What Are Exchange Traded Funds?

Andy Guzzetti, Managing Director of DLG Wealth Management firm near Saratoga Springs, NY, breaks down what you should know about Exchange Traded Funds.

Exchange Traded Funds began in 1993. They are mutual funds that trade on the NYSE or the NASDAQ. They track a specific index in stocks, bonds, commodities, etc. They can also track a sector. If you want to invest in utilities, instead of buying a group of utilities, you can buy an Exchange Traded Fund that indexes that utility.

Exchange Traded Funds are a nice way to make your bet without buying a lot of stocks. They are low cost and have minimal management fees. For more information on Exchange Traded Funds, Asset Allocation, Portfolio Management or other financial advice, contact DLG Wealth Management. Watch the entire WXXA Fox 23 News Money Monday segment about Exchange Traded Funds below:

DLG Wealth Management Discusses 3 Things To Do With A Dollar

Sometimes when things seem to be too much to understand the best thing to do is go back to the basics. In the world of investments things can get quite overwhelming, so let’s slow it down and discuss the 3 things you can do with a dollar. SPEND, LEND, OR OWN. These are the only 3 things you can do with a dollar, although some would say there is a fourth - DESTROY. We will leave that to the Federal Reserve.

SPEND

• If you have a dollar you can buy a hamburger, pay a bill or get a haircut. Pretty simple to understand.

LEND

• The second thing you can do with a dollar is lend it. Lending your dollar means to give your dollar to an entity that will pay you interest on your dollar for a specific length of time. The common way of lending is to give your dollar to a bank (savings account) and the bank will pay you interest as long as you keep the money in the account. Investors who want a higher rate of return from the bank can look at Certificates of Deposits (CD's). CD’s pay a higher rate of interest because you tie up your dollar for a specific time (1 month to 5 years).

• You can lend your dollar to the U.S Government (Treasuries). The government will pay you an interest rate depending on the maturity. The longer you go out, the higher the rate of interest.

• Another place to lend your money is with Corporate Bonds. By lending your dollar to a corporation (IBM, APPLE, etc) you will receive a fixed interest payment usually paid every 6 months for a specific amount of time. These corporate bonds usually pay higher interest rates than the bank but do have more risk. The longer the maturity is the higher the rate of interest. The higher the risk (can the corporation make its interest payments and pay the bond back at maturity) the higher the interest rate. All of the above examples of lending are taxable.

• You can also lend your dollar and receive a tax free interest payment. Municipal Bonds are issued by states, state agencies & local governments. The interest is federal tax free and can be state tax free if you lend within the state you reside.

All of these lending vehicles can be done within a mutual fund that can specialize in all or certain areas listed above. By investing in a mutual fund you can diversify your lending which can lessen risk. This lending is known as “fixed income” investing.

OWN

• The last thing you can do with your dollar is own your dollar. You can buy a house, buy stock in a corporation, buy a business, buy collectibles or buy many other assets. Buying means you own an asset. That asset may increase or decrease in value but you own it. When you invest in a stock, you own a piece of the corporation (hoping the value goes up). Owning your dollar usually is called equity investing. As with bonds you can invest in a mutual fund to diversify your dollars owned which can lessen risk.

Seems pretty simple, right? There are only “3 things you can do with a dollar”. You can spend it, lend it or own it. It gets a little more complicated when you have to decide where you want to spend, lend or own. 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.

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.

Did you miss the Saratogian’s Live Chat yesterday with Andy Guzzetti? An archive of the chat can be found on the Saratogian’s website here. Yesterday’s Live Chat between Managing Director of DLG Wealth Management, Andy Guzzetti, and Saratogian readers was a discussion on rising gas prices, who is behind the rise and why. View the questions and answers of the Live Chat whenever you like. Didn’t get to ask your question? Feel free to email Andy Guzzetti at aguzzetti@dlgwm.com or visit the wealth management firm’s website for more information.

Are you deciding whether to open a Roth IRA or Traditional IRA? Both forms of IRA are great ways to save for retirement. Find out more about IRA's, the benefits and financial planning from financial advisor, Andy Guzzetti, from DLG Wealth Management:



Every Monday morning at 7:45 a.m., don't miss the "Money Monday" segments on WXXA Fox 23 News Albany. Managing Director of DLG Wealth Management, Andy Guzzetti, gives tips on how to manage your money and protect your finances. Miss a segment? Get all the information you'll need about wealth management on DLG Wealth Management's News page.

