Castle Financial | Financial Planning, Retirement, Investments, Money Management News Feeds http://www.castlefinancial.com/ Economy and Equity Markets LAST WEEK RECAP: Stocks were higher out of the gate last Monday, after the first weekly loss for the S&P 500 Index in 2012, as Greece approved austerity plans to secure rescue funds. A report showing retail sales growth trailed economists’ estimates sent stocks lower and Treasuries higher on Tuesday. Stocks continued their southerly trek on Wednesday as investors digested data from Europe suggesting the region is headed for recession. Better-than-expected housing data and jobless claims, and a report that euro-zone central banks will swap Greek debt for new bonds  drove U.S. equities higher on Thursday,  with  the Dow Jones Industrial Average hitting its highest close in almost four years. The market closed the week muted as investors took a breather going into the long weekend and ahead of a big meeting on Monday, when European finance ministers are slated to sign off on Greece’s economic reform proposal. Oil spikes on Iran fears Prices for Brent crude oil rose to their highest level since April 2011 this week on fears that Iran might halt shipments of oil to Europe. Brent crude spiked more than 1.8 percent last Wednesday to $119.53 per barrel, following reports that the Iranian government was suspending shipments of crude oil to six European Union countries. The Iranian government denied the action. The price of Brent has been steadily rising over the past several weeks as investors grow increasingly worried about Iran's nuclear ambitions, with the United States, United Kingdom and Europe all imposing sanctions to restrict Iran's ability to sell oil. Of the 2.2 million barrels of oil Iran exports a day, about 18 percent is bound for European markets, according to the U.S. Energy Information Administration (EIA). The world consumes about 89 million barrels of oil per day. However, analysts say that if Iran does suspend shipments to some European countries, it would have little impact on oil prices. The European Union had already planned to halt oil shipments from Iran in July, when a grace period for current contracts expires. (Source: CNN).Last Week in ReviewA tale of three stories. That's a great way to describe last week's news, as a string of positive economic reports, news out of Greece, and hints that inflation is heating up all worked together to impact Bonds and home loan rates. Here are the details!A breakfast buffet of better than expected economic data hit the wires last week. In the housing arena, Housing Starts came in better than expected, while both the New York Empire State Index and the Philadelphia Fed Index reported positive manufacturing news. There was also decent labor market news, as Weekly Initial Jobless Claims fell by 13,000 in the latest week to 348,000 - the lowest level since March 2008! Meanwhile, Retail Sales rose in January by 0.4%, the largest gain since October.Remember, strong economic news often cause money to flow out of Bonds and into Stocks, as investors hope to take advantage of gains. That's partly what caused Bonds (including Mortgage Bonds, to which home loan rates are tied) to worsen late last week.Also weighing on Bonds was the news that inflation is heating up. Despite the Fed's claim that inflation is moderating, the Core Consumer Price Index (CPI), which strips out volatile food and energy, rose to its highest levels since October 2008. Meanwhile, as you can see in the chart, the wholesale measuring Core Producer Price Index (PPI) rose double the expectations of 0.2%, coming in at 0.4%. Any hints of inflation can serve to spook Bond investors - causing both Bonds and home loan rates to worsen - as inflation can reduce the value of fixed investments like Bonds. This is one story to keep a close eye on in the weeks ahead.The drama in Greece is another key story to monitor, as it also impacted Bonds and home loan rates last week. Greece sent the markets into the weekend with assuring messages that a deal for them to avoid default is close, and this sense of optimism weighed on Bonds and home loan rates. US Bonds and home loan rates have benefitted from all the uncertainty in Greece, as investors have seen the US Bond Market as a safe haven for their money. Time will tell whether this uncertainty and safe haven trading will continue.Forecast for the WeekThe capital markets were closed on Monday due to Presidents' Day and the economic calendar is light the rest of the week with just a few reports.On Wednesday Existing Home Sales will be released, followed by the New Home Sales report on Friday. The reports come after last week's positive Housing Starts data.Thursday brings the weekly Initial Jobless Claims Report, which has steadily declined this year to a more job-friendly level.On Friday, the Consumer Sentiment Report will be released.In addition to those reports, a number of news stories may move the markets, including additional news out of Greece, the Treasury Department's auction of $99 Billion worth of government securities, and movement in the Stock Market. All of those news stories have the potential to negatively impact the Bond Market, depending on how they develop.Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond that home loan rates are based on. When you see these Bond prices moving higher, it means home loan rates are improving - and when they are moving lower, home loan rates are getting worse.  To go one step further - a red "candle" means that Mortgage Backed Securities (MBS) worsened during the day, while a green "candle" means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.  As you can see in the chart below, good economic news late last week reversed the improving trend Bonds and home loan rates experienced early in the week.Chart: Fannie Mae 3.5%% Mortgage Bond (Friday Feb 17, 2012)With most brokers your money is invested to provide a dance floor for hedge fund managers, who trade in and out of the markets to make money,  while the typical “buy  and hold” approach to investing in mutual funds or stocks with a broker no longer generates decent returns on your money. At Castle Financial, we employ a conservative, tactical approach to managing client portfolios combining ETF’s (exchange traded funds with low expense ratios) and select tactical mutual funds in a “Post” Modern Portfolio Theory.  Money Managers do not need a bull or bear market for potential profits.  This innovative and conservative strategy blends the science of risk management with the fundamentals of traditional asset allocation to manage portfolios for profits in a complex and volatile world and protect and grow our valued clients’ money. Email aap@castlefinancial.com or call 732-888-4994 or 239-947-9255 to schedule a no obligation phone consultation or meeting, we advise clients throughout America.  Also visit www.castlefinancial.com for timely updates in the “Financial Planning Perspectives” library – new articles are added each month and every Friday night we update the “Current News” on the Castle website and you will also note I received an award for Top 10 Investment Advisors in America and was recently selected as 2011 Five Star Wealth Manager. What are the advantages to clients?  When you become a valued client of Castle, you can rest assured knowing we are keeping your best interests in mind at all times.  We do not represent any one particular financial institution nor have obligations to anyone other than our clients.  In other words, we work for you.  Client accounts are held at Pershing LLC member FINRA/SIPC, a Bank of New York Mellon Company.  Pershing offers one billion dollar account protection by Lloyd’s of London and Securities Investors Protection Corporation (SIPC).  Let us demonstrate how we can help you develop a conservative and tactical investment strategy to protect and grow your money. http://www.castlefinancial.com/News-more-423.html Week in Review: Investors tense ahead of Greek debt agreementFor the week ended February 17, 2012 and the week ahead.Greek bailout hopes riseMoody's cuts ratings for six European countries, puts banks on reviewBank of Japan moves to stimulate economyEurozone economy shrinks slightly in fourth quarterGM posts record earningsGlobal equities markets were flat this week after investors endured days of uncertainty, resulting from European policymakers' inability to cement an agreement on a Greek bailout and restructuring package.Adding to the tension, Moody’s cut its debt ratings for six European countries, including Spain and Italy. The credit rating agency also placed numerous large banks in Europe and North America on review.In the United States upbeat data assuaged some fears. After dipping sharply on Wednesday, the Dow Jones Industrial Average traded near a four-year high Thursday. U.S. weekly unemployment claims fell to a four-year low, housing activity rose, and inflation gauges showed modest rises.The U.S. Congress extended the U.S. payroll tax deal through the end of 2012, taking it off the table as an election campaign issue, and continuing a mild but steady form of economic stimulus for 160 million American workers.U.S. and global economic newsGreek bailout hopes rise - Drama rose surrounding the highly anticipated €130 billion bailout of Greece, which would allow it to make its March 20 bond redemption obligation of €14.5 billion among other payments. As the clock ticked, the Greek government approved austerity measures necessary for fellow eurozone member countries to sign off on a bailout package. The eurozone finance ministers initially hesitated to agree to the package as they felt the austerity measures didn’t go far enough. However, recent reports indicate they will likely approve the package on Monday. The bailout will require contributions from the International Monetary Fund, European Central Bank and European Union.Moody’s cuts ratings for Italy, Spain and other countries - Moody’s Investors Service cut the credit ratings for six European countries: Italy, Spain, Portugal, Slovakia, Slovenia, and Malta. Spain was downgraded to A3 from A1, Italy to A3 from A2, and Portugal to Ba3 from Ba2, all with a negative outlook. The ratings agency also revised its outlook for the United Kingdom, France, and Austria to negative. However, all three countries kept their Aaa ratings.Bank of Japan moves to stimulate economy- The Bank of Japan made a surprising move to stimulate the Japanese economy and battle deflation by expanding its asset purchase program. The BOJ added ¥10 trillion ($128 billion) to an asset-purchase program and set an inflation target to counter its stagnant, deflationary economy, which shrank 2.3% last quarter. The yen is expected to weaken as a result of this action, helping Japanese exporters.U.S. weekly jobless claims fall; four-week average at four-year low - Initial jobless claims by U.S. workers decreased by 13,000 to 348,000 for the week ended February 11, the fewest since March 2008, according to the U.S. Department of Labor. The four-week low fell to 365,250. The number of continuing unemployment benefit claims drawn by workers for more than a week fell by 100,000 to 3,426,000 in the week ended February 4, the lowest since August 2008.Eurozone economy contracts 0.3% - The eurozone economy shrank in the fourth quarter, but gross domestic product decreased by a slim 0.3%, less than had been expected. Germany’s economy, which makes up one-fifth of the eurozone’s economic output, fell 0.2% during the quarter, while France’s economy unexpectedly grew. German business sentiment improved in January and German investor confidence rose to a 10-month high in February.U.S. inflation tame according to two key measures - U.S. inflation remains quite tame based on both the wholesale producer price index and the Consumer Price Index. The CPI  rose just 0.2% in January from December and 2.9% over the past year. The core CPI, excluding energy and food items, climbed 0.2% for the month and 2.3% on the year. The producer price index rose a seasonally adjusted 0.1% in January from December, and was 4.1% higher than a year ago. Excluding volatile energy and food costs, the wholesale gauge was up 0.4% on the month and 3.0% year over year.U.S. housing starts rise; warm weather a possible factor - Home construction increased 1.5% in January, a possible sign of recovery in the fragile U.S. housing market, the U.S. Department of Commerce reported. The seasonally adjusted annual rate of 699,000 housing starts compared well to the previous three years’ numbers––609,000 in 2011, 587,000 in 2010, and 554,000 in 2009. However, the fourth-warmest January on record might have helped.Mortgage delinquencies at three-year low - In another positive sign for the U.S. housing market, 7.6% of residential mortgages were at least 30 days past due on their payments at the end of 2011, down from 8.3% a year earlier, and a drop from a peak of 10% early in 2010.U.S. economic indicators up for fourth straight month - The Conference Board’s index of U.S. leading indicators rose 0.4% in January, just shy of the 0.5% anticipated by economists surveyed by Bloomberg News. It was the fourth consecutive month of gains. Seven of the 10 indicators in the leading index rose.U.S. and global corporate newsGeneral Motors posts record profit despite stalling in Europe - General Motors posted its best year of profits ever, with net earnings of $7.6 billion in 2011 on strong North American sales, higher vehicle prices, and steady growth in China. Annual earnings in North America were $7.2 billion, up from $5.7 billion in 2010, and fourth-quarter results were much improved, at $1.5 billion in profits up from $813 million a year earlier. However, European results held GM back, with a $562 million fourth-quarter loss and $747 million for the year in the struggling region.Moody’s places big banks on review - Moody’s Investors Service has placed Goldman Sachs, Morgan Stanley, Bank of America, Citigroup, Deutsche Bank, JPMorgan Chase and more than 100 other financial institutions, including many in Europe, on review for possible downgrade. Moody’s indicated some firms might have their credit ratings dropped by as much as three levels. The ratings agency said new economic and regulatory restrictions could limit the banks’ future growth prospects.AMR posts billion-dollar quarterly loss - AMR, the parent of American Airlines, announced a fourth-quarter loss of $1.1 billion, compared with a quarterly loss of $97 million a year earlier. For the year 2011, AMR lost $1.98 billion, its fourth consecutive annual loss. In contrast, United Continental Holdings and Delta Air Lines posted annual profits of $864 million and $854 million, respectively.BNP Paribas, AXA take hit from Greek debt write-downs - French bank BNP Paribas reported a sharp drop in its fourth-quarter profit, which fell  51% from a year earlier, largely on a €567 million write-down on Greek sovereign bonds and another €148 million charge to protect its balance sheet from the impact of the European debt crisis. The bank's  revenue fell 6.1%. French insurer AXA also took a large write-down —€387 million––on Greek bond exposure in 2011. Its full-year revenue fell 4%.  