Market Update Through 2/28/2014

as of February 28, 2014        
  Total Return
Index 12 months YTD QTD Feb
Stocks        
Russell 3000 26.74% 1.43% 1.43% 4.74%
S&P 500 25.37% 0.96% 0.96% 4.57%
DJ Industrial Average 19.01% -1.07% -1.07% 4.34%
Nasdaq Composite 38.10% 3.36% 3.36% 5.15%
Russell 2000 31.56% 1.81% 1.81% 4.71%
EAFE Index 18.48% 0.26% 0.26% 3.74%
         
Bonds        
Barclays US Aggregate 0.15% 2.02% 2.02% 0.53%
Barclays Intermediate US Gov/Credit 0.31% 1.31% 1.31% 0.38%
Barclays Municipal  -0.21% 3.14% 3.14% 1.17%
         
    Current   Prior
Commodity/Currency   Level   Level
         
Crude Oil    $102.59    $100.30
Natural Gas    $4.61    $5.21
Gold    $1,321.60    $1,318.60
Euro    $1.38    $1.36

Mark A. Lewis

Director of Operations

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Market Update Through 2/15/2014

as of February 14, 2014        
  Total Return
Index 12 months YTD QTD MTD
Stocks        
Russell 3000 24.29% -0.08% -0.08% 3.18%
S&P 500 23.45% -0.26% -0.26% 3.31%
DJ Industrial Average 18.46% -2.19% -2.19% 3.16%
Nasdaq Composite 34.42% 1.76% 1.76% 3.52%
Russell 2000 26.06% -1.14% -1.14% 1.67%
EAFE Index 17.62% -1.57% -1.57% 1.85%
         
Bonds        
Barclays US Aggregate 0.02% 1.45% 1.45% -0.03%
Barclays Intermediate US Gov/Credit 0.39% 1.01% 1.01% 0.09%
Barclays Municipal  -0.87% 2.21% 2.21% 0.26%
         
    Current   Prior
Commodity/Currency   Level   Level
         
Crude Oil    $100.30    $97.49
Natural Gas    $5.21    $4.94
Gold    $1,318.60    $1,239.80
Euro    $1.36    $1.34

Mark A. Lewis

Director of Operations

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Does Jiro Dream of Retirement Too?

I recently moved to the Asheville area after living in Atlanta for twelve years. Ironically, the seeds of my move started around the time I purchased my very first home in Brookhaven, a charming neighborhood in Atlanta. I say ironically because for the prior ten years I held a fairly good and financially stable job, yet had never considered buying a house. Why not you ask? Well, I wasn’t sure myself until last week when I watched the documentary, “Jiro Dreams of Sushi” – which, by the way, I highly recommend.

Jiro is a world-renowned – – perhaps the world-renowned – – sushi chef, operating a tiny ten-seat restaurant inside one of Tokyo’s hundreds of subway stations. Jiro seemed to have no worries about money as far as I could tell, and at age ninety-something, he wasn’t quite ready to retire either. Something about Jiro, his perspective on- and relationship to his work prompted questions within me, questions about my own career, my relationship to my work, and my dreams for the future. Because as far as I can tell, most of us, myself included, work and save, plan and invest, with the hope and dream of one day retiring so that we no longer have to work. But in Jiro’s case, his work was his dream. It was one and the same. Which really hit a nerve in me and at the same time provided some clarity.

What I realized was that for the ten years prior to buying my first house, despite having a good job that would allow me to do it, my dreams and plans for my future life did not involve doing the work I was doing at the time. Meaning, I was not fully engaged in my career or my life and as a result I was often on the lookout for an escape route – and buying a house would have been a major impediment to escape. The job was a good one, interesting enough, and certainly gave me financial stability, but I believed happiness lived in some other job, at some other firm, pursuing some other career. I became so hungry for change that in 2008 I actually quit my job and moved to France for nine months. Interestingly enough, despite a fantastic, and in many ways, unexpected trip, I came home to find myself in almost exactly the same place. I say almost because while the circumstances, people, and places looked about the same, my perspective had changed.

I returned to my old job, worked with the “old” coworkers, and rented another apartment in the same old city. But having lived across the pond, having had the experiences I had, and having returned, I saw in the end that there actually was no escape. Good news really, because before France I planned and saved my money to escape my life, but after France I planned and saved my money to live more deeply into my life. As a result of this small shift, life and I were much more on the same page. It was in the midst of this shift that I started taking a deeper interest in my work as a financial analyst. I became more curious and engaged, and in turn the work itself grew more engaging and satisfying. A virtuous cycle had begun and continues today. It was when I finally stepped into my life and stopped trying to escape it that a new life, as such, presented itself. Just a year and half after purchasing my first house in Atlanta, a new and exciting career and life opportunity presented itself, and in my dream-city (Asheville), no less.

All this to say, that while planning for retirement, setting goals, and making smart choices are hugely important and necessary components of a satisfying and rewarding retirement, so too is engaging with our current circumstances, in our current jobs, and in our current lives, just as they are today. Thanks Jiro.

