Riley Financial Strategies Group Blog

Things Most Advisors Don’t Tell You #4: Financial Harmony in the Home

by Riley Financial Strategies Group

Riley Financial Strategies Group started the “Things Most Advisors Don’t Tell You” series upon recognizing many financial advisors rarely talk about habits and behaviors that, while not directly related to finance, can spell the difference between reaching your goals or not. Today we’re talking about how important it is to maintain financial harmony in the home.

Ever heard the saying, “No one person is an island”? It means no one is so self-sufficient that they don’t benefit from the help and comfort of others. It also means that no one is so isolated that their actions affect only them. The decisions we make – including those related to our financial goals – always have an impact on other people.

One of the saddest and most common obstacles people must overcome is a lack of financial harmony in the home. This can happen when two or more persons (usually spouses, but not always) have:

·         Competing goals
·         Different attitudes about money
·         An unequal relationship
·         A lack of communication

According to one study, finances are “the leading cause of stress in a relationship.”1 Often, the cause of that stress is no one’s fault. Maybe one spouse lost their job, or a partner is up to their neck in medical bills. But sometimes, that stress is entirely avoidable. For example, let’s take a hypothetical couple, Bob and Betty, and go through some common scenarios.

Competing goals. Betty wants to start a business, but Bob wants to travel. How do they allocate the time and money it takes for each to do what they want?

Different attitudes about money. Bob is a natural risk-taker and prefers to invest in riskier assets that offer potentially higher rewards, so they have more money to do all the things they want in life. Betty is more conservative and wants to ensure they never lose their hard-earned savings, so their family will always be protected. Neither approach is necessarily wrong, but how do they create a balance so both can sleep well at night?

An unequal relationship. The classic example here is when one person in a relationship “handles the finances” and the other…doesn’t. This could mean, for example, that one decides where every dollar goes while the other has no input. Or, it could mean that one pays all the bills and balances all the checks, while the other spends impulsively. How do Bob and Betty leverage both their skillsets while balancing the workload and ensuring both have an equal voice? (Often, this problem is the main culprit behind financial disharmony.)

A lack of communication. This one stems from – and worsens – the others. Bob and Betty have different goals – and they don’t talk about it. This means no planning and no prioritization, just competition for limited time and resources. Bob and Betty have different attitudes about money – and they don’t talk about it, which means each one’s habits stress the other one out. Bob and Betty have an unequal relationship – and they don’t talk about it. Which means one of them will always feel overworked, unappreciated, and unheard.

Maybe even un-loved.

Any of these situations can destroy financial harmony in the home, and when that happens, it makes reaching both individual and family goals so much harder and less pleasant. In many cases, it means some family members never even get to try. That’s why financial harmony is so important. Because when you have harmony, loved ones work together, each lending their talents and experiences so that everyone gets to achieve what they want in life.

None of this, of course, is meant to suggest that you don’t have financial harmony in your home. Our goal is simply to show how important it is, not only for a family’s financial success, but for their sheer happiness, too. But what if you don’t have financial harmony in the home? What’s the solution?

While we certainly aren’t relationship counselors and there is no way to cover this in one letter, there are two simple steps you can take. The first is to work with an experienced financial advisor who can help create a plan for your entire family. A good advisor can help put your entire picture in view, so everyone can understand the “what, when, where, why, and how” of working towards your goals in life.  

The second is even more important, and you’ve probably already guessed it: Communicate. Have a discussion with your family about goals, feelings, and opinions about money. When you’re all “reading from the same sheet music,” the result can be glorious music instead of strident cacophony.

Riley Financial Strategies Group aims to instill harmony in every aspect of your financial life. Call 412.856.4556 or contact us to learn more about our unique approach. For the penultimate entry in this series, we’ll explore how working towards your goals is like driving in an unfamiliar city – and how to make the ride go much smoother!

1“Fighting with your spouse? It’s probably about this,” CNBC, February 4, 2015.


Questions You Were Afraid to Ask #12: What Does It Mean to Invest in Commodities?

By Riley Financial Strategies Group

Since it’s been a few months, Riley Financial Strategies Group thought March would be a good time to revisit our Questions You Were Afraid to Ask series and cover a specific type of investment that people often wonder about – commodities.

In an investing context, a commodity is a physical product that is either consumed or used to produce something else. For example, corn, sugar, and cotton are all commodities. We generally refer to products like these as agricultural commodities. Pork, poultry, and cattle are livestock commodities. Energy products, like oil and gas, are commodities, too. Precious metals like gold, silver, and platinum qualify as commodities as well.

A commodity is generally seen as an alternative investment. Alternative investments are called that because they trade less conventionally than more traditional stocks and bonds. Despite this, many people find the idea of investing in commodities to be an attractive one. For some, it’s because it makes more intuitive sense than owning shares in a company (buying stock) or lending money to an organization (buying bonds). There’s something tangible about the idea of investing in things we see and use on a daily basis. By comparison, stocks and bonds can feel a little more abstract. For others, investing in commodities is a way of adding even more diversification to a portfolio.

All that said, the question of how to invest in commodities can be an overwhelming one. Most people – including experienced investors – don’t even know how to get started! Today we’ll explore the myriad of ways to invest in commodities, then compare the pros and cons of this particular asset class in our next entry.

The oldest and most basic way to invest in commodities is to physically own them. This is what traders have been doing for most of human history. Person A buys a herd of cattle from Person B, and then sells some or all of them to Person C, hopefully for a profit. Person X buys a stack of gold bars from Person Y and then sells them to Person Z. You get the idea.

This method is still utilized today. But for most retail investors – regular folks like you and me – taking physical ownership just isn’t feasible. When you buy commodities, you must also have a way to store them. Unlike stocks and bonds, commodities can take up A LOT of space. You must also have a way to deliver the commodities to and fro. There are insurance considerations in case something goes wrong in relation to the product. Finally, there’s a lot of technical expertise to know how to trade those commodities for a fair price.

For these reasons, most investors choose two different avenues when considering commodities: 1) Buying stock in companies that produce commodities or 2) by investing in commodity-based funds.

Under option 1, let’s say you wanted to invest in a certain type of precious metal that you feel will rise in value in the future. For reasons we’ve already covered (storage, etc), you don’t want to own the metal itself. Instead, you buy stock in a company that specializes in mining or extracting that particular metal.

Commodity-based funds are similar to previous examples of investment funds we’ve talked about in prior blogs. The big difference is commodity-based funds are centered around specific commodities, not investments. The fund may be comprised of a number of companies that specialize in the commodity. A fund may even purchase and store the physical product itself if they have the means to do so. Either way, these types of funds – which can be mutual funds or exchange-traded funds – can give you exposure to whatever commodities you’d like to invest in.

You might have heard of future contracts (or futures), which are another way that some investors participate in commodities. These are “contracts in which the purchaser agrees to buy or sell a specific quantity of a physical commodity at a specified price on a particular date in the future.”1 Let’s say an investor purchases a contract to buy X barrels of oil for $75 per barrel at some later date. By doing so, they anticipate the price of oil will rise above that, so their price effectively becomes a bargain. When the specified date arrives, the investor accepts a cash settlement. This means the investor is credited with the difference between the initial price they paid and the current market price. This is instead of actually receiving physical ownership of the oil. On the other hand, if the price of oil goes below $75 per barrel, the investor would have to pay back that difference themselves. To be frank, individual investors rarely turn to commodity futures because of how complex they are. More often, institutional investors will utilize commodity-based funds.

