Author Archives: Michael Cochell

Michael Cochell

About Michael Cochell

Michael Cochell is associate vice president of Jacob Gold & Associates. For the last 14 years, Cochell has helped thousands of households organize and manage their personal financial affairs in the areas of banking and finance. He is an investment adviser representative and is registered with FINRA and holds Series 7, 63, 65 licenses, and is a graduate of Arizona State University.

Reaching Requirement Goals

Reaching Your Retirement Goal Requires Commitment

When it comes to investing, retirement planning, or tracking our markets, we rely on the media to get our information. It may be from the newspaper, television, magazines, the Internet, or our cell phones. Either way, we learn a lot about what to do and what not to do about investing from the media. We must remember that the information can work for us or against us depending on how we apply it. Now, how does this relate to reaching our financial goals? Knowing some of the key elements that help reach financial goals is critical. The value of time, the commitment to save, and understanding what you invest in are a few of these critical elements.

Understanding these elements will help the everyday person read through some of the information from the media and apply it to their situation. For example, many investors may spend countless hours researching a product or investment but not consider the value of time in an investment. The future value of an investment, compounding at a given return, is powerful, but factoring in the concept of time can make a huge difference in one’s nest egg. In other words, if one were to start investing the same dollar amount every year at the age of 21 rather than 35, the value of that investment may differ by the hundreds. Most of the media information we see does not account for the value of time for investing — only the investment and what trend is in place NOW!

Saving for the future is dependent on so many factors. Many of us forget that understanding our behaviors is important as it applies to our finances. The commitment of saving is the first step and is usually the hardest. For some of us, taking the actions to execute a commitment is challenging and requires others to help. A great example of this is when employers automatically sign up their employees to participate in their retirement plan. Studies have shown that when the employers take this approach they had much higher participation even when employees were given the options to opt-out. (Source: “Behavioral Economics” by Sendhil Mullainathan, MIT & NBER and Richard Thaler, University of Chicago and NBER).  Planning and committing to saving can be a complex decision, many of us avoid making this decision and committing to it.

Once we have committed to saving, we must consider our investment strategies. It varies among several factors. These factors are risk tolerance, time horizon, and financial needs for retirement. For this reason, I highly suggest using a financial professional to provide recommendations for investments that are appropriate. In addition, it is imperative to consistently review your accounts and objectives. Although we may have a plan in place, our world, economy and financial situations change, so we must be educated and prepared to make adjustments when needed.

Weak dollar

A Weak Dollar Isn’t Always A Bad Thing For The Economy

For years, we have experienced a rise or decline of our dollar relative to other major currencies. However, this may not be a huge concern right now, but we must start thinking about it for our future. If we track our dollar over the long term it has been weakening due to several factors.

Some of the primary factors that cause the U.S. dollar to decline are currency exchange rates, treasury notes, and the amount of dollars held by foreign countries. These three factors are constantly changing and will affect the value of the dollar now and in our future.

If we look back at the dollar’s value from 1913, it steadily increased until the 1950s. Since the 1950s, the dollar has decreased and most likely will continue if changes are not made. Today, low interest rates and domestic trade deficit are the variables that have been a main cause of our weakening dollar. Hopefully as our economy strengthens and government policies are implemented, we’ll begin to see some stability in the U.S. dollar.

Most Americans view a “weak” dollar as a bad thing and in many cases it is. An interesting side note, a weak dollar can be a useful tool in the business of world trade. It encourages people and businesses of other countries to buy from the U.S. A weak dollar stimulates the exporting of goods and services, which can increase U.S. economic growth. By increasing exports it provides opportunities for American manufacturing companies to produce more “stuff” so other countries can buy at a cheaper cost.

On one side, a weak dollar is a bad thing, but on another it can spark opportunity. Many times the factors that cause a weak dollar are issues that need to be addressed and not the dollar itself. If we continue to experience a weak dollar for the long term, it will certainly be painful for future investors and will increase the challenge the U.S. will have in maintaining its global status. We must be attentive to the variables that affect our dollar and take action to make a change for our future.

Global Economy

With The Global Economy, Far-Off Natural Disasters And Wars Affect Us All

Today, the United States, China, Japan, Germany, France, and the United Kingdom are among the largest economies in the world. Each of them has grown significantly in past decades and provides our global world with needed goods and services. This was not always the case; politics, religion and cultural differences kept us from working together. Throughout time, many of our leaders have put their best foot forward to improve our government relationships. As improvements in technology, communication and transportation evolve it has allowed us to grow globally.

On one hand, global economic growth is great. But on the other hand, being a global economy also has its drawbacks. As our economies work together and we rely more and more on each other, we have become more vulnerable. For example, war, government policies, political leaders and natural catastrophic situations can affect all of us. There are certainly pros and cons to having a global economy, but given recent events many of us may question this direction.

The recent situation in the Middle East and the tragic earthquake and tsunami in Japan show us how our markets and social humanity can affect not only that country, but also the rest of the world. Since the rebellious strikes in Libya, we have seen a spike in gas prices, commodities and will incur a great financial obligation for the military efforts to help the civilians of Libya. Also, the rebuilding of Japan will be very costly and cause slower production of their goods and services for quite some time. Not only is it a devastating situation for the people of Japan, but it also will hurt them economically for years to come.

Analysts have spent countless hours struggling to quantify the effects and make projections about how these situations will affect our global economy. Until it’s behind us and we look back on history we will not know the full impact

Without a doubt, economically we are more dependent today on other countries to provide importing and exporting of goods and services for growth. We will continue to experience this progression in our future, so we must adapt and learn to change as our environment changes.