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Market Update Through 1/31/2014

 

as of January 31, 2014    
     Total Return
Index 12 months YTD/QTD/JAN
Stocks    
Russell 3000 22.60% -3.16%
S&P 500 21.52% -3.46%
DJ Industrial Average 16.07% -5.19%
Nasdaq Composite 32.33% -1.70%
Russell 2000 27.03% -2.77%
EAFE Index 16.31% -3.36%
     
Bonds    
Barclays US Aggregate 0.12% 1.48%
Barclays Intermediate US Gov/Credit 0.41% 0.92%
Barclays Municipal  -1.07% 1.95%
     
  Current Prior
Commodity/Currency Level Level
     
Crude Oil  $97.49  $94.17
Natural Gas  $4.94  $4.33
Gold  $1,239.80  $1,238.30
Euro  $1.34  $1.35

Mark A. Lewis

Director of Operations

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Where is My Money?

It seems there are always stories in the news about the latest scheme that has defrauded many people. Seeking a big return, people give their hard-earned dollars to criminals. The big return is never realized. All the money is lost.

With all the bad guys in our industry, I can understand how someone would look at Parsec with a skeptical eye. I am not going to discuss our performance returns or market strategies in this post. I want to discuss something a little more basic that everyone should consider when interviewing a potential investment advisor: “Where is my money?”

In some cases, the victim gives the criminal money to buy investments. In turn, the fraudsters provide the victim with a statement showing assets purchased with that money. It may contain the names of easily recognizable companies. Without an actual stock certificate behind that piece of paper, the statement is worthless.

At Parsec, we do not take custody of your assets. The assets are held at an independent broker, in your name. We recommend Charles Schwab, Fidelity, and T.D. Ameritrade, all brokers whose names you probably recognize. You will receive a quarterly statement from us that contains performance statistics and other information. You also receive a monthly statement from the independent broker so you know exactly what you own in each investment account.

Furthermore, we do not have the authority to move those assets to an unlike-registered account without your consent. You must sign a letter or form to authorize the movement of securities to unlike-registered accounts, which adds another layer of security.

When assets are held at a broker and registered to you, an independent source tells you what you own. There are no “phantom” assets. Also, giving someone the ability to move assets to accounts not registered in your name can be dangerous if in the wrong hands.

When you select an investment advisor, I hope you will ask this very basic question. You worked hard to accumulate what you have. Don’t let an unscrupulous person take it away from you.

Cristy Freeman, AAMS
Senior Operations Associate

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I Want it All

My husband and I are planning a trip to celebrate our 30th anniversary this summer. We love to travel, and we are fortunate to have taken some wonderful trips over the years. But, when it comes to planning a new trip, I have a weakness: I want it all. You see, there are many places still on my list to visit, and yet there are others we have visited and enjoyed so much, we want to return. It can take weeks for us to pull the trigger and settle on an option. I want it all and I want it right now.

So, it was with great amusement when I read the most recent blog post by the NY Times “Sketch Guy,” Carl Richards http://www.nytimes.com/2014/01/21/your-money/the-trap-of-too-many-choices.html?ref=your-money. You see, having few options is bad, but having too many options can be debilitating.

In the world of financial planning, we most often see this debilitation when people try to time the market. When the market is up, people want to wait for a correction. When it is down, they think it hasn’t gone down enough. Just when they think it is safe to go back in the water, they have missed the biggest part of the upswing. The cycle continues.

This is why the right asset allocation and portfolio diversification play such an important role in your financial success. It may not be exciting and you may not beat the Russell 3000 year after year, or ever. But you are participating in the markets, you have the cushion that fixed income provides and sufficient cash for emergencies to ride out just about any storm. And if you stick with your plan, over the long term, you will be a winner. You definitely won’t get there by sitting on the sidelines.

We all want to make the best decision, invest at the best time, pay the perfect price, plan the perfect trip, etc. But all of the research in the world won’t guarantee success 100% of the time. In fact, waiting for the best often causes us to do nothing.

Richards’ suggestion is to accept that sometimes good enough is better than not at all. And I would have to agree. For now, we have settled on our travel plans. And with any luck, there will be another trip next year.

Tracy H. Allen, CFP®
Financial Planner

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Retirement Plan Savings 101

This time of year there are many employee benefit emails being churned through inboxes. Some of these benefits are time sensitive and can only be changed during qualifying events. Many times these benefits include health insurance coverage, group life and disability insurance coverage, and Health Savings or Health Reimbursement account withholdings. One benefit that is available to many employees, and can be changed at any time, is a retirement savings account. The maximization of these account benefits can result in a large reduction of your year-end tax bill. Let’s take a look at a few of the major plans approved for use by the IRS.

The 401(k):

The 401(k) is the most popular defined contribution plan available. The plan sponsor (the company) sets up the rules for employer contributions, which is approved by the IRS. Participants (employees) also have some decisions to make in regards to contributing to the account. For employees younger than 50, the 2014 maximum funding is $17,500 and for those older than 50 the maximum is $23,000. This employee contribution is subtracted from the employee’s taxable income for the year. This can lead to significant tax savings, but will also reduce the amount of take home pay for the employee. Similarly, some plans allow for a Roth 401(k). This plan functions the same way as the traditional 401(k), except employees do not get to exclude contributions from taxable income. However, once the employee reaches retirement age, all withdrawals from the Roth 401(k) are tax free, unlike a traditional 401(k).