Like all types of investments, commodities come with risk and might not be right for everyone. As we have discussed the how of investing in commodities today, we’ll talk about some of the ‘whys’ behind commodities by discussing their pros and cons in the next entry in this blog series. In the meantime, don’t hesitate to call 412.856.4556 or click here to send a message to discuss commodities – or anything else on your mind!

1“Futures and Commodities,” FINRA,

Futures trading, which is speculative and volatile and involves a high degree of risk, is only appropriate for the risk capital portion of a portfolio.

The commodities markets are considered speculative, carry substantial risks, and have experienced periods of extreme volatility. Investments in commodities may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity.


Things Most Advisors Don’t Tell You #3: The Importance of Prioritization

As Riley Financial Strategies Group believes achieving the things you care about requires more than just money, we started the ‘Things Most Advisors Don’t Tell You’ blog series to talk about some of the things people rarely hear about from their financial advisors. Our belief is applying these lessons makes working towards your goals both easier and more rewarding. Today’s entry is all about the importance of prioritization. First, a story.

Once there was a farmer who woke up early to milk his cows. On the way to the barn, he noticed his fence was broken. So, he went to his shed to get his tools, only to find he was out of nails. On the way to town to buy more, the fuel light in his truck came on. As he filled up at the gas station, he noticed a shoe store across the street advertising a special on men’s work boots. As his own pair was starting to wear down, he went to buy a pair. Then, he went to the hardware store. Once inside, he remembered his tractor needed a tune-up, so he bought the equipment he needed and drove home. Upon arriving, the sound of clucking hens reminded him to collect their eggs. After finishing that, he turned his attention to his tractor. By the time he finished, the afternoon was making way for the evening. “Still time to fix the fence,” he thought, when he realized he’d never actually bought the nails. So, back to town he went to get more.
The stars were out by the time he finally fixed the fence. Exhausted, the farmer went inside and kicked off his boots. But just as he sat down, his wife asked him why they had no fresh milk. Groaning, the farmer rubbed his eyes and wondered why there was never enough time in the day to do what needed doing.

This is an extreme example – and obviously no self-respecting farmer would work like this – but it illustrates an important point. Too often, many people start the day – or the month, the year, or even an entire phase of their life – with a goal in mind, only to be distracted and side-tracked. The result?

We fail to achieve what we originally set out to do.

We fail to realize our most cherished dreams.

There are two main culprits behind this.

1) We don’t plan ahead. In the story above, the farmer probably would have felt a lot better about his day if he’d laid out a plan. But instead, he started going around in circles, always making decisions based on what he saw right in front of him.  Many people do this with their finances, too. For instance, maybe you decide it’s time to pay off your debt. But then you notice the roof needs repaired, so you pay for that. Then you get frustrated because your personal computer is old and slow, so you buy a new one. By that time, your money is running low, so you decide to just wait until your tax refund comes. But when the refund comes, you’re burned out from work, so you go on vacation instead. Meanwhile, your debt just grows and grows. When we plan ahead, we can determine what we want to accomplish, what steps it will take to get there, and when and in what order we execute those steps. Done correctly, this ensures we do more of what we actually want to do.

2) We don’t prioritize. This is the culprit many advisors don’t talk about. Let’s take the farmer again. Obviously, everything he did needed to get done – but some things were probably more important than others. The fence, maybe, could have waited. Buying new boots could have waited. Or perhaps he could have made a list of everything he could do without going into town, and a list of everything that required going into town. Then, he could have prioritized which tasks to do first, and in doing so, gotten a lot more done with a lot less effort.

Similarly, taking time to prioritize our goals, needs, and short-term wants helps us get things done with less effort. It ensures that we allocate our time and our money as effectively as possible. For instance, some people may find that investing their money for retirement is a lower priority than starting a rainy-day fund. Others, meanwhile, may get the most bang for their buck if they prioritize minimizing their taxes over, say, earning more money.

Life is hectic, and it seems like we always have a million-and-one things to do. Thankfully, the solution doesn’t always require beating our heads against the wall because we’re trying to “work harder.” Sometimes, the solution is to work smarter – by planning and prioritizing how we spend our time and money.

In the next entry for this series, we’re discussing achieving financial harmony in the home. It’s not typically a subject you hear about from a financial advisor, but Riley Financial Strategies Group always strives to be anything but ‘typical.’ Until then, call us at 412.856.4556 or click here to send a message to discuss today’s topic or anything else on your mind regarding the world of financial wellness!


Things Most Advisors Don’t Tell You #2: Your Most Precious Asset

by Riley Financial Strategies Group

Back in October of last year, Riley Financial Strategies Group introduced the ‘Things Most Advisors Don’t Tell You’ series because we believe achieving the things you care about most requires more than just money. There are certain habits and behaviors that, while not directly related to finance, can spell the difference between reaching your goals or not. In our experience, people rarely hear about these things from their financial advisors. Our belief is applying these lessons makes working towards your goals both easier and more rewarding.

Today, we’re talking about your most precious asset. Do you know what it is? It’s not your house. It’s not your car. It’s not even your investment portfolio. It’s your time. Benjamin Franklin once said, “If time be of all things the most precious, wasting time must be the greatest prodigality, since lost time is never found again, and what we call time enough, always proves little enough.” (Translation: wasting time is very harmful because we don’t get enough time to begin with.)

You’ve probably seen or heard a lot of fancy terms related to your finances. “Asset management,” for example, or “Investment management.” You get the idea. But just as important is the concept of time management, which is, “The act of planning and exercising conscious control over the amount of time spent on specific activities - especially to increase effectiveness, efficiency, or productivity.”1 Look at those words again. Planning. Control. Effectiveness. Productivity. All things that can have a big impact on how much money you have to achieve what you want most.

The art of time management is essentially the art of prioritizing your life. It’s the art of recognizing which activities are most important in terms of reaching your goals. Some activities will bring you closer; others will move you further away. Many activities, of course, will have no effect either way. Let’s call them “A” activities, “B” activities, and “C” activities.

-          “A” brings you closer to your goal.

-          “B” keeps you stationary.

-          “C” moves you further away.

For example, let’s say one of your most cherished goals is to travel to the country your ancestors came from. “A” activities could include creating a plan for getting there, setting aside money specifically for the trip, or learning that country’s language. “B” activities, meanwhile, could be anything from going to the grocery store, to playing a round of golf once a month, or sleeping.

Some examples of “C” activities? How about buying that new $1,000-version of the phone you already have? Or deciding not to plan, but just wing it, instead?

As you can see, “B” and even “C” activities are NOT inherently bad! In many cases, those activities can be fun, rewarding, or even necessary. But when you prioritize “B” activities over “A” activities, or when you spend your time or money mainly on “C” activities, then your most cherished goal will always be a fantasy instead of a reality.

Time management, then, is the process of:

-          Determining what you need to do to get where you want to go. (These are your “A” activities.)

-          Making those activities the first priority on a daily, weekly, and monthly basis.

-          Filling up the remainder of your time with “B” activities after the “A” activities are done.

-          Being very cautious about when you spend time or money on “C” activities.

