FINANCIAL PERSPECTIVES

Fall 2019

IN THIS ISSUE

• Common Financial Mistakes You Can Easily Avoid

• September is Life Insurance Awareness Month

• Check Your Withholding

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• Defer instant gratification: It takes strong willpower to

stick to a plan. Innovations in technology drive the desire

to constantly update home electronics to better, faster

models. And who would have ever thought we would

pay more than $300 per month to watch TV and use the

phone? Social media can also play a role in our discontent.

A neighbor posts pictures of their fabulous vacation

and we begin to think we too need a getaway. When

tempted to purchase the latest (you name it), remember

your financial independence is far more important

than increasing your social status. Be sure to keep debt

reasonable relative to your ability to pay it off with minimal

—or no—monthly finance charges.

• It’s never too late to start a plan: Whether you are early in

your career or in your peak earning years, setting aside a

portion of your income to meet your financial goals, and

paying yourself first is a good place to start. A common

practice is to follow the 50/20/30 rule. Your income

allocated:

Common Financial Mistakes

You Can Easily AvoidWhen asked about their finances, 75%

of adults say they are either doing

okay or living comfortably. However, if

faced with an unexpected expense of

$400, 27% of adults would borrow or

sell something to pay for the expense,

and 12% would not be able to cover

the expense at all.* Although most

of us may think we have our financial

house in order, an unexpected expense

may easily derail our path to financial

independence if even for a short period

of time. So how can you better prepare

yourself to reach your goals and avoid

some common mistakes?

Common Financial Mistakes

You Can Easily Avoid

Flexible Spending

Living expenses & essentials

Financial Goals

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• Prioritize funding of tax-advantaged accounts: Make your

20% financial goal allocation work harder for you in tax-

advantaged accounts.

• Contribute to your employer-sponsored plan. At the

very least, contribute enough to qualify for the

employer’s match.

•Fund a Traditional or Roth IRA.

•If you are self-employed, fund a SEP IRA.

•If you are no longer working, consider investing in tax

efficient mutual funds, ETFs or a tax-efficient Separately

Managed Account.

If you are still not sure where to begin, you are not alone.

• Thirty-six percent of working adults think that their

retirement saving is on track, but one-quarter have

no retirement savings or pension whatsoever. Among

those over the age of 60, only 45 percent believe that

their retirement saving is on track*

• Six in 10 working adults who hold self-directed

retirement savings accounts, such as a 401(k) or IRA,

have little or no comfort in managing their investments*

Do you feel like you need more guidance? Ask your financial

advisor for assistance in developing a plan.*Source: Federalreserve.govconsumerscommunities/shed.htm. The latest SHED interviewed a sample of over 11,000 individuals—with an online survey in October and November 2018.

Once you are committed to a disciplined approach and have

a plan in place that is right for you, there are a number of

investment principles to put into practice to help you

when the economy and the volatility of the financial

markets get scary.

• Know your investment time horizon: How long does your

investment portfolio need to work for you? Not only do you

need to consider the amount of time to retirement, but you

also need to consider how long you may be in retirement.

With longer life expectancies, your plan needs to take this

longevity into consideration. You want to be sure your plan

and your investments will see you through the years when

you are no longer taking home a regular paycheck.

• Select an investment objective and risk orientation that reflects your personal situation: Are you seeking growth or

income or a combination of the two? Does your tolerance

toward risk place you in the conservative, moderate or

aggressive profiles? How would you react to declines in

your investment portfolio that are similar to, greater than or

less than that of the market overall?

• What asset allocation is good for you: Your age and time

horizon are important factors in determining how you

allocate your investments across asset classes. Conventional

wisdom from the past is not the only variable to consider

today. Traditionally, younger folks had longer horizons and

allocated a larger percentage to common stocks, funds and

ETFs that were equity-based. As we aged, there often was a

gradual shift to a higher percentage in fixed income. With

perhaps more years “in retirement”, some older investors are

keeping a larger percentage in equities than has been the

norm. Of course, you need to weigh the risk/return benefits

and your financial advisor can help guide you in these

decisions.

• Market Timing is risky: As we learned from the Great

Recession, no matter how experienced we are as investors,

we cannot effectively time the market although we may

feel we get lucky sometimes in our selections. Therefore,

be sure to spread risk by investing in different asset classes,

economic sectors and geographical regions. Proper

diversification is also important within equity sectors, as

some businesses can be more volatile than others.

