.33% 19.79% 5.24% 3.14%
DJ Industrial Average 15.59% 17.63% 2.12% 2.27%
Nasdaq Composite 23.00% 26.12% 11.20% 5.14%
Russell 2000 30.07% 27.68% 10.21% 6.38%
EAFE Index 20.35% 13.36% 10.94% 7.12%
         
Bonds        
Barclays US Aggregate -1.68% -1.89% n/a 0.95%
Barclays Intermediate US Gov/Credit -0.50% -0.84% n/a 0.81%
Barclays Municipal  -2.21% -2.87% n/a 2.15%
         
    Current   Prior
Commodity/Currency   Level   Level
         
Crude Oil    $102.33    $108.21
Natural Gas    $3.56    $3.68
Gold    $1,326.50    $1,308.40
Euro    $1.35    $1.32

Mark A. Lewis

Director of Operations

Senior Moments

You’ve arrived somewhere only to realize you’ve forgotten what you went there to do. Or perhaps you forgot the punch line at the end of a joke. When I was a young new mother, I got in my car to go to work when I suddenly remembered the baby was in her car seat in the living room! These are a few situations many of us will find we know too well. Incidents such as these remind me of the famous line from Mark Twain: “Of all the things I’ve lost, I miss my mind the most.”

Memory lapses such as these are caused by a variety of factors – thankfully few of them serious. If you can relate to the first scenario, you have experienced what researchers have dubbed “the doorway effect.” A paper published by Gabriel Radvansky at the University of Notre Dame explains that our brains use a file system not too dissimilar from our computers. However, rather than file folders for documents, music, pictures, etc, your brain files by physical location. This means that the information readily accessible to you in one room (or file) suddenly becomes a lot harder to access when you go to another one. The researchers suggest that saying things out loud as you pass through the doorway can help you remember your mission. You can read more about this study here: http://al.nd.edu/news/27483-walking-through-doorways-causes-forgetting-new-research-shows/

As the young harried mother, I blamed post-partum hormones and work overload on my memory lapse. But the forgotten punch line? I blame that on age. Knowing we are living longer and longer, I refuse to let my brain atrophy!

Doctors have long said that eating right, getting enough sleep and regular exercise are good for the body, including the brain. In addition, certain “brain foods” are thought to help protect brain function. There are also brain “exercises” one can do – crossword puzzles, Sudoku or Ken-Ken can help, or you can register with Lumosity, a free brain-training program developed by a group of neuroscientists. Even playing video games can provide benefit.

In addition to exercise, multiple studies have shown that community involvement, prayer and meditation help maintain healthy brain function. The reason: all three help control stress and anxiety.

And finally, never stop learning. Take up a new language, learn to play an instrument, buy a dictionary and learn a new word every day (and write a sentence using it!). Learn to play chess or poker. Do you want to know more about Higgs boson and the Large Hadrons Collider? Then sign up for the MOOC (Massive Open Online Course) being offered by the University of Edinburgh. In fact, there is a vast and growing world of free online courses covering wide range of topics offered by leading universities. You can get more information here: http://www.openculture.com/free_certificate_courses

I personally love crossword puzzles, and every time my husband and I travel to a new country, we work hard on learning key phrases and words. No matter which method you choose to exercise your brain, you will be doing yourself a favor.

Tracy Allen, CFP®
Financial Advisor

Market Update through 9/15/2013

as of September 13, 2013        
                                       Total Return
Index 12 months YTD QTD MTD
Stocks        
Russell 3000 19.80% 21.20% 6.26% 3.63%
S&P 500 18.20% 20.18% 5.58% 3.47%
DJ Industrial Average 16.60% 19.54% 3.77% 3.93%
Nasdaq Composite 19.87% 24.42% 9.70% 3.72%
Russell 2000 24.90% 25.22% 8.08% 4.33%
EAFE Index 20.85% 14.52% 9.56% 5.36%
         
Bonds        
Barclays US Aggregate -2.62% -3.34% n/a -0.54%
Barclays Intermediate US Gov/Credit -1.26% -1.95% n/a -0.32%
Barclays Municipal  -3.07% -4.49% n/a 0.45%
         
    Current   Prior
Commodity/Currency   Level   Level
         
Crude Oil    $108.21    $107.65
Natural Gas    $3.68    $3.58
Gold    $1,308.40    $1,395.80
Euro    $1.32    $1.32

Mark A. Lewis

Director of Operations

Stating the Obvious

Once again, an article on Bloomberg.com has inspired today’s topic – women matter.