As you may know, Riley Financial Strategies Group helps people plan for retirement. In our experience, people who don’t practice time management end up planning for retirement this way:

-          First, they dream about what they’d like to do in retirement, and then decide it’ll probably happen “some day.” Then they start thinking about what to do for the weekend.

-          A few months or years later, they read a book or article on retirement planning and think, “This makes sense, I’ll have to get on that     sometime.” Then they turn on the TV.

-          Occasionally, they remember to save or invest a portion of their income, between bouts of buying the latest thingamajig that everyone else seems to have.

-          Then, before they know it, they’re in their sixties, and realize they’re nowhere close to being ready for retirement.

The point is that time is an asset. But like all assets – money, property, personal skills – if you fail to manage it properly, it will go to waste and be lost forever. That’s why, when it comes to accomplishing what really matters, time management is just as important as money management. And that’s something most advisors just don’t bother to tell you. In the next entry in this series, we’ll dive more into the concept of prioritization, and look at why some financial decisions are more important than others. If you have any questions about time management or anything else in the meantime, call Riley Financial Strategies Group at 412.856.4556 or click here to send a message!

1 “Time Management,”, accessed January 17th, 2024.

Questions You Were Afraid to Ask #11: What Does It Mean to Invest in Cash Alternatives?

by Riley Financial Strategies Group

For this month’s entry into the ‘Questions You Were Afraid to Ask’ series, Riley Financial Strategies Group wants to address some questions we’ve been hearing about recent investing trends. You might often see a headline that mentions the word “cash.” Here are some examples just from the last year or so:

“Cash is king again.”

“Warren Buffett sits tight on cash.”

“No more ‘cash is trash’ billionaire hedge fund manager says.”

“How much of an investment portfolio should be in cash?”

Headlines like these often bewilder new investors. But even experienced investors sometimes wonder: “What does it mean to invest in cash?” After all, we don’t usually think of the word “cash” in relation to investing. For most, cash is the paper you keep in your wallet. So, what gives? This is a textbook example of an intelligent question people are often afraid to ask.

There’s good news, though! “Investing in cash” is a fairly simple concept. It means to invest in a type of short-term security for a set period of time in exchange for one or more interest-rate payments. Certificates of deposit (CDs), money market accounts, and treasury bills are three examples. These securities are known as “cash alternative” investments, but the word “cash” alone is often used as an umbrella term to cover all the various types. That’s because these types of investments tend to be very liquid.

What does ‘liquid’ mean? Simple - the funds inside them can be converted to actual cash you can spend at a moment’s notice. This process is much quicker and easier compared to stocks, bonds, or investment accounts like a 401(k) or IRA. Stocks and bonds aren’t always easy to sell, and depending on the timing, you may sell for a lower amount than what you paid for. Meanwhile, withdrawing the money from an IRA or 401(k) before you retire can trigger financial penalties from the government.

That’s why these types of securities are referred to as “investing in cash alternatives.” They still provide a return – hence the investing part – but also a level of liquidity close to actual, physical currency.

Cash alternatives are may be appropriate if you have money that you:

  • Want stability. Money markets and certificates of deposit are historically stable investments and are often insured up to a certain point by the federal government.

  • Want to earn a return. In the form of interest rate payments, which are typically higher than with a basic savings account.

  • Want easy access within a relatively short period of time. Most money markets have a maturity of six months or less. Treasury bills mature within one year or less. CDs, meanwhile, usually have a maturity of 6 months to a few years.

That said, there are some downsides to investing in cash alternatives. For one thing, if your focus is on growing your money, there are typically much better options. That’s why many investors often shun putting too much money into cash. They feel there are more productive ways to invest. There are also concerns about diminishing purchasing power over time due to inflation. And while they are very liquid compared to other securities, there are still penalties if you withdraw the money from a CD before maturity. Money markets don’t have an early withdrawal penalty, but many banks and credit unions will charge monthly fees if the balance falls below a certain minimum.

With all this in mind, why have we seen so many headlines about “cash” in recent years? It all has to do with interest rates. As you probably know, the Federal Reserve has been gradually hiking rates for much of the past two years to bring down inflation. When the Fed raises rates, banks and credit unions usually follow suit. As a result, some cash investments have been paying higher interest rates than normal. This, coupled with a volatile stock market, has caused cash alternatives to gain in popularity with some investors.

How long this trend continues is impossible to know. And it’s worth emphasizing that cash, like all securities, is an investment that is sometimes right for some people in some situations…not always right for all people all the time. If you are interested in cash investments, call Riley Financial Strategies Group at 412.856.4556 or click here to send a message! In the next entry in our series, we’ll look at another recent investing trend. Happy Holidays!

Cash alternatives typically offer lower rates of return than longer-term equity or fixed-income securities and provide a level of liquidity and price stability generally not available to these investments.  Some examples of cash alternatives include:  Bank certificates of deposit; bank money market accounts; bankers’ acceptances, federal agency short-term securities, money market mutual funds, Treasury bills, ultra-short bond mutual funds or exchange-traded funds and variable rate demand notes.  Each type of cash alternatives have advantages and disadvantages which should be discussed with your financial advisor before investing.


Questions You Were Afraid to Ask #10: What are the Pros and Cons of Investing Apps?

By Riley Financial Strategies Group

In the past nine entries of ‘Questions You Were Afraid to Ask,’ Riley Financial Strategies Group has discussed the essentials of how the markets work, the differences between various types of investment funds, and the ins and outs of stocks and bonds. The core concept has always been that the only bad question is the one left unasked.

A few months ago, however, an acquaintance of one of our team members asked us a question not about investments but investing itself. Specifically, she wanted to know our thoughts on the modern trend of using mobile investing platforms — aka “investing apps.”

It’s a terrific question, because the use of such apps — and the number of apps available — has exploded in the past few years. So today, we’re exploring the pros and cons of these new popular apps.

Definitions first: mobile investing apps enable people to buy and sell certain types of securities right from their phone. They have provided investors of all types and skill levels with a quick and easy way to access the markets. For new investors who are just getting started, these apps have made the act of investing more accessible than ever before.

That’s a good thing! Even today, many people only invest through an employer-sponsored retirement account, like a 401(k). That’s because they may lack the resources, confidence, or ability to invest in any other way. But not everyone has access to a 401(k). And while 401(k)s are a great way to save for retirement, many people have other financial goals they want to invest for, too. Mobile apps provide a handy, ready-made way to do just that.

Continuing with the accessibility theme, many apps enable you to invest right from your phone, anytime, anywhere. In addition, many apps don’t require a minimum deposit, so you can start investing with just a few dollars. Finally, the most popular apps often charge extremely low fees – or even no fees at all – to buy or sell stocks and ETFs.

Many apps also come with features beyond just trading. Some apps will help you invest any spare change or extra money, rather than let it simply lie around in a bank account. Others enable you to invest automatically – daily, weekly, bi-weekly, monthly, etc. That’s neat because investing regularly is a key part of building a nest egg.

It's no surprise, then, that these apps have skyrocketed in popularity. In fact, app usage increased from 28.9 million in 2016 to more than 137 million in 2021.1 Part of this surge was undoubtedly due to the pandemic. With social distancing, many used the time to try new activities and learn new skills from the safety of their own home…investing included.

