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A New Way to Look at Investing
PRESENTED BY NASSER BARAKAT
About Nasser Barakat
• Series 65 licensed Investment Advisor Representative (IAR)
• Financial advisor at Partnervest Advisory Services LLC
• Works closely with some of the most established advisors in the industry
• Specializes in wealth preservation and multi-level diversification
About Partnervest
Partnervest Financial Group was created to provide unbiased investment solutions for advisors and their clients. The firm uses state- of-the-art alternative strategies and investments to create portfolios designed to generate income and manage risk.
At Partnervest the principals have over a century of combined experiences in all aspects of investment management. The firm is proud of its flawless reputation, creative thinking and entrepreneurial spirit.
Wealth Preservation
Wealth Preservation• Think of yourself as the head coach, and your wealth as your team.
• Every sport requires a defense and an offense. It is your job as the head coach to try to have the best possible combination of offensive potency and defensive grit in order to succeed.
• So how do you as the coach strike the perfect balance?
• And how does this relate to your money?
Wealth PreservationA look into sports history
• In the 2014 Super Bowl it was a match up of the leagues most potent offense in the Denver Broncos versus the leagues toughest defense in the Seattle Seahawks, both being of historical proportions.
• Denver was heavily favored to win, yet Seattle ended up shutting down Denver’s offense, leaving them with nothing. The final score being: 43-8 in favor of Seattle.
• The Phoenix Suns of 04-06 had some of the most potent offense the NBA had ever seen, which is still true till this day.
• Despite having arguably the most potent offense in league history, each of those three years, they were eliminated at the hands of a defense orientated team.
Wealth Preservation
“Offense sells tickets, but defense wins championships”
-Bear Bryant
The same is true for your investments
Wealth PreservationHow it has looked when a little offensive fire power was sacrificed for a more
solid defense.
(foxbusiness.com)
Wealth PreservationWhat you will notice in this hypothetical comparison is that the growth wasn’t always as great as the S&P 500.
For example, for the year 2009, the S&P went up 28% while this investors account only went up 15%
But what you will also notice is this investor’s losses weren’t as great as the S&P due to an impeccable defensive strategy.
Look at the year 2008 when the stock market crash happened. The S&P went down nearly 41% while this investor’s account did not move from the previous year, sitting at 0% for that year.
By 2010 for this investor, there was about a 110% difference between his current defense orientated account versus what it would have been if it was an all out offensive strategy, which in this case, would be putting all of his/her assets in the S&P 500
Wealth Preservation
• Nasser specializes in investing strategies designed to provide wealth protection while at the same time allowing for the potential to achieve growth.
• Though there are different defensive strategies, one commonly overlooked strategy is in the use of options.
Wealth Preservation
Options can provide protection (defense) while at the same time providing the investor with potential revenue
(offense).
Option: A contract to buy or sell a specific financial product. The contract establishes a specific price, called the strike price, at which the contract may be exercised, or acted on. It also has an expiration date. When an option expires, it no longer exists or has value.
Strike price: The price at which a put or call option can be exercised. (Oxford Dictionary)
• Options are purchased for a premium
Wealth PreservationDifferent types of options include:
Calls: The purchase of a call gives the owner the right, but not the obligation, to buy the underlying security at the strike price on or before the expiration date. In turn, the seller of the call is required to sell the security at the strike price at the buyer’s request.
Puts: The purchase of a put gives the owner the right, but not the obligation, to sell the underlying security at the strike price on or before the expiration date. In turn, the seller is required to buy the security at the strike price at the buyer’s request.
Wealth PreservationWhat’s in a name?
When dealing with options, it gives you, well, options!
Having the option available to either buy or sell at a predetermined price gives you and your resources more control and more predictability.
It can be used to hedge against loss while at the same time providing an income stream.
Most importantly, you are enforcing a defense orientated strategy for your portfolio.
Wealth Preservation
• Options are just one form of defense, or protection, and are versatile in nature. Hence, why most investors should consider adding the use of options to their portfolios.
• Everybody’s situation is a little different, therefore it is important to consult with Mr. Barakat about which strategy would be most appropriate for you and your goals.
