Have you been thinking about starting a new business? If this is the case, you need to make sure you have certain key factors planned before you take the challenge. Managing Director of DLG Wealth Management, Andy Guzzetti, explains important factors when starting your own business.


Research shows that 75 percent of all small businesses fail within the first year of business. There are the obvious reasons; no sales, poor product, poor service, no demand, to name a few. The most common mistake made by start-up small businesses is not getting a true picture of costs and not understanding the factors that will determine demand for the product before the business opens its doors. Let’s use a real life example.

A few weeks ago I was getting ready to go on FOX 23 MORNING SHOW and the camera man, Andrew, asked me what I thought about a new business venture he was interested in. Andrew was offered the opportunity to sell novelties at local fairs. He was being offered the product at a very low cost and the profit margins seemed enormous. The next week I did a segment on the Fox Morning Show, Money Monday's, about starting your own business using Andrew’s example. Here is the breakdown.

ANDREW’S ADDITIONAL COSTS
1.    RENT - the fair organizers will charge rent
2.    SIGNAGE - Andrew will need to invest in signage
3.    LABOR - it’s a long day so Andrew will need some help
4.    PAYROLL TAXES - when you figure the cost of labor add on 20%
5.    GAS PRICES - Andrew will have to drive to the fairs
6.    INSURANCE - if you are dealing with the public you will need insurance
7.    FED/STATE TAXES - government wants their piece too

ANDREW’S PRODUCT SELLING PRICE & DEMAND

1.    COMPARISONS - what is the competition selling these items for & what is the average pricing of all items at the fair?
2.    DEMAND FACTORS -

• Do the novelties attract buyers?
• Andrew has to be concerned about weather…..a weekend washout can be a disaster
• Fair location & demographics
• Andrew has to make sure he gets good placement at the fair
• The economy will play a part. Andrew probably will do better in a down economy as folks stay close to home rather than take big vacations
• Gas prices…..although higher gas prices would be bad for Andrew on the cost side, higher gas prices would be better for the sales side as folks stay home and go to local fairs

As you can see, Andrew has many things to think about because at the end of the day, if your margins (selling price-cost) and the amount demanded do not make sense, then this new business is sure to fail.

For more information on managing your finances or other financial advice, contact the financial advisors at DLG Wealth Management today. You can also see Andy Guzzetti every Monday morning on WXXA Fox – Albany.

Some may or may not have heard of High Frequency Trading or HFT. To discuss what this is and what this means to the market, Managing Director of DLG Wealth Management, Andy Guzzetti, breaks it down.
High Frequency Trading is the computerized trading of stocks. Computers, using sophisticated technological tools (algorithms), are trading stocks at lightning speed and can make 20,000 to 50,000 trades in just seconds. As an example of how fast these computers trade, slap your hand on your desk, in the time it took you to slap the desk, a computer can do 50,000 trades. By conducting high frequency trading, traders can buy or sell millions of shares in a short period of time. These HFT firms are looking for very small differences in the bid and ask of an equity or option. Computers do not worry about traditional analysis of companies such as earnings, profits etc. Positions are held for very short periods, from seconds to hours. Some argue that HFT provides no actual value to the market, but rather absorbs capital from slower trading platforms.

Currently, high frequency trading, accounts for 50 % of the volume in the market. On the New York Stock Exchange (NYSE), they account for 70 % of some individual stocks. This type of trading is affecting the markets and the traditional investors who are trying to save for retirement, increase their income or save for their kids’ education. These HFT programs thrive in volatile markets even as proponents will argue HFT reduces volatility.

Is high frequency trading a good thing?

FLASH TRADING
One area of concern relates to “flash trading”. Flash trading allows certain participants to see incoming orders to buy or sell securities earlier (30 milliseconds) than the general market participants in exchange for a fee. Many exchanges have opted out of these programs, but there are some exchanges that still offer the program. Many opponents of HFT site this flash trading as a program that creates a two tiered market giving a certain class of traders the ability to “front run”.

2010 FLASH CRASH
HTF has come under increased scrutiny since the practice has been linked to the “2010 FLASH CRASH” that occurred May 6, 2010. Investors lost $800 billion of net worth in 20 minutes. Investigations pointed to a program trade that was incorrectly submitted by a trader at a mutual fund company. The trade triggered HFT trading that caused the DOW to plunge to its largest intraday point loss in history. The computer programs either pulled bids and asks or widened them. In any case HFT caused the plunge or exacerbated the down fall in prices. Many market observers point to this FLASH CRASH as one of the reasons retail investors have not participated in the 1st Quarter rise in the markets. They fear this volatility and the chance for another May 6th event.