AXA seemingly had a good year, posting a 57% jump in profits, but that relative gain was largely a result of its year-earlier result being affected by a €1.6 billion loss on the sale of part of its U.K. life insurance business.Deere profit rises 3.7% - Deere & Company’s earnings rose 3.7% in its fiscal first quarter as the world’s largest farm equipment manufacturer benefited from strong global demand. The company’s revenue rose 11%. Sales rose 22% outside of North America and 22% in Deere’s smaller construction and forestry-equipment segment.The week aheadWal-Mart and Dell announce their earnings on Tuesday, February 21.Hewlett-Packard announces its earnings on Wednesday, February 22.The National Association of Realtors releases monthly existing home sales data on Wednesday, February 22.Germany and the U.K. release their GDP data on Friday, February 24.The University of Michigan Consumer Sentiment Index is released on Friday, February 24.With most advisors your money is invested to provide a dance floor for hedge fund managers, who trade in and out of the markets, to make money while the typical “buy  and hold” approach to investing in mutual funds or stocks with a broker no longer generates decent returns on your money.At Castle Financial, we employ a conservative, tactical approach to managing client portfolios combining ETF’s (exchange traded funds with low expense ratios) and select tactical mutual funds in a “Post” Modern Portfolio Theory.  Money Managers do not need a bull or bear market for potential profits.  This innovative and conservative strategy blends the science of risk management with the fundamentals of traditional asset allocation to manage portfolios for profits in a complex and volatile world and protect and grow our valued clients’ money. Email aap@castlefinancial.com or call 732-888-4994 or 239-947-9255 to schedule a no obligation phone consultation or meeting, we advise clients throughout America.  Also visit www.castlefinancial.com for timely updates in the “Financial Planning Perspectives” library – new articles are added each month and every Friday night we update the “Current News” on the Castle website and you will also note I received an award forTop 10 Investment Advisors in America and was recently selected as 2011 Five Star Wealth Manager. What are the advantages to clients?  When you become a valued client of Castle, you can rest assured knowing we are keeping your best interests in mind at all times.  We do not represent any one particular financial institution nor have obligations to anyone other than our clients.  In other words, we work for you.  Client accounts are held at Pershing LLC member FINRA/SIPC, a Bank of New York Mellon Company.  Pershing offers one billion dollar account protection by Lloyd’s of London and Securities Investors Protection Corporation (SIPC).  Let us demonstrate how we can help you develop a conservative and tactical investment strategy to protect and grow your money. http://www.castlefinancial.com/News-more-422.html Sector funds target specific industries and economic niches to seek above-average returns. With the opportunity for greater returns comes greater risk, as these funds typically are prone to fluctuate in value more than diversified, multisector funds. Many investors look to sector funds to gain exposure to industries that may appear to offer exceptional potential. Sector funds target specific industries and economic niches. Are they right for your portfolio? Sector funds target specific industries and economic niches to seek above-average returns. With the opportunity for greater returns comes greater risk, as these funds typically are prone to fluctuate in value more than diversified, multisector funds.1Sector funds may invest solely in specific industries, such as utilities, technology, financial services, health care, and manufacturing. They may also invest in commodities, such as oil and gold. Additionally, there are sector funds that invest in specific international markets, such as Germany and China.Many investors look to sector funds to gain exposure to industries that may appear to offer exceptional potential. Top-down investors and market timers look first for industries that often perform well in certain economic cycles and then seek to predict which industry will be next in the "rotation." Because of their higher potential volatility, it may be prudent to limit investments in individual sectors to no more than 10% of an overall equity portfolio.Some investors choose a contrarian strategy, seeking value in sectors that have been passed over by the rest of the market. Another strategy is the tilted index. Passive investors will invest in a market index seeking to avoid the inefficiencies of picking individual stocks. By adding shares of sector funds that outperform the market, you may outperform the index overall.Evaluating Sector FundsWhatever strategy you use in choosing a sector fund, be careful not to chase past returns. A high-flying sector may be at its peak. The table below shows the top three performing sectors from the S&P 500 for the past five years. As you can see, it's rare for one sector to lead the pack year after year.YearTop Performing Sectors22007EnergyMaterialsUtilities2008Consumer StaplesHealth CareUtilities2009Information TechnologyMaterialsConsumer Discretionary2010Consumer DiscretionaryIndustrialsMaterials2011TelecommunicationsUtilitiesHealth CareYou should also be aware that even if the name of the fund is the same, not all sector funds are alike. Stock/cash allocations, sector segment weights, top holdings, portfolio size, past performance, yield, and portfolio turnover are among the criteria used to compare funds that invest in the same sector.Stock/cash allocations refer to the percentage of a fund's assets that is actually invested in the chosen sector. In addition to cash, funds may invest in bonds, or even stocks from other sectors. Although these investments may increase performance or decrease risk, you should be aware of the portfolio's composition.Many sectors can be divided into subsectors and industries, and sector weight refers to the percentage of assets invested in each.Portfolio turnover measures trading aggressiveness and often exceeds 100% in a single year.Although past performance is no guarantee of future results, the longer the return period the better. Look at returns over at least a five-year period, if available. Investors should ideally compare how funds performed in a variety of different market climates and be prepared for the volatility inherent in many sector funds.Yield is just one component of total return, but high yield can mean less reliance on capital gains. This often points to lower volatility.As with any investment, be sure to get a copy of the fund's annual report and prospectus before investing. You should also consult with your financial professional to help determine the suitability of sector funds in your overall portfolio.Source/Disclaimer:1Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so you may lose money. Past performance is no guarantee of future results. For more complete information about any mutual fund, including risk, charges, and expenses, please obtain a prospectus. Please read the prospectus carefully before you invest. Call the appropriate mutual fund company for the most recent month-end performance results. Current performance may be lower or higher than the hypothetical performance data quoted. The hypothetical data quoted is for illustrative purposes only and is not indicative of the performance of any actual investments. Investment return and principal value will fluctuate, and shares when redeemed, may be worth more or less than their original cost. Diversification does not ensure a profit or protect against a loss in a declining market. 