Consultations are always free
Multi-Level Diversification
Multi-Level Diversification• Traditional diversification involves a portfolio of mixed securities and
investment classes designed to lower the risk of your portfolio. And it is absolutely necessary to a prudent investor, but is only one facet of true diversification.
• Many investors don’t think about diversifying in the different ways your money can grow along with how your investments are taxed.
• These are all important considerations as these strategies play a big role in the over-all performance of your portfolios as well as how much of it you can keep and how much of it you would have to pay to Uncle Sam.
Multi-Level DiversificationThree main growth strategies:
• Fixed: Money grows at a fixed rate regardless of external factors.
• Variable: Money growth and loss varies in direct correlation of an underlying security or index. Variable accounts most commonly correlate to the performance of the stock market.
• Fixed-Indexed: A hybrid between a fixed account and a variable account. Has the potential to grow with the underlying security or index yet has the safety of a fixed account. The caveat is in its limitations. This strategy usually involves a cap (growth limit).
Pros ConsLess Risk Low-YieldMore Predictable
Bull Market
Bear MarketPros Cons
Often Higher Yield
More Risk
Historically successful Strategy
Unpredictable
Bull Market Bear MarketPros ConsLess Risk Long Term
StrategyGrowth
PotentialMultiple Fees
Capital Preservation/ Bear Market
Multi-Level Diversification
But It’s Not What You Make, It’s What You Keep.
Multi-Level Diversification
• The most commonly used investing strategies often involve the highest levels of taxation, they aren’t very tax efficient.
• Tax efficiency is simply measured by how much of an investment’s return is left over after taxes have been paid.
• We must first figure out how your current portfolio is structured under the law as well as your current tax bracket in order to see how we can reposition assets to maximize efficiency, and ultimately maximize your returns.
Multi-Level DiversificationThree main forms of taxation:
• Tax Now: Investors pay taxes on the growth of their investments the same year. The usual tax rate is any where from 10% to 39.6% depending on your tax-bracket.
• Tax Later (Deferred): Investor’s accounts are sheltered from taxation so long as money goes untouched for a specified amount of time. “Pre-tax dollars” are being paid into the account. During the withdrawal period, withdrawals are taxed as ordinary income.
• Tax-Free: Paid with “post-tax dollars”. Contributions are not tax deductible. Growth on investments are not taxed. During the withdrawal period, withdrawals can be made tax free.
Accounts May Include:Corporate Bonds
Bank CDs
Money Market Funds
Accounts May Include:Municipal Bonds
Roth IRAs
Life Insurance
Accounts May Include:
401(k)s
403(b)s
Most IRAs
Multi-Level Diversification• Given these different taxation methods, the seemingly logical thing to do
is to put as much as possible of your portfolio in a tax-free kind of investment.
• This won’t always be true. Analyzing your tax situation is a huge part in customizing a portfolio that is tailored to your needs.
• As with everything, each method has it’s virtues as well as it’s downfalls. For example, if the tax advantages of a qualified tax deferred plan will move you into a lower tax bracket, then it should really be considered.
Closing Thoughts
Closing Thoughts
There are many similarities to managing a sports team and managing investments. With both, defense has been, and continues to be the most underrated attribute.
It may not be flashy and at times could look ugly. But history will tell you time and time again, defense is a powerful and successful strategy. Defense wins championships.
Closing Thoughts
There is a multitude of different investing strategies and a multitude of different investments.
It is on you the investor, to partner up with a knowledgeable and like-minded advisor to help you maximize your gains with the primary focus in minimizing your losses.
It is on you the investor, to take a risk-free opportunity of a second opinion from a qualified professional advisor in Nasser Barakat.
Contact Information:
(805) 416-6190
Important Disclosures• Investment Advisory Services provided through
Partnervest Advisory Services, LLC. Insurance products sold through Life and Annuity Masters Inc. This presentation is designed to provide educational and/or general information and is not intended to provide specific legal, accounting, investment, tax or other professional advice. For specific advice on these aspects of your overall financial program, you will need to consult directly with Mr. Barakat. There is always a possibility of loss as well as gain with any investment strategy.
