Dynamic Wealth Advisors
Business Development Officer
Urban Adams is an Investment Advisor Representative of Dynamic Wealth Advisors. Urban earned a Bachelor of Science degree in Business Administration, and has held numerous securities licenses during his career. Urban possesses over 15 years’ experience in the financial services industry.Urban began his career with a prominent mutual fund company, and worked with individual investors. Later, Urban joined a major discount brokerage firm, where he worked nearly 10 years.Prior to joining Dynamic Wealth Advisors, Urban worked as Director of Operations, and Investment Advisor Representative for a large advisory firm in Orange County, California.
As an independent, fee-only advisor with Dynamic Wealth Advisors, Urban works with a wide range of clients from small business owners to employees of large corporations, from clients who are still accumulating their wealth to those nearing (or in) retirement. Urban focuses on his clients’ long term goals for retirement, college savings, legacy, and more, and works with clients to design a plan to reach their goals.In addition to individual wealth management, and financial planning, Urban also serves as advisor to retirement plans for businesses.
When Urban is not working with his advisory clients, he is involved in his local community. Previously, Urban has volunteered with Boys and Girls Clubs delivering financial literacy classes to teens. Urban also volunteered with Big Brothers Big Sisters of Central Arizona. Since relocating to Orange County, Urban has served as a volunteer coach, and Board Member of Irvine Girls Softball Association, and President of Woodbridge High School Boosters. Most recently, Urban joined the softball coaching staff for Woodbridge High School as Junior Varsity coach.
BS, Business Administration, University of Phoenix
Assets Under Management:
Advisory services offered through Dynamic Wealth Advisors.
The likely explanation is that your brokerage account does not have enough cash available to buy the new stock at that time. Even though you sold the first stock, the proceeds of that sale are not available until three business days after the sale is executed. This is known in the industry as T + 3, or Trade + 3. As a result, unless you had additional cash to cover the purchase of the new stock, you would need to wait until the sale of the first stock settles (T + 3).
The industry is working to shorten the time it takes for trades to “settle”, from Trade + 3 to Trade + 2. You can find more information about the efforts to shorten the settlement period at this site: http://www.ust2.com/.
I applaud your decision to help your son in the future by opening an IRA. It is also a good sign to recognize the potential impact of fees on long term returns. With respect to the investment decisions, it is important to distinguish if the investment (or investments) you selected for your son’s IRA were appropriate for his time frame. Since it sounds like he might not be old enough to establish what his tolerance for investment risk is, it is up to your risk tolerance for the time being.
While the account value may be below the original investment amount, it is not a loss until action is taken to realize the loss. In any case, it is first necessary to determine if the current investment is appropriate. If it is indeed not, it may be necessary to sell the current investment (even at a loss) in order to get into a better investment for the goals of this IRA for your son. If the current investment is appropriate, it is not necessary to sell simply to realize a loss. And if your son is many years away from retirement age, there is plenty of time for additional contributions over time, and the opportunity for the investments to grow in value.
First of all, let me commend your daughter on making the decision to save for her future. By choosing to start saving so early, she will be taking advantage of her biggest ally, time. Since she will have somewhere between 45 and 50 years until she reaches full retirement age, the money that she contributes in the early years could have a significant impact on the long term outcomes.
With respect to how to invest the contributions to the Roth IRA, this is where the individual investor's feelings about risk come into play. When choosing the appropriate investment mix, it is a good idea to utilize a questionnaire that measures an investor’s time horizon (in this case, 40+ years), and the investor’s appetite for risk in their portfolio. To be clear, the definition of risk here is the possible short-term fluctuation in the value of a portfolio. When deciding where to open the account for your daughter, look for a risk assessment tool online. When working with my own clients, the risk assessment questionnaire is one of the first things I will review with a new client.
The purpose of the risk assessment is to provide the investor with a guideline for how to invest the funds in the account for the proper mix of equity (stocks), and fixed income (bonds) to match the investor’s tolerance for risk, and their time horizon. At this stage, it is a good idea to look for a mutual fund whose mix of equity and bond investments matches your daughter’s tolerance for risk. Could this be accomplished with a “Target Date” fund? Yes, it is possible, but when selecting any fund, be sure that the allocation mix of the funds matches the recommended allocation from the risk assessment tool, not necessarily just the target future year in the fund name.
There are a number of funds available that can accomplish this in a single mutual fund. And in a single mutual fund, this will ensure that the mix of stocks and bonds stays consistent over time. I will assume that your daughter will continue to make contributions over time, and having a single fund will simplify the process of adding new contributions as well.
Looking ahead, your daughter’s tolerance for risk may change over time. It is a good idea to take those risk assessment questionnaires periodically to ensure that the account is invested according to her tolerance for short term fluctuation in the portfolio.
Thank you for the question, and congratulations on seeking out additional information with regard to investing. If you intend to invest on your own, it is a great idea to be well-informed about varying philosophies. For my personal investments, and for those of my clients, I prefer Evidence Based Investing. It is an investing philosophy based on, you guessed it, historical data. You might also hear this described as factor investing, which is a very important component to the strategy. You will find a great deal of information online when searching either term. There are quite a few books written on the topic as well, but I suggest you start with “The Investment Answer” written by Daniel C. Goldie, CFA, CFP, and Gordon S. Murray.
First, you’ve done a great job recognizing the potential risk with holding onto a single stock holding, and taking action by selling a majority of the stock. Your question asking for help investing for the long term inside the IRA prompts several questions that you should ask yourself, and most advisors would ask.
Question 1: You mentioned that you would like to “live off the interest, and not touch the principal.” How much income do you need for this account to generate for you on a monthly or annual basis? Living off interest would not likely generate the income you need, and investing the balance in an interest bearing account (i.e. Money Market) could limit the future income possibilities as well.
Question 2: Since the account is a beneficiary IRA, is there a requirement to distribute the funds within a certain time frame from the IRA?
Question 3: When you say “invest for the long term”, can you help me understand what you mean by long term – in years?
Question 4: Now that you’ve experienced this tremendous increase in the value of the account, and have decided to diversify, please answer a few questions for me that will help me understand your risk tolerance. Have you taken a questionnaire like this?
In the story Alice in Wonderland, Alice asks the Cheshire Cat, which way she ought to go. And the Cheshire cat responds, “That depends, on where you want to get to.” When Alice replies that it doesn’t really matter, the cat responds, that it doesn’t really matter which way Alice goes.
After asking yourself the four questions above, or speaking with a professional, you will then have the information necessary for determining the most appropriate way to invest for the long term with the beneficiary IRA. By determining where you want to be, will help define the path to get there.