2Source: ChartSource, McGraw-Hill Financial Communications. Sector performance is represented by the total returns of the 10 GICS sectors within Standard & Poor's Composite Index of 500 Stocks, an unmanaged index that is generally considered representative of the U.S. stock market. It is not possible to invest directly in an index. Past performance is no guarantee of future results. Required Attribution Because of the possibility of human or mechanical error by McGraw-Hill Financial Communications or its sources, neither McGraw-Hill Financial Communications nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall McGraw-Hill Financial Communications be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. http://www.castlefinancial.com/News-more-421.html Worries about inflation have been cropping up more frequently lately, largely due to escalating commodity prices, which are pushing up consumer prices, both in the United States and abroad. Although many economists project overall U.S. inflation to remain modest in the near future, most see an uptick down the road. Inflation could finally be on the rise. What can you do to help protect your portfolio?Economists and market watchers have been warning investors about the prospect of increased inflation since the housing bubble burst in 2007.Worries about inflation have been cropping up more frequently lately, largely due to escalating commodity prices, which are pushing up consumer prices, both in the United States and abroad. At the beginning of 2011, the inflation rate stood at a paltry 1.6%. By the end of the year, it had more than doubled to 3.4%.1 And this could be just the start of a longer-term inflationary cycle. With an improving economy and soaring federal deficits, many experts feel that prices in the United States will inevitably pick up their pace even further.Inflation Rates Around the World (as of December 31, 2011)2CountryRateBrazil6.5%Canada2.9%China4.1%France2.5%Germany2.1%Greece2.4%India9.3%Italy3.3%Japan-0.5%Mexico3.8%Russia7.0%United Kingdom4.8%United States3.4%Venezuela28.9%Staying AheadFor investors, staying ahead of inflation means choosing investments that are most likely to provide returns that outpace it. Here's a look at how a climbing inflation rate could impact various investment types and asset classes.Domestic Stocks -- Although past performance is no guarantee of future returns, historically, stocks have provided the best potential for long-term returns that exceed inflation. An analysis of holding periods between 1926 and December 31, 2011, found that the annualized return for a portfolio composed exclusively of stocks in Standard & Poor's Composite Index of 500 Stocks was 9.83% -- well above the average inflation rate of 2.99% for the same period. However, over shorter time periods the results are not as appealing. For the 10 years ended December 31, 2011, the S&P 500 returned an average of only 2.92%, compared with an average inflation rate of 2.50%.3International Stocks -- During the same 10-year span that ended December 31, 2011, the Morgan Stanley Capital International (MSCI) EAFE, which is composed of established economies such as Germany and Japan, outpaced U.S. inflation with an average return of 5.12%. The MSCI Emerging Markets index, which tracks developing world economies such as Brazil and China, was even more stellar, returning an average of 14.2%.4Bonds -- Historically, investors have turned to shorter-term corporate and high-yield bonds for protection in rising-rate environments.5 There are two types of bonds that receive a lot of investor interest when inflation starts to rise: Treasury Inflation-Protected Securities (TIPS) and I Savings Bonds. Both TIPS and I bonds are types of fixed-interest rate bonds whose value rises as inflation rates rise.CDs and Other Cash Instruments -- The Federal Reserve is still keeping a tight lid on interest rates, forcing investors who hope to keep pace with inflation by investing in cash instruments facing a harsh reality. The rates on a one-year CD are averaging under 1%, while a five-year CD is yielding an average of under 2%, according to Bankrate.com. Money market and other bank savings accounts are also averaging well under 1%.6Although many economists project overall U.S. inflation to remain modest in the near future, most see an uptick down the road. For investors, a well-rounded portfolio may be your best weapon. The key is to consider your time frame, your anticipated income needs, and how much volatility you are willing to accept, and then construct a portfolio with the mix investments with which you are comfortable. Consult your financial professional to discuss your specific needs and options.Source/Disclaimer:1Source: U.S. Bureau of Labor Statistics, January 2012.2Sources: TradingEconomics.com; U.S. Bureau of Labor Statistics, January 2012.3Sources: Standard & Poor's; U.S. Bureau of Labor Statistics. The S&P 500 is an unmanaged index. It is not possible to invest directly in an index. Past performance is no guarantee of future results.4Source: Morgan Stanley. The MSCI EAFE and MSCI EM are unmanaged indexes. It is not possible to invest directly in an index. Past performance is no guarantee of future results.5Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and are subject to availability and change in price.6Source: Bankrate.com, January 20, 2012. Required Attribution Because of the possibility of human or mechanical error by McGraw-Hill Financial Communications or its sources, neither McGraw-Hill Financial Communications nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall McGraw-Hill Financial Communications be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. http://www.castlefinancial.com/News-more-420.html For those newly stepping into a role of retirement plan governance or for those who need a refresher on how their plan should be administered, this article provides an overview of key considerations. In addition to "back office" oversight, plan sponsors are also advised to communicate clearly, honestly, and frequently with plan participants. Considerations for those new to the role of a retirement plan fiduciary or who just need a refresher. Regulatory complexity and increased scrutiny on compliance arguably has made the task of retirement plan fiduciaries harder today than ever before. Many employers and their delegates may not have a full understanding of their roles and responsibilities to the plan and its participants. For those newly stepping into a role of plan governance or for those who need a refresher on how their plan should be administered, here is an overview of key considerations.ERISA: The Letters of the LawQualified workplace retirement plans -- such as 401(k) plans -- are governed by the Employee Retirement Income Security Act (ERISA). ERISA mandates that a plan fiduciary must fulfill four primary responsibilities:To act solely in the interests of plan participants and beneficiaries.To do so with the care, skill, and diligence characteristic of a "prudent" person familiar with such matters.To diversify plan investments, with exceptions for investments in company stock.To comply with the written plan document.Focus on InvestmentsImplicit in the ERISA guidelines is the need for sponsors to monitor all investment options, not just company stock. While ERISA does not specifically define what type of monitoring practices should be employed, many experts recommend that plan fiduciaries should review each investment option at least once per quarter to make sure that it remains a potentially appropriate option for participant contributions. Details of such monitoring procedures should be spelled out in the plan's investment policy documents.The ongoing review should typically resemble the process employed for investment selection and take into account the following considerations.A comparison of recent and rolling performance data, relative to an appropriate peer group and industry index.A comparison of fees and expenses, relative to an appropriate peer group.An assessment of risk-adjusted performance relative to a relevant peer group.The significance of changes