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Avoiding Common Investment Mistakes

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By Bobby Buhr

The professionals at Hook Law Center are frequently asked to assist our clients with estate, long-term care, and investment planning. Unfortunately, we often find that our clients have made significant mistakes in their investment planning. These mistakes jeopardize our clients’ ability to provide for their support and to leave inheritances to their children. In some cases, these clients may run out of money needed for their support because of the investment mistakes.

For example, we recently met with a couple in their 80s to discuss their long-term care planning. The wife was in the early stages of Parkinson’s disease. Their combined annual income was about $30,000. They owned their home and about $400,000 of investments. On the advice of their “commission-based” investment advisor, about 80% of their investments were in illiquid real estate investment trusts (REITs). This elderly couple was taking too much risk by concentrating their investments in one asset class, and they may suffer a significant loss when they sell the REITs to pay for the wife’s care. Other elderly clients have invested too large a percentage of their investments in deferred variable annuities with significant withdrawal penalties.

  1. To avoid investment errors, Hook Law Center recommends that our clients: Put their investment and estate planning goals in writing. Although a professional advisor can assist the client with this responsibility, the client should not delegate this task to the professional. In making investment decisions, the client should not deviate from the client’s stated goals and objectives; however, the client should annually review and revise these goals as necessary.
  2. Obtain investment advice from “fee-based” advisors rather than from “commission-based” advisors. Commissions create conflicts of interest because a commission-based advisor is compensated for making money from the client rather than for the client. Hook Law Center thinks that commissions were the reason that the elderly couple discussed above was advised to invest 80% of their funds in REITs.
  3. Do not rely on their emotions. It will lead them to sell at market lows and invest at market highs.
  4. Save. Save. Save.
  5. Do not speculate. When clients play the market or day-trade, they are gambling on their ability to beat the pros. They will lose.
  6. Do not invest primarily for “tax reasons.” Tax shelters are frequently poor investments.
  7. Do not consider the client’s home as an investment. Think of it as a place where the client and the client’s family live.
  8. Reduce investment risks and increase returns by allocating investments among different asset classes, like large cap stocks, small cap stocks, REITs, foreign stocks, and bonds.
  9. Monitor investment performance on a quarterly basis and re-balance their investment allocation annually.
  10. Increase investment returns by controlling investment expenses and taxes. To accomplish these objectives, Hook Law Center recommends that our clients consider using index mutual funds or exchange traded funds. For larger accounts, Hook Law Center recommends separate account managers.

Hook Law Center thinks that a competent fee-based investment advisor can assist our clients in accomplishing their estate, long-term care, and investment goals. To better assist our clients with such investments and advice we have recently added Amanda L. Richter to our professional team. Amanda graduated from Old Dominion University in 2007 with a business administration degree, with a concentration in accounting. She specializes in taxation of individuals, estates and trusts, small business and not-for-profit organizations. Prior to joining the Firm, Amanda was a Partner at a medium-size accounting firm in Hampton Roads where she worked on a wide range of individual, fiduciary, partnership and corporate tax returns as well as audit engagements. She is a member of the American Institute of Certified Public Accountants and the Virginia Society of Certified Public Accountants.

Kit KatAsk Kit Kat – Cat Team 7

Hook Law Center:  Kit Kat, what can you tell us about Cat Team 7?

Kit Kat:  Well, I am happy to report that there is a cat rescue team operating out of the Norfolk Naval Station which is known as Cat Team 7. Last year (2017), the team rescued about 70 cats and kittens. Some of these were feral. None of the cats can be re-released on to the base because of a Department of Defense policy. After they are spayed and neutered, Cat Team 7 then transfers them to animal shelters or volunteers who foster them until they can be adopted. The feral felines have found placements with farmers. Farmers find them to be great at pest control, and at a much lower cost.

The felines sneak on to the base along the shoreline. They then hang out at a running track and picnic tables on base. Despite signs saying not to feed them, visitors tend do so anyway. With their numbers multiplying, they had become a threat to protected migratory birds. Cat Team 7, thus, is a win for everyone.

If you would like to assist Cat Team 7, Caitlyn McIntosh, team coordinator, recommends either donating money or supplies, such as litter, food, and carriers. Or you could adopt one of these lovely creatures. For donations, contact the team at catteam7norfolk@gmail.com. To view cats which can be adopted, go to tinyurl.com/yawqy4s2 or www.facebook.com/catteam7/. There’s a whole lot of neat kitties waiting to love you! (Courtney Mabeus, “Cat rescue team at Navy base placed 70 in ’17,” The Virginian-Pilot, 12-28-17, p. 1 and 7)

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Distribution of This Newsletter

Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at mail@hooklawcenter.com or fax us at 757-397-1267.

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Posted on Tuesday, January 9th, 2018. Filed under Newsletter.
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