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Encore Financial Current Newsletter - Financial Tips                                                                                        

August 2017 Newsletter


'Earnings Season': What is It and Why Does It Matter?

‘Earnings Season’ is a period of time in which publicly traded companies release their quarterly earnings report.  Based on this information, stock prices can fluctuate either up or down depending on the ‘financial health’ of the company during that quarter.  Although not all companies are on the same quarterly reporting schedule, most ‘earnings seasons’ begin one or two weeks after the last month of each quarter.  Look for the majority of public companies to release their earnings reports in early to mid- January, April, July, and October.  All publicly traded companies must release their quarterly earnings report at the end of each quarter through press releases and filing of the report with the SEC (Securities Exchange Commission).

Why does ‘an earnings season matter’?  It’s a very busy time in the market as analysts, traders, and investors review the reports and decide if they will keep the company’s shares, or liquidate.  It’s a time when there will be a lot of trading as shares will increase in value or fall as the market reacts to the earnings report data.  This may be a time when you see your retirement accounts increase, or lose value based on the share value of your portfolio’s independent holdings.  This is also when you will see more media coverage of major earnings reports released, or missed expectations. It is all tied to a company’s quarterly earnings report.  Your fund or stock statements reflect the earnings season reporting, and report the value of your shares the last day of trading for the quarter.

Earnings season gives us a look into a company’s individual financial health, and a broader view of the specific industry the company is in.  Because these companies employ millions of Americans, and tie up investment dollars of individual investors, this is a time when financial analysts and traders make decisions on whether to hold or sell off company stock.

Earnings season is a great time to determine if you want to hold or sell off holdings inside your portfolio.  As your advisor, I can also assist with your 401(k) account by analyzing fund performance for each quarter.  Many times short term investors are more affected by the volatility of earnings season than long term investors.   It’s important to remember that your stock related investments are directly tied to company performance during each earnings season.  Contact our office if you would like to review your portfolio during this earnings season.


Does Your 'Net Worth' Matter?

Many times people compare what they have to that of their peers.  This comparison is usually visual; we compare the house, the car, the ‘toys’, etc.  But Net Worth is something that is not always visual.  Net worth is determined by subtracting liabilities (debt owed) from assets (things that are actually ‘owned’).  Net worth is calculated for both individuals and companies and is a true determination of how much someone, or something, is actually worth.

A consistent growth in net worth is an indicator of good financial health.  If liabilities grow faster than assets, or the value of assets drop, the indications are pointed toward poor financial health and show a negative net worth.  People’s, and a company’s, net worth can fluctuate based on assets decreasing or increasing in value, or acquiring more or paying off debt.

Net worth calculations are something that should be completed at least annually to help you determine if you are moving toward a positive net worth or not.  It’s easy to get caught up in ‘stuff’ especially if you are having to finance purchases.  Remember that those purchases also lose value over time as they become older.  Automobiles and even homes can lose value based on geographic economic conditions and aging neighborhoods.  Your retirement and investment accounts can be affected due to the company’s net worth of the stock valuation, which directly affect your net worth.

Whether you’re trying to become a millionaire before you retire, or simply pay off all your debt, net worth matters because it’s a measuring tool of your progress.  Measuring your net worth based on your goals is a way to track how you’re doing.  Bankrate’s net worth calculator is an easy tool for you to monitor your net worth periodically and even allows you to view a report after you’ve inputted your personal information.  Discussing your net worth at your annual investment meeting can be beneficial to you in providing your advisor with the information to help keep you on track with your financial goals.  Remember that net worth is always a true indication of financial health.


Social Security Mayhem

The annual report from the Trustees of the US Government’s two largest entitlement programs (Social Security and Medicare) was released on July 13, 2017.  Not surprising, the report relayed the same information regarding Social Security and Medicare as it did last year; without revision and additional funding, both programs will see cuts in payments to Americans that receive benefits by 2034.  Because both of these programs pay out based on present day FICA tax collection, there are less Americans working now than are supporting current retirees.  The reason for this is twofold; a smaller population (average birth rate in 2016 was 12.4 births per 1000 women per year) can’t support a large aging population (Boomer birth rate in 1950 was 122 per 1000 women) and a job pay rate that hasn’t kept up with inflation resulting in low wages and low FICA tax collection.  Regardless of your political preference, Social Security and Medicare reform is a problem facing every American with no easy solution.

The report indicated that Social Security and Medicare are not predicted to ‘run out’, but that payments will be cut by 23% for those retiring after 2034.  Future generations will not receive payments to the level that current retirees are receiving.  One fallacy that people believe is that when they pay in to FICA, that money is ‘banked’ for them for when they need to access it through Social Security or Medicare.  The FICA taxes collected present day is used for the present day Social Security and Medicare payments benefit retired Americans.

What can you do if you are not a retiree?  Plan to not receive Social Security or Medicare and don’t include any calculations in your financial plan.  Because we do not know the amount of the payment you may receive, or if the mathematical formulation will be changed, view these benefits as something you will not benefit from.  Although you may believe that to be extreme, putting aside more into your other retirement investments may help to offset the shortage from these two benefit sources.

For updates to Social Security and Medicare, visit register for an account.  This is the same account you will use when you sign up for Social Security and Medicare benefits.  If you’re retiring in the next ten years, attend a meeting sponsored by the Social Security Administration regarding benefits.  Using your SSA account, you can also find a sponsored meeting close to where you live where you will have access to a Social Security Administration employee to answer questions you may have.

Contact our office if you would like to visit regarding developing a plan to offset Social  Security retirement benefits in your financial plan, or discuss other options for saving for your retirement.


Breaking News! How NOT to React

In light of the ‘financial meltdown’, the political issues, the scandals, and ‘fake news’, keeping yourself removed from media as much as possible may be good for you (and your investments).  Every day the American public is exposed to multiple stories that may have an effect on them and their decisions.  During the financial crisis, the media’s reporting caused wide spread panic as millions of Americans chose to liquidate their accounts out of fear ‘of losing their money’.  Unfortunately liquidating in a down market versus waiting for share prices to increase before selling, caused many people to financially hurt themselves.

The newest and most popular way Americans choose to get their news is through social media.  Social media gives us only a small part of information, and many times the information that we see (in the form of news) is paid by the advertiser.  We get to participate in social media at no cost, but what we may see and read is being ‘sponsored’ by another source.  It is up to us to investigate the validity of the news story and source, and consider how ‘expensive’ inaccurate information may be to us if we react to it.

When it comes to money and investing, being more diligent on what we choose to react to is our own responsibility.   Many stories that we read (or listen to) are non-biased, while many others are biased.  Taking the time to consider how your reaction to a media story may affect you is important to your financial health.  If you’re concerned about financial decisions related to what’s being reported in the media, have a conversation regarding your investments with a financial advisor. 


Securities and advisory services are offered through The Strategic Financial Alliance, Inc. (SFA) Member FINRA/SIPC. Kimberly Surber, CFP is a registered representative and investment advisor representative of SFA, which is unaffiliated with Encore Financial Consulting. Supervisory Branch office: 202 Abbey Court, Alpharetta, GA 30004. 678-456-4049. Past Performance is not a guarantee and the SFA does not give tax or legal advice.

Past Performance is not a Guarantee and The SFA does not give tax or legal advice.

Copyright 2017 Fresh Finance LLC; Copyright 2017 Leno Communications Corp. All rights reserved worldwide.


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