to a portfolio management team.The significance of changes to investment strategy (e.g., has style drift occurred?).Whether investment options offered by the plan complement the plan's stated investment strategy.Whether there has been a significant increase or decrease in the plan's fees and/or assets under management.Of course, these initiatives may prove relatively useless in court if they remain undocumented. For that reason, the individuals or committees responsible for such tasks should make every effort to keep detailed minutes of their discussions and decisions.Make Participant Communication a PriorityIn addition to "back office" oversight, plan sponsors are also advised to communicate clearly, honestly, and frequently with plan participants. Under normal circumstances, those communications might address a wide array of topics -- such as how the plan works, how to calculate a savings goal, and how to arrive at realistic investment expectations -- as well as basic educational themes, such as understanding asset allocation and investment risk.But when volatility negatively influences the value of specific investment options -- particularly employer stock -- it may be appropriate to issue a message from company management explaining the current situation and reinforcing the need to maintain a long-term, diversified investment strategy.1Keep in mind that a company cannot give participants more information about a specific security than they would be allowed to give to other shareholders. Also, make sure that participant communications do not contain any information that could be perceived as erroneous, inconsistent, or promissory in nature.The information in this article is not intended to be legal or tax advice. You should consult with a financial professional and ERISA counsel to help determine your unique situation and needs.Source/Disclaimer:1Asset allocation and diversification do not ensure a profit or protect against a loss. Required Attribution Because of the possibility of human or mechanical error by McGraw-Hill Financial Communications or its sources, neither McGraw-Hill Financial Communications nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall McGraw-Hill Financial Communications be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. http://www.castlefinancial.com/News-more-419.html As uncertainty at home and abroad roils the financial markets, income-minded investors seeking protection from the bumpy road ahead may find dividend-paying stocks offer an attractive mix of features and warrant a place in their equity portfolios. Dividend payouts are often seen as a sign of a company's financial health and management's confidence in future cash flow. Are dividend-paying stocks a good investment for those seeking protection from the bumpy road ahead? As uncertainty at home and abroad roils the financial markets, income-minded investors seeking protection from the bumpy road ahead may find dividend-paying stocks offer an attractive mix of features and warrant a place in their equity portfolios.The appeal is simple: Dividend-paying stocks can provide investors with tangible returns on a regular basis regardless of market conditions.The Benefits of Dividend-Paying StocksIf you own stock in a company that has announced it will be issuing a dividend, or if you are proactively considering adding an allocation to dividend-paying stocks, history provides compelling evidence of the long-term benefits of dividends and their reinvestment.A sign of corporate financial health. Dividend payouts are often seen as a sign of a company's financial health and management's confidence in future cash flow. Dividends also communicate a positive message to investors who perceive a long-term dividend as a sign of corporate maturity and strength.A key driver of total return. There are several factors that may contribute to the superior total return of dividend-paying stocks over the long term. One of them is dividend reinvestment. The longer the period in which dividends are reinvested, the greater the spread between price return and dividend reinvested total return.Potentially stronger returns, lower volatility. Dividends may help to mitigate portfolio losses when stock prices decline, and over long time horizons, stocks with a history of increasing their dividend each year have also produced higher returns with considerably less risk than non-dividend-paying stocks. For instance, since 1990, the S&P 500 Dividend Aristocrats -- those stocks within the S&P 500 that have increased their dividends each year for the past 25 years -- produced annualized returns of 11.04% vs. 8.23% for the S&P 500 overall, with less volatility (14.14% vs. 15.22%, respectively).1 The Growth of Dividend-Paying Stocks, 1950-20112If you are considering adding dividend-paying stocks to your investment mix, keep the following thoughts in mind.Dividend-paying stocks may help diversify an income-generating portfolio. Income-oriented investors may want to diversify potential sources of income within their portfolios. Given current realities present in the bond market, stocks with above-average dividend yields may compare favorably with bonds and may act as a buffer should conditions turn negative within the bond market.Dividends benefit from continued favorable tax treatment. The extension of the Bush-era tax cuts helps to reinforce the current case for dividend stocks. The tax bill that passed in late 2010 extended the 15% tax on qualifying dividends and other forms of investment income through December 31, 2012.Note that dividends can be increased, decreased, and/or eliminated at any time without prior notice.Source/Disclaimer:1Volatility is measured by standard deviation. Past performance is no guarantee of future results. 2Source: Standard & Poor's. Stocks are represented by the S&P 500, an unmanaged index considered representative of the broad U.S. stock market. For the period January 1, 1950, through December 31, 2011. Past performance is not indicative of future results. Investors cannot invest directly in any index.Required Attribution Because of the possibility of human or mechanical error by McGraw-Hill Financial Communications or its sources, neither McGraw-Hill Financial Communications nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall McGraw-Hill Financial Communications be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. http://www.castlefinancial.com/News-more-418.html Glimmers of hope out of the doom and gloom . . .The S&P 500 ended in 2011 where it started at the end of 2010.  However, the Dow performed better and closed up 5.5 percent in 2011.  It was supposed to have been a year when profits should never have been made by a great majority of the markets bellwethers, yet companies such as Apple (AAPL) became not only the world’s largest company, but also its premier brand. Proceeding into 2012, there are too many possibilities of problems on the horizon with civil unrest, inflation, strikes, shortages in food, chronic unemployment, a financial meltdown in Europe, Iranian conflict, China real estate bubble blowing up and U.S. real estate languishing, etc.  The constant drumbeat of bad news has put many Americans into a deep funk. Some are going into survival mode and stocking up on freeze-dried food. Others are dumping their stocks in fear that another protracted bear market and recession might be right around the corner. Many see no way out of the intractable problems confronting the world. In 2011, the U.S. lost its AAA bond rating and Congress came perilously close to causing a Treasury debt default.  The U.S. housing market showed few signs of recovery despite herculean efforts by the government to prop it up and ditto for the labor market.  