TCI Summer 2012 Newsletter

Cause and Effect
Doug Nelson, CPA, PFS

Last fall, I took a fishing trip to Canada. Because of the trip length, I decided to add international calling to my cellphone. But when I got home, I neglected to remove the international option. So for the last 10 months, I’ve been paying $25 per month for a service that I wasn’t using.

There are a lot of other things I’d rather have spent that $250 on, something that I would have gotten value from. Luckily this decision is an easy one to fix, and I’m sure many of you have had a similar experience.

We forget. We’re human, so that’s expected. But when it comes to money, we seem to forget a little too easily.

The problem is that we can’t escape the cause and effect of our financial choices. Big or small, there will be a consequence, and we need to take the time to understand our options so the outcome is closer to what we want. But one of the fastest ways to fail financially is choosing to forget the past completely, which can create financial problems in the future.

For instance, I see some people starting to repeat the mistakes of pre-2008. Speculating in real estate, buying stocks for the wrong reasons, or even being careless with their credit. It seems as though the hard lessons learned five years ago haven’t stuck. And they’re lessons that we need to continue applying over time.

The problems that we faced in 2008 didn’t appear from out of nowhere. They were the result, a build up if you will, of multiple financial decisions made over many years. As these decisions piled up, we were left with a mess that’s only recently begun to get unraveled.

Even now we’re watching the result of another build up play out in Europe. There are several reasons behind Europe’s financial problems, but one of the primary ones is one we face, too. If we choose to only focus on the present AND fail to consider the consequences of that choice, at some point we’re going to face an outcome we don’t want.

A big part of my job as an advisor is to help you assess all the options and information available so you can make the best financial decisions possible for right now, but with the long-term consequences in mind. Ultimately you’re the one who says “yes” or “no,” but by helping you understand cause and effect, we can work together to figure out the financial choices that make the most sense for you and your situation.

Five Ways To Think About Investment Diversification
Carl Richards, NY Times Blog Contributor

Many of us learned the lesson years ago: don’t put all your eggs in one basket. But when we start to call it diversification, we forget the simple things that make this concept so powerful. What follows are a few thoughts on diversification that might spark a conversation about money in your home or office.

Before we begin, let’s start with a couple of assumptions:

*   You’re using broadly diversified mutual funds in your portfolio.

*   When we mention bonds, we’re talking about bonds that are high quality and not junk bonds.

I know there’s a ton we could talk about just in terms of what those two assumptions mean, but for this post, let’s just leave them be. Now, on to the interesting stuff.

1) Asset Allocation: How you divide your investments between bonds and stocks will be one of the most important decisions you make, and it is far more important than the question of which bonds or stocks you actually choose. Sure, those things matter. But you should only address them after you decide on an allocation gives you the best shot at reaching your long-term goals.

2) Correlation: The reason we diversify is because we want to own investments that move in different directions at different times. We want one to zig when others are zagging. The reason you include bonds in your allocation is to counter the times when the stock market is down (remember, I said high-quality bonds). This is true when we talk about including international stocks in a portfolio.

The main reason to include international stocks is because they often act slightly different than domestic stocks. You can make the same argument for stocks of small companies versus large companies, value companies versus growth companies, real estate stocks and even commodities. Your goal is to consider portfolio options that act slightly differently than everything else in your portfolio. If it acts the same and has the same expected future return, why add it?

3) Temptation: When you diversify correctly, you will usually have something in your portfolio that you don’t like. Just remember that it will probably change next year. This year, maybe your international fund will do well. But that creates a temptation to get rid of everything else and move all your money to the international fund.

Resist that temptation! Things change. Next year the investment you wanted to fire might turn into your new favorite. This process is likely to repeat. So instead of making the classic mistake of moving all your money to an investment that just did well, remember that the winners in a properly diversified portfolio will probably rotate.

4) Concentration: You can make a lot of money by being concentrated instead of diversified, but you can also lose it all. Often you hear people say that diversification is overrated. It’s easy to find examples of people who have gotten insanely wealthy by laying it all on the line with their business or investments, but what we often forget is how many people lose it all doing the same thing. Betting it all might be exciting and celebrated in our society, but slow and steady still seems to be the best way for the most people to have the best chance of winning the race.

5) A Real Financial Plan: Design your portfolio based on your life and not the markets. Your asset allocation should reflect your goals. If you do it that way, you should only make changes when your goals change, not when the market does.

Despite knowing better, I continue to see people ignoring the lessons of diversification.

Employee Spotlight: Dana Sandoval

Our employee spotlight this quarter is focused on Dana Sandoval who works as an Associate in the Denver office.  Dana joined TCI in October of 2010 and was actually the first employee present in the Denver office when it was established.

Dana is a native of Colorado and during her life has only spent a few years living outside of the state. She is a graduate of Colorado State University where she received an Economics degree. She also earned her paralegal degree from the University of San Diego.  Dana has been married to her husband Alex over six years and for fun they both enjoy golfing together in their free time, especially as a team in couples tournaments. That seems only fitting since they actually met on a golf course and although it is an activity they enjoy together, they actually compete against one another once a week!

Dana was the past Governor of the Mountain Plains District of Civitan International which is an International Service Organization focused on helping the mentally and physically handicapped. She worked on several projects during her time as a member of Civitan including the construction of a boardwalk for Wilderness on Wheels, bowling in the Unified Special Olympics and helping to raise funds for the Civitan International Research Center.

In her capacity as an Associate, Dana works alongside TCI advisors in order to deliver a great experience for our clients. She certainly has the breadth of knowledge to do so after receiving her CERTIFIED FINANCIAL PLANNERTM designation in 2002. Dana really enjoys her client interaction and says that her favorite aspect of her role at TCI is the ability to provide clients with peace of mind especially in respect to their finances.  She likes being able to offer a solution that hadn’t previously been suggested as a way to solve a client’s problem or resolve an issue for them.

TCI News & Events

TCI continues to host the works of local artists at its office in Tucson. The latest exhibit by artist Susie Gillatt was kicked off with a reception held on May 10th, 2012. Her work will be on display at TCI from now through October 2012 and is available for viewing by the public from 3:30—4:30, Monday through Friday or by appointment.

Susie Gillatt grew up in Tucson, Arizona where she received a Bachelor of Arts degree from the University of Arizona. She studied photography at the Banff Centre in Canada and also under Louis Carlos Bernal at Pima Community College.  About her art, Susie says: “Combining photography and painting helps me create a scene that is part reality and part illusion. I like the ambiguity of my digital paintings—is it a painting or a photograph?


In May, the Scottsdale office of TCI hosted a reception at Orange Table in downtown Scottsdale followed by a performance of PSY by the 7 Fingers Circus at the Scottsdale Center for the Performing Arts. Orange Table provided a wonderful selection of appetizers and refreshments and the performance of PSY was definitely a unique and entertaining take on the circus.


In June, TCI Reno hosted Carl Richards, author of a new book, The Behavior Gap; How To Stop Doing Stupid Things With Your Money, at the Grove Corporate Retreat Center in Reno. Clients and valued partners in attendance enjoyed an entertaining presentation coupled with appetizers and refreshments. Those who attended also received a complimentary copy of Carl’s book.


  • Congratulations to our own Justin Thomas, advisor in the Reno office. In April, he won both the Prison Hill Half Marathon held in Carson City, Nevada as well as the 2012 XTERRA Lake Las Vegas 21k. He is a dedicated athlete and we are proud to celebrate both of his wins!
  • Guy Holman has recently been named a 2012 Five Star Wealth Manager for the third year in a row. This is a distinction achieved by fewer than 7 percent of the wealth managers in his area and we are very excited to announce that Guy has received this honor.

Tucson

4011 E. Sunrise Dr.
Tucson, AZ 85718
Phone: (520) 733-1477
Fax: (520) 733-1488

Scottsdale

6929 Greenway Pkwy.
Ste.150
Scottsdale, AZ 85254
Phone: (480) 991-0401
Fax: (480) 991-0574

Flagstaff

150 W. Dale Ave.
Ste.1
Flagstaff, AZ 86001
Phone: (928) 226 -0868

Reno/Tahoe

4757 Caughlin Pkwy.
Ste.B
Reno, Nevada 89519
Phone: (775) 746-6255
Fax: (775) 746-6254

Santa Fe

215 W. San Francisco
Ste.202C
Santa Fe, NM 87501
Phone: (505) 982-3808

Denver

1228 15th St.,
Ste.300
Denver, CO 80202
Phone: (303) 296-2196
Fax: (303) 623-1144

Santa Monica

312 Arizona Ave.
Office 302
Santa Monica, CA 90401
Phone: (310) 319-6545
Fax: (520) 733-1488

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