Now that the election is behind us we can focus on some of the positive aspects of our economy and how to improve Gross Domestic Product (GDP) and jobs in both in the short and long term. In the fall I blogged about the fact we ARE better off now than we were in 2008. One area that is definitely on the move is the housing market, recovering from a recession and unscrupulous dealings on Wall Street involving the sub-prime mortgage market.
There was a time when home ownership was the American Dream and it still is for some. With today’s low rates families can get into mortgages and buy properties that are very affordable. America was losing 750,000 jobs a month in 2008 and began adding jobs monthly since the spring of 2009. It has taken a little time to take hold, but the housing market as a whole is certainly on the way up and is expected to add 1/2 % to GDP in 2013. Here in Newburyport values of homes have improved at a rate higher then the national average and other major markets are improving modestly, while some like Las Vegas and Tampa, FL where homes lost ~50% will take longer to improve.
The low mortgage rates are getting real estate investors back in the game. The combination of low rates and low values make purchasing real estate and holding it for the long term a very viable option. Over 23 years I have worked closely with many personal real estate investors who came to me and said, for example: “Stu, I am going to buy these 2 3-familiy homes in (insert city); I will improve them and flip them in less than 1 year. I expect to make a profit of (Insert Profit) on the deal.” Many of these people failed for so many different reasons. The new real estate investor today is buying and holding the investment for the long term and collecting rent instead of flipping the property.
Today, builders of homes are the most optimistic they have been since the peak of the real estate market in 2006. Many are looking to hire new construction workers and will do so in 2013. Consumer confidence rose again in October (the highest this year) and the improving job market is the leading indicator. Housing will continue to rise as long jobs are being created.
If you are a homeowner you may also be able to benefit from the low rates by looking at your debt and refinancing your home. There has never been a better time to do so, and it is great that entire generations of families are able to refinance their homes at very low fixed rates. Get the answers you need as it pertains to your particular situation.
Listen below to hear Win Damon and I chat about this topic on WNBP Radio 106.1 FM and wnbp.com
Stuart Steinberg of Eaglerock Financial, Inc. has worked with families for more than 20 years, helping them work toward their financial goals through a holistic, well rounded approach rooted in objectivity, education, and empowerment. Stu is highly regarded by clients and colleagues for his unique combination of investment, CPA and entrepreneurial experience in the high net worth market.
EAGLEROCK FINANCIAL IS PLEASED TO INTRODUCE A SPECIAL PRESENTATION
“Invest for Life: A road map for your financial future”
Thursday October 18, 2012 at 1 p.m.
As Lao Tzu said “A journey of a thousand miles begins with one step” Planning your financial future can take many twists and turns. You are the navigator of your future financial success. There are many steps in securing your future financial future.
** Learn how to Set Goals
** Working with the right financial advisor
** Mapping a personalized strategy
**Checking your progress through benchmarking and personal goals
**Selecting investment types
**Understanding assets and classes
**Principles of investing
Stuart Steinberg of Eaglerock Financial, Inc has worked with families for more than 20 years, helping them work toward their financial goals through a holistic, well rounded approach rooted in objectivity, education, and empowerment
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Investing in mutual funds involves risk, including possible loss of principal
Investors should consider the investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus contains this and other important information about the investment company.
Securities Offered through LPL Financial, Member FINRA/SIPC
I wish I had a dime for every time someone called me with a hot tip or a new investment idea. Boy I certainly would be a rich man. I am glad I did not take all that advice for sure. Every single investor is different and has varying needs, wants, and desires. Here are some common myths about money and investing:
1) You need a lot of money to invest. It is actually the opposite. The sooner you start with a disciplined, long term, financial strategy, the better. I always say: “Start with $50/month for a while. As life progresses, and your career advances, your monthly savings will increase as well. Your long term plan will be off and running!
2) You need to find a more complex investment strategy to beat the market. While some portfolios need to be more complex and further diversified because of the large size of the investment, although no strategy assures success or protects against loss, often times it is the simple buy monthly and hold, value oriented strategy that does the best over time. Yes, I know this is boring. But some of the best long term strategies I have seen over the years are the simplest, even if the personal or business assets get into the millions! Sometimes it is best to remain simple, and truly understand the investments you are making.
