Ask Our Experts

Tom SaxonTom Saxon, Financial Advisor

Tom.Saxon@wyetrust.com

How Do Mutual Funds and Stocks Differ?

Whether you're a first-time stock investor or a seasoned veteran, you should understand what differentiates single stock investments from mutual fund investing.

Picture a collection of stocks, bonds, or other securities that are purchased by a group of investors and then managed by an investment company. That's a mutual fund. When you buy shares in a fund, you're really buying a piece of a large, diverse portfolio. Conversely, stocks are shares of a single company.

When it comes to managing their investments, some investors prefer leaving the details and skills to someone else. They like having a professional manager oversee the day-to-day decisions that a changing stock market involves and see that as a distinct advantage. A good manager, they might argue, has access to information that would cost them an exorbitant amount, even if they had the time and inclination to do the work themselves. On the other hand, some investors would never surrender control of their investments. Individual comfort level plays a big part in your investment choice.

Diversification is a big selling factor for mutual funds. When one security in a fund drops, an insightful fund manager may have included stocks that could cushion or offset that loss. But that's not to say that an investor couldn't diversify his or her own stock selections. Diversification does not guarantee a profit or protect against investment loss; it is a method used to help manage investment risk.

In terms of liquidity, fund investors can cash in on any business day. When you sell a stock, you must wait three business days before the trade settles and your money is released.  

The issue of red tape also sets mutual funds apart from stocks. Mutual fund investors often cite transaction ease as an inviting factor. And it is hard to beat the convenience of having records and transactions handled for you, while periodically receiving a detailed statement of your holdings.

Transacting business with stocks can be a more complicated experience. Placing buy orders, selling shares, or dictating any number of orders can be time-consuming. To some, however, that's just part of the experience.

In summary, fund investors are often attracted by the overall convenience. By contrast, stock investors may tend to be more comfortable with their own investing skills.  Keep in mind that the value of mutual funds and stocks will fluctuate with changes in market conditions; when investments are sold, the investor may receive back more or less than the original investment amount.

Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

 

 

Neil Zurowski, Financial AdvisorNeil Zurowski

Neil.Zurowski@wyetrust.com
 

Annuities and Retirement Planning

Have you maxed out your contributions to your IRA and employer-sponsored plan? Do you want to save more? An annuity may be a good investment to look into.

Get the lay of the land

An annuity is a tax-deferred insurance contract. You invest your money with a life insurance company that sells annuities. In exchange for your investment, the life insurance company promises to make payments to you or your beneficiary in the future. Chances are, you'll start receiving payments after you retire. Annuities may be subject to certain charges and expenses so do your research first.


Understand your payout options

Understanding your payout options is very important. Payments are based on the claims-paying ability of the life insurance company. You want to be sure that the payments you receive will meet your retirement income needs. Here are some common payout options:

  • You surrender the annuity and receive a lump-sum payment of all the money you accumulated. Your tax bill on the investment earnings will be due all in one year.
  • You receive payments from the annuity over a number of years. If you die before this "period certain" is up, your beneficiary will receive the remaining payments.
  • You receive payments from the annuity for your lifetime. You can't outlive the payments (no matter how long you live), but there will typically be no survivor payments after you die.
  • You combine a lifetime annuity with a period certain annuity. This means that you receive payments for the longer of your lifetime or the time period chosen. Again, if you die before the period certain is up, your beneficiary will receive the remaining payments.
  • You elect a joint and survivor annuity so that payments last for the combined life of you and another person. When one of you dies, the survivor receives payments for the rest of his or her life.

Consider the details

An annuity can often be a great addition to your retirement portfolio:

  • Your investment earnings are tax deferred as long as they remain in the annuity. You don't pay income tax on those earnings until they are paid to you.
  • If you die with an annuity, the annuity's death benefit will pass to your beneficiary without going through probate.
  • Your annuity can be a reliable source of retirement income, and you have some freedom to decide how you'll receive that income.
  • You're not subject to an annual contribution limit, unlike IRAs and employer-sponsored plans.
  • You're not required to start taking distributions from an annuity at age 70½.

Choose the right type of annuity

Most annuities fit into a small handful of categories. Your choices basically revolve around two key questions. How soon would you like annuity payments to begin? How would you like your money invested? You should consult a Financial Professional to help you consider the investment objectives, risk, charges, and expenses carefully before investing.

 

Christopher ParksChris Parks

Chris.Parks@wyetrust.com

Handling Market Volatility

Conventional wisdom says that what goes up, must come down. But even if you view market volatility as a normal occurrence, it can be tough to handle when it's your money at stake.

Here are some tips to help handle market volatility.

Don't put all your eggs in one basket

Diversifying your investment portfolio is the best way you can handle market volatility. Because asset classes perform differently under different market conditions, spreading your assets across different investments such as stocks, bonds, and cash alternatives can help manage your overall risk. Ideally, a decline in one type of asset will be balanced by a gain in another, though diversification can't guarantee a profit or eliminate the possibility of market loss.

Focus on the forest, not the trees

As the markets go up and down, it's easy to become too focused on day-to-day returns. Instead, focus on your long-term investing goals. Only you can decide how much risk you can handle, but don't overestimate the effect of short-term price fluctuations on your portfolio.

Look before you leap

When the market goes down, you may be tempted to pull out altogether. The small returns that typically accompany low-risk investments may seem attractive when more risky investments are posting negative returns.

But before you leap into a different investment strategy, make sure you're doing it for the right reasons. How you choose to invest your money should be consistent with your goals and time horizon.

For instance, putting a larger percentage of your portfolio into conservative investments may be the right strategy for you if your investment goals are short-term. But if you still have years to invest, stocks have historically outperformed stable value investments over time.

Look for the silver lining

A down market does have a silver lining; the opportunity you have to buy shares of stock at lower prices.

One of the ways you can do this is by using dollar cost averaging. Here, you don't try to "time the market" by buying shares when the price is lowest. Instead, you invest the same amount of money at regular intervals. When the price is higher, you’ll buy fewer shares of stock, but when the price is lower, you will buy more shares. Over time a regular fixed dollar investment may result in an average price per share that's lower than the average market price.

Don't stick your head in the sand

While focusing too much on short-term gains or losses is unwise, so is ignoring your investments. You should check up on your portfolio at least once a year, more frequently if the market is particularly volatile or when there have been significant changes in your life. You may need to re-balance your portfolio to bring it back in line with your investment goals and risk tolerance, or redesign it so that it better suits your current needs. Don't hesitate to get expert help if you need it when deciding which investment options are right for you.