The European sovereign debt crisis worsened, with rioting and strikes breaking out in several European capitals. The emerging market economies of Asia and Latin America—heretofore the engine of a global economic recovery—began to slow under the weight of tighter monetary policy. Everywhere it seems nothing is headed in the right direction as rated by Standard & Poor’s and Moody’s Investors Service. Given all this bad economic news, the markets have acted in a traditional and predictable fashion. Stock and commodity prices stagnated. Even gold—often touted as a hedge against both inflation and crisis—declined sharply in price during September. A flight to quality took place in the bond market. Yields on lower-grade bonds rose (bond prices declined) and the yields on higher-grade bonds declined (bond prices rose). Bond investors, however, did not pay much attention to the Treasury debt downgrade. Treasury bonds rallied during the year and were probably the best performing asset in most portfolios. At this juncture, the key question for investors is whether a recession is near or the recent slowdown in growth is a transitory soft patch. If we are going through a temporary slowdown in growth, then the stock market appears to have overshot to the downside. It appears that some investors believe the gloom and despair will dissipate and stocks will rally. However, if a recession is right around the corner, then the stock market may decline again and things are as bad as they seem. In this case, there will be another flight to bonds. For now, it appears that the U.S. and the emerging market economies will avoid recession at least through the start of 2012, so there is a possibility that the U.S. stock market can move up in the months ahead. Europe, about 25% of the world economy, is likely to drift into recession, but it may not be severe enough to drag down the rest of the world. Time will tell. What people are doing is not concurrent with what they are saying . . .It appears that what Americans are saying about our economy is out of sync with prevailing reality. For example, recent surveys of consumer and business confidence are at recession levels. Yet, the latest data on retail sales, industrial production and capital spending portray an economy that is experiencing moderate growth. U.S. economy not solely dependent on Washington . . .It appears that much of the angst that Americans are feeling reflects their disappointment with the way government is functioning. The bearish view is that the U.S. government is out of monetary and fiscal options to stimulate the economy. It cannot increase spending or cut taxes because of debt and deficits. It cannot lower interest rates much further because they are so low already.  Moreover, if government could come up with a plan to stimulate growth, gridlock among the Democrats and the Republicans would prevent its implementation. In short, there appears to be no way out of the rising mountain of U.S. debt. A recession and financial crisis, just like 2008, could be right around the corner. While events could play out this way, I am hopeful they will not. Fortunately our relatively free market U.S. economy—operating in a global financial and economic system—is not solely dependent on what happens with the clowns in Washington. Neither is our stock market or bond market. The U.S. government did play a crucial role in preventing a complete financial meltdown in 2008 and 2009, but the influence of the U.S. government in promoting economic growth in 2010 and 2011 has been marginal at best.  Other powerful and global forces are at work on the U.S. economy.One such force is the value of the dollar on world currency markets. This stimulus is not discussed that much in the media. Over the past decade, the dollar has dropped over 30% in value. A weaker currency has made U.S. goods more competitive on world markets and is one reason exports are at record highs. Another force is technological innovation. The U.S. is a world leader in computer hardware, software and internet applications. You will not find too many Steve Jobs and Bill Gates abroad because most other countries do not have the critical combination of free market venture capital, higher education, regulatory infrastructure and entrepreneurial spirit that we fortunately have in America.  Technology has driven big increases in manufacturing productivity over the years. That is precisely why foreign auto makers have located their production facilities in the U.S. In the case of BMW, they make all their X3 SUVs at their Greenville, SC plant and export 70% of the output to the rest of the world. Still another force is the global commodity markets . . .The broad-based CRB Commodity Index is well off from its high in May, reflecting the slowdown in global economic growth. Lower gasoline, heating oil, copper and corn prices have given a much needed boost to consumer purchasing power. The last force is foreign central banks. While the Fed does not have much room to lower interest rates, many foreign central banks can lower rates. Most emerging market countries began to raise interest rates in 2010 as inflation pressures began to build following their rapid recovery from the 2008-2009 global recessions. Now, with commodity prices weaker and growth slowing, these central banks are in a position to begin lowering their interest rates. When they do, it should have a salutary effect on both the U.S. economy and stock market. In 2011, the Fed announced Operation Twist . . . This was developed as a plan to lower long term U.S. interest rates and should have a beneficial effect as well on the U.S. economy and stock market. I think the positive impact of these four forces should help keep the U.S. out of recession for the next year or less and I expect a moderate acceleration in U.S. GDP growth in 2012. Keep an eye on Europe which is key to avoiding global recession . . .The wildcard in the global economic outlook is Europe. It is also the key to whether the rest of the world can avoid recession. The economies of Portugal, Italy, Ireland, Greece and Spain are at, or near, recession. Their GDPs total about 7% of global GDP. I think Greece will probably default on its sovereign debt. The fear is that the other countries will follow suit and a rash of defaults will bring down the European banking system and eventually the global economy. The European governments are taking drastic actions to bring their economies into balance. Tax evasion runs rampant amongst the Southern European countries like Greece and Italy.  Recently, there was something quite interesting that happened at Cortina d’Ampezzo, one of Italy’s most exclusive ski resorts. After tracing 133 Lamborghinis, Ferraris, and other top-end cars parked in the streets of the town, 80 tax officials raided the swanky Italian resort town and found that 42 of the owners declared income of less than 22,000 euros ($28,200) a year, and another 16 claimed less than 50,000 euros ($64,000) a year.  Then it was found that an additional 118 sports cars in the area were owned by companies for the purpose of writing them off for taxes.  And as you could imagine, it was found that many companies were either reporting losses or grossly understating their profits–all to avoid the tax man.  