1 / 39

May 2005 Dr. Gary J. Harloff, Ph.D. Harloff Capital Management (HCM) Registered Investment Advisor 815 Crocker Road, Su

Investment SAVVY and Your 401(k)/IRA Educational Presentation. May 2005 Dr. Gary J. Harloff, Ph.D. Harloff Capital Management (HCM) Registered Investment Advisor 815 Crocker Road, Suite D-10,Westlake, Oh 44145 440-871-7278. Disclaimer.

alijah
Download Presentation

May 2005 Dr. Gary J. Harloff, Ph.D. Harloff Capital Management (HCM) Registered Investment Advisor 815 Crocker Road, Su

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Investment SAVVY and Your 401(k)/IRA Educational Presentation May 2005 Dr. Gary J. Harloff, Ph.D. Harloff Capital Management (HCM) Registered Investment Advisor 815 Crocker Road, Suite D-10,Westlake, Oh 44145 440-871-7278

  2. Disclaimer • This information is not specific investment advice for any particular person. • Past performance does not insure future performance.

  3. Retirement/Job Change- What to do with your 401(k),403(b), 457 govt. retirement money? • 5 choices: • (1)do nothing • (2) take the cash • (3) rollover to a self-directed IRA • (4) rollover to an actively-managed IRA • (5) rollover into your new co.’s 401(k) plan

  4. Outline • HCM original models, tactical / dynamic asset allocation- opposite of buy-hold • Mutual Funds & ETF investing • Types of funds • Bull and bear markets • Recent restrictions on funds

  5. Outline (cont’d) • Retirement needs rules of thumb • Fees and commissions drive services • 401(k), 403(b) and 457 government rollover issues • Prospects for high return for individual investors

  6. About Harloff Capital Management • Active-fee-based portfolio management • Help you rollover money from 401(k), 403(b), 457 into a managed IRA account • HCM manages individual 401(k) accounts in retirement plans; 74% never re-allocate • HCM establishes new 401(k) plans with management • HCM technology- not available on Wall St.

  7. About Harloff Capital Management (cont’d) • 1994 registered investment advisor • To identify and invest in sector/index winners • Most on Wall Street use data based on 3 to 20 years of data. This is buy-and-hold regardless of the rebalance time. • HCM has discretionary trading authority

  8. HCM helps establish new 401(k) Retirement plans • HCM consults with management • turn-key 401(k) • internet access, daily valuation • funds, life style funds, international • includes a HCM managed portfolio option • IRS filing help

  9. HCM: Active Original Strategies • Four new strategies developed by Gary: Aero Ph.D., research started in 1970. • New HCM models and concepts not available in books or brokerage houses. • In contrast to HCM’s original strategies, majority of investors use public strategies (see Encyclopedia Technical Market Indicators-Colby where there are at least 3 good pages of 800).

  10. P/E high when 10 year bond yield low

  11. Four HCM systems 1) Harloff Value Index model: absolute 2) Long term rel. momentum model 3) 2004 oscillating market was difficult for momentum systems. Developed new oscillating/trending system 8-04 4) Dynamic asset allocation - portfolios

  12. HCM original research: Nonlinear Market Oscillations- we know how to analyze funds

  13. HCM Technology Example: HCMcycle & trend model with buy/sell, 3-4-05 Past performance does not insure future performance, hypothetical-not actual trades 3 4 2005 nav res sup HCM l-gn b/s last-date ProFunds INV:UltraSecto ENPIX 30.54 31.29 29.20 5.14 43.38 B 1 3 2005 USGlobal Global Resourc PSPFX 13.07 13.49 12.53 4.12 27.51 B 1 3 2005 Rydex INV:Energy/231 RYEIX 17.92 18.12 17.28 3.18 25.93 B 1 4 2005 Fidelity Sel Energy/60 FSENX 39.82 40.26 38.38 3.14 22.33 B 12 29 2004 Fidelity Sel Natural Re FNARX 20.59 20.77 19.88 3.05 23.66 B 1 4 2005 ProFunds INV:Basic Mate BMPIX 42.31 42.73 40.04 2.99 17.04 B 1 19 2005 ProFunds INV:UltraSecto BMPIX 42.31 42.73 40.04 2.99 17.04 B 1 19 2005 Icon Energy ICENX 27.36 27.97 26.41 2.89 23.41 B 1 6 2005 ProFunds INV:Ultra Sect PMPIX 30.22 31.72 28.07 2.87 13.78 B 1 28 2005 USGlobal World Precious UNWPX 17.56 17.82 16.58 2.83 15.15 B 1 20 2005 AdvInCir INST:Acadian E AEMGX 22.89 23.38 22.42 2.72 25.49 B 10 11 2004 Putnam Global Natural R EBERX 27.58 27.71 26.77 2.70 22.47 B 10 26 2004 Oppenhmr Real Asset-A QRAAX 7.92 8.16 7.40 2.60 19.64 B 12 27 2004 Fidelity Sel Natural Ga FSNGX 35.24 35.79 33.84 2.59 18.29 B 12 31 2004