Investing wisely

Learn To Avoid Investment Mistakes

Avoiding big mistakes can have a significant impact on a long-term investment. This impact may be more significant than the performance of a specific fund, stock, bond, or alternative investment. More often, big mistakes occur when investors begin making decisions based on emotions such as fear and greed, rather than using logic and objectivity when making their decisions about investments. For these reasons, it is important for investors to have a coach on their side, such as a financial professional, to help guide them during challenging times such as we experienced during the 2008 recession. There are many mistakes that can occur, but if the big mistakes can be avoided, it can make a huge difference on an investor’s recovery. Here are three that are critical: failing to plan, waiting for the right moment to start investing, and buying high and selling low.

Many of us have spent countless hours planning for vacations, weddings, graduations, and having children. However, failing to plan for retirement will certainly present major issues for investors when retirement is near. Having a plan in place and a purpose of investing is critical. This is usually broken down in two parts. First, the building of wealth and second the disbursement of wealth. During the wealth-building process, investors will need to consider portfolio growth, time frame of investing, risk tolerance, and tax consequences. During an investor’s disbursement phase, our investment objectives will change and strategies will be tailored toward capital preservation rather than growth. It is not easy and takes a lot of patience, yet having a plan in place to build wealth, and managing it properly during the distribution phase, will improve the odds of having a secure retirement.

When it comes to investing for your retirement, the best time to start is now. Whether you’re a new investor or experienced investor, time is the most important factor you can have on your side. The earlier you start, the easier it is to save more, ride out the shifts of economic changes, and utilize compound interest to your advantage. By starting later in life, investors may fall short of their needs. The later you start the more you will need to save, reduce discretionary spending, and work longer than expected. For these reasons, the earlier you start saving the better the odds of saving enough for retirement.

Emotional investing usually ends on a bad note. Investors who buy and sell on emotions typically buy high and sell low. We have seen this time and time again. The interesting part about this is that most of the time our objective is to get out before we lose or to get in to gain something. In most cases, we end up doing the opposite. We get out before the market shifts because of fear and don’t get in until we are comfortable, when it’s too late. This is why having a plan in place that includes logic and objective decision making is crucial. Usually, a well balanced portfolio with rebalancing will allow investors to meet their goals and minimize major swings in their portfolios.  Avoiding these mistakes does take planning. In many cases, working with a financial professional can help you be more objective and reach your retirement goals.

Stock Market

The Dow Reaches 12,000 — Where Will We Go From Here?

The Dow Jones Industrial Average briefly climbed to 12,000 on Jan. 26. Is this a sign of hope for our economic growth? The last time the Dow traded at the 12,000 level was in June 2008, when our economy was just starting to see the effects of job losses, dollar value changes, tax concerns, mortgage defaults, and monetary policy struggles. Although we still face some of these challenges today, we are gradually seeing improvements in some areas of our financial economy.

The most positive are corporate earnings. Reported by Bloomberg, 88 out of the 120 estimates of quarterly earnings exceeded predictions. Corporations with strong business models regained some strength by scaling back and many competitors are no longer in the game to compete. Analysts predict similar expectation earnings for 2011. If analysts are correct, then we expect the equity market to improve and draw strength from our economic growth.

Some economic issues have improved since 2008, but many still persist. In order for the economy to regain its strength, long-term, several key metrics will need to improve.

The value of the U.S. currency must stabilize in comparison to other currencies. As for taxes, once China’s tax reform goes into effect the U.S. will have the highest business tax rates than other developed countries.

Federal spending has exploded in the last few years, but some could argue that it was needed to help avoid a worse recession. Our national debt has reached the $14 trillion marker and will take decades to reduce.

Ben Bernanke, chairman of the U.S. Federal Reserve, has great responsibility overseeing monetary objectives. The control of our money supply and interest rates either expands our economic growth or contracts it. When we experience a dramatic market change like 2008, it is much more difficult to predict the results of monetary decisions. Now that there is less uncertainty we may see progress in this area.

It’s been nearly 18 months since we exited our recession. Is our economic environment better? Yes, but it is improving very slowly and there are still many issues to work out. Hitting the 12,000 mark on the Dow provided some comfort for investors. We also had positive growth with the U.S. GDP — it expanded by 3.2 percent in the fourth quarter following a 2 percent annual rate in the third quarter, according to Bloomberg. As investors, we must continue to focus on our objectives and refrain from making decisions on emotions.

Consumer Confidence

Consumer Confidence In The New Year Will Influence Buying Decisions

Employment and real estate prices have regularly influenced our economy over the last century. Recently, they have negatively compounded the economic crisis and will most likely continue to be an issue as we fight through to recovery.

What will it take to change the direction of unemployment and low real estate prices? It begins with corporate confidence and consumer spending. Due to the challenges we currently face, many corporations have held on to large amounts of cash. Until corporations feel the worst is behind us and start deploying their large cash reserves, we will see a delay in our recovery. These large cash reserves will be used for research and development, marketing, and most importantly, hiring. Over time, people’s confidence will increase due to hiring, and as this happens people will begin to tap into their savings to start buying goods and services such as clothes, small home appliances, automobiles and vacations.

As more time goes on and we experience improvement with unemployment, people will begin to feel more confident and see the opportunity to invest in the markets. Doors will open for new opportunity for individuals to consider buying homes again. People who thought that owning a home was once out of their reach can now afford to buy. Home buying will certainly increase as we see unemployment decrease, which will benefit most of us — as long as we don’t get greedy again. Slowly, both will recover. Unemployment will most likely come down before real estate goes back up.

Everything is cyclical. Eventually, low unemployment and higher real estate prices will help the economy again. How long will it take? We don’t know. Recovery from a crisis such as the recent recession will take longer than we think. Be patient and use the knowledge we have learned from this recession to plan appropriately for the next crisis.