And finally, the spooked local businesses in the resort town, like hotels, boutiques and restaurants also admitted to grossly underestimating their earnings as well. The “black economy” in Italy is an enormous problem, and the new Italian Prime Minister Mario Monti must tackle it successfully if he is to rein in the country's $1.9T euro debt load and bring down ten year Italian bond yields which are now above an unsustainable 7%.The U.S. banking system is much better capitalized than the European system and has limited exposure to troubled European sovereign debt that is, of course, if Credit Default Swaps actually work. Estimates show that about 15%–20% of S&P 500 revenues come from Europe, so trouble there will adversely impact the earnings of many U.S. multinational companies and also the Asian companies that export into Europe. The European situation is difficult to handicap. The European Central Bank will likely ease monetary policy and eurozone leaders will continue to promote a bailout plan akin to our Troubled Asset Relief Program (TARP) in the USA. These measures are unlikely to prevent a recession in Europe, but they should reduce its severity and alleviate concerns about the stability of the European banking system. Any signs of progress in Europe should lift the spirits of U.S. equity investors.  All this, however, will require some political skill as well as luck. Calling for a “Muddle Through” World in 2012 . . .The world continues to operate in a post-credit bust environment in which significant amounts of deleveraging still need to occur. The momentum in the United States is pointing in the right direction, but expect to see ongoing back-and-forth in the tone of economic data. Conditions will not continue to improve at the same pace we have seen over the last couple of months, nor will they deteriorate to the point that a double-dip recession becomes likely. Instead, expect the economy to chart a middle course and grow somewhere around 2% for the year. This sort of environment should be one in which risk assets (chiefly U.S. stocks) should be able to post some gains. The main risk, as noted earlier, continues to be the European debt crisis which could derail an economic recovery.  Accordingly, I will continue to watch developments out of Europe very closely. Our strategy going forward is to proceed with extreme caution with the core of client accounts remaining conservatively invested and also investing for growth, if and when we see opportunities with limited risk and good upside potential.  Event risk is unfortunately more prevalent than ever before and a flexible and tactical approach to investing is now more important than ever. As a Certified Financial Planner, my responsibility is to keep track of client investments and to develop appropriate investment strategies in an ever-changing world and to help you be in a better position to be more successful in reaching your long-term financial goals.  I am focused on preserving principal, providing dividend yields and interest above bank earnings rates while still maintaining the potential for capital appreciation.  When it comes to your investment portfolio, I believe the most prudent strategy is to maintain a long-term perspective, but be flexible and open minded in an ever changing financial environment.  Feel free to contact me if there are any changes in your financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account. Please contact us if you are not receiving custodial account statements – Pershing, Mutual Fund Companies, etc.  I trust my comments, observations and insights have been helpful to you in understanding the current economic and worldwide financial markets. Al Procaccino II, MBA, CFP®, CFSPresident & CEO  The opinions and forecasts expressed are those of the writer and may not actually come to pass.  These views are not intended to predict or depict performance of any investment and are subject to change based on subsequent developments. This information has been gathered from what we consider to be reliable sources; however, no guarantee is made with respect to accuracy.  This information is subject to change at any time, based on market and other conditions and should not be construed as a recommendation of any specific security.  Past performance does not guarantee future results.  *Please refer to disclosures tab above on this website. http://www.castlefinancial.com/News-more-411.html Prolonged market volatility has left many investors, especially those investing for retirement, searching for strategies to cope with the situation. If you have a traditional IRA, you may want to consider converting to a Roth IRA.Callout:Thanks to legislation that took effect in 2010, investors at any level of income can convert a traditional IRA to a Roth IRA. A choppy market can be an excellent time for those considering a conversion to take the plunge. Social Media Message:One strategy to take advantage of market losses and volatility: Convert your traditional IRA to a Roth.                                                                                                                      As a volatile stock market continues its ups and downs, many investors facing losses are searching for strategies to help them cope with the situation. Retirement investors may want to examine converting a traditional IRA to Roth IRA, with the understanding that the conversion can be reversed if needed.Why NowThanks to legislation that took effect in 2010, investors at any level of income can convert a traditional IRA to a Roth IRA. A choppy market can be an excellent time for those considering a conversion to take the plunge. Here are a few reasons why it could make sense.Smaller balance = small tax bite: A conversion triggers a tax bill on the amount of money that is converted, so a smaller account balance results in a smaller tax bite.Hedge against future tax rate increases: Many observers believe that federal taxes are likely to increase in the years ahead as the federal government grapples with budget problems. Currently, qualified withdrawals from Roth IRAs after age 59½ are tax free, which presents an important benefit for retirement investors.1Before deciding whether a conversion makes sense for you, make sure you understand the differences between a traditional IRA and a Roth IRA. The table below includes a summary of some of the key differences. You can learn more details by referencing IRS Publication 590. Traditional IRARoth IRA Funded with after-tax dollars.Funded with after-tax dollars. Contributions may be tax deductible if certain income limits and other considerations are met.Contributions are not tax deductible. For 2012, the maximum contribution is $5,000 (those aged 50 and older can make an additional $1,000 contribution).For 2012, the maximum contribution is $5,000 (those aged 50 and older can make an additional $1,000 contribution). There is no income limit to open an account.Income thresholds for contributions do apply and are typically indexed annually to inflation. Distributions must be taken upon reaching age 70½.No distributions are required upon reaching age 70½. Distributions are subject to taxes.Distributions are tax free.  If you are considering a conversion, be sure to consult a tax professional to help you calculate the corresponding tax bill. Financial advisors usually recommend that taxes associated with a Roth IRA conversion be paid from assets outside of the Roth IRA account so as not to disrupt retirement savings.You Can Change Your MindIf you convert from a traditional IRA to a Roth IRA and you subsequently change your mind, there is a redo known as recharacterization. In effect, recharacterization is reversing the conversion and moving the assets back to a traditional IRA. Your financial institution can handle this transaction for you, and you are required to file an amended tax return. There are several reasons why investors may want to consider a recharacterization:The conversion from a traditional IRA to Roth IRA increases your marginal tax rate. (Consulting a tax advisor in advance could potentially help you avoid this situation.)You do not have enough cash on hand to pay the taxes.Note that these reasons are not specified by the IRS. According to current tax rules, you do not need to present a reason for recharacterizing. Recharacterization needs to be complete by the last date when federal taxes, including extensions, are due. This date is usually in mid-October for the prior tax year. (For example, a Roth IRA conversion for the 2011 tax year needs to be recharacterized and an amended tax return filed by mid-October 2012.)Source/Disclaimer:1Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. http://www.castlefinancial.com/News-more-407.html Some factors that influence your retirement savings results, such as the types of investments available to you through your plan and the performance of the financial markets, can't always be controlled. But there are some factors you can influence that can help keep your portfolio on track.Callout:Whether retirement is just around the corner or 30 to 40 years away, regularly setting money aside -- particularly in a tax-deferred vehicle such as a 401(k) or tax-exempt account like a Roth IRA -- can often be the smartest move you can make.Social Media Message:You can't control the markets, but there are some factors you can influence to help keep your portfolio on track.                                                      