But before you whip out your phone and start trading, there are some important things to know first. Investment apps come with definite advantages - but also some unquestionable downsides. When you think about it, an app is essentially a tool. Like any tool, there are things it does well, but also things it can’t do at all. And, like any tool, it can even be dangerous if misused.

The first issue: the very accessibility that makes these apps so popular is also what makes them so risky. When you have a tool that provides easy, no-cost trading, it can be extremely tempting to overuse it. Researchers have found that this temptation can lead to overly risky and emotional decision-making, as investors try to chase the latest hot stock or constantly guess what tomorrow will bring.2 The result: Pennies saved on fees; fortunes potentially lost on speculation.

The second and biggest issue is that while these apps make it easy to invest, they provide no help with actually reaching your financial goals. No app, no matter how sophisticated, can answer your questions. Especially when you don’t even know the questions to ask. No app can hold your hand and help you judge between emotion-driving headlines and events that necessitate changes to a portfolio. No app can help you determine which investments are right for your situation. Just as you can’t hammer nails with a saw, or tighten a bolt with a screwdriver, no app can help you plan for where you want to go and what you need to get there.

Take a moment to think about the goals you have in your life. They could be anything. For instance, here are a few Riley Financial Strategies Group’s clients have expressed to us over the years: Start a new business. Visit the country of their ancestors. Support local charities and causes. Design and build their own house. Play as much golf as possible. Volunteer. Visit every MLB stadium. Send their kids to college. Read more books on the beach. Tour national parks in a motorhome. Spend time with family.

Achieving these goals often requires investing. But there is more to investing than just buying and selling stocks. More to investing than simply trading. Investing, when you get down to it, is the process of determining what you want, what kind of return you need to get it, and where to place your money for the long term to maximize your chance of earning that return. It’s a process. A process that should start now, and last for the rest of your life. A process that an app alone cannot handle – just as you can’t build a house with only a saw.

All in all, investment apps are tools, and for some people, very useful tools. But they should never be the only ones in your toolbox. If you’re curious about investing with apps yourself, don’t hesitate to reach out to Riley Financial Strategies Group at 412.856.4556 or click here to send a message! For the next entry in this series, we’ll look at two other modern investing trends.

1 “Investing App Usage Statistics,” Business of Apps, January 9, 2023. "”

2 “Gamified apps push traders to make riskier investments,” The Star, January 18, 2022. “”


Things Most Financial Advisors Don’t Tell You #1: The Importance of Avoiding Burnout

WHEN IT COMES to helping people reach their goals, most financial advisors tend to focus on areas like investing, tax planning, and other money-related topics. Riley Financial Strategies Group (RFSG) is no exception. After all, these things are critically important if you want to save for retirement, start a business, travel the world, or simply leave a legacy for your family.

However, we have also learned a very valuable lesson: Achieving the things you care about most requires more than just money. There are certain habits and behaviors that, while not directly related to finance, can spell the difference between reaching your goals or not. The problem is, people rarely hear about these behaviors from their clients.

While we’re not life coaches, we’ll be sharing some non-financial lessons we’ve learned over the next few blog posts in our series called “Things Most Financial Advisors Don’t Tell You.” Applying these lessons can make working towards your goals both easier and more rewarding. First we’ll be tackling a buzzword you hear a lot nowadays – burnout.

Burnout is a “physical or mental collapse caused by overwork or stress.” Anyone who has ever worked a demanding job or raised children has probably experienced it at some point or another. But what does this have to do with your financial goals?

In a word: Everything. We call it “working towards your financial goals” because it’s a lot of work! It’s not uncommon to take decades to accomplish what you value most. During that time, you may work at the same job for many years. Or you may change jobs frequently. You may set aside money for the future only to be forced to use it when times are tough. As a result, there may be occasions where the daily grind just doesn’t seem like it’s getting you anywhere. In other words, you get burned out.

Some common symptoms of burnout include:

·         Fatigue that just doesn’t seem to go away.

·         An inability to complete projects, or get started on new ones.

·         Apathy about your job or your goals.

·         An increase in addictive behavior (like eating unhealthy foods or watching too much TV).

·         A drop in efficiency, competence, or productivity in your work.

From a financial standpoint, this matters because people who are burned out often start making short-term decisions that delay their long-term goals. For example, instead of investing for the future, they start spending more on instant gratification. Instead of planning ahead and being proactive, they procrastinate. Instead of making consistent, steady progress towards the things they want most, they get side-tracked by things they only want right now. At Riley Financial Strategies Group, we try to teach our clients how important it is to do everything you can to avoid burnout. Here are a few methods we’ve found effective:

Take the idea of time management seriously. Time management might seem dry and boring, but in truth, it’s an incredibly useful skill that helps you get more out of your day while doing more of what you love! There are several methods, but most have one thing in common: Setting aside specific times and time limits for specific activities every day.

Take smart vacations. Going on vacation is a common remedy for burnout, but some vacations are more therapeutic than others. If you’re trying to avoid burnout, don’t go somewhere far away that you’ve never been to. Those types of destinations, while rewarding, can also cause a lot of stress. (Ever wanted a vacation from your vacation?) Instead, revisit somewhere you know you’ll enjoy and have little trouble navigating.

Make physical and mental health your first priority. Take power naps every day. Work out. Eat healthy. Schedule times to pursue your passions. The more you take care of yourself, the more armored you’ll be against burnout. After all, you shouldn’t have to wait until retirement to start enjoying life!

Delegate/ask for help. Burnout is often a result of trying to do too much by yourself. While society often lauds “the rugged individual” or “do-it-yourself” types, the truth is, you are not alone. Don’t hesitate to delegate responsibilities to family members or ask neighbors and coworkers for help with projects! It can make a huge difference in avoiding burnout.

All in all, working towards your financial goals requires a lot more than just money. Time management, for example, is another critical consideration that we’ll delve further into next time. Your team at Riley Financial Strategies Group is here to help you balance your financial concerns with the rest of your life, so don’t hesitate to call us at 412.856.4556 or click here to send a message

CAR# 0723-02043

Questions You Were Afraid to Ask #9: What Are Bond Yields and Why Do They Matter?

By Riley Financial Strategies Group

LAST TIME ON ‘Questions You Were Afraid to Ask,’ we spoke about almost all common terms associated with bonds except yield. Given that it’s the one you hear the most about in the media, the team at Riley Financial Strategies Group thought we’d dedicate an entire post to the subject!

But first – a super-quick refresher on four of the terms we defined last time. They’ll play a role here, too:

Par Value: This is the amount that must be returned to the investor when the bond matures – essentially, the original investor’s principal. (Many bonds are issued at a par value of $1,000.)

Coupon Rate: This is the bond’s interest rate, paid by the issuer at specific intervals. For instance, let’s say you owned a $1,000 bond with a 10% annual coupon rate. The issuer would then pay you $100 in interest each year until maturity.

Maturity: This is the amount of time until the bond is due to be repaid. A 10-year Treasury bond, for instance, matures 10 years from the date it was issued.

Price: This is the amount for which the bond is traded in the secondary market. Sometimes, bonds trade at their par value, but they don’t have to. For instance, imagine Fred bought a bond from the issuer for $1,000, but trades it to Fran for only $950. The bond’s par value is still $1,000. The price, though, is $950, and is said to be traded at a discount. On the other hand, if Fred trades it for $1,050, then Fran would be buying it at a premium. And if Fran buys it for the same price that Fred originally paid – $1,000 – she would be buying it at par.  

