Welcome to Retirement Unpacked with Al Smith, owner of Goldn Eagle Financial. You want a retirement plan that alleviates your fears about the future so you know your money will last. As a chartered financial consultant, Al Smith will help you find a balance between the risk and reward of the market and the safety of your retirement income. And now here’s your host, Al Smith. Welcome back to another program of Retirement Unpacked. I want to thank you for tuning in. And hopefully you’ll enjoy the information I have today. It’s not things that you’ve heard before, a few of the things you might have heard before. But they’re kind of important and they have to do with investing. And I think in order to have your money grow toward a nest egg, as you get closer to retirement, I think it’s important that you get strong returns. And mostly that you have good guidance because there’s lots of take into consideration as you plan for retirement. There’s no question about that. And right now if you have things that you’re thinking about, questions or you know, things, anything that’s popping into your head about your own retirement, your own financial plan, give my office a call. And you’re going to range to come in. We can have a conversation. If you live a considerable distance away, I often meet people either at their homes or somewhere for coffee halfway between my office and where you live because I think it’s important that people get some of the guidance from what I’ve learned over many years. And a lot of what I’ve learned surprisingly is from some of my clients. And when I learned something new from one of my clients, I explore that and dig more deeply and find out exactly how my client was using their money in perhaps a slightly different way. I’ll be talking this afternoon about some financial products and some financial strategies that you may not be familiar with and some of those have considerable risk and some of them are much safer but generate guaranteed income. First one I’ll be talking about are what are called structured notes. And I’ve talked about those before and they are not new products. They’ve been around since the 1990s but they haven’t been terribly popular for the retail investor. Some advisors I work with are unfamiliar with them or they have an impression about them that is inaccurate. And essentially structured notes are offered by big banks, by big banks and talking companies like Bank of America, BMO, Morgan Stanley, Goldman Sachs, Royal Bank of Canada, big big investment banks and so forth. And periodically, by periodically, every month, they will come out with different kinds of notes. We’ll talk first about what’s called the flash note. It’s a note that pays a certain level of interest every month and the amount of interest is what’s declared for that particular note and the note lasts one year. So for example, a note that came out in August of this year, it can pay one of two rates of interest depending on if the interest rate is paid on the American style or the European style and you’re probably thinking, well gee, what’s that? Well I’ll explain. First of all, the American style note will pay 12.35% over the course of a year and they divide that of course by 12 and pay that 12% interest incrementally over the course of a year. Now the only way there could be a loss of principle is if one of three indices, the Nasdaq, the Dow, not the Dow, the Nasdaq, the S&P or the Russell, if one of those indices dropped by 30% or more during that 12 month period, then the principle that’s placed into that note would go down that amount also. Now statistically there’s about an 8% chance of this happening. Now the way a lot of people invest into notes is they put money in them each month because they pay that interest for one year and they come out, new ones come out each month. Now that’s the American style, the European style works like this. It pays in this case 10% interest instead of 12 and the only way there would be a loss of principle is if that 30% drop in one of those indices were to occur at the end of that 12 month period rather than any time during the 12 month period. The chances of that happening is much slimmer. It’s about 3%, which is why it pays a slightly lower rate of interest. So those are structured notes we can also call those income notes. Now one of the other notes that I think is extremely attractive is called a growth note. And with the growth notes, the ones that I find attractive are the two year notes and rather than paying a rate of interest, they will link your funds to a particular index. In this case, the index is the NASDAQ. And essentially how it would work at the end of a two year period, the amount invested would grow by 150% of the change in value of the NASDAQ at the end of that 24 month period. There was also some downside protection or as they call it a hard buffer at maturity of 15%. So here’s what that means. Let’s say if someone put $10,000 into the growth note and if the NASDAQ grew 20% over that two year period, which for the NASDAQ, that’s not enormous growth really, then the investor would get 150% of that or 30% so the $10,000 that he or she invested would grow to 13,000. Now on the other hand, let’s look at it negatively and say, well gee, what if the NASDAQ is down 20% after that two year period? Well with the 15% buffer, the investor would lose only 5%. So then at the end of that two year period, the $10,000 would become $95,000 but had he invested fully, maybe in a NASDAQ index, it would have been down to $8,000, not $95,000. If I said $8,500, I’m incorrect. But in any event, so those are growth notes. So these structured notes, both the growth notes and the income notes, those are investments that can either permit your investment to grow in the case of the growth note or the flash notes or the income notes, they can provide a stream of income that can be extremely important. If people need income from their investment on a regular basis or I know I have some clients who have assets that are generating income for the purpose of paying expenses such as rent for assisted living or anything of that nature, it’s really good to have investments that are going to generate income. That can become extremely important. Another