Clients need advice, and they looking for the next Wolf of Wall Street and stock guru, it seems as if these advisors are moving from the movie screen and onto statements of many Americans. The glitz and glamour of a fast paced life in my opinion seems to many Americans. But is switching investment strategies from long term passive to short term aggressive to get a market edge a good idea? And if you do, will you get closer to your goals faster? We will discuss, how to choose a strategy, become aware of confirmation bias, how to use patience and discipline to be successful in this podcast.

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Social media is changing how many people see the stock market. Before it use to be this big intimidating arena where only the well educated dared to travel. With the "gamifcation" of many platforms and the GameStop frenzy, investors see the barrier of entry may not be has hard as they once thought. Well that may cause some problems for investors and the stock market alike. Join us as we address these concerns such as: uninformed investors, the reliance on Facebook and Twitter for investment advice, and how these sentiments have an impact on the market.

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Today we break down what is a Banker's Acceptance and Euro Dollar.

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This is the 3rd installment of a series of podcasts around cash and cash equivalents. We spoke about what is cash, we spoke about CDs, money market funds, money market deposit accounts, commercial papers, repurchase accounts, and negotiable CDs. But today we are going to talk about Banker’s acceptance and Euro Dollars.

Bankers Acceptance are short term drafts by private companies. Just like treasury notes they are traded at a discount but sold on the secondary market and these companies are too small to issue commercial paper to fund their short term debt needs. Because of this most of the times a bank will act as an intermediary. This usually deals with imports and exports. SO the banks helps the transaction between the American and the foreign company and provide credit. In this transaction, the bank pays the supplier and the importer has to pay the bank in 3 to 6 months. And if the bank needs cash, they may sell the debt at a discount to another bank. So think of it, as a line of credit but this one is unsecured line given to the company. For tax purposes, these are federal and state taxable.

Let’s move on to Euro Dollars. In simple terms, these are dollars in U.S. denomination in banks OUTSIDE of the united states. And usually in the millions. And the product is usually a Eurodollar CD which works just like a domestic CD but it isn’t not a domestic bank but a non-U.S. Bank. Once again you don’t get paid for the risk you don’t take. So since it is a little less liquid than domestic CDs they have a higher yield. Because of this, traditionally only large institutions invest in this market directly. Mostly, individuals invest indirectly using money market mutual funds.

During this series, there is one thing I want you to take away. There are many ways to have low risk investments. But just you have seen, it can be complicated to understand the ways these instruments work. But once you sit down with your advisor and you determine your level of risk and where you want to be, you can see it is more than just picking a money market and calling it a day. Your financial advisor works very hard to hear you as a client and find out what may work best for you and your situation.

Whether a CD or a Bankers Acceptance draft, they may have a place in an investors portfolio. This is a great introduction because all of these are short term, low risk investors that are considered cash and cash equivalents. Also take this away. Even though the returns may be low, they are something, which is better than nothing.

Commercial papers-Repurchase Agreements-Treasury Bills

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On our episode on Cash equivalents we spoke about money market funds and how they were high quality short term funds. Usually you can purchase taxable money market funds- which seeks a stable net asset value and has a maturity of less than 90 days. You can invest in tax-exempt money market funds, which are national. They are municipal funds and the income is free from federal income tax. Also keep in mind if some of the income comes from the state, it can be tax exempt as well, but you need to check.

So now onto U.S. Treasury Bills- usually issued in $100 increments with $100 minimum purchase. They are issued at different intervals, a 52 week t-bill is auctioned every 4 weeks, and there are 4, 13, 26, and 52. There are also cash management bill which are auctioned sometimes in a matter of days and not weeks. Basically, they don’t auction on a regular schedule. The way they work is that they are sold at a discount. Which is taxed at ordinary income (whatever you tax bracket is) But remember, they have a maturity date of less than one year. They are not subject to the original issue discount taxation rules that apply to other bonds. The interest is taxable on the federal level, but not the state or local income level.

