Chornyak & Associates

June 2019

Our team will help you avoid the many common mistakes made with your retirement money. Our lead story reviews many of these, with some helpful hints.

One way for privately held businesses to insure long-term survival is through well-planned buy-sell agreements. Commonwealth shares details in our second article.

This month's "What's Happening Now" section shares interesting stories on Unbelievable Government Spending, the U.S. Navy's new $13 Billion Aircraft Carrier, and the Best Wireless Headphones to Make Calls With.

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Common Mistakes Made with Retirement Money

Common Mistakes Made
with Retirement Money

It's no time to gamble with your hard-earned money when you're approaching retirement, or even if you've just landed your first job and are starting to think about saving. Investing poorly and without due diligence or paying unnecessary fees and costs can derail your retirement, or at least make it less comfortable than it could be.

You can avoid some common mistakes with a little planning, whether you're in your 60s or your 20s.

1. Investing in Things You Don't Know About

Steer clear of new investment schemes with which you're unfamiliar. This includes that free seminar with a dinner thrown in, which could be a fraud or a Ponzi scheme. Don't trust anyone who tries to pressure you into handing over your retirement money. Any reputable financial adviser understands hesitancy and reluctance.

Take the time to learn as much as you can first, then invest in new areas in small steps, a little money at a time.

2. Betting on Stocks

Don't invest a large portion of your valuable retirement holdings in a stock that's supposed be a can't-miss opportunity or the next big thing. It's too easy to lose your shirt and your retirement future, or to not realize the full potential of your investment dollars. A lot more people would be billionaires if beating the market were that easy.

Myriad smart people place trades every day, and for each trade, only half can be right. Just because you're talented in your own chosen field, that doesn't translate into market timing skill. Investing is a process, and that process has a name: asset allocation. The process only works if you use it.

As exciting as the thought of big gains can be, think of such an approach as going to Vegas and betting your retirement money on red or black. Again, do it with small amounts of money if you like the thrill, not with the bulk of your retirement funds. Moderation is key. Read More

Buy-Sell Agreements: What Every
Business Owner Should Know

As a business owner, you focus your time and energy on the growth and daily operation of your business. Consequently, it can be challenging to find the time to think about its long-term future. But having a plan in place to ensure the continuity of your business should anything happen to you is essential. For many business owners, this plan involves setting up a buy-sell agreement.

To help you determine if such an agreement is right for your business, it's important to understand what it is, how it works, and the funding methods available.

What Is a Buy-Sell Agreement?
A buy-sell agreement ensures business continuity if the owner becomes disabled, decides to retire, or passes away unexpectedly. It outlines the parties involved in the agreement, describes the events that trigger a transfer, and lays out an agreed-upon value of the business. Having this kind of agreement in place can help avoid rushed decisions during what can be a stressful time. Plus, knowing the company has a plan in place provides assurance to its employees and instills confidence in its customers that the business will remain strong.

Structuring the Agreement
There are several ways to construct a buy-sell agreement. The best choice for you will depend on your company's structure and ownership:
  • Cross purchase: Another business partner agrees to purchase the business from the owner or the owner's family.
  • Entity purchase: The business entity agrees to purchase the business from the owner or the owner's family.
  • Wait-and-see: The buyer of the business is allowed to remain unspecified, and a plan is put in place to decide on a buyer at the time of a triggering event (e.g., retirement, disability, death).
After a triggering event occurs, either the business entity or another party will begin the process of purchasing all or a portion of the business, based upon the valuation described in the agreement. Read More

What's Happening Now

15 Unbelievable Things the U.S. Government Spends Money On! U.S. Navy's New $13 Billion Aircraft Carrier Best Wireless Headphones

Market Update

Markets hit turbulence in May

After four months of rising stock markets, we finally saw a decline in May. All three major U.S. markets ended the month down, driven by rising worries about a trade war. The S&P 500 declined by 6.35 percent during the month, the Nasdaq Composite lost 7.79 percent, and the Dow Jones Industrial Average fell by 6.32 percent. Of course, this pullback is a concern. But in the bigger picture, it has taken markets back only to mid-March levels. They are still well above where we started the year, so there is no need to panic yet.

The pullback was due to declining confidence, as fundamentals improved during the month. According to FactSet (as of May 24, 2019), with 97 percent of companies reporting, the first-quarter blended earnings growth rate for the S&P 500 stands at – 0.4 percent. If this number comes in as expected, it would be the first quarter of year-over-year earnings declines since the second quarter of 2016. On first glance, this may seem like bad news. But it is much better than the 4 percent drop forecast on March 31, or even the 2.3 percent drop expected at the start of May. Plus, analysts expect earnings growth to be positive for the rest of the year. This growth should help bolster equity performance going forward.

Although fundamentals were supportive during the month, technical factors were another story. All three major U.S. indices ended May below their respective 200-day moving averages. In fact, the S&P 500 and Nasdaq dropped below the trend line on the last day of the month. This drop is a warning signal for U.S. markets. A prolonged dip below the 200-day moving average can indicate deteriorating investor sentiment and serve as a headwind for future performance. Read More