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Author Archives: LarsonFinancial

Do You Have Full Home and Auto Coverage? (Trick Question.)

Did you know you can carry the highest coverage levels on your home or auto insurance policy and still not have “full” coverage if you’re hit with a major lawsuit? Physicians can be especially vulnerable to legal fallout from accidents that might not pose the same financial risk to people in other professions.

Most people who get into car collisions typically exchange insurance details and let the two carriers sort it out. But when injured people find out a driver is a doctor, they may be more likely to file a claim because they’re aware that doctors make a good living. That puts you at risk for losing personal assets which may include your:

  • Savings
  • Home, cars and valuables
  • Current earnings
  • Future earnings (yes, these can be garnished)

Umbrella coverage is a surprisingly affordable add-on to your current home and auto policies that helps you safeguard your financial health in the event of a lawsuit. This “insurance for your insurance” kicks in when your other policies reach their financial limits.

With an umbrella, you can be prepared for unfortunate situations that won’t be fully covered by your home or auto policies. Real-life examples include:

  • You hit a driver in her 30s who sues you for emotional distress, as well as lost wages. If her injuries deprive her of earning $50,000 a year, you might have to pay $2M+ in lost wages and $1-$5M in “potential loss.”
  • You host a paintball party in your backyard for your kids and their friends. Even though you advise them of proper safety precautions, one participant removes her headgear while leaving the game and is struck in the eye with a paintball. Between the cost of a lawsuit and medical bills, you could pay upwards of $475k.
  • You own a rental property, and a tenant claims she became ill from black mold found in her apartment. Because she suffered permanent lung damage, she lost her track scholarship to a four-year college. She sues you for over $750,000.

In these unfortunate situations, an umbrella policy can make all the difference in helping you maintain your financial wellbeing. Most policies start at a payout of $1M and go up to $10M. And the good news is, you don’t have to wait until you make your first million to buy an umbrella. You can get one as early as residency and increase your policy limits as you go.

Interested in your options for top-rated umbrella policies … and bundling your home and auto insurance in one place? 

Coronavirus Market Perspective: A Long-Term Plan

As the Coronavirus spreads, so too do does the fear of what is to come. By now, many of us are seeing real life impacts from the Coronavirus. This may be in the form of having travel plans altered, or maybe you know someone whose school has been closed. President Trump even announced a travel ban to Europe and the NBA has suspended its season.

The stock market has been hit particularly hard over the past month as well. As of the close of the market on Wednesday, the US Market is now down over 15% from the start of the year1 and down nearly 20% from its peak in February.

In times like this, it is not uncommon to feel additional stress and anxiety. No one enjoys seeing declines to their portfolio’s value. Studies have provided evidence that our tolerance for risk is challenged in times like these2. As stress increases, we may be tempted to make financial decisions out of fear. At LFG, we believe that a strong antidote to fear is preparation.

Your financial plan and portfolio strategy have been carefully crafted by your financial advisor in order to be prepared and equipped to endure times like these. And that strategy is informed by facts and observations in capital markets that are worth repeating:

  • Markets have recovered from every disruption in the past. The 5-year average annualized return after a 20% market decline is 11.76%3.

  • This is not the first time we have seen a market drawdown close to an infectious disease outbreak4. In most cases, we see a recovery within 12 months.

  • Downturns are not uncommon over time. On average, we see market corrections of 15% or more once every four years; 20% and greater corrections occur about once every six years5.

  • Volatility is part of investing. It is this risk for which we expect to be compensated. We cannot reasonably expect a higher return on stocks (vs. a safer investment like cash) without embracing the reality that stocks have more risk.
  • The capital markets are efficient. As the markets get new information, prices adjust accordingly. In this current case, markets are pricing in the impact of short-term disrupted supply chains and lost production associated with the Coronavirus. As that short-term disruption is resolved, prices should also adjust accordingly.

Although it may feel like things are different this time, it is important to remember that the markets have withstood similar circumstances in the past. Valuations of stocks are based upon decades of expected cash flows, not just what we see in the coming months as we deal with the fallout of the Coronavirus.

Many of us vividly remember the Global Financial Crisis from the late 2000s. An investor in an 80% stock/20 bond portfolio6 starting out in 2008 would have lost over 40% of their value by March 2009. By April of 2011, they would have already recovered, and had a positive return.

Obviously, no one has a crystal ball and this message is not meant to imply the market has reached the bottom. But we do believe now presents an opportune time to strategically reposition assets in the market.

Our team is working diligently to keep your portfolio in line with your strategic, long-term allocation by selling the asset classes that become overweight and buying what is underweight. We also are harvesting taxable losses in this process to help lessen your tax burden when you file in 2021.

Are you concerned Coronavirus could impact your long-term financial strategy?