STOCK MARKET AS AN ECONOMIC INDICATOR
The stock market has always been a leading indicator to the direction of our economy. If you look at the performance of the markets in the 2012, the 1st quarter seems to be indicating a rebounding economy. Many analysts were surprised when we started to see weaker job numbers. Many investors are questioning the value of the stock market as a indicator of our economy when 50% of volume now is HFT. Computers do not discuss company earnings, company revenues or company hiring. These areas would be great indicators of the strength or weakness of the economy. The equity markets were set up to help raise capital for businesses, and allow investors the opportunity to own corporations, building their net worth. The equity markets were not set up to be a race track that rewards the faster program. This situation has to be investigated before we have another “FLASH CRASH”.

For more information on managing your finances, or other financial advice, contact DLG Wealth Management. You can also see Andy Guzzetti every Monday morning on WXXA Fox – Albany.

This year, tax season officially ends on April 17th. The deadline is creeping closer and closer, and below are some last minute tips, from the financial professionals at DLG Wealth Management, to help improve your investments.

1.    People should be taking a look at their IRAs and 401k plans. If you have IRAs in more than one place, consider consolidating them. IRAs in multiple places may be subject to be double charge. By consolidating them in one place, you will save yourself some money and it will be a lot easier for asset allocation because everything is in one place.

2.    Many people forget about the Non-Working Spousal IRA deduction or IRA. Make sure you are aware of this type of deduction, and if qualified, you can save money and put almost $5,000 or $6,000 into an IRA of the spouse who isn’t working as long as the person, who is working, has income to cover it.

3.    Play Catch-up: If you’re 50 years old or older, make sure to take advantage of catching up. Instead of putting $5,000 into an IRA, you can put $6,000 into an IRA.

4.    Always make sure you’re taking the maximum out that you can afford to put into an IRA. The more you can afford to put in, is more earned money that is tax-deferred.

5.    Start thinking about a ROTH IRA. Taxes are increasing and any money put into a Roth IRA is tax-free when the money is withdrawn. It may be a good idea to move more money into these Roth IRAs now.

6.    Remember to rebalance your portfolios. They are probably over weighted in bonds. In 2008, bonds outperformed every other asset class by a great deal. The next year they fell to last place. In 2011, bonds outperformed all other 13 asset classes. It is known that an asset class that was #1 in one year, usually does not repeat the following year. 2012 is up in the air but it is important to note that the chances are high that 2012 will not be a good year to be in bonds.

For more information on managing your finances, or other financial advice, call DLG Wealth Management today at (518) 348-0060 to speak with a financial advisor in Albany, NY or Utica, NY. You can also see Managing Director, Andy Guzzetti, every Monday morning on WXXA Fox – Albany's Money Monday segments.

There’s been a lot of talk about Target Date Funds. What are they and are they beneficial to a retirement plan? Managing Director of DLG Wealth Management, Andy Guzzetti discusses what these funds are, the pros and cons.

Target-date funds are a relatively new type of mutual fund that allows financial investors to set a “target date” for the life of the fund. These funds have become popular with investors and retirement planning. As people get closer to the target date or their retirement time, they take money out of stocks and put money in bonds; therefore shifting a 401(k) to a more conservative investment.

These funds are aimed at people planning for retirement and have appeal because of its convenience. Here are the pros and cons to this new type of fund:

PROS:
•    They are convenient, as investors put their investments on autopilot in one fund

•    Employers have made these their 401K default funds. These funds are better than the money market

CONS:
•    Target date funds are a “one-size-fits-all” approach, which may not be beneficial because investors are different

•    Target date funds may not keep up with inflation after you retire, especially if you live 20 or 30 years after retirement – may be too conservative

•    For people close to retirement around 2015, it may not be a good idea to have investments highly into bonds, as we believe that’s not the place to be right now

•    They could ultimately reduce opportunities for growth over time

With investments in a target date fund, people may be earning a little bit, but we feel that now in the market, it is ideal to make your own asset allocation, your own rebalancing so you will make a better return.

For more information on managing your finances, or other financial advice, visit our Contact page to speak with an investment advisor. You can also see Andy Guzzetti every Monday morning on WXXA Fox – Albany.