type of investment that I haven’t spoken about that certainly deserves attention are called buffered portfolios and you’re thinking, well, what’s that? Well, buffered portfolios are portfolios that come with both a buffer and a buffer is basically another word for downside protection and in exchange for a buffer, it also has an upside cap. So in other words, in order to protect oneself against a market volatility, you could have part of what your assets are invested into a buffered portfolio so that your upside growth could be limited based on that cap in exchange for a downside buffer. To give you an example, the firm I work with, which is Brookstone, they have their regular buffer and these are one year plans and the downside buffer and the upside cap those change periodically. There’s different companies who have these and to give you one example, one of the buffers has an upside cap of 15%. And basically that means if your account grows by 20%, you’re limited to 15% growth for that one year period. But what if the market drop 10%, well, the downside buffer is 8.8%. So if the market drop 10% during that one year period, your account would only drop about 1.2% because of that buffer. Now they have some other buffered portfolios that have a much bigger downside protection buffer but in exchange for that the upside cap is also lower. For example, one of these, I’ll give an example here, has an upside cap of 11.95%, nearly 12% so that means no matter how much your account grew, yours would only grow by 11.9%. But if the market drop 20%, let’s say, this has a downside buffer of 14.75%. So if it dropped 20%, you would only lose about between 5 and 6. And these are tools, investment products that are useful to people who want to protect themselves from market volatility. And those are extremely important as people do their risk tolerance and risk tolerance is what I do when I meet with people when we’re sort of making some determination, where is the best place for your IRA or where is the best place we should allocate your financial resources. And there’s a lot of questions that I ask people before we make any choices and where’s the best place to have some of your money. We ask questions like how soon will you be using the money? How would you feel if the market dropped 10% or how would you feel if it dropped 25%? Would you do? Are you relying on this money right now for income or is this money earmarked for some point well into the future? So a lot of these kinds of questions or questions that I ask people before we get anywhere close to deciding where is the best place for some of your resources. And the more digging deeply that we do, the better choices we can make. And most of not hardly any of these choices are in stone because if there’s a choice we made that someone maybe wants to change in the future, perhaps because there are circumstances have changed, then they can change how they allocate their resources for their nest egg that’s going to grow for their future. And some more things to talk about after the break, their investment things that you may not know about. Ausmith of Golden Eagle Financial as a Fiduciary will act in your best interest. Many people misunderstand that it is critically important for your financial advisor to be a Duciary. Like Ausmith, with retirement planning you won’t know you have problems until it’s too late. That’s why you need Aus extensive knowledge and years of experience to strategize with you, taking into consideration your individual circumstances. And you’ll have Aus cell phone number. If you have a concern or question no need to press one for English, just call him personally. If you need to make a change or have a question about something, you can reach him directly. Most importantly, financial advisors are typically fee based, Al doesn’t charge anything up front. Rather an industry standard rate based on your portfolio’s performance. So there’s no upfront cost. Find out more with a free consultation. You can reach Al by clicking on golden eagle on the klseradial.com Advertisers page. Investment advisory services offer through bookstown capital management LLC a registered investment advisor. BCM and golden eagle financial limited are independent of each other. Insurance products and services are not offered through BCM but are offered in sold through individually licensed and appointed agents. Welcome back. Hopefully you enjoyed some of the information through the break. We put together must be fall pollen getting into my nasal passages or something. Anyment, we’re going to talk a little bit about financial products that are not run of the mill. They are not products that most people dive into on a regular basis even if they invest on their own. We’re going to talk about options. You’re thinking, well gee, I’ve heard of those. What are options? Well, a definition of options would be an option is a contract that permits someone, give someone the right to buy or sell a financial product at an agreed upon price at any time before it expires. There are basically two kinds of options. For a sophisticated definition, you’re kind of betting that the individual stock that you purchased the call on, you’re betting that’s going to go up. With a call or a put, you can leverage the growth of that particular stock versus if you own shares in the stock itself. So a call, you’re betting that the value of a stock is going up because what a call allows you to do, it allows you to purchase or buy an asset, in most cases a stock, at a specific price during a particular timeframe. So if you own a stock that was trading at $100 a share and the call says you can buy this stock in the future, anytime let’s say during a specific timeframe, let’s say if it were 60 days, you can buy that same stock at $102 a share. Well if that stock goes up to $110 a share, then that call has improved in value and you’ve made a profit. And the other hand, if the price of that stock were to fall, then you lose the money that you paid for that option because you wouldn’t exercise it because it would be worth very little. A put on the other hand is sort of the opposite. You’re betting that the value of a particular stock is going to go down. So a put permits you