In modern portfolio theory which we will discuss in another episode, U.S. Treasury bills because of their low risk and high liquidity and marketability, are used as the risk free rate in most calculations, specifically the 13 week U.S. Treasury Bill. The risk-free rate is used as a benchmark to measure the return of other assets and represents the lowest level of return an investor expects to receive. So if all else fails, you will at least get that much.

Commercial paper is a negotiable, short-term, unsecured promissory note issued by a large corporation to finance accounts receivable and inventories. This type of debt is usually issued in denominations of $100,000 or more and is a substitute for short-term bank financing. Money market mutual funds are the primary purchasers of commercial paper. Which we discussed in our last episode concerning cash equivalent instruments.

Repurchase Agreements or known as repos is another form. And it is pretty simple. Dealers will agree to sell a security at a certain price, and buy it back at a higher price at a later date, and the difference will be interest that the buyer would receive.

When we speak about cash and cash equivalents we speak about liquidity and marketability. In these cases, we can includes these equivalents in our emergency fund because they are easily accessible and the loss in principle in minimal if any.

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Certificates of Deposit or CDs is a term many of us are familiar with. They are deposits that are made with banks or savings and loan for a specified period. The terms can vary but usually one month up to 5 years. The benefit use to be that the longer you kept the money in the bank, the higher the interest rate they paid you. But investors beware, if you put a CD in for too long or put in money that you needed, there is usually a penalty to take your money out. And before, sometimes it was more than the interest you made. So not only did you not make any money, you owe money. This helped in 2 ways. There was always money that could be taken out without penalty, and you could take advantage of any rate changes. These interest rate are fixed and secured by FDIC for up to $250,000 per ownership category, so if you had a personal account and a trust, (depending on the number of trustees) you could insure up to $500,000 or more.

There are also negotiable CDs which are $100,000 or more and usually for terms up to one year. Just remember these are sold on the secondary market and they determine the prices, so that might be different than the original principal invested.

There are also Money Market deposit Accounts better known as Savings account and not to be confused with Money Market Mutual Funds. This savings account has a limit on how many withdrawals you can take without a penalty or being converted from an interest bearing account to a non interest bearing account. I think it is 6 per month. It is supposed to be a savings account and not treated like a checking account. Because banks depend on that number to determine how much they can lend. All in all, Just know this is a great place to put funds that you are saving before you invest.

Money Market Mutual Funds are offered as both taxable and tax-exempt investments. Usually investing in high quality short term investment with low risk such as U.S. Treasury bills, commercial papers, and as we discussed before negotiable CDS. They have very short maturity dates, the average is less than 60 days Now keep In mind most rates can change due to short term interest rates by the federal funds rate or the overnight lending rate between banks but they are pretty consistent.

In this market update, I go over some things to look out for, such as the VIX, volatility in the market (or lack thereof), inflation, and short term market highs. Letting investors know that they shouldn't get "used" to these times of markets due to fiscal policies and stimulus packages that are keeping this economy afloat. Check out this episode to see what other information I provide on this market update.

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What is Cash?

Sounds simple...but it is more complicated than the money in your wallet.

On this episode of Financial Advisors Say The Darndest Thing

• Learn what is the technical term for cash and cash equivalents.

• Figure out if you have TOO much cash

• Learn about inflation and how you could be losing on the money you have in the drawer or safe deposit box.

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Well when we do financial planning, when we think of cash, we think of an asset that has a high liquidity. What is liquidity? Liquidity is the ability to sell or redeem an assets at a known price without a lot of principal loss. For example, if you have $200 in a savings account at 9 am in the morning, in most cases, you will be able to get that $200 in the afternoon without much issue. That is because those funds are liquid.

But if you have $200 in XYZ stock in the morning and the news comes out that they are going bankrupt, at noon, you may not have $200 by that afternoon. Now, this isn’t to scare you from investing. It is to let you know that investing in stocks is less liquid than holding in cash or a cash equivalent.