I know, it seems obvious, but this has been a recurring theme in the press lately. I have read several articles in financial industry magazines about how advisors can attract more female clients. One article actually said there was more to it than just putting out fresh flowers in the office. And this is news?

It’s a well-intentioned article, but it just seems a little ridiculous. I’m not denying that there are differences between the genders, but I tend to believe that everyone appreciates a financial advisor who listens, asks valid questions, treats them respectfully, and makes them feel valued, regardless of gender. I would certainly hope that advisors treat all of their clients this way – I know we endeavor to do so in our practice.

The article on Bloomberg.com that caught my eye was also female-centric, but it was about a Dutch private equity fund founded by three women. The fund invests in companies with a balance of male and female top executives, citing research by McKinsey & Co. that found companies with the highest percentage of women directors made a 41% greater return on equity than companies with all-male boards. What I found especially interesting was that the fund is not doing this to “serve the cause of women,” as one of the founders said, but because they think companies with gender-balanced management perform better on average, a belief that is backed by more than one study.

I have to admit I am pleased to see greater efforts being made to include women, whether it’s as potential clients or as vital members of a company’s senior management. Women have something to offer! Who knew?

Sarah DerGarabedian, CFA
Director of Research

More Questions to Ask

Harli’s prior blog post covered some good steps on what you should be considering when hiring a Financial Advisor. An important part of that is having an understanding of the investments that your Advisor recommends when implementing your portfolio. Once you’ve agreed to an asset allocation – how do you go about buying into that allocation?

One important item to understand here is whether or not the Advisor receives compensation for recommending certain investments. At Parsec, we are a fee-only firm which means our sole revenue source is our percentage fee based on the assets we manage for a client. This means we do not receive any compensation through the investments we purchase or sell on a client’s behalf. Other Advisory Firms or Brokers can receive up-front commissions or ongoing annual revenues that vary based on the type of investment they purchase for clients, and we feel this adds an unnecessary bias during the investment selection process.

Along with the importance of knowing if your Advisor is paid based on what they recommend is also knowing how much that investment costs you overall. If you purchase a mutual fund or exchange traded fund within your portfolio you should get a good understanding of their expense ratios to know what that fund costs you on an ongoing basis, and how do their costs impact their performance net of all fees and costs.

At Parsec, we try to limit the overall cost of client investments by tracking the mutual fund costs charged by the investments we recommend. For clients with a larger account size we may buy individual stocks for a large portion of their equity allocation and thus we remove the layer of fund manager costs. Clients will pay a transaction fee to buy or sell the individual stock, but there is no mutual fund expense on those assets – just our annual fee of assets under management.

If when interviewing an advisor you feel like you don’t have a full understanding of the costs of the advice you will receive, or the costs of the investments that will be purchased for you, then ask more questions! If you feel like you aren’t getting an honest answer then that should be a good sign to keep looking around.

Travis Boyer, CFA
Financial Advisor

Update Through 8/31/2013

as of August 30, 2013        
                                      Total Return
Index 12 months YTD QTD August
Stocks        
Russell 3000 20.32% 16.95% 2.54% -2.79%
S&P 500 18.69% 16.15% 2.04% -2.90%
DJ Industrial Average 16.13% 15.02% -0.15% -4.11%
Nasdaq Composite 18.97% 19.95% 5.76% -0.82%
Russell 2000 26.28% 20.03% 3.60% -3.18%
EAFE Index 19.42% 8.70% 3.99% -1.27%
         
Bonds        
Barclays US Aggregate -2.47% -2.81% n/a -0.51%
Barclays Intermediate US Gov/Credit -1.12% -1.73% n/a -0.20%
Barclays Municipal  -4.11% -5.46% n/a -2.55%
         
    Current   Prior
Commodity/Currency   Level   Level
         
Crude Oil    $107.65    $107.33
Natural Gas    $3.58    $3.42
Gold    $1,395.80    $1,361.60
Euro    $1.32    $1.32

Mark A. Lewis
Director of Operations

How Do You Choose a Financial Advisor?

Clients of Parsec have already gone through the process of interviewing and hiring a financial advisor. Other readers of this blog may not have done that, but may be thinking about it. How do you go about finding the right advisor?

