Utah Valley BusinessQ

Person of Interest

admin — Mon, 27 Feb 2012 18:34:18 +0000

Usually it’s stock market investors who feel stressed. These days, conservative investors are feeling the pinch, too.
Life used to be simple. You took your retirement savings and put it into a savings account, annuity or bank CD. You didn’t earn much, but you did get 4 or 5 percent — and that was enough to make your retirement plan work.
Now things aren’t so easy. Interest rates are the lowest ever. Conservative savings options are paying between zero and 1 percent. If you want to take a chance and tie up your money for 10 years in a U.S. government Treasury Bond, you can get a whopping 1.9 percent! Soon, you might just have to pay to put your money in a bank account.
Unfortunately, it doesn’t look like the situation is going to change anytime soon. Ben Bernanke, chairman of the Federal Reserve, said they’ll keep interest rates this low until sometime in 2014. That’s three years from now.
So for the foreseeable future, conservative savers will watch their accounts decline in value, even if they don’t spend any of their money. In 2011, the inflation rate was 3.2 percent. If you were lucky and earned 1 percent interest on your CD, you lost 2.2 percent for the year. Keep that constant for five years, and your $100,000 in savings is worth only $89,000 in real terms. It’s even worse if you pay taxes on the interest you earned.
All in all? Not a good plan for building wealth.

So, what are the alternatives?
Option one: Stay ultra conservative, and watch your savings go down in value each year.
Option two: Take on a little more risk, but clearly understand the risk you’re taking in order to get higher returns.
It doesn’t make any sense to move from very low risk to very high risk. Unfortunately, many investors make this mistake. If you decide to take more risk, you must be absolutely certain you fully understand the amount of downside risk you are taking on.
For example, on a one to 10 scale, as long as the bank doesn’t go broke, a bank CD might have a risk level of two. A bond might be a risk level of four. A real estate project might have a risk of level of 6. A gold purchase might be an 8. An investment in your neighbor’s business might be a 10.
Sometimes, when investors become weary of getting 1 percent, they throw in the towel and move over to something extremely aggressive that promises a 20 percent return. Such rash behavior usually results in losing everything.
Not understanding the risk of a potential investment causes some investors to stay stuck in their low interest investments indefinitely. They are afraid to make any changes because they aren’t sure how much risk they are taking. On the other hand, not understanding risk properly sometimes causes investors to invest in risky things they should never consider.
In order to get a better return, an investor might consider moving from a one on the risk scale to a three — or maybe from a three to a five. But it is foolish to move from a one on the risk scale to a seven or 10.

So, what are the recommendations?
Many investors use our conservative Managed Income portfolio in order to generate income and control risk in this very difficult environment. This conservative portfolio follows a strategy of moving between various conservative investments depending on market conditions.
Its primary objective is to preserve principal. Its secondary objective is to generate returns. This conservative portfolio has returned an annual return of 6.03 percent compounded, net of fees, to investors from October 2001 through December 2011. See www.paragonwealth.com for the full track record and disclosures.

At this Sage in the Game

admin — Mon, 27 Feb 2012 18:31:12 +0000

Altiris legend Greg Butterfield now mentors others with SageCreek Partners

Roundtable – Direct Sales Leaders

admin — Mon, 27 Feb 2012 18:29:23 +0000

4 direct sales leaders tout their industry’s benefits for the Wasatch Front

Longevity Profiles

admin — Mon, 27 Feb 2012 18:25:41 +0000

Layton Construction, Novell, Inc., Warburton’s Inc., Zerorez, Checknet, Computer Lane, Les Olson Company

Let’s Get Together

admin — Mon, 27 Feb 2012 18:21:14 +0000

Diamond Rental, UCCU Center, Utah Valley Convention and Visitors Bureau, Kneaders Bakery, The Manor At The Riverwoods, Sleepy Ridge, Utah Valley Convention Center

Right On Q

bstewart — Mon, 27 Feb 2012 18:10:54 +0000

Ten years is kind of a big deal.
In this world where our thumbs are a-texting and a-tweeting, the fact that Utah Valley’s business pros still revel in thumbing through our glossy pages (where we have LOLs of our own, thank you very much), makes us want to write about you local leaders decade after delightful decade.
So to kick off our 10 years of being in good company, we relived the glory pages by putting together 10 lists of 10 that celebrate our past, present and future.
Thumbs ready? Happy flipping.