3) You need to shoot for aggressive “home run” investments to get to where you want to be. Again the goal here is really the opposite. Let’s say your friend at work has a great tip on an investment. You decide to invest $100,000, the entire amount of your bank account! Of course, the investment does not work out and you lose ½ and sell the asset netting $50,000. A loss of 50%! What will it take now to get back to where you started? A 100% gain! This of course will be very challenging to reach in many situations. So instead of trying to hit a home run, it is often best to hit many quality singles and build for the long term.
4) You need to study the market constantly in order to beat the market. It is best to have a basic understanding of the various markets you are investing in, and to know what they are doing. But it is often best to stop there. At this point, I would rather you study yourself, and what makes you tick. Study your needs and wants and desires and see how they all fit in with your big picture financial plan. It is important to not get swallowed up in the latest stock or tip or what the media says. With the help of a trusted advisor you may able to take some or all of the emotion out of the actual investment and really benefit from the understanding of the process.
5) You need to do what your friends, family, and co-workers dowith their money. Believe it or not, this is what many people do. They follow the herd and do whatever everyone else is doing. It is obviously not the recommended path for anyone to take. It is the foundation of emotional investing, and it is also commonly seen in certain consumer behavior as well as in politics. In dealing with the public and their money for over 23 years, I can truly say that no 2 clients are the same. Even the best of friends or brothers and sisters!
6) You NEED to own a home because renting is like throwing money away. Rent is like other household money you spend like gas, food, and utilities that gets used up over time but is necessary for basic living. You would not consider those expenses as throw away, would you? Buying a home to live in is certainly an investment, but I like to think of it as my home as opposed to a certain investment that needs to make money. Besides, with a traditional 30 year fixed rate at 4% on a $300,000 mortgage. After 5 years you will have made ~$86,000 in payments yet still owe ~$271,000 on the mortgage. Many would consider that throwing away ~$57,000 in interest.
Listen below to hear Win Damon and I review this very topic on WNBP Radio 1450 and wnbp.com. Win and I have educational financial chats every Tuesaday morning at 8:30!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. Stock investing involves risk including loss of principal.
Securities Offered through LPL Financial, Member FINRA/SIPC
I like to help my clients take the whole approach to their finances. It’s too easy to lock into a single financial obsession, to bite into some hot topic in the financial news.
Rather than do that, I encourage my clients to step back. For instance, let’s take a look at the issue of personal debt.
Or, having good debt versus having bad debt.
First, let’s look at the good debt. Those two words – good and debt – don’t seem to go together, do they? But it can make sense when you step back and look at the big picture.
For many of us, home ownership is not just a goal it’s a dream – one that I share with many of you. Fortunately in our country a lot of us get to realize this dream. And if we have a chance to pay down the mortgage on our property, it feels good to do it. We own our place. We’re paying it off. It feels like we’re getting somewhere.
But let’s say you have a mortgage rate that is nice and low. Let’s say we’ve locked into a 30-year 4% fixed rate. Or even if it’s a little higher than that, you still have an outstanding deal. This is what you call good debt.
Now for bad debt. Just take out your credit card. If you owe money, what interest rate are you paying? Some credit cards have interest rates as high as 20%. I can say unequivocally that this is bad debt. Because it’s hard to get ahead of it. It’s the kind of debt that keeps us from attaining and maintaining the lifestyle we want. It’s more important to take care of bad debt like this than it is to pay down your good debt mortgage.
One more thing about debt. It’s a good idea to be conscious of your credit card rating at all times. Be sure to pull a credit report once a year to get your rating, and be sure that you are not a victim of identity theft.
PODCAST OF THIS TOPIC! Click below to listen to Stu discuss this topic with morning guy Win Damon on wnbp 1450 am on your radio dial or listen live online at wnbp.com every Tuesday morning at 8:30.