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Author: Robert Blakely

Tax Season Scam Alert Warning Blakely Financial

Tax Season Scams Alert

Posted on by Robert Blakely

Presented by Robert Blakely, CFP™ 

With tax season upon us, many of us are busy gathering the appropriate documents, meeting with CPAs, and ensuring to meet all relevant tax deadlines. But in all the hustle and bustle, taxpayers also need to keep an eye on the risks, especially tax season scams. Scammers get savvier with strategies to access other people’s personal information and money each year. To help you steer clear of this year’s top scams, learn red flags to watch out for—along with some timely tax-filing reminders.

“Ghost” Tax Return Preparers

One truly frightening scam haunting taxpayers is the ghost preparer. These preparers remain hidden from the IRS by not signing returns, making the returns appear to be self-prepared. In cases where the individual e-files, the ghost preparer will refuse to sign the return digitally. The result can be disastrous for taxpayers, leaving them open to serious filing mistakes, tax fraud, penalties, and audits by the IRS.

Red flags. To help avoid this issue, be aware of red flags surrounding ghost preparers. They usually:

  • Don’t sign the return with a Preparer Tax Identification Number (PTIN) (The PTIN is required by law for anyone who is paid to prepare or assist in preparing a federal tax return.)
  • Lure clients in with the promise of big refunds (Unfortunately, these scammers will resort to claiming fake deductions to boost the size of the refund.)
  • Require payment in cash
  • Have refunds directed into their bank accounts, not the taxpayer’s

Pro-tip. If you’re looking for someone to prepare your taxes, the IRS has an excellent online resource that offers a tool for checking your tax preparer’s credentials and tips for avoiding potential tax scammers. No matter who prepares your return, it’s essential to review it carefully, including the routing and banking numbers if you’re receiving your refund via direct deposit.

New Round of COVID-19 Scams

As the coronavirus continues to spread, so do scams, unfortunately. Criminals often try to exploit taxpayers during times of uncertainty, and this pandemic has been no exception. The latest COVID-19 scams center around the most recent round of stimulus payments. They have taken on a few forms, all with the singular goal of stealing taxpayers’ money and personal information.

 Red flags. The IRS Criminal Investigation Division has compiled a list of the latest COVID-19 scams. Here’s what to be on the lookout for:

  •  Text messages asking you to disclose bank account information to receive the $1,200 economic stimulus
  • Emails, letters, and social media messages that use “coronavirus,” “COVID-19,” and “stimulus” in different ways, requesting personal information and financial account information (e.g., account numbers and passwords)
  • Sale of fake at-home COVID-19 test kits
  • Fake donation requests for individuals, groups, and areas heavily affected by COVID-19
  • “Opportunities” to invest in companies developing COVID-19 vaccines, which also promise these companies will drastically increase in value as a result

 Pro-tip. If you receive unsolicited emails or social media attempts to gather your personal information and appear to be from the IRS or an organization linked to the IRS, forward the message to phishing@irs.gov.

Online Identity Theft

One of the most common tax scams remains personal identity theft, particularly rampant during tax season. Why? Scammers can file phony tax returns and steal refunds by accessing unsuspecting taxpayers’ social security numbers, addresses, and birth dates. The worst part is this can all be done before the victims even know their identities have been stolen.

Red flags. So, what can you do to help ensure that someone doesn’t file a return in your name? Know the warning signs of this pervasive scam. If you receive an IRS notice regarding any of the following, contact the IRS immediately: 

  • a duplicate return
  • that you received wages from somewhere you never worked
  • you owe additional taxes or that the IRS will offset your tax refund
  • collection actions are being taken against you for a year you did not file a tax return
  • As noted above, ensure that your tax preparer has the appropriate credentials.
  • Unless there is a valid reason, don’t give out your social security number—and always know who to whom you’re giving it.

Pro-tip. The best way to avoid this scam is to file your taxes early before a scammer can access your information. You might also think about proactively using an Identity Protection PIN (IP PIN) to protect yourself from identity theft. The IP PIN is a six-digit number known only to you and the IRS that you can use to help the IRS verify your identity when a paper or electronic tax return is filed.

Never Has the IRS Ever . . .