A study conducted by the Employee Benefit Research Institute estimated that the average American worker will face a retirement savings shortfall of more than $47,000.1 How can you avoid a similar fate?Some factors that influence your retirement savings results, such as the types of investments available to you through your plan and the performance of the financial markets, can't always be controlled. But there are some factors you can influence that can help keep your portfolio on track.Step 1: Stay invested.It's not easy to see your account value decrease after a decline in the stock market, particularly after a steep, sudden drop of 10% or more. But one of the dangers of cashing out is missing a potential market rebound. Trying to "time" the market is a strategy even the most-seasoned financial professionals have difficulty mastering. It can also lead investors into the trap of "chasing gains"; that is, moving your money from one investment that's lagging into another one that's currently achieving better performance.Step 2: Regularly monitor your investment mix.One of the benefits of a diversified portfolio is balance. If one type of investment is experiencing losses, another type may be earning gains. Over time, these gains and losses may cause your asset allocation to skew away from your target mix.2 Or your tolerance for risk may evolve over time. Lifestyle changes can also necessitate a readjustment to your allocation. That's why it's important to monitor your mix and make adjustments when necessary.Step 3: Increase your savings rate.Perhaps the most important way to help fund your future is to sock away as much as possible. Finding the extra money to invest can be tough -- you've got plenty of expenses to worry about today without the added anxiety of worrying about tomorrow. But every dollar you can spare can make a difference. Whether retirement is just around the corner or 30 to 40 years away, regularly setting money aside -- particularly in a tax-deferred vehicle such as a 401(k) or tax-exempt account like a Roth IRA -- can often be the smartest move you can make.2011 Retirement Plan Account Limits Maximum contribution limit for 401(k), 403(b), and 457 plan participants$16,500Maximum additional "catch-up" contributions for 401(k), 403(b), and 457 plan participants age 50 and older$5,500Maximum traditional IRA contribution$5,000Maximum additional "catch-up" contributions for traditional IRA account holders age 50 and older$1,000Maximum contribution limit for SIMPLE retirement accounts$11,500Maximum contribution limit for Roth IRAs3$5,000Source/Disclaimer1Source: Employee Benefit Research Institute, EBRI Notes, October 2010.2Diversification and asset allocation do not ensure a profit or protect against a loss in a declining market.3Roth IRA contributions may be made only by single taxpayers with modified adjusted gross incomes (MAGIs) of less than $122,000 and married joint filers with MAGIs of under $179,000. Phase-out limits for partial contributions also apply. If your MAGI is close to or over these limits, talk to your financial or tax professional before contributing to a Roth IRA. http://www.castlefinancial.com/News-more-406.html The recession -- and subsequent slow recovery -- has caused millions of Americans to focus even more closely on living within their means. If you are ready to face up to your own financial realities, one crucial step is to set out a plan of action.Callout:Once you have a record of your spending, compare your average monthly outlay with your monthly income.Social Media Message:Ready to make reducing your debt a priority this year? These handy tips can help you make and stick to a plan. The recession -- and subsequent slow recovery -- has caused millions of Americans to focus even more closely on living within their means. If you are ready to face up to your own financial realities, one crucial step is to set out a plan of action. Here are some key considerations to keep in mind.Keep Track of Your SpendingIt's hard to reduce your spending if you don't have a good idea of how much you are spending. Keep track of your typical monthly expenses for three months to find out where your money is going. To get an even more realistic idea, factor in some unexpected expenses -- such as auto and home repairs. Once you have a record of your spending, compare your average monthly outlay with your monthly income. If you have a surplus, this is the amount you can apply each month to paying down debt and building savings. If you have a shortfall, you'll need to examine your expenses more closely to see what you can potentially cut back or cut out.Keep SavingOne way to establish good saving habits is to make saving even easier than spending. A handy tip is to set up separate savings accounts with separate goals attached to them. Here are three suggestions that can help you better allocate your savings.Emergency Account: Your goal for this account should be to build up at least three to six months of living expenses. This way, if you lose your job or need a lump sum to pay for a significant expense, you may not have to tap into your other savings or ring up more debt.Family Account: This account can help fund your children's school expenses (such as class trips and team uniforms) or vacations.Investment Account: This account should be reserved for general or long-term saving goals. Hopefully, you already have a retirement savings account (either through your workplace or on your own) and perhaps a college savings plan. But having another account to save for other longer-term goals -- maybe to start your own business or remodel your home -- can be a smart move. Keep a Tight Watch on Your Credit CardsIf you've accumulated significant credit card debt, you've first got to stop the bad behavior. Paying off debt is easier once you stop using your credit cards.Pay off your highest interest credit card debt first, making sure you avoid the "minimum balance trap." Paying more than the minimum can make a big difference.Consolidate your debt by transferring outstanding balances to lower-rate cards. If you don't want to transfer your balances, you may be able to get your current credit card company to match the interest rate of a competitor.Cancel all cards except for the one that offers the lowest interest rate.Finally, set up a realistic payment timetable and stick with it. If you have trouble keeping pace, talk to a professional. The counselors at the nonprofit National Foundation for Credit Counseling can help develop a more structured plan for you. To find the nearest location, call 800-388-2227 or visit http://www.nfcc.org. http://www.castlefinancial.com/News-more-405.html