1 The US Market as represented by the S&P 500. https://www.wsj.com/market-data/quotes/index/US/S&P%20US/SPX?mod=md_home_overview_quote
2 https://www.pnas.org/content/pnas/111/9/3608.full.pdf?with-ds=yes
3 https://www.mydimensional.com/us-equity-returns-following-past-downturns
Eugene Fama and Ken French are members of the Board of Directors of the general partner of, and provide consulting services to, Dimensional Fund Advisors LP. Short-term performance results should be considered in connection with longer-term performance results. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio.
4 Source: Epidemics and Stock Market Performance; First Trust Portfolios L.P. Data from Bloomberg, as of 2/24/20. Month end numbers were used for the table on the right. *12-month data is not available for the June 2019 measles. This graphic is for Informational purposes only and is an authorized reprint from First Trust Portfolios L.P. Larson Financial Group (“LFG”) and Larson Financial Securities (“LFS”) are separate from and unaffiliated with First Trust Portfolios L.P. Material is believed current and accurate but is not guaranteed. Investments are subject to various market, political, currency, economic, and business risks, and may not always be profitable; further, neither LFG nor LFS guarantee financial or investment results.
5 https://www.capitalgroup.com/advisor/insights/articles/how-stay-calm-when-markets-stumble.html?cid=sm_og_fb_sf_cap_ci_6292026
6 Figures based upon performance of VASGX (Vanguard LifeStrategy Growth Fund). Figures represented do not reflect any advisor fees, expenses, or sales charges. Returns are based on price only and do not include dividends.
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. Consult your financial advisor regarding your specific needs. Past performance is no guarantee of future results.
Advisory Services offered through Larson Financial Group, LLC, a Registered Investment Advisor. Securities offered through Larson Financial Securities, LLC, Member FINRA/SIPC.
Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services. Please consult the appropriate professional regarding your legal or tax planning needs. 

Could an Alternative Investment Strategy Work for You?

You may have heard of alternative investments without knowing exactly what they are. Are they different types of common investment products, like stocks or bonds? And what are they an alternative to? Read on to find out.

The term “alternative investment” doesn’t refer to any asset that’s part of the more typical categories, like stocks, bonds, cash, etc. Alternative investments typically include things like private equity, hedge funds, real estate and other tangible assets. Since they’re outside of the “norm,” they can have a different set of rules.

For one, they normally aren’t regulated by the SEC. They can be examined by the SEC, but they don’t have to be registered and aren’t overseen or heavily regulated the way the stocks, mutual funds or ETFs may be.

Alternative investments can be a great way to diversify your portfolio and hedge against inflation while offering potential for high rewards—these can come at a price, though. Alternative investments typically have a high barrier to entry and often require a much more substantial investment, both in time and money, than conventional investments.

If you’re considering alternative investments, it would be a good idea to talk to your financial advisor or similar professional. They can help you manage the risks and prepare you for diving into the world of alternative investments. If done right, they can be the perfect supplement to your portfolio.

Are alternative investments the right choice for your portfolio? We can help you decide.

Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor.
Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.
Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services. Please consult the appropriate professional regarding your legal or tax planning needs.

Should I Hire a Professional to Do My Taxes, or File Myself?

Tax time could be a stressful time of year and one that means impending expenses to be paid, or it could be a breeze so much so that you wonder why everyone has a freak out around tax time. A way to potentially ease your tax-time stress is filing your taxes the right way—and no, we don’t mean jointly or separately.

The choice of choosing whether you want to hire a professional vs. handling it yourself can be likened to any job or project. Cost is a factor, as is time investment and skill. Let’s take a look at some advantages of both methods.

Filing Yourself

If you file yourself, you’ll usually save a good bundle of money. There are tons of services out there that let you file your taxes yourself—often, for little or no cost. If you’re looking for the budget-friendly option, filing yourself is probably it.

You can also save yourself a lot of time by filing separately if you don’t have very complex financial needs. If you aren’t itemizing and looking for every deduction, you can breeze through the process in no time at all by filing online. If you’ve got a more complex situation, this option may be best left by the wayside.

Hiring a Professional

By hiring a professional to do your taxes, you can add a personal element. Like a trusted family physician, an accountant can learn about your specific situation and what’s important to you. They can even make suggestions you’d never think of. Never underestimate the value of good advice.

Accountants also shine when it comes to complex situations. If you’ve got a lot of different deductions, or you may be managing a business or two plus a few rental properties, filing taxes can quickly become overwhelming. Having a knowledgeable resource to answer your questions and wade through the murky areas can be a lifesaver.

The Bottom Line

When everything is said and done, you need to consider your or your family’s personal situation. Are you looking for a budget-friendly, speedy and simplistic approach? Or, are you trying to find a knowledgeable expert to handle your complex financial needs? That will determine how best to proceed.

Do you have complex financial needs and would like to hire a professional? We can help.

Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor.
Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.
Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services. Please consult the appropriate professional regarding your legal or tax planning needs.

How Much House Can I Afford? The 28/36 Rule

There are many factors that go into making the decision to buy a home. It’s a substantial financial step, whether it’s your first or fifth home, and your first home is a milestone in every adult’s life. The first step toward home ownership is deciding that buying is right for you vs. renting. Once you’ve set your mind on buying a home, finding out just what you can afford is next.

There’s a common rule in lending called the 28/36 rule, which is essentially a common-sense rule of thumb for figuring out how much debt a person or household should take on. The rule states that your total housing expenses each month shouldn’t exceed 28% of gross income, and total debts shouldn’t exceed 36% of gross income—which includes your mortgage, student loan debt, car loans, etc.

Using the 28/36 rule, you can get ballpark idea of the kind of home you can afford and begin making plans accordingly. Whether you’ve got some saving to do, or you’re pleasantly surprised at how much house you can afford, it’s a helpful piece to work toward buying a home.

The 28/36 rule is a good place to start, but there are a lot of different pieces that factor into how much house you can afford, such as using a physician loan for your home. As with all substantial financial decisions, reviewing the situation with your financial advisor is the best bet. They can look at your plan and give you more practical idea of whether buying a home is in line with your plan.

Curious if buying a home can fit in your current financial plan?

Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor.
Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.
Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services.  Please consult the appropriate professional regarding your legal or tax planning needs.