to purchase, it’s a right to purchase a stock at a particular, and not purchase. The put allows you to sell a particular stock at a particular price. So going back to that stock that was trading for $100 a share, let’s say if the put allows you to purchase the stock at a particular price and that price falls, then your put has gained value. And calls and puts options in general permit people to have what we can call leveraged positions. To give you an example, there’s a term called hedged equity. Let’s say for example, if you owned a considerable amount of stock in a few companies that you felt were going to grow, but if you wanted some protection in case the value of those stocks were to fall, you could purchase puts on those stocks and puts as we know, gain value if the value of the underlying stock falls. So calls and puts options in general are vehicles that permit people to leverage their position in the market. And there’s two basic ways that they determine these. The American option versus the European option. The American option that call or put can be exercised anywhere within that time frame. If it’s 60 days or six months, whatever it is, the option can be exercised any time during that time frame. With the European method, you can only exercise the option at the end of the expiry period. So very different ways of looking at these. And as we mentioned, the call then, the call option grows in value as the price of the underlying security rises. But the maximum loss is whatever someone paid for the call option. That’s the most they can be lost. And I think it’s important that we know what these are because they are some things that are often exercised for people who do day trading. And I’m not going to talk too much about day trading before I talk about one additional things. People who purchase options, they’re people who have to pay attention to the market on a regular basis. And on the other hand, most of my investors, we decide where is the best place for your money. And they look at them periodically, contact me periodically. And they don’t stare at the computer and do day trading. But what is available, people can take advantage of this strategy. One of these strategies, for example, is what’s called a covered call strategy. And it’s not something that you necessarily have to do yourself. But when people work with me, one of the choices they have is the covered call strategy, basically how that works is the investment purchases stock. And then by also selling a call, that permits there to generate income from that same stock that they own. And it also minimizes volatility. For example, Brookstone’s covered call strategies, they have some that are written through JP Morgan, Global X Russell, Global X 500, and so forth. And these are strategies that are middle of the road in terms of risk. But they generally generate income. And the income they’re estimating is anywhere from 7.5 to 12%. And they have only a modest amount of risk. And another term that we use another alternative is smart option strategy. And that’s where there are protective puts in place so that if the market were to fall, it minimizes the loss that someone can possibly experience. There is also available. People ask me about crypto. Well, the first thing I say about crypto is crypto is highly volatile. And I don’t sell positions in crypto, but the company I represent, Brookstone, they have an ETF that invests totally in crypto. And unlike a lot of the positions and investments, I place my investors in crypto is highly volatile. It is off the scale when it comes to measuring between conservative investing and aggressive investing. To give you an example, crypto has been incredibly, incredibly volatile. The ETF that invests in crypto, they have the biggest share of it in Bitcoin, then Bitcoin and Galaxy, they also have it in Ethereum and so forth. And as I say, it’s highly volatile and it’s only a place for people’s money if they would be willing to ride out the increases and decreases in it and so forth. Last topic I’ll be talking about today is day trading. Basically day trading is when people open up their computer and they open up their account and they basically want to make money from buying and selling stocks and options and things in this nature during the day. And then because we know that the market goes up and down during the day and you may know people who do this and if they tell you they’re making money or making a lot of money, I’m not saying it’s untrue but it is unlikely. 80% of people who begin day trading quit after two years. One of the reasons day trading is difficult because a lot of changes in the market are driven by algorithms, much of the buying and selling of stock and so forth is driven by massive entities that are investing money for pension funds and things in this nature. 40% of people quit day trading after as little as one month. After three years only about 3% people continue day trading after five people only 7%. One stat that I found interesting is of all the people who begin day trading only 4% are able to make a living doing that. And I’m not trying to scare anyone away from it but when they talked about that 4% that’s after they’ve spent 6 to 8 hours a day practicing for 6 months and then about 80 people out of 2000 who attended an institution that trained them how to day trade only 80 out of 2000 remained. If you’d like to know more about how you can have your wealth grow safely, give my office a call 3037441128. I’d love to have a conversation and we can learn how I can help your nest egg grow. God bless you. Thank you for listening. Let’s continue to pray for our friends in Israel and hopefully you’ll be here next week. Thank you for listening to Retirement Unpacked with your host Al Smith of Golden Eagle Financial. Start up a free consultation with Al today at klsiradio.com/money. Find your purpose in retirement with Golden Eagle Financial. Investment Advisory Services offered through Brookstone Capital Management LLC, a registered investment advisor. BCM and Golden Eagle Financial Limited are independent of each other. Insurance products and services are not offered through BCM but are offered and sold through individually licensed and appointed agents.