Financial terminology can be like mental soap - slippery and hard to remember. But keeping all these terms in mind, the definition of a bond’s yield is this: The return – or amount – an investor expects to gain until the bond matures. Simple, right? Now we can wrap this up and go about our day.

Not quite! While that may be the definition, the actual ramifications of yield go a bit deeper. To understand this, we first need to understand the most basic way yield is calculated. A bond’s current yield can be found by dividing the bond’s annual interest rate payment (coupon rate) by its price.

For example, imagine Fran buys a bond with a 10% coupon rate for its original $1,000 price. The bond’s yield would be 10%, too.

Now imagine that Frank buys that same bond from Fran a year later – but for $75 more. Since the bond is being traded for more than its par value – in this case, $1,075 – the yield would go down to 9.3%.

After all, if Frank pays more than Fran for the same level of interest rate, he’s getting a lower return on his investment than Fran did, who paid less. However, if the bond trades for less than par – say, $975 – then the yield goes up to 10.25%.

Put simply, yields and bond prices are inversely related. If the price of a bond goes up, its yield will go down. If the price goes down, the yield goes up.

By comparing the current yield of different bonds, you can see which bonds are expected to give more or less of a return on your investment. The higher the yield, the better the expected return. That doesn’t mean an investor should just look for bonds with the highest yields and call it a day. High-yield bonds tend to come with more risk than low-yield bonds do. Issuers with lower credit ratings will often pay higher interest rates, since there is some risk they won’t be able to repay the principal by the time the bond matures. Investors must always balance risk versus reward when choosing where to put their money, and that holds true for bonds, too.

Analysts and economists use yields to project which direction interest rates will move in the future…and by extension, the overall economy. That is why you hear so much about bond yields in the media. When interest rates are expected to rise, bond prices tend to go down. That’s because an existing bond’s coupon rate will no longer be as attractive as that of a new bond, meaning the owner would need to sell the bond at a discount.

Conversely, when interest rates are expected to fall, bond prices rise. For that reason, when yields rise across the entire bond market, analysts often see it as a signal that interest rates may rise soon, too. Furthermore, when the yield on short-term bonds rises above that of long-term bonds, this can indicate that investors are concerned about a possible recession.

High-yield bonds, also known as junk bonds, are subject to greater risk of loss of principal and interest, including default risk, than higher-rated bonds. Investors should not place undue reliance on yield as a factor to be considered in selecting a high yield investment.

Sometimes, the world of investing is more complicated than it needs to be. You will often see terms like “yield” thrown about in the media without any explanation or context. So don’t feel bad if you haven’t grasped or retained everything in this series. We’ve barely just scratched the surface, and even experienced investors can find this lingo to be confusing and intimidating. At Riley Financial Strategies Group, we believe investing shouldn’t be either of those things. You just need to help someone to help translate it into English. Next time we’ll be moving away from bonds and tackle some of the things financial advisors don’t tell you. In the meantime, if you need anything from this blog (or anything else!) clarified, reach out to us at 412.856.4556 or click here to send a message!

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Planning for the Ultimate Vacation

By Riley Financial Strategies Group

THERE’S A LOT that goes into planning a summer vacation. Rentals, lodging, activities, travel arrangements all must be considered. As our staff at Riley Financial Strategies Group (RFSG) shared stories of prepping for their trips, it got us wondering – what if people put as much time into planning their retirement as they did their vacations?

Unfortunately, most people don’t. That’s a problem - the average vacation only lasts a few weeks. Retirement, on the other hand, can span decades; which can make planning for it seem intimidating! However, the real terror would be to retire without a plan.

Fortunately, it’s easy to get started—and some aspects of retirement planning can actually be fun! When you get right down to it, all you really have to do is apply the principles of good vacation planning to your retirement.

Vacation Planning

Tip #1: Make a list of places you want to visit. Write down the activities you want to do in each location, and what you like about them.

Tip #2: Rank these places in order of how important each one is to you.

Tip #3: Determine your budget. Factor in travel, hotel, and food costs. Then determine how much it will cost to do the various activities you listed in Tip #1. Don’t forget to include how much you plan to spend on souvenirs and things like that.

Tip #4: After determining what your vacation will cost, calculate your current budget by adding up your income minus expenses. Whatever’s left is what you have, to put towards your vacation.

Tip #5: Go online, consult with a travel agent, or check out a travel book and try to find ways to bring your costs down. Savvy vacationers can find deals, coupons, and tour companies that really make a trip easier on your wallet.

Tip #6: Book your vacation!

Retirement Planning

Tip #1: Make a list of goals you want to pursue during retirement. Write down why they’re important to you.

Tip #2: Rank these goals in order of how important each one is to you. Have fun with these first two steps.

Tip #3: Determine your budget. First start with expenses; where do you want to live, and how much will it cost to live there. What are your utilities like? What medical costs do you anticipate having? What debts do you owe? Finally, estimate how much it will cost to pursue the goals you listed in Tip #1. (It’s okay if it’s a rough estimate.)

Tip #4: Calculate your current budget by adding up your income minus expenses. Whatever’s left is what you have, to put towards your retirement on a monthly basis.

Tip #5: Get together with Riley Financial Strategies Group and bring everything you’ve written down so far. We can discuss possible ways to further fund your retirement, whether it’s through investing or something else.

Tip #6: Set your retirement date!

While planning a vacation and planning for retirement aren’t exactly the same, they’re not too far apart either. In the end, what’s really important is that people devote the same energy to their retirement as they do their summer excursions. For both, the solution is the same: Plan ahead, don’t wing it. After all, planning a vacation is great for spending a few weeks in the sun, but planning for retirement can lead to a holiday that lasts for years. Don’t know where to start? Call us 412.856.4556 or  click here to send a message!

Questions You Were Afraid to Ask #8: What on Earth do all these Bond Terms Mean?

By Riley Financial Strategies

ONE COMMON FRUSTRATION investors have is dealing with all the terms and jargon used in the finanical industry. Ever hear two Wall Street types talking? It can be like listening to a bad episode of Star Trek! As we covered the difference between the various types of bonds in our last blog post, today we’ll demystify some of the intimidating bond-related lingo you hear in financial news.

To recap, when you buy a bond, you are lending money to an issuer. In return, the issuer promises to pay you a specified rate of interest on a regular basis, and then return the principal when the bond matures. In this paragraph alone, we can find four common terms: issuer, par value, coupon rate, and maturity.

Issuer: This is the entity that “issued” the bond to borrow money. Generally, issuers include local and state governments, the U.S. Treasury, and corporations. Whoever it is, it’s their responsibility to make interest payments and repay the amount you initially loaned. That brings us to:

Par Value: This is the amount that must be returned to the investor when the bond matures – essentially, the investor’s principal. (Many bonds are issued at a par value of $1,000.) Note that it doesn’t matter whether the bond matures in 10, 20, or 30 years. Whenever that time is up, the issuer would still pay back the initial par value. You may also occassionally see the term “face value” instead of par.

