Financial Symmetry News & Views

Archive for April, 2009

With the price of consumer goods increasing, Financial Symmetry would like to pass along a few money-saving tips that can help you trim your grocery bill, as well as help to find savings at restaurants.

How can you save money on your grocery bill?

• Make a list and stick to it.
• Stock up on staples when they are on sale.
• Evaluate packages by unit cost, rather than looking at the package price. Use a calculator when you shop, and remember to include taxes.
• Try not to buy convenience foods. Instead, buy foods that can be prepared from scratch and reheated for tomorrow’s lunch.
• Try not to go grocery shopping on an empty stomach.
• Use coupons!

Besides the Sunday paper, online websites now offer printable coupons with barcodes that can be scanned at the checkout counter. Be sure to read for any restrictions, such as limitations on the number of times the coupon may be used, or if the website requires that the coupons be delivered via email. Also, research the website before committing to signing up; especially those that require you to sign up with their partners, mention that your email address may be shared, or involve purchasing a membership. Many of the websites require you to install a coupon printer on your computer, which ensures that barcodes print clearly. Others may give you the option to sign up for weekly coupons, promotional discounts and savings tips through email.

We suggest the following websites:

How can you save money going out to eat?

Restuarants.com allows visitors to purchase restaurant gift certificates for a significant discount. We found gift certificates that could be purchased for $3 that are valued at $10 and others for $10 that are valued at $25. Simply enter your zip code or state, choose the desired restaurant and purchase the gift certificate, then print and enjoy the savings.

Some of the gift certificates are available to be sent via email, making them a quick and easy last minute gift. Discounted gift certificates would also make a great gift for college students and recent graduates. When purchasing, be sure to read the restrictions carefully, as many gift certificates may have certain limitations on the times of day or day of the week when they can be used. Many also place restrictions on alcohol purchases or the number of people in the dining party.

One of our primary jobs is assessing mutual fund managers to look for those who can provide good results. Understanding what your mutual fund managers are thinking is an integral part of our research effort on your behalf, and given the current onslaught of news and opinions on the economy and the markets, we thought it would be helpful for you to hear from a few of your funds’ managers.

Under the Hood:
A behind the scenes look at three of your fund managers

Davis VY Venture

Davis NY Venture, which invests in large US holdings, looks for companies that have “wide moats” separating themselves from their competitors. The fund holds a total of 109 positions with some of its top holdings including Costco, Berkshire Hathaway, JP Morgan Chase and ConocoPhillips. The managers look for stocks with solid balance sheets and defensible market niches that trade below what industry analysts think they’re worth.

“When I first started investing, my grandfather gave me a card on which was written,’ You make most of your money in a bear market, you just don’t realize it at the time.’ Although at first blush this saying sounds counterintuitive – after all, in a bear market prices are going down – it makes sense when you recognize that as investors we are buyers and thus should welcome lower prices for the simple reason that lower prices may increase future returns.”

“In today’s bear market, investors are racing for the exits. Cash is pouring into ‘riskless’ securities like short-term U.S. Treasuries with virtually no yield. Although such a choice feels good, it is, given the near certainty of inflation, likely to prove very costly. Meanwhile, investments in high grade common stocks, which feel like a terrible choice, are likely to prove very profitable and are almost certain to outperform cash over the next decade.”

Christopher C. Davis
Davis NY Venture

Baron Growth Fund

Baron Growth Fund could be described as a ‘Homerun hitter’ type of investment. The management here likes to discover stocks that can double their price over the next 4-5 years. They are also fond of quality management, which they evaluate by developing relationships with executives of the companies in which they invest. Some of the holdings they currently like include Devry, Strayer, Dick’s Sporting Goods and Arch Capital Group. The fund has been a solid choice for us in the small and mid-cap area over the years.

“Among the most important beneficiaries of President Eisenhower’s program to build an interstate highway system in the 1950’s were not the contractors and materials suppliers but businesses like roadside restaurant McDonald’s, roadside hotels like Holiday Inns and destination resorts like Disney. When President Kennedy set a national goal for America to send a man to the moon and bring him back before the end of the 1960’s, the beneficiaries were not only the defense contractors who made the rockets and supplied fuel. Communications companies, semiconductor fabs, other technology businesses and something called the Internet were the true long term beneficiaries. Similarly, we think President Obama’s infrastructure, alternative energy and energy conservation programs could provide opportunities for many new industries like electric and battery driven cars, more efficient power grids and producers of new composite materials with unusual characteristics that can be used in windmills and by the turbines that drive them. It is our job to find beneficiaries of President Obama’s program in which we can invest.

We think that when the worldwide economic recession begins to recede, the mountains of cash on the sidelines invested in “safe” government securities providing no yield held until “the coast is clear” will not prove a good idea either. We think it may then be just as difficult to buy stocks as it was to sell them only a few months ago.”

Ron Baron
Baron Growth Fund

Cambiar Opportunity

Cambiar Opportunity is one of our more concentrated funds which generally holds 30-40 stocks at a time. They focus on mostly large US companies that are cheap when compared to their peers and the market. The fund had a rough ride down this latest bear market but holds one of the best 10 year returns in their category beating the S&P 500 by nearly 5% and has been particularly impressive since the November lows. Some of the funds top holdings include BP Amoco, El Paso Corp, Allstate, and CVS.

