Celebrating Your Financial Freedom

Independence Day or “the Fourth of July” is a federal holiday in the United States commemorating the adoption of the Declaration of Independence in 1776, which declared freedom from what is now known as the United Kingdom.  This day is commonly full of celebrations including fireworks, parades, barbecues, carnivals, fairs, picnics, concerts, baseball games, family reunions, and more.

 

In honor of Independence Day and our logo, “Money is freedom. Freedom is fun,” we would like to recognize a few of the many characteristics of being financially free.  If you find that you meet these characteristics or are continuously striving toward them, then you should have even more reason to celebrate this year!

• You are happy with what you have and you are grateful for your blessings.
• You have financial goals and you are continuously moving forward toward them.
• You are patient and work for what you want.
• You are prepared with an emergency fund and an extra savings fund for life's little "what if's".
• You understand that financial wealth takes time and effort.
• You are responsible with your money and properly handle your debts.
• You manage your spending and always have money left after your paycheck.
• You invest in a long term strategy that builds wealth surely and steadily over time.

On this year's holiday, we wish you lots of love and laughter, and as always we hope you have happy and safe celebrations!  Happy Independence Day from the entire FIC family!

PIMCO: Stay The Course

PIMCO (PacificInvestment Management Company, LLC) produced a market-relevant article earlier this month entitled “Stay The Course”.  This article discusses four (4) reasons why long-term investors should remain focused on their goals and not fear rising rates.  Click here to view the full article (with visuals!) in PDF form.

1)  Rising Rates Build Income:  With interest being the primary driver of bond returns, reinvesting into a gradually rising rate environment can actually help build long-term growth.  When rates rise, new bonds may pay higher, which can increase what you (as a lender) receive in the long run.
 
2)  Lower Volatility Helps Preserve Capital:  During uneasy times in the market, investors are often reminded why fixed income investments can be solid anchors for their portfolios.  Bonds have historically been less volatile than stocks, while also providing capital preservation, income and growth, and low-to-negative correlations to equities.
 
3)  Cash ‘Safety’ Comes at a Price:  Investors concerned about market fluctuations and short-term bond volatility may be tempted to withdraw their investments until prices stabilize.  However, with cash and money market investments typically yielding rate of returns close to zero, and especially after accounting for inflation, these types of investments can actually provide a negative return.  Compounding over the long-term, maintaining investments in bonds will almost always generate a higher rate of return.
 
4)  Experts Have Access to a Diverse Toolset:  Although mainstream media tends to focus on U.S. Treasuries (which are the most sensitive to changing rates), the “market of bonds” is exceedingly diverse and global, including corporate and high yield bonds, mortgage-backed securities, floating rate issuers, emerging market bonds, and many others.  Since each sector or asset class responds differently to economic and market trends, a skilled bond fund manager should be capable of diversifying a portfolio which can defend against capital losses while also capturing a range of growth opportunities.
 
PIMCO is the world’s largest bond investor and one of the world’s largest active global fixed income investment managers.  As of the end of 2012, PIMCO had $2 trillion in assets under management.

Annual financial review moves you forward

Happy New Year! With the fresh calendar page comes opportunity. This is your clean slate. To create 2010 goals, you'll also need to review 2009. What did you accomplish last year? What didn't you get done that still matters? Put those goals at the top of your list.

A great tool for getting this process started is an annual financial review. Dan Danford goes into detail on how to do this in this podcast on Dad's Divorce, a web site for men going through the divorce process..