Coupon Rate: This is the bond’s interest rate, paid by the issuer at specific intervals. For instance, let’s say you owned a $1,000 bond with a 5% coupon rate. The issuer would then pay you $50 in interest each year until maturity. (Note that some bonds pay interest semiannually. In such cases, you would be paid $25 every six months, which of course equals the same $50 in interest per year.)

You may be wondering how coupon rates are determined. There are two main factors: the amount of time to maturity, and the credit rating of the issuer. Typically, bonds that take longer to mature come with higher rates. After all, investors want compensation for not getting their principal back until later. Conversely, bonds with shorter maturities usually pay lower interest rates. Furthermore, if the issuer has a low credit rating – meaning there is some risk that they may not be able to repay their creditors – they will usually pay higher interest rates to compensate for the additional risk.

So, why is it called a “coupon” rate? Once upon a time, investors were given actual, physical coupons to redeem to collect their interest payments.

Maturity: You may have already figured this one out. Maturity is the amount of time until the bond is due to be repaid. A 10-year Treasury bond, for instance, matures 10 years from the date it was issued.

Rating: As mentioned, some issuers have higher or lower credit ratings. An issuer rating signifies the bond’s credit quality. Here in the United States, there are three main rating services: Standard & Poor’s, Moody’s Investor Services, and Fitch Ratings Inc. Each agency rates bonds based on the issuer’s potential ability to pay both interest and principal in a timely fashion.

Price: Hopefully, all these terms have been easy to understand, because here is where things get a little tricky. As you know, bonds can be traded on the open market. For example, let’s say Fred buys a bond, but before it matures, decides to sell it to Fran. The “price” is the amount for which the bond is traded. Sometimes, bonds trade at their par value, but they don’t have to be. For instance, imagine Fred bought his bond for $1,000, but trades it to Fran for only $950. The bond’s price, then, is $950, and is said to be traded at a discount. On the other hand, if Fred trades it for $1,050, then Fran would be buying it a premium.

Why would a bond’s price differ from its par value? Most of the time, it is due to rising or falling interest rates. For example, if interest rates around the country rise above what they were when the bond was issued, that bond would no longer be as valuable. That’s because the old bond’s coupon rate would be lower than what an investor could get if they bought a new bond. Hence, if Fred wanted to sell his bond before maturity, he would have to do so at a discount.

There is one final bond-related term you should know – yield. In fact, this is probably the one you’re most likely to hear about in the media. It is also (unfortunately) a little too complex to define in a pargaraph or two, so it’ll be the sole subject of next month’s blog.

While we hope this clarifies some of the lingo around bonds for you, we definitely understand if you have more questions! Don’t hesitate to call 412.856.4556 or click here. Most of the concepts aren’t really that complex once you translate them into plain English – which Riley Financial Strategies Group is always happy to do!

This information is hypothetical and is provided for informational purposes only. It is not intended to represent any specific return, yield, or investment, nor is it indicative of future results.

Investments in fixed-income securities are subject to market, interest rate, credit and other risks. Bond prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can cause a bond’s price to fall. Credit risk is the risk that an issuer will default on payments of interest and/or principal. This risk is heightened in lower rated bonds. If sold prior to maturity, fixed income securities are subject to market risk. All fixed income investments may be worth less than their original cost upon redempition or maturity.

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Questions You Were Afraid to Ask #7: What’s the Difference Between All These Types of Bonds?

By Riley Financial Strategies Group

ONE OF OUR core beliefs at Riley Financial Strategies is that stupid questions simply don’t exist. That very belief is what drove us to create our ‘Questions You Were Afraid to Ask’ blog series. A few entries back, we explored the differences between stocks & bonds. Today, we’re delving deeper in the different kinds of bonds – Corporate, Municipal, and U.S. Treasuries.


When you buy a bond, you are lending money to the issuer – generally a company or a government. In return, the issuer promises to pay you a specified rate of interest on a regular basis, and then repay the principal when the bond matures after a set period of time.

As you know, the markets had a very up-and-down year in 2022. Whenever that happens, many investors start showing renewed interest in bonds, because they tend to be less volatile than stocks. This interest may continue in 2023. But there are several types of bonds to choose from, each with different characteristics. As all these options can be confusing, Riley Financial Strategies Group has created a brief overview of the main types from which to choose.

Corporate Bonds

Corporate bonds are issued by both public and private corporations. Companies use the proceeds from bond sales to buy new equipment, invest in new research, and expand into new markets, among other reasons. These bonds are usually evaluated by credit rating agencies based on the risk of the company defaulting on its debt.

Based on their credit ratings, corporate bonds can be: Investment-grade and High-Yield. Investment-grade bonds come with a higher credit rating, implying less risk for the lender. They’re also considered more likely to make interest payments on time than non-investment grade bonds.

High-yield bonds have a lower credit rating, implying higher risk for the investor. These are typically issued by companies that already have more debt to repay than the average business or are contending with financial issues. Newer companies may also issue high-yield bonds because they simply don’t have the track record yet to garner a high credit rating.

In return for this added risk, high-yield bonds typically pay higher interest rates than investment-grade bonds. In short, investment-grade implies lower risk for a lower return; high-yield implies higher risk for a higher return.


Municipal bonds, or “munis”, are issued by states, cities, counties, and other government entities so that entity can raise funds. Sometimes these funds are to pay for daily operations like maintaining roads, sewers, and other public services. Sometimes the funds are to finance a new project, like the building of a new school or highway.

The two most common types of municipal bonds are: Revenue bonds and general-obligation bonds. Revenue bonds are backed by the revenues from a specific project, such as highway tolls. The latter are not secured by any asset however are instead backed by the “full faith and credit” of the issuer, which has the power to tax residents in order to pay bondholders, should that ever be necessary.

In other respects, muni-bonds work similarly to corporate bonds in that the holder receives regular interest payments and the return of their original investment. But they do come with one additional advantage, in that the interest on muni-bonds is exempt from federal income tax. (It may also be exempt from state and/or local taxes if the holder resides in the state where the bond is issued.) However, muni-bonds often pay lower interest rates than corporate bonds do. Also, certain municipal bonds are subject to the federal alternative minimum tax (AMT).

U.S. Treasuries

Treasury bonds are the types of bonds you usually hear about in the news. As the name suggests, these are issued by the U.S. Department of Treasury on behalf of the federal government. They carry the full faith and credit of the government, which has historically made them a very stable and popular investment. In fact, U.S. treasuries tend to be so stable that economists often use them as a bellwether for the overall health of the entire economy.

There are several types of U.S. Treasury bonds. Treasury Bills are short-term bonds that mature in a few days to 52 weeks. Treasury Notes are longer-term securities that mature in terms of 2, 3, 5, 7, or 10 years. Finally, actual U.S. Treasury Bonds typically mature every 20 or 30 years. Both Notes and Bonds pay interest every six months.

Finally, we have Treasury-Inflation-Protected Securities, or TIPS. These are notes and bonds whose principal is adjusted based on changes in the Consumer Price Index, which tracks inflation. Interest payments are made every six months and are calculated based on the inflation-adjusted principal. That means if inflation goes up, so too does the principal in the bond…thereby increasing the amount of interest that is paid. However, if inflation goes down, the principal does too, thereby decreasing the interest rate.


We’ve only really scratched the surface on bonds here, so if you have any further questions, please don’t hesitate to call us at 412.856.4556 or click here! For our next entry, we’ll explore the terms you often see associated with bonds that many investors find confusing.

