A Financial Plan for the Middle Class


Submitted by Gary Burroughs, CPA, CEP - Retirement, Tax & Financial Planner

Financial planning for the middle class: Save ten percent of your income in vehicles you are comfortable with. Buy 7 times your income in life insurance. Buy a good disability policy from a life insurance agent who specializes in disability insurance. See a P&C (Property & Casualty) agent about your liability issues. See a certified estate and trust planner about a will and/or trust. Consider your need for LTC (Long-term Care) insurance. Eliminate your consumer debt with a debt-acceleration plan and curtail credit card buying. Now, if everyone followed that advice we'd have a lot more rich retirees in 20 years. Note: Although the above plan seems simple enough, the difficulty is always in the beginning. Just get started! You have nothing to lose, and everything to gain! If you are just unsure about your next step, give me a call or send me an email, it's that simple.

How Diversified is Your Portfolio?    

Submitted by Jeff Fleming, Esq., CFP, CLU, ChFC, AEP / Joseph W. Cavrich, Esq.

When talking about investments, diversification is a method of reducing risk. If you own the stock of one company and it goes bankrupt, you lose your entire investment. But, if you buy two or more stocks and one of them goes bankrupt, your realized loss will be significantly less. The potential problem that exists when attempting to diversify your portfolio of individual securities is that you may need a substantial amount of money to effectively diversify. Mutual funds eliminate this "cost factor" of diversification because each single mutual fund may contain dozens or even hundreds of different securities. The next question you should be asking yourself is whether or not it makes sense to divesify your mutual fund holdings as well. After all, the more mutual funds you own, the more diversified you must be, right? Unfortunately, this is a misconception believed by far too many investors. In fact, a recent article in a professional journal journal reported on an indvidual who owned 124 funds. The problem with mutual fund diversification is that each fund with similar objectives may own the same security, so you may not be as diversified as you might otherwise think. The securities overlap between funds. To avoid this problem, you should know what the objective of each investment in your portfolio is, and why it makes sense for you. Consult with an investment advisor that you trust, to assist you with analyzing your portfolio, identifying each investment's objective, and determining whether any overlap exists between investments. Remember, your goal should be to match your portfolio to your investment objectives, while at the same time minimizing risk.