A BIT OF THIS, A BIT OF THAT

Focus on What You Can ControlMany investors feel they have little or no control over their efforts to build and maintain their retirement savings. True, there’s a lot that investors don’t have power over; this includes the federal budget, international events, the weather, taxes, gas prices, interest rates and health care costs. As a result, some worried investors decide to “get out of the market” and remain in cash until things are less volatile. Other investors who worry about those uncontrollable factors can become so paralyzed they can’t make any decisions whatsoever about investing the cash in their portfolios. But worrying about factors over which investors have no control can contribute to becoming distracted from the long-term investing picture. It is difficult to feel in charge when significant economic changes – both local and global – are both fast and intense. But many investors have learned not only what they can’t control but more importantly, what they can. This is critical because investors need to understand what is in their power to manage; this knowledge can contribute to stability in their portfolios while facing a shifting investment landscape.

What you can control

• Establish a general financial plan

• Identify your investment objectives

• Determine risk comfort level

• Select quality investment managers

• Review portfolio for tax efficiency

• Minimize investment expenses

What you cannot control• Market volatility

• Outcome of U.S. elections

• Global economic conditions

• International political events

• U.S. tax policy

Acknowledging what you can and cannot control, investing your portfolio according to your individual risk level, and the help of the REDW Stanley wealth managers will help make you a more disciplined investor.

Statement of Investors RightsThe CFA Institute is the global organization representing the views of investment professionals before standard setters, regulatory authorities and legislative bodies around the world. The CFA Institute awards the Chartered Financial Analyst (CFA) credential which is held by Paul Madrid and Daniel Yu in our office. The Institute developed the Statement of Investor Rights to advise buyers of financial service products of the conduct they are entitled to expect from financial service providers. As a fiduciary to our clients, a fee-only advisor and the employer of two charterholders, REDW Stanley agrees with the Statement of Investors Rights. This list of Investor Rights should be applied to financial products and services such as asset management, personal banking, insurance and real estate so that trust is built with the person and the firm with whom consumers choose to work. The Institute’s Statement of Investor Rights follows:

When engaging the services of financial professionals and organizations, I have the right to:

1. Honest, competent, and ethical conduct that complies with applicable law;

2. Independent and objective advice and assistance based on informed analysis, prudent judgment and diligent effort;

3. My financial interests taking precedence over those of the professional and the organization;

4. Fair treatment with respect to other clients;

5. Disclosure of any existing or potential conflicts of interest in providing products or services to me;

6. Understanding of my circumstances, so that any advice provided is suitable and based on my financial objectives and constraints;

7. Clear, accurate, complete and timely communications that use plain language and are presented in a format that conveys the information effectively;

8. An explanation of all fees and costs charged to me, and information showing these expenses to be fair and reasonable;

9. Confidentiality of my information;

10. Appropriate and complete records to support the work done on my behalf.

December 2014

Continued...Copyright 2014 REDW Stanley Financial Advisors, LLC. All Rights Reserved. This publication is intended for general informational purposes only. The information provided herein is for informational purposes only and should not be construed as investment, financial, tax, or legal advice.

By Laura Hall, CIMA®, AIF® Portfolio Manager/Chief Trading and Operations Officer

Rebalancing PortfoliosEvery quarter, the investment professionals of REDW Stanley analyze our clients’ portfolios to determine whether changes need to be made to any of the specific assets in the portfolios or whether rebalancing of the asset class targets is necessary. Depending on how the U.S. stock market performed during the previous quarter, our clients can resist the rebalancing process. For example, if the market declined in value, resulting in stocks being under- allocated per the target percentages, our clients resist adding to positions that declined in value by selling assets that have increased in value. On the other hand, if the U.S. stock market has increased in value, resulting in stocks being over-allocated per the target percentages, our clients can be unwilling to sell positions that have increased in value in order to add to positions whose values have decreased. With U.S. stocks going up and the specter of a rise in interest rates, the need to rebalance can be a difficult discussion. One of my clients described this process as “Selling the winners and buying the losers” – followed by the question, “Why would I want to do that?” While that description may seem like what’s happening, the rebalancing process is important to maintain the agreed-upon risk tolerance for the portfolio. When stocks are doing well, a portfolio that began with a 60% allocation to stocks and a 40% allocation to bonds can end up with a 66% allocation to stocks and a 34% allocation to bonds. That variance of 6% (66% versus 60%) increases the risk in the portfolio due to an increase in the allocation to stocks and an under-allocation (34% versus 40%) to bonds and is larger than the 5% variance as noted in our clients’ Investment Policy Statements. Most clients do have a higher risk tolerance in a market with stocks going up but become more conservative and much less risk tolerant when the stock market declines in value. It is human nature to remember and focus on the losses with clarity while remembering the increases with less accuracy. Increases in the allocation to stocks or decreases in the allocation to bonds should be based on each individual client’s risk tolerance – not on what the stock market is doing. A properly diversified portfolio, invested according to each client’s individual risk tolerance and rebalanced on a regular schedule, is a basic premise for the asset management professionals of REDW Stanley.

It Really Does HappenRecently, one of our clients received an e-mail from someone, whom our client didn’t know, with an emotional request for money to be wired overseas. The story was persuasive, appealing to our client’s soft heart and desire to keep a mother from going to jail and thus prevent her child from becoming homeless. But despite the compelling plea, the e-mails received by our client contained misspelled words and the improper use of English, indicating the messages had been composed by a person whose first language was not English. Although we at REDW Stanley are aware this type of fraudulent activity occurs, we were disturbed to see it happen to one of our clients. The good news is that our client contacted the Relationship Manager who assisted in determining the request was indeed fraudulent. With the help of the Relationship Manager, the incident was reported to the FBI office in Albuquerque where FBI personnel agreed the request for funds was fraudulent and should be ignored. The client followed the FBI’s advice.

1. Firm news: REDW is pleased to announce that Dean Willingham, a principal in the firm’s Audit & Consulting department, was named Chair of the New Mexico Society of CPAs, effective July 1, 2014 for 2014-2015. He served as Vice Chair 2013-2014.

2. Economic news: The S&P 500 lost 5.5% (total return) in the first half of October 2014 (thru 10/15/14), but then gained 8.4% in the second half of the month. The first half of October included 5 trading days with losses of at least 1%. The second half included the best trading day of the year (+2.0% gain on 10/21/14). The S&P 500 consists of the 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (Source: BTN Research).

3. Client news: One of our clients has written a book that was recently published by Random House. Her husband directed a short film that was nominated last year for an Academy Award.

Did You Know?

Albuquerque | Phoenix | redwstanley.com

REDW Stanley is a highly respected investment advisory firm with a primary focus on serving clients in the Southwest. As fee-only advisors, we do not receive commissions or sell investment products, so you can be confident that our recommendations and advice are based solely on your needs and with only your success in mind. In Arizona, the firm operates under REDW Stanley Wealth Advisors, LLC, an SEC registered affiliate of REDWLLC. In New Mexico, it operates under REDW Stanley Financial Advisors, an SEC registered firm subsidiary of REDWLLC.