• Too many positions can make your portfolio more difficult to manage—too few positions can significantly increase risk: Pay attention to the number and size of the positions

in your portfolio. Keep in mind about 5 to 30 positions

depending on the type of investment with minimum

investments of 3% to 5%. Limit your position sizes to 10%

or less and sector exposure of 20% or less. Be sure to keep

a cash equivalents reserve should funds be needed or to

take advantage of market opportunities. If you have several

investment accounts, be sure to view them as a whole to

be sure you are well-diversified.

• Failure to rebalance your account can limit your returns and raise your risk exposure: As markets fluctuate, your

investments may diverge from your target asset allocation

and risk profile and so periodic rebalancing is another key

to financial success.

Your financial advisor can help guide you around these

possible financial mistakes and help to steer you on a proper

course of action.

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... could your family continue to meet their financial

obligations such as paying the rent or mortgage, paying

bills, daily living expenses, or even sending a child to

college? If not, having a life insurance planning discussion

with your financial advisor is imperative. While the planning

conversation surrounding death is often uncomfortable, it

is necessary to ensure you have the proper amount of life

insurance for your family to maintain their current and future

lifestyle should something happen to you. A life insurance

policy provides an income-tax free lump sum death benefit

to your family in case you die early or unexpectedly, which

can be used to replace lost income and fund other needs.

According to a recent study* one in three households

would have immediate trouble paying living expenses if the

primary wage earner died. The study also found that 40% of

individuals haven’t bought life insurance because they are

unsure of the amount or type of coverage to buy.

Your life insurance needs are unique, and throughout your

lifespan, those needs can change based on your income

earned and family situation. As a result, changes may need

to be made to the amount and type of insurance owned. As

a first step in reviewing insurance needs, gather your current

life insurance policy statements for an evaluation by your

advisor. Your financial advisor can help you take an inventory

of your existing coverage and determine if you have a surplus

or shortage of coverage by conducting a Life Insurance

Needs Analysis. This analysis can compare income needs to

income sources, and can determine how much additional

insurance is needed, to protect any shortfall.

September is Life Insurance Awareness Month, which is a month-long public awareness campaign

sponsored by the nonprofit organization Life Happens.

If the income you earn would suddenly stop, due to death ...

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Don’t let your family suffer financially should the unexpected

happen. We can review your situation to ensure your family

will be protected should your income be halted due to an

unforeseen death.

*2016 Insurance Barometer Study by Life Happens and LIMRA

Term Period Male Female10-Year $461 $393

15-Year $593 $505

20-Year $761 $629

30-Year $1321 $1060

Note: Premiums are estimates from Protective Life Insurance Company. Rates will vary by carrier and underwriting. All products are not available in all states.

Did you have a big check to write to the IRS in April? If so, you were not alone. Almost half a million taxpayers recently received relief from underpayment penalties for failure to withhold enough tax after the biggest income tax reform in decades became reality. That number doesn’t include those taxpayers who previously requested relief from underpayment penalties after the IRS lowered the 90% penalty threshold to 80%.

Even though relief was provided for 2018 income tax returns, don’t count on such relief to be ongoing. The IRS is encouraging all taxpayers who found themselves with large income tax liabilities to do a paycheck checkup to make sure they are on track with their 2019 tax withholding before it’s too late.

In addition to estimating your income tax obligation for 2019 and your projected withholding, the Tax Withholding Estimator will make specific recommendations on how to complete a new withholding election with your employer based on the number of paychecks you have remaining in the year. According to the IRS, those most at risk of having too little tax withheld include those who itemized in the past, but now take the increased standard deduction, as well as two wage earner households, employees with non-wage sources of income and those with complex tax situations.

Sample Guaranteed Annual Term Life Insurance Premiums40-Year-Old Preferred NS/$1,000,000 Death Benefit

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MARKET RECAPMarket Summary (As of September 1, 2019)

Securities Research

• A meaningful growth rate for Gross Domestic Product (GDP) is

dependent on favorable contributions from both the consumer

and from manufacturing. Combined, they show broader strength

in the overall economy than from either independently. July

retail sales rose 0.7% from the prior month. This was better than

expected and the strongest monthly report since last March.

Consumer spending accounts for more than 2/3 of overall U.S.

economic output. Based on the strength from the consumer,

some economists raised their third-quarter GDP growth

estimates to around 2.0% - 2.2% from the prior estimates of

1.7% - 1.9%. Manufacturing, the largest component of industrial

production, on the other hand, fell 0.4% during July, month-

over-month. Manufacturing output has fallen more than 1.5%

since December 2018. Manufacturing is very sensitive to changes

in global demand, so a turnaround is dependent in part on an

improvement in worldwide economic conditions and reasonable

trade/tariff policies which impact demand from overseas.