Investments in fixed-income securities are subject to market, interest rate, credit and other risks. Bond prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can cause a bond’s price to fall. Credit risk is the risk that an issuer will default on payments of interest and/or principal. This risk is heightened in lower rated bonds. If sold prior to maturity, fixed income securities are subject to market risk. All fixed income investments may be worth less than their original cost upon redemption or maturity.

U.S. government securities are backed by the full faith and credit of the federal government as to payment of principal and interest if held to maturity. Although free from credit risk, they are subject to interest rate risk.

Although Treasuries are considered free from credit risk they are subject to other types of risks. These risks include interest rate risk, which may cause the underlying value of the bond to fluctuate.


Municipal securities may also be subject to the alternative minimum tax and legislative and regulatory risk, which is the risk that a change in the tax code could affect the value of taxable or tax-exempt interest income.

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Questions You Were Afraid to Ask #6: How Do I Know Which Investment Options are Right for Me?

By Riley Financial Strategies Group

WHEN IT COMES to investing, there’s a lot to know, a lot to consider, and a lot to choose from. And while choice is always a good thing, many investors often come to Riley Financial Strategies Group with their heads spinning because they’re not sure where to start, what to do, or which options to choose. They all come with some variation of our headline question today.

When it comes to this question, we have good news and bad news.

The bad news is that there is no one-size-fits-all answer.

The good news…is that there is no one-size-fits-all answer.

You read that right. To illustrate what we mean, think about your clothing for a moment. Do you buy one-size-fits-all attire? Of course not – and there’s a reason for that. “One-size-fits-all” wouldn’t look very good. It wouldn’t feel very good. And it simply wouldn’t work for every person and every lifestyle.

In life, we have a variety of different clothes we can choose from. We make choices based on several factors.

  • Climate: pants or shorts.
  • Personality: colorful vs dark, brazen vs muted.
  • Employment: jeans or slacks.
  • Figure: from extra-small to extra-large.
  • Occasion: a day at the beach or a day at a wedding

You choose your clothes – and your style – based on what’s right for you. Based on your wants, your needs, and your nature. Investing is much the same. There is no one-size-fits-all. No single “best” option. Only the best for you, based on your wants, your needs, and your nature.

This might seem like a no-brainer, but it’s critical all the same. As an investor, you will often hear the media say otherwise. You will hear people claim that the Dow is more important than the S&P (or vice versa). That stocks are better than bonds, or bonds are safer than stocks. That passive is better than active (or vice versa), or that ETFs are always better than mutual funds (or vice versa). The truth just isn’t that simple.

When determining YOUR answer to that question, Riley Financial Strategies Group has six questions for you to consider. Six questions you must not be afraid to ask. Questions only you can answer. Those questions are as follows: Who, What, When, Where, Why, and How.

Who am I? Are you cautious by nature or a risk-taker? Are you a family-oriented person, or more of a lone wolf? An adventurer or caretaker? Someone with a few simple wants, or big, bold dreams? Or – as many people tend to be – are you a mixture of all these things?

What kind of lifestyle do want? Simple or extravagant? Always trying new things, or staying in your comfort zone? One focused on work and personal accomplishment, or one focused on family and community? Or again – and we can’t stress this too much – a mixture of those things, depending on what stage you’re at in life?

When will I most need money? Do you need it soon because you’re buying a new home or starting a new business? Or do you need it later when you’re about to retire?

Where do I see myself in ten years? Or twenty? Life is all about change and growth. That means you need to ensure you’re investing for long-term growth to reach your long-term goals.

Why do I need to invest? To help send your kids to college? To retire? To see the world? To give to charitable causes? To feel like you always have a safety net?

How will I pay for retirement? This is key. Regardless of your other goals, there’s probably going to come a time when you want to stop working. However, you can’t just pick a day to not show up at work. Retirement creates a massive lifestyle change, one that will be quite upsetting to your finances if you don’t prepare for it.

It’s these questions that should determine the right investment options for you. The types of assets you invest in. How much risk you take on. Whether your portfolio is simple or complex. Active versus passive. You get the idea.

Riley Financial Strategies Group recommends reflecting on each of these questions and calling us at 412.856.4556 or contacting us here for a no-pressure meeting to clarify your answers. Our goal is to tailor you an investment plan as specific as the clothes you wear. A plan designed to get you where you want to be.


Questions You Were Afraid to Ask – Mutual Funds, ETFs, and Hedge Funds

By Riley Financial Strategies Group

Last time on Questions You Were Afraid to Ask, we looked at two categories of investment funds – passively managed funds and actively managed. Regardless of which category you choose to invest in, there are many types of funds within those categories. Many IRAs and 401(k)s will give you the option of choosing from at least two of them, so they’re important to know.

Let’s start with mutual funds, one of the oldest and most common ways that people invest. Here’s how the Securities and Exchange Commission defines mutual funds.

A mutual fund is a company that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt. The combined holdings of the mutual fund are known as its portfolio. Investors buy shares in mutual funds. Each share represents an investor’s part ownership in the fund and the income it generates.1

Mutual funds can be either actively managed or passively managed. Regardless of which umbrella the fund falls under, many investors flock to mutual funds because they offer several potential benefits:
  • Simplification. Instead of devoting time to researching dozens – or even thousands – of individual companies to invest in, the mutual fund does it for you. (Note, of course, that you or your financial advisor should still research which fund is right for you.)
  • Diversification. Mutual funds often invest in a wide range of companies and industries to meet the fund’s stated objective. This could lower your overall risk. If one company/industry does poorly, you may not experience the same kind of loss you would if you had invested all your money in that company or industry.
As with all investments, there are potential issues with mutual funds, though. It can be difficult to understand how the fund actually invests. Mutual funds can differ drastically depending on their objectives, investing style, time horizon, and other factors. Mutual funds are required by law to provide a prospectus to investors that explains how the fund works. However, if you don’t know what you’re looking at, this information may confuse more than enlighten. Furthermore, all of this information is true for ETF and hedge funds as well. This is why it’s important to do your homework.

Mutual funds can also sometimes come with more expenses than other funds. They might include management fees, purchase fees, redemption fees, and tax costs. These expenses can eat into your returns - thereby lowering your overall profit.

Finally, mutual funds may not be a great choice if immediate liquidity is a high priority. All mutual fund trades run at the end of the day. Say you wanted to sell a mutual fund at the beginning of the day hoping to avoid what you think the market will do - you will still get the end of day price. For this reason, some investors utilize Exchange-Traded Funds instead.

Exchange-Traded Funds

ETFs, as they are often abbreviated, differ from mutual funds in a few ways. While they can be actively managed, more often they track the companies in a specific index, similar to an index fund. (Check out the last blog for more information on index funds.) One big difference between a mutual fund and an ETF is the shares each investor has in an ETF can be traded on the open market. That means you can buy or sell your shares in an ETF just like you would an individual stock, unlike with regular mutual- or index funds. That’s a big advantage for investors who value flexibility and liquidity.

Most ETFs also come with lower expenses than mutual funds.2 As well, they fully disclose all holdings held. This makes it easier to see exactly what you are investing in and where you have overlap.