 

You may choose to use a list of prepared questions to thoroughly understand the scope of the engagement and the advisor’s qualifications. Or you may just want to sit down and talk with the advisor to get a gut feeling about whether the two of you would see eye-to-eye.  Many people receive a recommendation from a trusted family member or friend and that helps make the decision.  When you hire a financial advisor it’s important to find the right fit for you, and to hire someone who is competent and trustworthy.  Ultimately it’s up to you to make this determination.

 

At Parsec we believe that credentials are one important way that you can determine if an advisor is competent.  Experience is important too, which is why we have our newer advisors working in a team structure, led by some of the most experienced and successful advisors in the firm. Philosophy and discipline is also something that we highly value, as that ends up being the driver to the advice that a client receives.

 

All of the factors will play a part in your decision-making process. The Certified Financial Board of Standards has a wealth of information regarding how to find a financial advisor. One helpful article on the subject can be found here:  http://letsmakeaplan.org/working-with-a-financial-planner/what-to-ask. This provides some very important questions that you should be asking when interviewing advisors.

 

Parsec welcomes the opportunity to talk to you or any of our client’s family members and friends to answer questions about choosing the right financial advisor.

 

Harli L. Palme, CFA, CFP(R)

Partner

Market Update through 8/15/13

as of August 15, 2013        
  Total Return
Index 12 months YTD QTD MTD
Stocks        
Russell 3000 22.51% 18.71% 4.08% -1.33%
S&P 500 20.84% 18.07% 3.73% -1.29%
DJ Industrial Average 17.86% 17.24% 1.78% -2.26%
Nasdaq Composite 20.94% 20.45% 6.20% -0.41%
Russell 2000 29.64% 21.95% 5.26% -1.62%
EAFE Index 23.86% 12.33% 7.46% 2.03%
         
Bonds        
Barclays US Aggregate -1.58% -2.93% n/a -0.64%
Barclays Intermediate US Gov/Credit -0.15% -1.52% n/a -0.38%
Barclays Municipal  -2.52% -4.34% n/a -0.83%
         
    Current   Prior
Commodity/Currency   Level   Level
         
Crude Oil    $107.33    $105.03
Natural Gas    $3.42    $3.45
Gold    $1,361.60    $1,312.40
Euro    $1.32    $1.32

Mark A. Lewis

Director of Operations

North Carolina Tax Law Changes

After months of grappling with members of the state’s legislature, Governor Pat McCrory signed a bill authorizing the most significant changes to North Carolina’s tax code since the 1930s on July 15.

The new tax code reduces both personal and corporate income taxes and eliminates the estate tax. Early estimates indicate that taxpayers across the board will pay less in state taxes once the changes go into effect. Some of the other key provisions of the new law are:

• Deductions for mortgage interest on first homes will be capped at $20,000.
• Charitable contributions will remain fully deductible.
• The child tax credit will continue
• Social Security income will remain exempt from state taxes.
• The corporate tax rate will be cut from the current 6.9 percent to 5 percent by 2015.
• North Carolina’s gas tax will be capped until June 30, 2015.
• A deduction on retirement income is eliminated.
• Starting in 2014, the sales tax holidays for back-to-school and Energy Star products are eliminated.
• The deductibility of the first $50,000 of business income has been eliminated
• Service contracts will be subject to sales taxes
• Electricity will be taxed at a general sales tax rate of 7%
• Amusements, movie tickets, etc will be subject to sales taxes

This is only a small representation of the changes. And this information should not be considered tax advice. Individual situations may vary. And as always, please consult your tax advisor regarding how the laws may affect you.

Tracy H. Allen, CFP®
Financial Advisor

Market Update through 7/31/13

as of   July 31, 2013
Total Return
Index 12 months YTD QTD July
Stocks
Russell 3000 26.86% 20.31% 5.48% 5.48%
S&P 500 24.99% 19.61% 5.09% 5.09%
DJ Industrial Average 22.36% 19.95% 4.12% 4.12%
Nasdaq Composite 25.41% 20.94% 6.64% 6.64%
Russell 2000 34.78% 23.97% 7.00% 7.00%
EAFE Index 24.27% 10.09% 5.32% 5.32%
Bonds
Barclays US Aggregate -1.91% -2.31% n/a 0.14%
Barclays Intermediate US   Gov/Credit -0.37% -1.15% n/a 0.31%
Barclays Municipal -2.19% -3.54% n/a -0.88%
Current Prior
Commodity/Currency Level Level
Crude Oil  $105.03  $96.56
Natural Gas  $3.45  $3.56
Gold  $1,312.40  $1,223.70
Euro  $1.32  $1.30

Mark A. Lewis

Director of Operations