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March 2014 Town Hall Presentations

The presentations from our March Town Hall Breakfast by guest speakers Kim Natovitz, CLU, CLTC, whose topic was Long-Term Care Planning: How to Develop a Playbook for Your Care and Michael Davis, Esq. who spoke about Retiring Out of State. To view the presentations, please click on the links below.

Blue Sheets: Strategy for Choppy Markets

Throughout 2013, a surge of demand for U.S. stocks swept the S&P 500 Index to a 32% total return! In that same 12 months, though, the earnings of those 500 companies only grew by about 5%. Hmmm. For perspective, over the past 15 years, the market’s compound annual return has been just 4.5%. But single-year returns have been very erratic, ranging from 2008’s 37% loss to last year’s 32% gain. To read the complete issue of the Blue Sheets please click on the link below.

FAI Equity Allocation Process

Since our founding in 1987, FAI has pursued a disciplined value investing philosophy. This valuation foundation has served us well through both up and down investment cycles. Recently, we also incorporated this valuation discipline into our equity asset allocation process. Since stocks have the largest impact on portfolios because of their wide range of potential returns (standard deviation of return), we believe that successful active equity asset allocation can deliver performance enhancements to our clients’ portfolios over full investment cycles.

Lyn A. Dippel, JD, CFP® Receives the Women’s Choice Award for Financial Advisors

As the leading advocate for female consumers, WomenCertified®, Inc. is pleased to announce that Lyn A. Dippel, President and CEO of FAI Wealth Management, has received the Women’s Choice Award® for Financial Advisors based on rigorous research, 17 objective criteria including a client survey to obtain feedback regarding service and practices. The Women’s Choice Award is the only recognition program for well-qualified advisors who are committed to the women’s market and serving their female clients. Achieving this award reaffirms the commitment FAI Wealth Management has to extraordinary service in addressing the financial needs of women and their families. “I love working with women. Because women often come in with slightly less confidence than men, they are eager to listen and expand their understanding. They are typically more discerning and make thoughtful decisions. It is fulfilling to watch them succeed financially and feel empowered.”

Best Practices for Business Owners With Retirement Plans

Fiduciary responsibility and best practices should be a priority for employers offering defined contribution retirement plans. Starting in 2012, the Department of Labor increased disclosure requirements for plan fees and established guidelines for ERISA (Employee Retirement Income Security Act) compliant retirement plans. After sharp market declines during the recessionary period of 2008–2009, these guidelines were established to protect plan participants. Market volatility and declining account values increased litigation against plan sponsors and highlighted the need to monitor and disclose plan fees. New guidelines also focused on improving the process of educating participants on the importance of investment diversification.

The Power of Portfolio Diversification

While understanding the past is crucial, investing is always about the future… the near future and the far future; our personal future and the future of the world we live in. When we make investment decisions, of course we cannot know how things are going to unfold... so we make assumptions, usually based on a notion that the future world will more or less resemble the one we have known. And it will …except when it won’t! Each new generation of investors must weigh its own unique set of hopes and concerns about the future; ‘tomorrow’ will always host both tantalizing and terrifying possibilities. But we moderns invest in the context of an especially powerful new reality… the Internet. Now, any fact, idea or insight that has occurred to mankind in the 5,000-year history of written words, up to and including last night… can be browsed this morning before breakfast! And usually for free! What has become routine for us was inconceivable just one generation ago!

Pricey, Volatile Biotech Stocks Losing Favor

Disappointing clinical trials and steep prices are leading some advisers to split their bets on biotech stocks between funds focused on health care and technology. "We like to invest in companies with innovative products, but at reasonable prices. Biotech has become too rich for our tastes," says Curt Gross, research director at FAI Wealth Management in Columbia, Md., with $325 million in assets.

Plotting A Course

FAI Wealth Management (formerly Financial Advantage Inc.), a Columbia, Md.-based firm that manages $330 million for approximately 220 families, shortened the duration of its bond portfolio at the beginning of both 2012 and 2013. “That’s the best defense against rising interest rates,” says J. Michael Martin, the firm’s chairman and chief investment officer. “Our expectation, and that’s a lot different than knowledge, is that we have seen the low point in bond rates and it’s going to be a long, erratic uphill climb,” he says. Namely, he sees a continuing struggle between monetary policy and real-world supply and demand for capital.

Memo: Government "Shutdown" and Potential Government "Default"

Inquiring Minds Want to Know... Q. I'm curious to know FAI’s thinking on the prospect of market gyrations around the current Government “Shutdown” and any potential Government “Default” on its debt payments. Are these risks that require any defensive portfolio adjustments?

Advisers Handle Hot Biotech Stocks With Care - Curt Gross quoted in the Wall Street Journal

Another way to view the market is by evaluating a biotech company's value relative to how much it's spending on research and development -- often considered the industry's real growth engine. Those metrics show a market that's a bit split, says Curt Gross, research director at FAI Wealth Management in Columbia, Md., with $300 million under management. He agrees large-cap biotech prices appear stretched. But mid- and small-cap stocks are trading at much more appealing valuations, Mr. Gross says.

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