One of the most important things to know is how the IRS does (and doesn’t) contact taxpayers regarding tax scams. Here are some things the IRS won’t do:

  • Demand that you pay taxes without the opportunity to question or appeal the amount it says you owe
  • Call to demand you make an immediate payment using a specific method (e.g., prepaid debit card, gift card, or wire transfer)
  • Threaten to bring in local police, immigration officers, or other law enforcement to arrest you for not paying (Threats are a common tactic used by scammers.)

If you get a call or email that sounds like any of the above, it’s likely a scam. For steps to take if you suspect fraudulent tax activity, visit the IRS’s Report Phishing and Online Scams page.

Scams Don’t End with Tax Season.

Although the focus here is on tax season, we would all be wise to remember that new scams pop up every day, year-round. So, keep your personal information safe and be on the lookout for potential scams.

 

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

 

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© 2021 Commonwealth Financial Network®

High Deductible Health Plan Robert Blakely Blakely Financial

Is a High-Deductible Health Plan Right for You?

Posted on by Robert Blakely

In 2020, 31% of U.S. workers with employer-sponsored health insurance had a high-deductible health plan (HDHP), up from 24% in 2015.1 These plans are also available outside the workplace through private insurers and the Health Insurance Marketplace.

Although HDHP participation has proliferated, the most common plan — covering almost half of U.S. workers — is a traditional preferred provider organization (PPO).2 If you are considering enrolling in an HDHP or already enrolled in one, here are some factors to consider when comparing an HDHP to a PPO.

Up-Front Savings

The average annual employee premium for HDHP family coverage in 2020 was $4,852 versus $6,017 for a PPO, a savings of $1,165 per year.3 In addition, many employers contribute to a health savings account (HSA) for the employee, and contributions by the employer or the employee are tax-advantaged (see below). Taken together, these features could add up to substantial savings that can be used to pay for current and future medical expenses.

Pay As You Go

You pay more out of pocket for medical services with an HDHP until you reach the annual deductible in return for lower premiums.

Deductible: An HDHP has a higher deductible than a PPO. Still, PPO deductibles have been rising, so consider the difference between plan deductibles and whether the deductible is per person or family. PPOs may have a separate deductible (or no deductible) for prescription drugs, but the HDHP deductible will apply to all covered medical spending.

Copays: PPOs typically have copays that allow you to obtain certain services and prescription drugs with a defined payment before meeting your deductible. With an HDHP, you pay out of pocket until you meet your deductible, but the insurer’s negotiated rate may reduce costs. For example, consider the difference between the copay and the negotiated rate for a standard service such as a doctor visit – certain types of preventive care and preventive medicines may be provided at no cost under both types of plans.

Maximums: Most health insurance plans have annual and lifetime out-of-pocket maximums above which the insurer pays all medical expenses. HDHP maximums may be the same or similar to that of PPO plans. (Some PPO plans have a separate annual maximum for prescription drugs.) If you have high medical costs that exceed the yearly maximum, your total out-of-pocket costs for that year would typically be lower for an HDHP with the savings on premiums.

Your Choices and Preferences

Both PPOs and HDHPs offer incentives to use healthcare providers within a network, and the network may be identical if the same insurance company provides the plans. Make sure your preferred doctors are included in the network before enrolling.

Also, consider whether you are comfortable using the HDHP structure. Although it may save money over a year, you might be hesitant to obtain appropriate care because of the higher out-of-pocket expense at the time of service.

HSA Contribution Limits
Annual contributions can be made up to the April tax filing deadline of the following year; any employer contributions must be considered part of the annual limit.

Health Savings Accounts

High-deductible health plans are designed to be paired with a tax-advantaged health savings account (HSA) that can be used to pay medical expenses incurred after the HSA is established. HSA contributions are typically made through pre-tax payroll deductions, but in most cases, they can also be made as tax-deductible contributions directly to the HSA provider. HSA funds, including any earnings if the account has an investment option, can be withdrawn free of federal income tax and penalties as long as the money is spent on qualified healthcare expenses. (Some states do not follow federal tax rules on HSAs.)

The assets in an HSA can be retained in the account or rolled over to a new HSA if you change employers or retire. In addition, unspent HSA balances can be used to pay future medical expenses whether you are enrolled in an HDHP or not; however, you must be enrolled in an HDHP to establish and contribute to an HSA.

1–3) Kaiser Family Foundation, 2020

 

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other expert advice we can provide towards your financial well-being.