  14. HCM Dynamic Asset Allocation • Original HCM DAA statistics. Original HCM constrained optimization program. • Dynamic asset allocation- max return for certain risk • Market neutral constraint, portfolio beta = 0 (portfolio returns independent of market) • Portfolio example given for market neutral

  15. HCM Employs Dynamic (DAA) or Asset Allocation • Change asset allocation (portfolio) often- goal: stay with winners and to sell losers • Partly a data analysis problem as data, statistics, and time series are “turbulent”

  16. Practice Sometimes Beats Theory“HCM says it is due to wrong statistics typically used” (graph from Michael D. Smith, CFA, Hewitt Investment Group, June, 2000)

  17. HCM Optimal Portfolios: Dynamic Frontier & Market Neutral,return =1.4%/wk, 3-4-05 (hypothetical not actual portfolios) • DAA: n=9 r= 1.40 sg= 0.50 beta = 0.99 • tiker dynamic frontier fract alpha beta var 1 RYVNX Rydex Venture 100-H 0.14 1.22 -3.15 1.226 2 USPIX ProFunds INV:Ultra Sh 0.13 1.21 -3.15 1.217 3 FLATX Fidelity Latin Americ 0.24 1.21 2.50 0.791 4 FSESX Fidelity Sel Energy S 0.11 1.21 1.50 0.916 5 ENPIX ProFunds INV:UltraSec 0.08 1.80 4.23 5.536 6 FSENX Fidelity Sel Energy/6 0.08 1.27 2.20 1.759 7 PSPFX USGlobal Global Resou 0.06 1.38 3.62 3.353 8 RYVIX Rydex INV:Energy Serv 0.08 1.13 1.71 1.123 9 SLAFX Scudder Latin America 0.08 1.13 2.63 0.865 Mkt Ntl:n=5 r= 1.40 sg=0.78 beta = 0.06 tiker market-neutral 1 RYVNX Rydex Venture 100-H 0.27 1.22 -3.15 1.226 2 ENPIX ProFunds INV:UltraSec 0.26 1.80 4.23 5.536 3 USPIX ProFunds INV:Ultra Sh 0.26 1.21 -3.15 1.217 4 PSPFX USGlobal Global Resou 0.11 1.38 3.62 3.353 5 FSENX Fidelity Sel Energy/6 0.10 1.27 2.20 1.759

  18. Mutual Funds and ETF Investing • Many 401(k)s have mutual funds • Funds may have 100 stocks - diversification • Exchange Traded Funds- like funds and trade like stocks • portfolios of funds, and ETF’s • about 7,000 funds, about 150 ETF’s

  19. Types of Funds: Parsing the Market • Sector, Index, international, bonds • “style box”: large (market valuation), small (market valuation), growth (earnings), value (cheap) • about 9,000 funds. Many similar in name • only a few fund families are trader friendly

  20. Bull and Bear Markets:Why and How Often • Bear markets - 20%, within a business recession, usually 1 out of every 4 years • Buy-&-hold accepts bear losses • Bull market 3 out of 4 years is typical • Fed’s charter is stability???? After millenium, Fed sharply reduced money supply and a bear market followed in a few months, and a recession followed with a year lag