The 403(b):

The 403(b) functions very similarly to the 401(k) but is only offered in certain types of organizations. Primarily, the 403(b) is offered to employees in public education and most non-profit organizations. The contribution limits are the same as the 401(k), with a slight advantage with the “catch up” rules.

SEP/SIMPLE Plans:

SEP IRAs and SIMPLE IRAs are two savings vehicles available to small business owners. These accounts give small business owners and their employees access to tax-deferred savings vehicles with lower administrative costs. The SEP IRA’s contribution limit is similar to the 401(k) and 403(b), but based on the discretion of the business owner. This is different from a 401(k), for which an employer is required to contribute a certain amount. The SIMPLE IRA has a maximum salary deferral of $12,000 for 2014, with a $2,500 catch-up for employees older than 50.

This just scratches the surface of the details involved with employer sponsored savings plans. If you have questions about whether you are making an appropriate deferral, contact your advisor for a review of your situation. If you own a business and are interested in establishing a company plan, contact Neal Nolan, our Director of ERISA for a comprehensive consultation.

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The Best Man for the Job is…a Woman?

I was pleased to read yet another article supporting the importance of women in portfolio management. The article (found here) cited a recently released report which found that an index of hedge funds managed by women outperformed the HFRI Global Hedge fund Index over a 6.5-year period. During that time, the female-managed fund index rose 6%, while the HFRI declined 1.1%. Of course, the sample size was relatively small, as only about 125 of the 10,000+ hedge funds have female portfolio managers. Still, the data seem to support the notion of gender diversity in investment management. There have been many articles written about how men and women differ in their approach to investing, indicating that women investors on average have a performance edge on men.

Many theories abound as to why this might be the case. Some of the most popular theories are that women tend to be more risk-averse (less testosterone) and are therefore less likely to take risky bets that don’t pay off. Another theory is that women lack “over-confidence” leading them to trade less, which has shown to contribute to outperformance. This particular article also suggested that these women hedge fund managers took a longer-term view compared to their male counterparts, which paid off over the time period in question.

Fortunately, Parsec is ahead of the curve when it comes to gender diversity in the investment management arena. Three of our five CFA charterholders are women, and are active members of our Investment Policy Committee. We don’t really know the reasons behind the findings in these studies, but some of the theories described above make sense to us. At Parsec, we don’t see this as a gender issue, just good investing. Our philosophy has always been one with a long-term view that eschews market timing and excessive risk-taking. While this approach doesn’t guarantee outperformance, it is a prudent way to invest for retirement, and we do know the research supports that.

Sarah DerGarabedian, CFA
Portfolio Manager

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Market Update through 1/15/2014

as of January 15, 2014    
       Total Return
Index 12 months YTD/QTD/MTD
Stocks    
Russell 3000 29.28% 0.24%
S&P 500 28.24% 0.07%
DJ Industrial Average 24.79% -0.50%
Nasdaq Composite 37.28% 0.94%
Russell 2000 34.18% 0.69%
EAFE Index 24.05% 0.90%
     
Bonds    
Barclays US Aggregate -1.29% 0.60%
Barclays Intermediate US Gov/Credit -0.55% 0.42%
Barclays Municipal  -2.07% 1.19%
     
  Current Prior
Commodity/Currency Level Level
     
Crude Oil  $94.17  $98.42
Natural Gas  $4.33  $4.23
Gold  $1,238.30  $1,202.30
Euro  $1.35  $1.37

Mark A. Lewis

Director of Operations

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2013 IRA Contribution Rules

The deadline to make IRA contributions for tax year 2013 is April, 15 2014.  The maximum contribution is $5,500 of earned income or $6,500 for those 50 and over.   These amounts will stay the same in 2014.

There are income limits which determine whether you can deduct your Traditional IRA contribution or if you qualify to make a Roth contribution.  The following table gives the phase-out range for the most common circumstances.

Do you qualify to deduct your   Traditional IRA contribution?
 If   your income is less than the beginning of the phase-out range, you   qualify.  If your income is over the phase-out range, you do not.  If   your income falls inside the range, you partially qualify.
  Modified   Adjusted Gross   Income                                           Phase-Out   Range
Single,   participates in an employer-sponsored retirement plan $59,000-$69,000
Married,   participates in an employer-sponsored retirement plan $95,000-$115,000
Married,   your spouse participates in an employer-sponsored retirement plan, but you do   not. $178,000-$188,000
 
Do you qualify to contribute   to a Roth IRA?
Single $112,000-$127,000
Married,   filing jointly $178,000-$188,000

If your filing status differs from those listed above, please contact your advisor and he or she can help you determine whether you qualify.

 

Harli L. Palme, CFA, CFP®

Partner

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