ROBERT BLAKELY, CFP® is a financial advisor with BLAKELY FINANCIAL, INC. located at 1022 Hutton Ln., Suite 109, High Point, NC 27262. He is the founder and president of Blakely Financial, Inc.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

Diversification and asset allocation programs do not assure a profit or protect against loss in declining markets, and cannot guarantee that any objective or goal will be achieved.

Beneficiary Planning

Beneficiary Planning: What You Need to Know

Posted on by Robert Blakely

Presented by Robert C. Blakely 

 

Designating a beneficiary on retirement accounts is one of the most important—yet one of the most frequently neglected—retirement and financial planning tasks. Oftentimes people forget to update beneficiaries after major life events. A beneficiary is any person or entity that an account owner chooses to receive the benefits of a retirement account in the event the account owner dies.

Here are some important factors to consider when selecting beneficiaries for your retirement accounts:

  1. Don’t leave a beneficiary form blank, and don’t name your estate as beneficiary. Failing to name an individual, or individuals, as your beneficiary could deprive your heirs or loved ones of inheriting your retirement assets. Another downside of not naming a beneficiary: your retirement assets would need to go through the lengthy probate process and could be subject to creditors.

 

  1. Make a beneficiary designation for each retirement account that you own. People often make the mistake of assuming that the beneficiary they name on one account will dictate who the beneficiary is on their other retirement accounts, but that is not the case. You need to have a valid beneficiary on file for each account.

 

  1. Remember that beneficiary designations take precedence over wills. Retirement assets are distributed according to the named beneficiary, regardless of any other agreements, such as wills.

 

  1. Keep your beneficiary designations current. Many people fail to update their beneficiary designations after major life events, such as a marriage, divorce, or new addition to the family.

 

  1. Consider consulting a professional. You may wish to seek the guidance of an experienced attorney, CPA, or financial advisor to help you make the best choices for you and your heirs.

 

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other expert advice we can provide towards your financial well-being.

ROBERT BLAKELY, CFP® is a financial advisor with BLAKELY FINANCIAL, INC. located at 1022 Hutton Ln., Suite 109, High Point, NC 27262. He is the founder and president of Blakely Financial, Inc.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

Diversification and asset allocation programs do not assure a profit or protect against loss in declining markets, and cannot guarantee that any objective or goal will be achieved.

Five Money Tips: Shopping for a Mortgage

Five Money Tips: Shopping for a Mortgage

Posted on by Robert Blakely

Presented by Robert C. Blakely

Shopping for a mortgage can be daunting, even for homeowners who have been through the process before. By being prepared, doing your homework, and asking questions, you can find a suitable mortgage for your circumstances.

Tip #1: Obtain your credit report. It goes without saying that borrowers with the best credit history get the best terms.

To determine your credit score, a tool used to determine your creditworthiness, lenders rely on three reporting agencies: Equifax, Experian, and TransUnion. Before you begin shopping for a mortgage, get your credit report from all three agencies at www.annualcreditreport.com. If you haven’t requested a report within the last 12 months, there is no charge. Correct any errors immediately and take steps to improve your score.

Tip #2: Know how much you can afford. There is a difference between what lenders are willing to lend you and how much you can afford. In their efforts to increase their compensation, real estate agents and mortgage brokers look to get you into the most expensive home and the largest mortgage you can qualify for. But only you can determine how much you can afford.

Review your current spending and obligations and add in closing costs, estimated monthly mortgage, property taxes, insurance, utilities, and maintenance. In addition, consider the following before you make your decision:

  • Will you have enough to pay for moving expenses, furnishings, repairs, or remodeling and still have enough money to make regular contributions to your emergency fund?
  • How soon will you be able to replenish your savings after the down payment?
  • If you were to lose your job, would you have enough money saved to get you through a rough period?
  • Would taking on too much debt prevent you from achieving other important financial goals?
  • If you purchase a home, how would your lifestyle have to change? How would you feel about that?

After answering these questions, you will have enough information to help decide how much you can afford without compromising your future happiness.

Tip #3: Failing to shop around can cost you thousands of dollars. Get quotes from at least three mortgage brokers or lenders. Just because a mortgage broker is independent doesn’t mean that he or she will offer you the best value available in the marketplace.

