New England Capital Financial Advisors, LLC

We have a new face at New England Capital!  Matt Sczurek recently joined us and is a great addition to our team!  He will be working as a Para-planner, assisting us in meetings and also with client service.  Please make sure you say “Hi” to him when you are in the office or call.

Chris Lee and I sent out an email on Friday June 24^th, the day after the historic vote in the United Kingdom where the British people voted to leave the European Union.  We told you to be prepared for a negative market reaction to the vote in world markets and increased market volatility in the following months.  While the Dow Jones was down by more than 600 points on the first trading date after the vote, many would be surprised to know that on the first day of July, the Dow Jones, S&P 500 and NASDAQ index were all higher than they were before the Brexit vote.  This strongly suggests to Chris and I, that once again people who panic and let their emotions rule their investment decisions are more likely to lose money by selling low and buying back at higher prices.  For those who understand that short-term volatility is the price to be paid for higher, longer term returns, they will be better positioned to achieve their financial goals.  

I don’t want to imply that Brexit is a “non-event.” Quite the opposite; Chris and I know that many questions remain not just for the United Kingdom (UK) and the European Union (EU), but also for the USA and around the world.  Brexit, along with future acts of terrorism, the seemingly endless Mid-East saga, the Zika epidemic, rising oil prices, declining oil prices or any other crisis du jour that our 24/7 news media bombards us with will certainly have an influence on us as investment advisors and how we consequently manage your money.  

Of course the biggest question is: Will the EU break up?  After all, the UK is the second largest economy in the EU.  There are already renewed talks of a Grexit (Greece departing from the EU) other clever names have already popped up too.  How about “De Partugal”, the “Czechout” and the “Big Finnish.”  We can even bring the issue closer to home with rumors of Texas leaving the United States.  

Hopefully you are enjoying your summer, whether it is at the beach, in the mountains, in your backyard, or even sitting poolside enjoying your favorite beverage.  This time of year makes it easy to fantasize about what retirement may look like – or even if you are retired – what life can look like away from “home”.

Vacations are great – everyone needs down time to recharge their batteries, reflect on the past, and look ahead to the future.  Some people prefer to travel, while others would like a “home away from home”.  At what point should you consider buying that vacation home or second home?  In part of that decision making process, there are some questions you need to answer first:

Where's a good place to buy? Take a look a market demographics, re-sale prices, weather, proximity to grocery/shopping/medical centers, traffic, etc.

"I don't trust the stock market". I've heard that a lot over my 33 year career. It may even be the way you're feeling right now. Did the negative double-digit returns of the S&P 500 at the beginning of the year (which was the worst January in the history of the stock market), only to be followed by a positive double-digit return since mid-February, leave you feeling the same queasiness as riding the Wildcat roller coaster, the oldest continuously operating wooden coaster, at Lake Compounce in Bristol, Connecticut?    As the chart below shows the S&P 500 has a positive return in 27 of the last 36 years. Of course that means we've had nine years of negative returns during that time. The average annual return for the 36 years has been over 11%. But in order to enjoy that 11% return you must have been able to endure an average, temporary, intra- year decline of 14.2%.

With the current low interest rates for mortgages and the present status of the stock market, should you be putting extra payments onto your mortgage and pay it off faster, or should you rather invest that money?  Thanks to a suggestion from a client, we will try to give you some solutions in this article.

First, let’s first start with this case study.  Teddy and Donald Smith recently re-financed their house for $200,000 for a 30 year mortgage at 3.75%.  Their monthly payment for principal and interest and is $926, which does not include taxes or homeowners insurance.   Let’s assume that they make 1 extra payment per year.  By making that one extra payment, they chop 4 years off their mortgage, finishing in roughly 26 years.  Meanwhile, Hillary and Bernie Jones took out the same mortgage, but rather then make an extra payment on the mortgage; they invested that annually for the same 30 years at a 6% rate of return.  For this same example, let’s assume that after the mortgage is paid off, Teddy and Donald save their $926/monthly for 4 year years at 6%, which the results are shown below: