InAlliance Financial Planning
Elizabeth Saghi, President of InAlliance Financial Financial Planning, is the founder and President of InAlliance Financial Planning, a fee-only financial planning firm serving individuals and small businesses in Santa Barbara and throughout the Central Coast region. Her mission is to help her clients take full ownership of the financial direction of their lives.
Elizabeth became a financial planner because she wanted to help people discover the power of the financial planning process. She is especially passionate about helping women, in particular, become financially literate, independent and secure. And she truly believes that if clients have control of their money, they'll have control of their lives.
Elizabeth has over 30 years of experience in the financial services industry, where she worked in New York, London and San Francisco as a financial advisor for major investment banks including Morgan Stanley, Merrill Lynch, BNP Paribas and Credit Suisse. Prior to founding InAlliance Financial Planning in 2014, she was the Marketing Manager for Santa Barbara Bank & Trust's Wealth Management and Trust division. She holds a BS from Boston University, and a Certificate in Financial Planning from the College of Financial Planning in Denver.
As a Certified Financial Planner (CFP®) and Registered Investment Advisor (RIA), Elizabeth is considered a fiduciary and therefore, must always act in the best interests of her clients.
BS, Nursing Science, Boston University
Certificate in Financial Planning, College of Financial Planning, Denver
Fee-only - Hourly, Project and Retainer
First of all, I am so sorry for your loss. You didn't mention how long ago your husband passed away, but if it's fairly recent, I would strongly advise you to talk with a financial advisor, preferably one that is a fiduciary and has had experience helping widows such as yourself. I'm happy for you that you have insurance proceeds that can be invested, so I'm assuming your cash needs for daily living are covered by other funds. Your first priority should be to make sure you have access to funds to pay bills and expenses for you and your family.
After things have settled down and you have decided where you'd like to live or what sort of lifestyle you'd like to have going forward, your advisor can map out an investment plan to meet those objectives. There is no cookie cutter approach to investing. A good strategy depends on your needs and goals, your time horizon (i.e. when will you need access to the money), your risk tolerance and other investments available.
I hope you'll find a good advisor with whom you feel comfortable. Interview several until you find the right person so that you can develop a good, long-term relationship. I wish you the very best as you transition to your new life.
What a great question. First of all, congratulations on becoming a teacher and setting a very worthwhile goal for yourself in buying a home in the next five years. For most of us, our home is the single largest asset we'll own in our lifetime, so making a plan beforehand is a good thing. Working on improving your credit score is great because the higher your credit score, the more attractive mortgage offer you'll receive from the banks. Your interest rate will be a little lower and possibly even the fees too. I'm assuming that improving your credit score means paying off all your debt or at least the debt with the highest interest rates. Make sure that you never miss a payment on any credit card debt because one missed payment will ding your credit score. Also, when you pay off your credit cards, don't cancel the account. Just leave it there unused as the banks like to see that you have a credit line available and are either not using it or you're making regular payments.
If you know the area in which you'd like to purchase a home, start following the real-estate market now. Look at the homes for sale and make note of what their asking price was and what they eventually sold for. You'll want to start saving money for at least a 20% down payment. Put those savings into a CD or money market fund so that you'll earn a little bit of interest but you're not putting your money at risk. The stock market is great if you don't need the money for a long time, but if you need the funds within 5 years, you don't want to take any risk of losing some of the principal.
When you have the 20% down payment and a secure position as a teacher, go to your local bank or credit union and get pre-approved for a mortgage. They will tell you how much you can afford to spend on a house and they'll be able to calculate your monthly payments. If you make an offer on a house with a pre-approval letter from your bank, you'll be in a better position to negotiate with the seller. The rule of thumb that banks look for is a debt to income ratio of no more than 35%. In other words, your total household debt (including your mortgage) shouldn't be more than 35% of your gross monthly income.
And finally, remember the #1 rule of buying real-estate: Location, location, location. Buy the best house you can afford in the best area. Don't ever buy more house than you can afford - it's not worth the sleepless nights of trying to figure out how to make the mortgage payments. You can always move up as your income increases.
Good luck to you!
The simple answer is that buying stocks is almost always a less risky strategy that buying options. When you buy a stock, you are making an investment in a company and you can hold that investment for as long as you like. When you buy an option, your holding period is limited to the date the option expires. If you make money during that time period, great. If not, you've lost the money you invested to purchase the option and that's it.
An option is a contract to either buy a stock or sell a stock at a specified price during a specified time period. A call option gives you the right to buy the stock and a put option gives you the right to sell a stock. You can either buy or sell a call option and you can either buy or sell a put option. If you are bullish on the market, you would either buy a call option or sell a put option. Conversely, if you are bearish on the market, you would buy a put option or sell a call option. You don't need to own the underlying stock to trade the option.
Buying options is usually less risky than selling options because your loss is limited to the amount you paid for that option. But selling options can actually expose you to unlimited loss. Remember that an option is a contract between two entities, so for every buyer there is a seller and vice-versa. For example, let's say you sell a call option on XYZ stock when the price of the stock is $100 but you think the price is going down. Someone bought that option from you because they thought the price was going up. So before the option expires, the stock moves to $120. Now the buyer uses his call option to buy the stock from you at $100. You then have to go into the market and buy it for $120 and sell it to him for $100. You've lost money obviously, but the stock could have moved much higher so the potential for loss is unlimited. If you had owned the underlying stock and sold that option, you could just deliver the stock to the buyer of the option. That is called "covered call buying" and it is a fairly conservative strategy that generates income on the stocks you hold in your portfolio.
If I have confused you at this point with the explanation above, then you should not be buying options or do so only under the guidance of a professional who has had lots of experience trading options. There are many option strategies that use combinations of selling and/or buying puts and/or calls, but they are beyond the scope of this discussion. As I said at the beginning of this answer, the simple and less risky strategy is to buy the stock.
I hope this helps and good luck with your investment strategy.
Both a Dividend Reinvestment Plan (DRIP) and Dollar Cost Averaging (DCA) are effective plans, but they don't have to be mutually exclusive. You can combine the two plans. A DRIP plan effectively uses the power of compounding for additional growth. A DCA plan eliminates the question of market-timing or "is this a good time to buy", which is usually not an effective long-term investment strategy.
If one chooses to invest regularly and consistently as in DCA, I would recommend that one also choose to reinvest the dividends at the same time. 40% of the average annual returns in the stock market over the past 75 years (or more) has come from dividends that were reinvested into shares of stock.
Before selling the stock, do a little research on the company to find out why the stock is down 70% in a market that has risen to all-time highs. Is it in a declining industry or is there something fundamentally wrong with the company? Are there management issues? Are they making money? If they have earnings, are they declining? Are profit margins declining? Sometimes a company with good fundamentals is undervalued by the market because it has little exposure, but in a bull market like this, investors are always searching for that "hidden gem," so it's unlikely.
If the prospects for the company are negative and you can use the tax loss, then I would recommend that you sell. You can reinvest whatever remains in a healthier stock and hope to eventually make up those losses. I'm an advocate for cutting losses when the fundamentals of a company are bleak because you don't want to keep looking at a losing position each time you check the price or open up your statement.