When making comparisons between brokers and lenders, be sure that the quote is for the same type of mortgage—that is, for the same amount, down payment, term, and type. This can make it easier to compare rates, fees, points, and insurance costs. And because interest rates can change daily, ask that the interest rate quoted to you is available on a set date. It is also helpful to ask for the loan’s annual percentage rate, as this takes into account additional loan costs such as points, broker fees, and other charges.

Comparing interest rates alone does not give you a fair assessment; you also need to understand overage costs. Overage is the difference between the lowest possible loan price that a lender can afford and the amount you are willing to pay. It can be built into the interest rate, points, or other fees. It is negotiable, so shop around.

Remember that “no-cost” can actually mean “hidden costs.” Virtually every mortgage incurs costs. They can be built into longer prepayment penalties (back-end fees), into commissions from the sale of related products or services, or through the interest earned by rolling closing costs into the loan principal. Study the lender’s good faith estimate (GFE) for a full disclosure of your costs.

Tip #4: Read everything and ask questions. A mortgage is a financial commitment you will have to deal with for a long time. It is always wise to have your own real estate attorney review any contracts you are asked to sign that have to do with your home purchase. If you don’t understand the different types of mortgages, terms, or mistakes to avoid, you may want to consult a good educational resource like www.mtgprofessor.com, a website sponsored by a Wharton School professor who is a specialist in this field.

Tip #5: Lock in your interest rate. Quotes are only estimates, and rates are subject to change. Although there are laws governing the use of GFEs, market forces can change the rates and costs before you get to closing. Small changes can have a big impact on affordability. To guarantee the terms quoted, ask for a written lock-in from the lender. (If rates drop, a lock-in can work against you, but remember that only the rate is locked in, not you.) Let the broker or lender know you are going to shop for the best deal.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other expert advice we can provide towards your financial well-being.

ROBERT BLAKELY, CFP® is a financial advisor with BLAKELY FINANCIAL, INC. located at 1022 Hutton Ln., Suite 109, High Point, NC 27262. He is the founder and president of Blakely Financial, Inc.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

Diversification and asset allocation programs do not assure a profit or protect against loss in declining markets, and cannot guarantee that any objective or goal will be achieved.

Family Financial Wellness

Family Financial Wellness

Posted on by Robert Blakely

Family Financial Wellness

Presented by Robert Blakely, CFP®

Summer is almost here! Children will be out of school, and that means more time together as a family. What will you spend your time doing? Do you already speak to your children about financial matters? Perhaps this summer, as a family, you can focus on your family’s financial wellness.

What is family financial wellness? Simply put, it is how you and your family, together, prepare for the future. 

Managing your finances can be stressful and take time. If you are not proactive and do not put a plan in place, your physical and mental health can be affected; you can lose sleep and lose focus. So it is imperative for a healthy family and your peace of mind that you follow some simple steps to ensure financial wellness for all. 

There are four components to becoming financially well as a family: savings, expenses, debt, and risk protection. These can be crucial to your family’s financial wellness and improving in each area should be a priority for you and your family. The following are some simple steps that can help as you start down the path of family financial wellness.

To begin:

Spend less than you earn.

Begin by creating a budget. Keep track of every dollar that comes in and every dollar that goes out. This will allow you to see where you are spending your money and where you might be able to cut back.

Set up an emergency fund.

Relatively small expenses can be devastating if you do not plan for them. Set up an automatic transfer each month and put a portion of each check into this emergency fund. Then make a promise to yourself and your family that you won’t spend it unless it is in a true emergency.

Pay down your debt.

List all of your debt, including the monthly minimum payments and interest rates. Decide which you will pay off first and commit to that. Just do it!

Protect your family.

Purchase life insurance which will give you peace of mind knowing your family is taken care of should the worst happen. 

Save for retirement.

The best way to do this is to participate in your employer’s offered retirement plan. Many employers offer a match, so make sure you contribute to the plan so you can get this ‘free money’ and maximum benefit. If your employer does not offer any type of plan, make sure to contact a financial advisor to set up an automatic transfer into a retirement account.

 

Taking these simple steps – and working together as a family – will help promote a healthy relationship with money for your children but also put you on the path to financial wellness as a family!

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other expert advice we can provide towards your financial well-being.

ROBERT BLAKELY, CFP® is a financial advisor with BLAKELY FINANCIAL, INC. located at 1022 Hutton Lane, Suite 109, High Point, NC 27262. He is the founder and president of Blakely Financial, Inc.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser. Fixed insurance products and services offered through CES Insurance Agency or Blakely Financial, Inc.