If you are an investor, you are going to need some form of cash or cash equivalent, no matter how well the stock market is doing. If you don’t have cash for any other reason except to pay current expenses, it would be a good reason.

In this episode you will learn:

• The two primary factors that drives the stock market (Fundamentals and Sentiments
• The benefits of Dollar Cost Averaging
• And how having a long term view will help with fears in current markets

There are many things that can cause the market to go up and down and because you are invested in the market with your 401k that includes your retirement. We break down things you should look for when determining a strategy.

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Is the job market getting better? Is the economy getting better? And what can you expect coming up.

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Is the job market getting better? Is the economy getting better? And what can you expect coming up.

The proper protocol around Covid is still unclear but one thing is…we all are trying to find ways to cope with it. Whether you are wear masks, against vaccinations, or just stay at home. The truth is the matter is that everyone is doing what they feel is right.

According to the article unemployment dropped from 6.2% down to 6.0% and claims to the be lowest in a year says the Labor department on Friday.

So once again, let’s address what this means for you the investor.

1. Since you had low to no income and was able to surprise. Now that you have your job back take the time to figure out what you were able to eliminate to make ends meet. Then live on that amount as you save up an emergency fund, just in case this happens again. You may even try for 6-12 months before you start to think about adding any more to your investments

2. There will be an increase in investment options coming your way. As new job opportunities present themselves, it is important you get some guidance in the matter. Visit with your investment advisor or start to look for one.

3. Speaking of investment advisors, speak with your Human Resource department and request your retirement options. Some companies are able to match retirement savings as an employee benefit. For example, if you put 3% in the account some companies will match you up to that percentage dollar for dollar. Make sure you speak with your human resource department to see your specific options

I think it is obvious that COVID spikes late last year and early this year stalled the job recovery but we are going in the right direction. With vaccinations going out, whether you believe in them or not, we are seeing businesses using this data to speed up the re-hiring process. Some are predicting that the job market will be back to normal by 2022. Until then, we just need to continue to have our faith in God and make sure that we protect ourselves. And not just form the bacteria but financially.

We started to realize the difference between what we needed and what were luxuries. Not only that, we started to appreciate what we have. There is a saying: There are 2 ways to be wealthy. To be able to buy whatever you want, or wanting everything that you have.

Do You Have An Advisor Of The Future?

Many of us know we will need a financial advisor at some point of our life. Whether a mortgage officer, a lawyer, a CPA, a banker, or a holistic financial planner like me. But the question remains, will he/she be an advisor that can keep changing with the financial landscape.

In this episode, we speak about what to look for in the advisor of the future. And spoil alert: it is not the advisor of your parents.

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Technology is going to be number one. In this digital world, access to information and the advisor is critical. As the oldest of the millennials are approaching age 40, they have been through 2 recessions and they are realizing that they can’t do it on their own. The arrogance behind picking a few good stocks when the market was rising, gave this false sense of control. And now they are afraid that they won’t have enough money to reach their retirement goal. On that same note, it isn’t uncommon for the next generation to compare visiting their parent’s financial advisor like visiting the dentist.

We live in a very sensitive time, and transparency around what your advisor beliefs are, are becoming the non-negotiables in selecting an advisor.

Consumption, when you provide information, potential clients have a chance to consume information about the advisor when they have the time. The days of the in-person seminar is slowly fading away. People want webinars they can enjoy at home, and most importantly, replays they can watch if the time doesn’t match up with their schedule.

Next is branding. The general practitioner is going to find his business slowly fade away. We spoke about it earlier, how people want to be able to identify with their financial advisor. The information they provide should directly impact the clients that they serve.

So here are a summary of things to look for:

1) Common interest- As a faith based firm, we believe that faith and finances don’t have to be separate. That you can make money, and still do the work of God in your life. Your financial advisor should also share your perspective about life. Because they will be making decisions on your behalf.

2) Technology- You need an advisor that is able to meet you where you are. We spend a majority of our time on our computers and our phones. Finding out what technology they have to make access and information fast and fun will be a plus