July 2022 - Page 3 of 3 - Hobbs Group Advisors

Do Our Biases Affect Our Financial Choices?

Posted on July 5, 2022January 23, 2024 by adco_mathew

Investors are routinely warned about allowing their emotions to influence their decisions. However, they are not often cautioned about their preconceptions and biases that may color their financial choices.

In a battle between facts & biases, our biases may win. If we acknowledge this tendency, we may be able to avoid some unexamined choices when it comes to personal finance. It may actually “pay” to recognize blind spots and biases with investing. Here are some common examples of bias creeping into our financial lives.

Letting emotions run the show.

How many investment decisions do we make that have a predictable outcome? Hardly any. In retrospect, it is all too easy to prize the gain from a decision over the wisdom of the decision and to, therefore, believe that the findings with the best outcomes were the best decisions (not necessarily true). Put some distance between your impulse to make a change and the action you want to take to help get some perspective on how your emotions affect your investment decisions.¹

Valuing facts we “know” & “see” more than “abstract” facts.

Information that seems abstract may seem less valid or valuable than information related to personal experience. This is true when we consider different types of investments, the state of the markets, and the economy’s health.¹

Valuing the latest information most.

The latest news is often more valuable than old news in the investment world. But when the latest news is consistently good (or consistently bad), memories of previous market climate(s) may become too distant. If we are not careful, our minds may subconsciously dismiss the eventual emergence of the next market cycle.¹

Being overconfident.

The more experienced we are at investing, the more confidence we have about our investment choices. When the market is going up, and a clear majority of our investment choices work out well, this reinforces our confidence, sometimes to a point where we may start to feel we can do little wrong, thanks to the state of the market, our investing acumen, or both. This can be dangerous.²

The herd mentality.

You know how this goes: if everyone is doing something, they must be doing it for sound and logical reasons. The herd mentality leads some investors to buy high (and sell low). It can also promote panic selling. The advent of social media hasn’t helped with this idea. Above all, it encourages market timing, and when investors try to time the market, it can influence their overall performance.^2,3

Sometimes, asking ourselves what our certainty is based on and reflecting on ourselves can be helpful and informative. Examining our preconceptions may help us as we invest.

1. Investopedia.com, July 5, 2022
2. Investopedia.com, May 2, 2023
3. WebMD.com, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

Estate Management Checklist

Posted on July 3, 2022January 23, 2024 by adco_mathew

Do you have a will?

A will enables you to specify who you want to inherit your property and other assets. A will also enables you to name a guardian for your minor children.

Do you have healthcare documents in place?

Healthcare documents spell out your wishes for health care if you become unable to make medical decisions for yourself. They also authorize a person to make decisions on your behalf if that should prove necessary. These documents may include a living will, a power of attorney agreement, and a durable power of attorney agreement for healthcare.

Do you have financial documents in place?

Certain financial documents can outline your financial wishes. If you become unable to make decisions for yourself, these financial documents can be structured to empower a person to make decisions on your behalf. These documents may include joint ownership, durable power of attorney, and living trusts.

Have you filed beneficiary forms?

In some cases, naming a beneficiary for bank accounts and retirement plans makes these accounts “payable on death” to your beneficiaries. In other cases, you will need to fill out a “Payable on Death” form.

Do you have the right amount and type of life insurance?

When was the last time you assessed your life insurance coverage? Have you compared the life insurance benefit with your financial obligations? Keep in mind that several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Have you taken steps to manage your federal estate tax?

If you and your spouse have more than $25.84 million in assets (for 2023), you may want to consider taking steps to manage federal estate taxes, which will be due at the second spouse’s death.¹

Have you taken steps to protect your business?

Do you have a succession plan? If you own a business with others, you may also want to consider a buyout agreement.

Have you created a letter of instruction?

A letter of instruction is a non-legal document that outlines your wishes. A strong, well-written letter may save your heirs time, effort, and expense as they administer your estate.

Will your heirs be able to locate your critical documents?

Your heirs may need access to the specific documents you have created to manage your estate. These documents may include:

Your will
Trust documents
Life insurance policies
Deeds to any real estate, and certificates for stocks, bonds, annuities
Information on your financial accounts and safe deposit boxes
Information on your retirement plans
Information on any debts you have: credit cards, mortgages, and loans.

Note: Power of attorney laws can vary from state to state. An estate strategy that includes trusts may involve a complex web of tax rules and regulations. Consider working with a knowledgeable estate management professional before implementing such strategies.

1. IRS.gov, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

Critical Estate Documents

Posted on July 1, 2022January 23, 2024 by adco_mathew

Financial Documents

	Joint Ownership	Durable Power of Attorney	Living Trust
What does it do?	Enables you to own property jointly with another person	Authorizes someone to handle legal and financial decisions if you become incapacitated	Holds your belongings until your death
Can it authorize someone to handle your financial affairs if you are unable to communicate?	Generally, no		Generally, no
Can it specify how you want your belongings transferred after your death?	But only those belongings owned jointly	Generally, no
Is it private?
When does it go into effect?	As soon as joint ownership is recorded	Either immediately or upon a specific trigger event (such as your incapacity)	When the document is signed and the trust is funded
Does it require court involvement?	No	No	No

Health Care Documents

	Living Will	Power of Attorney	Power of Attorney for Health Care
What does it do?	Provides specific instructions about medical care and artificial life support	Authorizes someone to handle legal and financial decisions on your behalf	Authorizes someone to make health care decisions on your behalf
Can it outline your medical wishes if you are unable to communicate?		Generally, no	Generally, no, but it does authorize someone to make medical decisions on your behalf
Can it authorize someone to handle your financial affairs if you are unable to communicate?	Generally, no		Generally, no
Duration	No expiration; can be revised or revoked at any time	Depends on specifics in the document; can be revised or revoked at any time	Depends on specifics in the document; can be revoked or revised at any time
Is it private?
When does it go into effect?	Upon your incapacity	Either immediately or upon a specific trigger event (such as your incapacity)	Either immediately or upon a specific trigger event (such as your incapacity)

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.