To Keep or Not to Keep: A Guide to Common Records-Retention Questions

Posted on by Robert Blakely

Presented by Robert Blakely CFP®, AIF®, ChFC

Living in an increasingly paperless world has its benefits, but does it make a difference when it comes to records retention? Sure, digital recordkeeping on the cloud means more storage space, easy access, and less vulnerability to inadvertent destruction. But the questions of what to keep and how long feel just as confusing as ever.

Keep or Toss. Whether your files are physical or electronic, the same principles and time frames for record retention apply. Below, we review some rules of thumb to consider for a few common financial documents. Keep in mind, though, that this list is not exhaustive, and professional responsibilities and potential liability risks may vary.

ATM receipts, deposit slips, and credit card receipts. In general, you don’t need to hold onto monthly financial statements after you verify your transactions—that is, unless statements include tax-related information. Also, keep in mind that if you dispute a transaction included in a statement, you have 60 days from the statement date in most cases. Beyond 60 days, not initiating a dispute may alleviate the bank of liability associated with the charge—so you may be on your own to try to get your money back.

Paycheck stubs. Once you receive your annual W-2, it’s usually unnecessary to retain your paystubs for the prior year. However, you may want to keep your year-end stub if it includes any tax-related information not reported on your W-2. Additionally, if you anticipate a life event soon that will require proof of recent income—applying for a home loan, for example—then plan to hang onto pay stubs from at least the past two months.

Tax returns. Determining when to purge tax returns usually depends on how long the IRS has to contest a given year’s return. In most cases, it’s a period of three years—assuming tax returns are filed properly and do not contain any knowingly fraudulent information. However, the time frame can extend up to six years for severely underreported income, and there’s no time limit for the IRS to contest fraudulent returns. The same timing applies to the supporting documentation in preparing a tax return. Therefore, you should also retain the financial and tax documentation—investment statements showing gains or losses and evidence of charitable contributions, for example—pertinent to the corresponding year’s return. If you’re unsure how long you should keep a specific tax return and accompanying paperwork, check with your accountant. Additionally, the IRS offers useful information on time limitations that apply to retaining tax returns.

Old 401(k) statements. Once you’ve confirmed your contributions are recorded accurately, there’s little need to keep each quarterly or monthly statement. However, it may be a good idea to keep each annual summary until the account is no longer active.

Estate planning documents. Although there’s usually no distinction about whether records need to be retained in paper or digital form, there are certain instances where it’s essential to have original legal documentation with the “wet” signature. This requirement holds for estate planning documents. For example, a court will only accept a decedent’s original last will and testament in most circumstances—a copy will not suffice. If you’re unable to produce the original, the court may presume it doesn’t exist, deeming the copy invalid. There may be legal avenues you can pursue to get the court to accept a photocopy of a will, but this could prove to be a costly and stressful process.

Get Organized and Be Sure to Shred. A good records-filing system is a key to helping you maintain and easily access important documents. If you’re storing things digitally, you can retain much more than any filing cabinet could hold, making it easy to take a more liberal approach to what you save. Keep in mind that the retention guidelines for many documents aren’t clear-cut. When you’re unsure, start by assessing what purpose the document may serve in the future. And it’s always important to consult the appropriate financial, tax, or legal professional for advice on specific records. Finally, remember that when it comes to materials that include personal information, you should be shredding it if you’re not keeping it.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

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Blakely Financial, Inc. is located at 1022 Hutton Lane Suite 109 High Point, NC 27262, and can be reached at 336.885.2530.

Securities and Advisory Services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser. Fixed insurance products and services offered through CES Insurance Agency or Blakely Financial, Inc.

© 2021 Commonwealth Financial Network®

Diversification: Having Your Eggs In Different Baskets

Posted on by Robert Blakely

Diversification: Having Your Eggs in Different Baskets

Presented by ROBERT BLAKELY, CFP®, AIF®, CHFC®

We have all heard the saying, “Don’t put all of your eggs in one basket” which was coined in the early 1600s in Don Quixote by Miguel De Cervantes. When investing, particularly for long-term goals, there are two concepts you will likely hear about over and over again — diversification and asset allocation. Diversification is the art of not putting all your eggs in one basket and helps limit exposure to loss in any one investment or one type of investment. Asset allocation provides a blueprint to help guide your investment decisions. Understanding how the two work can help you put together a portfolio that targets your specific needs and keeps those eggs in different baskets.