Gas prices have broken the $4.00 per gallon mark in the Capital Region – but why? Managing Director from DLG Wealth Management, Andy Guzzetti, explained during a Money Monday segment on WXXA Fox News, the reason why we can’t catch a break at the pump.

The rising price of gas is a constant issue and the reason is very complex. The price of gasoline is 80% oil. So where does the price of oil come from?

• NYMEX (New York Mercantile Exchange) is a futures market and this is where risk is transferred to speculators from farmers, oil riggers, etc.

Last Friday, the price per barrel of oil closed at $106.71 cents per barrel. That’s an April contract. The oil contract is 1,000 barrels, which at today’s price costs $106,710.  The price of gas on average is around $3.74. In September 2011 alone, the price of gas rose 41%. When President Obama took over the White House in 2009, gas was at an average of $1.79. Gas prices have been steadily rising for the past 3 years.

So, why are the speculators saying that they think oil is going up?

• They take into consideration the conflict between Israel and Iran and how that will affect the world oil supply
• Another factor is President Obama’s policies. The current administration is concerned more with reducing the demand for oil rather than increasing the supply. This suggests to speculators that the U.S. policy is to have higher oil prices and needs to reduce the U.S. current consumption - which is 20 percent of World oil. On the supply side, if this administration were to say Yes to open up offshore drilling, to utilize the keystone pipeline and drill in Alaska, then the price of gas would likely decrease 50 percent in a matter of weeks.

It all comes down to supply and demand. The price of oil not only moves with the actual increase and decrease of supply and demand, but also in the anticipation of. If speculators believe the U.S. has a policy to increase supply, oil prices go down.

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

DLG Wealth Management financial advisors offering consultations

Financial Planners from DLG Wealth Management, an Investment Advisory Firm, are offering a complimentary consultation and lunch for prospective investors. Consultations offered by Certified Financial Planner®, Manuel Choy, and Financial Advisor, Tonia Kelley. Advisors will offer lunch at Angelo’s Prime Bar & Grille in The Hilton Garden Inn at 30 Clifton Country Rd., Clifton Park, NY.

Manuel Choy is a Certified Financial Planner®, with MBA at DLG Wealth Management. Choy manages client portfolios, customizing each client’s portfolio based upon their goals, objectives and the risks associated with current market conditions. To discuss current or future investments, he can be reached at 518-348-0060 Ext. 258.

Tonia Kelley is a Certified Divorce Financial Analyst and Financial Advisor at DLG Wealth Management. Kelley helps her clients plan for a financially equitable divorce settlement. She provides clients with advice and information on financial issues related to divorce such as; tax consequences, selling the marital home, pension and 401K plans and forecasting settlement options. To schedule a consultation, she can be reach at 348-0060 Ext. 262.

DLG Wealth Management's Andy Guzzetti shares the advice every college grad needs to know

The cost of higher education is expensive. College loan debt in the U.S. is reaching new heights, leaving young graduates, co-signers (parents and grandparents) or mature adults enhancing their education, to face the hefty price tag.

Here are the Facts:

•    Student loan debt is around $867 billion nationwide.
•    Student loan debt, in 2011, surpassed the nation’s credit card debt
•    The average student loan debt is approximately $25,000 per college graduate

With the economy struggling and unemployment at 9 percent, it is very tough for new, job seeking graduates to achieve jobs earning an income necessary to pay off these loans.

Another area which has been negatively affected by this high Student Loan Debt is the Housing Market.  In 2011, the 25-34 year age group bought just 27 percent of the houses, a new low in the past ten years. This has a widespread ripple effect on the entire Housing Market. These ‘Would Be’ First Time Home Buyers are already in debt which affects their ability to purchase homes put on the market by previous First Time Buyers looking to upgrade.

How can you manage your debt?

As with All Loan situations, always prepare ahead and think before you borrow. Some money-saving options to look at:

•    Get an Associate’s degree at a local community college and commute to
     save money
•    If you want a 4 year degree, go to Community college for two years then a public
     or private 4 year college to earn your Bachelor’s degree
•    Apply for Grants and Scholarships
•    Go to school part time and work part time

For college graduates, who already have the burden of student loans, make sure you have a budget in place and live within your budget. Research programs that may help eliminate some of your student loan debt, for example teaching in inner city schools.

Do not default on student loan payments or any type of credit. The best way to handle the situation if you are not going to be able to make a payment is to contact the loan administrator and make arrangements. Personal appointments are better than a phone call. Be proactive, before you get a call or letter concerning missing payments.

For more information on College Savings Plans, speak with a financial advisor at DLG Wealth Management today or call 518-348-0060.