by Integras Partners | Sep 12, 2020 | Career Builders, Case Studies, Integras Insights
Meet Megan. She’s in her early 30s, single (for now) and fairly stable in her career, although she may change employers.
Like most younger professionals we work with, Megan was unsure how to get started. She had a couple of previous company retirement accounts and a Roth IRA she started years ago. She had accumulated a sizable bank account but was unsure how to invest, especially after seeing her parents experience mixed results.
Integras Analysis
Our conversations determined that she was living within her means, needed a cash “safety net” (for unexpected car repairs or job search) and besides retirement hopes one day to start a family and own a home.
Recommendations
- A modest increase to her retirement contributions, to better fund her primary goal, retirement. A 2% increase for someone earning $100K typically lowers bi-weekly take-home by about $50
- Set aside a “safety net” savings account for unexpected expenses
- Allocate her remaining cash into two strategic accounts. First, a moderate account seeking 4% to 5% returns for goals in the next 3-5 years. Then, a growth account seeking appreciation over the 5-10 years it might be before settling down
- Consolidate her former company plans
Results
- With her “safety net” in place, Megan started an automatic bank draft of $100/month to her moderate account and is comfortable making the monthly maximum (currently $500) to her Roth IRA. Besides tax-free growth, once you’ve owned a Roth for five years you can withdraw up to $10,000 without penalty towards a first-time home purchase!
- We consolidated her former company plans and helped allocate her current employer’s 401(k)
- Now, her retirement investments complement each other, and she has a track to meet her primary goal
by Integras Partners | Jul 14, 2020 | Integras Insights
Structured Notes typically combine two or more futures contracts to generate cash and pay it as yield.
There are thousands of contract variations designed to help reduce or exploit market uncertainty. There must be a buyer and seller on each side, one being defensive (bearish) and the other optimistic (bullish).
- Farmers sell future contracts on their produce or livestock to lock in the price.
- Airlines buy contracts for future fuel deliveries to ensure that fares will cover costs.
- Companies buy currency futures to protect from unwanted price changes.
- Investors buy put options insuring a minimum value for a stock position.
- Speculators buy call options to capitalize on a stock’s possible upswing.
The more prices fluctuate, the greater a seller’s risk, so contract premiums can get very expensive. So, the turbulent markets of 2020 have provided unusual opportunities.
Integras Partners has tailored three different notes to provide attractive income during this recession.
The first was issued mid-March when oil prices collapsed. Our Chief Investment Officer, Keith Johnson, believed that the largest energy companies were unreasonably discounted. So, he designed a note based on the price movement of Exxon Mobil [XON], Conoco Phillips [COP] and Chevron [CVX]. Exxon, for example had dropped 34% since the beginning of the year. If none of the stocks fall another 40%, this note pays 4% every quarter (16% APY). The note will pay for six years, or full principal will be returned if all three stocks are above their benchmark after the first year.
The second note was issued mid-April when hospitality companies were getting crushed. For this one, Keith selected Marriott International [MAR] which was down 48% for the year and Darden Restaurants [DRI], which had dropped 41%. With dramatic uncertainty for hotels and restaurants, the contracts on these stocks at the time generate a 35% yield for this note! Today, both stocks are above their thresholds and the note will payout at the anniversary. Otherwise, unless they drop more than 50% from today’s prices, it will payout for three years.
The most recent note is based on four prominent electric utilities, paying a monthly coupon at a 10% annual rate. It will also pay up to three years and redeem at full value if none of the stocks have lost 40%.
Utilizing these notes reduce portfolio risk without owning the stocks, and greatly increases the yields vs. dividends. The impact on risk-adjusted portfolio returns are significant when markets are volatile and individual stock price moves are extreme.
Integras Partners works with successful individuals and families to align investments with personal goal timeframes. This is solely an illustration of strategic investing and not an offer to sell or promise of performance.
For more Integras Insights, click here.
by Integras Partners | Mar 11, 2020 | Integras Insights
The novel Coronavirus is the lead story in virtually every media outlet, so we are all aware of its widening presence. Further escalation and imposed work and travel restrictions will have impact global economic growth, which is what the markets are attempting to price in today.
After today (Feb. 28) the S&P 500 Index® has given up 11% of its value in only one week. An unprecedented sell-off, even taking 2008 into consideration.
While no one can predict the scope of infections, it is important to realize that fear of the unknown is driving this decline. Whether or not the virus leads to the global economy essentially grinding to a halt, the market is acting as if it will. Such violent selloffs have historically exhausted themselves and recovery from occurred quickly, as the worst-case scenario usually fails to materialize.
We aren’t attempting to predict the unknowable. Yet until facts support such fears, we believe the market is well ahead of itself pricing severe losses. As spring approaches and the virus plays itself out, we expect the markets to mount another V-shaped recovery. We can’t say how much farther it may fall in the meantime or how long it may take for the recovery to come.
We appreciate our clients’ restraint in calling us during this episode (you can read why below) but we know it’s on everyone’s mind, so know that we are well-aware of the threat that the virus poses to everyone’s health, the economy and the markets. Yet today it is fear driving markets rather than fact and we encourage you not to succumb to it.
Our client portfolios are built to protect near-term liquidity needs from such events. Should this process prove to be several years, we will not be forced into surrendering longer-term growth objectives at inopportune prices today. Clients are structurally protected from market upheavals, providing clients some peace for living life the way we planned for it. So please, go live life. But do be aware of your surroundings, unapologetically distance yourself from sick people and take the precautions recommended by health officials.
To that end, we are doing our part to protect against the spread of the virus. Until it fades, we are asking that all meetings and discussions that do not require a physical presence be conducted by phone or video conference. We don’t wish to be or become part of the problem and will certainly be personally available as necessary. So please, use good judgment as we will and if we can handle your needs remotely it may turn out to be best for everyone.
Thanking you all.