After over 25 years in business at Blakely Financial, our team has seen the long-term benefits of diversification and firmly believe the following will help you in your long-term financial goals.

One way to lower your risk without sacrificing return potential is to spread your money out more widely. Diversification refers to the process of investing in a number of different investments to help manage risk. The theory is that if some investments in your portfolio decline in value, others may rise or hold steady.

For example, say you wanted to invest in stocks. Rather than investing in just domestic stocks, you could diversify your portfolio by investing in foreign stocks as well. Or you could choose to include the stocks of different size companies (small-cap, mid-cap, and/or large-cap stocks).

If your primary objective is to invest in bonds for income, you could choose both government and corporate bonds to potentially take advantage of their different risk/return profiles. You might also choose bonds of different maturities, because long-term bonds tend to react more dramatically to changes in interest rates than short-term bonds. As interest rates rise, bond prices typically fall.

Choosing different baskets for those ‘eggs’ is the key.

Asset allocation: Investing strategically

The second part of successful long-term investing is asset allocation. Asset allocation is a strategic approach to diversifying your portfolio among different asset classes that seeks to pursue the highest potential return within a certain level of risk. After carefully considering your investment goals, time horizon, and risk tolerance, you would then invest different percentages of your portfolio in targeted asset classes to pursue your goals. A careful analysis of these three personal factors can help you make strategic choices that are suitable for your needs.

Generally speaking, a large accumulation goal, a high tolerance for risk, and a long time horizon would typically translate into a more aggressive strategy and therefore a higher allocation to stock/growth investments. One example of an aggressive strategy is 70% stocks, 20% bonds, and 10% cash.

The opposite is also true: A small accumulation goal (or one geared more toward generating income), a low tolerance for risk, and a shorter time horizon might require a more conservative approach. An example of a more conservative, income-oriented strategy is 50% bonds, 30% stocks, and 20% cash.

Mutual funds and ETFs for Diversification

Because mutual funds and ETFs (Exchange Traded Funds) invest in a mix of securities chosen by a fund manager to pursue the fund’s stated objective, they can offer a certain level of “built-in” diversification. For this reason, mutual funds and ETFs may be an appropriate choice for most investors and their portfolios. Including a variety of mutual funds or ETFs with different objectives and securities in your portfolio will help diversify your holdings that much more. You can also select a combination of mutual funds to achieve your portfolio’s targeted asset allocation.

If you have accounts spread over multiple brokerage firms, think about consolidating.  If you don’t have significant amounts of time, knowledge or desire to complete the research required for proper diversification, consider contacting a financial planning firm to assist with the decision process for proper diversification. Work with your chosen advisor to determine what steps need to be taken and if there are any exceptions to transferability.  We cannot stress this enough for investors at or nearing retirement.

Rebalance to stay on target

Over time, an asset allocation can shift simply due to changing market performance. For example, in years when the stock market performs particularly well, a portfolio may become over-weighted in stocks. Or in years when bonds outperform, they may end up comprising a larger-than-desired percentage of the portfolio. In these situations, a little rebalancing may be in order.

There are two ways to rebalance. The first is by simply selling securities in the over-weighted asset class and directing the proceeds into the underweighted ones. The second method is by directing new investments into the underweighted asset class until the desired allocation is achieved.

Keep in mind that selling securities can result in a taxable event unless they are held in a tax-advantaged account, such as an employer-sponsored retirement plan or an IRA so make sure you plan accordingly and consult with your financial advisor with any questions.

By planning appropriately and diversifying your portfolio with a specific asset allocation based on your investment objectives, you can pursue your financial planning goals with more confidence. And just remember, don’t put all your eggs in one basket.

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other expert advice we can provide towards your financial well-being.

ROBERT BLAKELY, CFP® is a financial advisor with BLAKELY FINANCIAL, INC. located at 1022 Hutton Ln., Suite 109, High Point, NC 27262. He is the founder and president of Blakely Financial, Inc.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

Diversification and asset allocation programs do not assure a profit or protect against loss in declining markets, and cannot guarantee that any objective or goal will be achieved.