• A lack of consensus among members of the Federal Reserve

about policy matters, especially those who vote on policy,

could be an overhang as we move into the final months of the

year. Investors seem to react more to Fed comments than they

may have previously given the market levels, low interest rates

and inflation which shows no real signs of overheating. Some

members are of the opinion that one more 0.25% interest rate

cut this year is warranted, another member opined that a one-

half point reduction is reasonable, and others claim the economy

is sufficiently strong that no stimulus is needed. Recently, another

member had a different spin—he said now is not the time to

lower interest rates as households and companies could take on

more low-cost debt, and not be as financially strong going into

the next recession which has been prognosticated by the interest

rate yield curve inversion.

YTD Trailing12 months

3-Year Annualized

5-Year Annualized

DJIA 15.14% 4.12% 15.50% 11.77%

Nasdaq 20.01% -1.81% 15.17% 11.70%

Russell 2000 11.54% -13.25% 7.46% 5.98%

S&P 500 18.34% 2.92% 12.70% 10.11%

U.S. Tresury Yields

Two-year 1.46%

Five-year 1.35%

10-year 1.49%

30-year 1.98%

Sector Weightings YTD Trailing12 months

5-Year Annualized

Info. Technology 21.1% 28.02% 4.98% 15.95%

Health Care 13.9% 4.55% -2.30% 7.25%

Financials 12.6% 12.57% -5.04% 7.25%

Comm Services 10.5% 20.03% 8.18% 0.74%

Cons Discretionary 10.2% 20.34% 1.21% 11.54%

Industrials 9.2% 17.35% -1.47% 6.52%

Cons Staples 7.6% 19.04% 12.66% 6.02%

Energy 4.4% -0.47% -22.92% -10.02%

Utilities 3.5% 17.63% 17.15% 7.64%

Real Estate 3.3% 26.04% 16.30% 6.62%

Materials 2.7% 11.89% -4.66% 2.18%

Sources:Benjamin F. Edwards & Co. and Bloomberg

Sources:Bloomberg (as of September 3, 2019)

U. S. Stock Performance of S&P 500 Index Price Returns for periods ended August 30, 2019

Ranked by highest to lowest index weightings Weightings may not equal 100 due to rounding Source: S&P®

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Fixed Income

• The fixed income market has taken a cautious tone for nearly

all of 2019, but that trend accelerated in the third quarter. The

10-year Treasury bond has moved to a 1.46% yield, just 10

basis points higher than the record low of 1.359%. The sharp

downward push in yields is due to the uncertainty of the trade

war/tariffs on trade with China.

• The municipal market has moved with equal aggression, with

the short end of the yield curve seeing significant demand as

you can see in the graph to the left. The first five years of the

graph are flat at approximately 1%. The investment mantra of

preservation of principal is palpable given the volatility we have

been seeing in the equity markets. Retail investors are cognizant

of the 2008 equity downdraft and are positioning based on

lessons learned previously.

Sources: Bloomberg, Bloomberg US Corporate (A) Fair Value Index, Thomson Reuters MMD/TM3

Fixed Income Yield Curves As of Spetember 3, 2019

CONTRIBUTING AUTHORS

BRUCE BUERKLE, CFA Senior Vice President and Manager, Securities Research

ELAINE CONWAY

Senior Vice President and Manager, Corporate Communications

DAN SCHULTE

Senior Vice President and Manager, Annuities and Insurance

THERESA FRY

Senior Vice President and Manager, IRAs, Retirement & Education Planning

ED O’NEAL

Senior Vice President and Manager, Retirement Plans

JOEL WIESEHAN Senior Vice President and Manager, Fixed Income

Important Disclosures Past performance is not a guarantee of future results.

The information provided is based on internal and external sources that are considered reliable; however, the accuracy of this information is not guaranteed. This piece is intended to provide accurate information regarding the subject

matter discussed. It is made available with the understanding that Benjamin F. Edwards & Co. is not engaged in rendering legal, accounting or tax preparation services. Specific questions on taxes or legal matters as they relate to your individual situation should be directed to your tax or legal professional.

Diversification does not guarantee a profit or protect against loss.

Investing in securities entails certain risks, including the potential loss of all or a portion of the proceeds invested. Individuals should consider their specific financial needs, investment objectives and risk tolerance before making an investment.

Equity investments refer to buying stocks of U.S. companies as well as companies outside of the U.S. The market capitalization of U.S. companies is used to group large, medium (mid) and small companies. The investment return to the owner of stock (shareholder) is in the form of dividends and/or capital appreciation.

Shareholders share in both the upside potential and the downside risk. Dividends are not guaranteed and are subject to change or elimination.

Mutual funds and ETFs are sold by prospectus. Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from your

financial advisor and should be read carefully before investing.

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