“There will be no all clear horn sounded when the crisis abates and when risk premiums begin to fall, but markets will quickly take notice. Timing an improvement in the stock market will be very difficult. Nonetheless, an analysis of risk premiums suggests the case for investing is very strong now.

In this and other areas of the market, we have thus taken some advantage of the profound price dislocation to “quality-up” our portfolio at valuations that we could only have dreamed about a year ago. Similarly, we have initiated positions in a number of core franchises within the media, consumer, and healthcare industries who have undergone significant value dislocations. While media, energy, and retailing may not jump out as being uniquely poised to perform owing to varying degrees of cyclicality, and health care may not be uniquely attractive under the auspices of a Democratically-controlled government, the valuation compression is just astonishing. Many energy companies have reverted to 1999-2001 stock prices, and though oil prices have fallen, we are far from the $10-20 level that prevailed at that time. Similarly, while advertising and consumer spending looks sure to contract, profit declines of as much as 60-70% are now baked into valuations – this too seems grossly excessive.”

Brian Barish
Cambiar Opportunity Fund

Special Notes:
* Your portfolio may not contain these specific funds. We recommended the funds in your portfolio based on your risk profile and goals.
* All comments from mutual fund managers were taken from their most recent shareholder letters.

Allison Berger, CFP®, was recently quoted in Investment News. The article discusses financial advisors’ views on young investors that are dealing with the current market.

Here is an except from the article written by Lisa Shidler:

In recent months, a greater number of younger investors have come in seeking help, especially as their assets have fallen, said Allison Berger, a certified financial planner with Financial Symmetry Inc. in Raleigh, N.C., whose firm manages $78 million in assets. “It’s been one of my goals to work with young professionals and help them get started on the right foot,” she said.

Sometimes, people in this age group are grappling with a wide range of issues, Ms. Berger said.

“We’re trying to help them pay off student loans, save for an emergency fund, buy the first home and save for retirement,” she said.

Click here to view the original article: Investment News

Budgeting works best when it becomes a regular routine. It can be hard at first, but knowing where your money goes is a critical part of understanding your complete financial picture.  Along the way, you may discover ways to cut costs, save extra money in retirement accounts, or plan for a big purchase. Here are a few tips to think about when creating and managing your budget.

• Think about your purchases and how they relate to the budget you have set up.
• Establish broad categories and assign an estimate of your expected expenses.
• The more micro-managed your budget becomes, the harder it is to execute.
• Use broad categories like food, transportation, clothing, housing, and discretionary.

It is most important to stay consistent in the way you categorize things as this will enable you to make meaningful comparisons when looking at how you did this April compared to last April.  Each month will vary in amounts, so it is best to have an estimated amount, or target, in each category to begin your budget.  Keep in mind that you may need to make a few adjustments from month to month until you can get a better estimate. Once you have a functioning budget, take some time mid-month to sit down and review how your doing against the targets you set.

Reviewing your budget gives you a measurable period for the last half of the month so that you can decide where to cut back, which will help you stay within your budget.  It is also important to remember that most people cannot become a successful budgeter over night.  Spending patterns are a behavior and will take time to adjust.  Holding yourself accountable is a must when budgeting.  The purpose is to provide discipline with regards to spending, so it is best not to expect a walk in the park.

With all of your accounts, transactions and targets, it may be helpful to consider using some type of computer software to assist in tracking your budget. In the coming weeks, we will be discussing different online and computer software programs that can help you create and manage a budget while tracking your expenses.

Tax day will soon be upon us.  But don’t stress out if you haven’t yet figured out how you’re going to get your return filed by April 15th.  You have an option that millions of taxpayers use every year: the Extension.

IRS form 4868 Application for Automatic Extension of Time must be sent in by the April 15th deadline in order to have a valid six-month extension with the IRS.  Form D-410 does the trick with the N.C. Department of Revenue.

There are many different reasons why you may need to file an extension.  Small business owners, for example, often need to get their business taxes completed before they can do their personal return.

No matter your reason for filing an extension, one rule applies across the board – an extension gives you extra time to file, it doesn’t give you extra time to pay.  In order to qualify for an extension the IRS requires that you “properly estimate your 2008 tax liability”.

You can usually get a pretty good estimate by preparing a preliminary return using the information you know is good – a W-2 for example – and guesstimating the information you need more time to gather.  Then apply the payments you have made through withholdings and/or estimated payments.  For any amount still due a payment should be sent in with the extension.

Some advice for those who don’t have the money to send in with the extension, file the extension anyway.  Remember we said earlier that the extension is extra time to file not extra time to pay?  The IRS can hit you with two separate penalties for not sending in the extension (late filing and late paying) – but only one (late paying) if you send it in.  So sending it in can only help and it certainly won’t hurt.

Whether you file the extension electronically or by mail it allows you six more months to get your act together.

This article was written by Will Holt, a CPA at Financial Symmetry, Inc.