  21. Recent Restrictions on Funds • Recent legal actions led many funds to add restrictions and short term redemption fees • Funds paid fines for illegal trading after 4 pm • Funds assessed fines for not sticking to their perspectuses • This will lead to more ETF portfolios

  22. Retirement Needs: Rules of Thumb • Life expectency, as of 1999 • men 80 years • women 85 years • Retirees need about 80% of preretirement income x no. of years • ex. 0.8 x ($50,000) = $40,000 for 20 years = $800,000 needed

  23. Asset Allocation: Rules of Thumb • Asset allocation ={% stocks, bonds, cash} • % bonds = your age is overly simplistic • Doesn’t help if you live 20 years longer than your parents=> need for increased return • Fixed asset allocation argument based on long term statistics; 3-20 years data. Industry mantra is buy-hold.

  24. Do You Buy and Hold (B-H) anything? • Your career?, Your education?, Your family? • Any part of your life? • The financial sales industry says you should buy and hold until they tell you otherwise. • HCM thinks investments should be actively managed, just like the rest of your life

  25. Buy & hold vs Dynamic Asset Allocation • Buy and hold: never sell, only buy once • Dynamic asset allocation: try to invest in the best portfolio (sectors, indexes, foreign, bonds, etc.) and change portfolio when market changes.

  26. Fees and Commissions: How they Drive Service • Commissions based: broker calls you to buy a stock, fund, insurance, fixed or variable annuity • May be a conflict of interest • Origin of buy-and-hold non-strategy

  27. Fees and Commissions: how they drive service • Fee-based: registered investment advisor manages account based on x% per year fee • HCM trades funds at institutional level, or inside 401(k); no trading fees (no commissions) • No conflict of interest

  28. Immediate Income Needs: 72(t) Distributions for IRA Rollover • Age<59.5 • substantially equal payments for 5 years or age 59.5 whichever is longer • not subject to 10% early withdrawal penalty

  29. Unique to IRA: Penalty Free Premature Distributions • Deductible medical expenses • medical insurance premiums if unemployed • income during disability • college education expenses • first-time purchase of primary residence

  30. Take the cash: You pay a high price, example • $10,000 initial distribution • -2800 federal income tax(28% bracket) • -500 state income tax (5%) • -1000 penalty tax (10% penalty if < 59.5) • _________________________ • $5,700 of original $10,000

  31. Take the cash: You pay a high price (cont’d) • Growth of $10,000 over 25 years at 9 % fixed • No rollover: after taxes and penalties becomes $24,637. (28%IRS, 5% state, 10% penalty, <59.5) • Rollover & tax deferred: $57,774.

  32. Transfer Money to New Employer’s Plan • Advantages: • no taxes or penalties • consolidate different 401(k) and other IRA’s for convenience

  33. Transfer Money to New Employer’s Plan (con’d) • Disadvantages: • employer may not allow it • may be waiting period at new job • new plan may not offer good funds • ability to control and access your money may be limited

  34. Leave your Money with Old Employer Advantages: no effort, no taxes or penalties Disadvantages: (1) employer may not allow it (2) old plan may not have good funds (3) may have limited access to your money (4) people and phone numbers change, and your old company may not last

  35. Rollover Your Money to a Managed IRA • Advantages: no penalties or taxes • Managed account- HCM has discretion and will actively manage your portfolio • Retirement savings can be consolidated • On line, daily access • Account remains in your name • HCM fills out the forms for you

  36. Prospects for high return: average self-directed investor receives1/5 of S&P500 return

  37. You/Spouse Candidate for Rollover? • Recently changed /changing jobs • anticipate retiring soon? • Have any retirement plans with previous employer? • Have any IRA’s not currently contributing to? • HCM fills out paperwork and follows up

  38. Are You a Candidate for Active HCM Money Management? • No desire to manage your portfolios • Prefer to hire a professional money manager • Believe in active strategy vs. buy-and-hope

  39. How Can HCM Help You? • Active management of your IRA, 401(k), or taxable accounts • 401(k) turn-key plan set up for companies • 401(k) rollover to IRA, HCM does paperwork • Alternate investment - accredited investors • Free consultation: 440-871-7278

More Related