Market Mayhem

admin — Thu, 01 Dec 2011 18:42:21 +0000

During the ’80s and ’90s, Paragon’s primary focus was to grow our accounts. We controlled risk by monitoring the business cycle and the strength of individual companies and industries. Since the economic meltdown of 2008, the challenges and number of risks to investors has multiplied. Significant new risks are the result of the $14 trillion debt our government has created. Government debt has always been a concern. It has now moved past the “concern” stage and into the “critical” stage. We are approaching a tipping point.
In 2010, the U.S. budget deficit was about $1.3 trillion. To put that in perspective, $1.3 trillion is close to the total amount of debt our politicians accumulated from 1776 to 1984. In one year, 2010, they added as much to the debt as they did during a 208-year period.
Current government projections show that from 2011 to 2019, $900 billion will be added to the debt — each year. If the projection is accurate, the debt will double by 2020. A debt of that magnitude could potentially cause economic chaos. It would likely cause taxes to rise, benefits to fall and interest rates to climb. Even now, our investment decisions are directly affected by the debt on a regular basis. Historically, political issues had little effect on our investments. Currently, they are the primary driver affecting the markets. For example, in July, the political drama over the budget and our Treasury bond rating pushed the global markets down. Recently, our trading has been driven by the political debt drama in Europe.
For savers — those that invest in savings accounts, CDs and annuities — life has gotten difficult. There is not a saving option that is safe and pays a decent interest rate. It simply does not exist.
Those “safe” accounts pay between 0 and 2 percent and provide about the same benefit as putting the money under a mattress. With inflation running at 3.5 percent, savers are losing money on investments. Each year, they watch their net worth lose value. If you consider the effect of taxes, it is even worse.
If you move to bonds for safety, your situation is potentially bleaker. Bondholders have had a great ride for the past 30 years. Owning bonds as the rates dropped from 17 percent to 2 percent worked extremely well, but it lulled bondholders into a false sense of security. When interest rates start to increase, bondholders will see the value of their bonds decrease accordingly. For example, the owner of a 10-year Treasury bond yielding 2 percent will see his bond lose 10 percent of its value when interest rates go up only 1 percent. If rates go up 2 percent, he loses 20 percent. If rates go up 3 percent, he loses 30 percent. And so on.
Investing in the stock market is more difficult as well. It’s likely only certain areas of the market will benefit depending on which economic and interest rate scenario plays out. Being in the wrong areas of the market will be costly.
So what should an investor do? Hiding the money in a bank isn’t the solution because of the effect of inflation. Moving to the safety of bonds doesn’t provide safety at all. For stock market investors, following the typical “buy and hold” advice you hear from the big institutions is full of potential obstacles. Buying into gold, which is priced for perfection at the highest prices ever, doesn’t seem to make a lot of sense either.
Investing in the right place at the right time is more important than ever. Building wealth is first about preserving wealth and capitalizing on opportunities when they present themselves. In this environment, you must have a strategy in place that allows you to increase and reduce your market exposure as needed. You need to move between market sectors when market conditions change. You must be flexible and able to adapt to the current market environment.

CLICK HERE TO VIEW THE MAGAZINE ONLINE

Roundtable – Online is not out of line

admin — Thu, 01 Dec 2011 18:38:47 +0000

4 local leaders talk social media, blogs, SEO and steak

Dave Decker, Kevin Winder, Adam Stevens, Seth Taylor

Have A Seat

admin — Thu, 01 Dec 2011 18:35:29 +0000

The task was simple: Take our cool chair and utilize it in a cool way.
And boy did we get what we asked for. In addition to the shots you saw in our cover story, here are some outtakes that couldn’t escape our glossy pages (as much as these cool folks may have wanted them to).

Enter The UV50

admin — Thu, 01 Dec 2011 18:33:06 +0000