But, of course, nothing’s perfect. Since ETFs can be traded like common stock, that might lead to trading too often. You may find yourself paying more than you anticipated in trading fees. On the other hand, some ETFs are thinly traded, meaning there’s just not a lot of activity between buyers and sellers. This could make it difficult to sell your shares.

Hedge Funds

Most people will never invest in a hedge fund – they’re generally not an option for 401(k)s or IRAs. We’re including them here because we often get asked about them – and for good reason! Hedge funds are often talked about in the media, and they’re the subject of multiple films. While mutual funds and ETFs can be either passive or actively managed, hedge funds are always active. The name comes from the idea that a manager can use a myriad of strategies & tactics to help investors beat the market while “hedging” against risk. Hedge funds often invest in non-traditional assets beyond stocks and bonds, too.

The reason hedge funds are not an option for most investors is because of the huge cost associated with them. You must be an accredited investor ($1 million in total net worth or annual income over 200k) to legally invest directly in a hedge fund. On top of that, you must be willing to stomach paying fees that are much higher than your average mutual fund. All in all, hedge funds may be right for some people, but they’re simply not necessary for the average investor to save for retirement or reach their financial goals.


There’s been a lot of information over our ‘Questions You Were Afraid to Ask’ posts - click here or call us at 800.677.4556 if there’s anything we can clarify or elaborate on further! In the next post in the series, we’re going to look at the most important question of all: How to know which investment options are right for you.

1 “What are Mutual Funds?” Securities and Exchange Commission 

2 “ETFs vs Mutual Funds,” Kiplinger,

Mutual Funds are sold by prospectus. Please consider the investment objectives, risks, charges and expenses carefully before investing. The prospectus, and, if available, the summary prospectus, which contains this and other information, can be obtained by calling your financial advisor. Read the prospectus and, if available, the summary prospectus carefully before you invest.

Exchange-Traded Funds are subject to risks similar to those of stocks. Investment returns may fluctuate and are subject to market volatility, so that an investor’s shares, when redeemed, or sold, may be worth more or less than their original cost. Exchange Traded funds may yield investment results that, before expenses, generally correspond to the price and yield of a particular index. There is no assurance that the price and yield performance of the index can be fully matched.

Alternative investments, such as hedge funds, funds of hedge funds, managed funds, private capital, real assets and real estate funds, are not appropriate for all investors. They are speculative, highly illiquid, and are designed for long-term investment, and not as trading vehicle. These funds carry specific investor qualifications which can include high income and net-worth requirements as well as relatively high investment minimums. The high expenses associated with alternative investments must be offset by trading profits and other income which may not be realized. Unlike mutual funds, alternative investments are not subject to some of the regulations designed to protect investors and are not required to provide the same level of disclosure as would be received from a mutual fund. They trade in diverse complex strategies that are affected in different ways and at different times by changing market conditions. Strategies may, at times, be out of market favor for considerable periods with adverse consequences for the fund and the investor. An investment in these funds involve the risks inherent in an investment in securities and can include losses associated with speculative investment practices, including hedging and leveraging through derivatives, such as futures, options, swaps, short selling, investments in non-U.S. securities, “junk” bonds and illiquid investments. The use of leverage in a portfolio varies by strategy. Leverage can significantly increase return potential but create greater risk of loss. At times, a fund may be unable to sell certain of its illiquid investments without a substantial drop in price, if at all. Other risks can include those associated with potential lack of diversification, restrictions on transferring interests, no available secondary market, complex tax structures, delays in tax reporting, valuation of securities and pricing. An investment in a fund of funds carries additional risks including asset-based fees and expenses at the fund level and indirect fees, expenses and asset-based compensation of investment funds in which these funds invest. An investor should review the private placement memorandum, subscription agreement and other related offering materials for complete information regarding terms, including all applicable fees, as well as the specific risks associated with a fund before investing.


Questions You Were Afraid to Ask: What’s the Difference Between Passively and Actively Managed Funds?

By Riley Financial Strategies Group

Last time in ‘Questions You Were Afraid to Ask,’ we looked at the differences between stocks and bonds. But these days, most “regular” investors – i.e., non-professional – have neither the time nor expertise to research and select individual stocks. (Or bonds, for that matter!) Furthermore, doing so can subject your portfolio to increased risk and unexpected tax consequences. That’s why investors usually rely on a different method: Putting their money into some type of fund. An investment fund is when a group of investors pool their money to invest in the same portfolio of stocks or other securities.

These days, most people invest either through an employer-sponsored retirement plan, like a 401(k), or an Individual Retirement Account (IRA). Either way, this usually involves selecting between one or more funds to invest in. But how do you know which funds to choose? And what’s the difference between them, anyway?

If you’re investing in, say, an IRA, most of the fund choices you’ll see will fall under one of two categories: Passive vs Active. An actively managed fund is exactly what it sounds like: A fund where a manager takes an active role in selecting which securities to buy or sell, and when.

Different managers have varying styles and philosophies. For example, some may specialize in finding companies they believe are undervalued, which means they can be bought at what is believed to be a good price. Others may try to find companies they think are likely to grow by a significant amount. Some managers may specialize in certain industries or market sectors. Either way, with active management, you are paying for one of two things:
  • The possibility that the fund will “outperform” the market. This means the fund could do better over a specified period than a benchmark index – like the S&P 500 – that it measures against.
  • The possibility that the manager will be able to protect you against undue risk or limit losses during times of market volatility. (Note that this more generally fits the purpose of hedge funds than the standard mutual funds you’ll usually see in your IRA or company 401(k). We’ll cover these types of funds in the next blog!)
The possibility of outperforming the market comes with some tradeoffs, however:
  • Actively-managed funds often come with more – and higher – fees than passively managed funds. That’s because the manager must charge for his or her services.
  • While it’s possible for a manager to outperform, it’s also possible to “underperform.” When that happens, you are essentially paying more for less.
Now, let’s look at passively managed funds. Here, there is no “active” or research-based management decisions to the buying or selling of holdings. Instead, the fund invests in a specifically designed portfolio and then stays put. The fund may “rebalance” at some other set time frame, often quarterly or annually. This is to reset to its original objective or to match its index better. Otherwise, everything is held for the long-term.

These days, many passive funds are index funds. This is when the fund’s portfolio is built to try to match a target index. So, if you essentially want to replicate a broader stock market - like the S&P 500 - index funds could be the way to go.

Passive funds come with the following advantages:
  • Typically, much lower cost, especially with index funds. Because there’s nobody actively picking stocks, the fund could come with fewer expenses, and thus, lower fees.
  • However the target index performs - with occasional variances - that’s how you’re likely to perform, too. Given that indices like the S&P 500 have historically risen in value over the long-term, that could make index funds a good option for those who want to invest and forget it for a long period of time.
On the other hand…
  • There’s little chance of outperforming the market. That’s an issue if you need more aggressive returns. In addition, index funds come with no specific protection against extreme volatility.
Note that when you make your selections in a 401(k) or IRA, you can tell whether a fund is active or passive by reading its summary. I should also note that passive vs active doesn’t have to be a binary choice. Many investors take advantage of both options in their portfolio!

Click here or call us at 800.677.4556 to learn more about how Riley Financial Strategies Group utilizes both active and passive strategies to help our clients meet their goals. Next time, we’ll be covering the many types of funds within these two categories, including mutual funds, hedge funds, and exchange-traded funds!

Wells Fargo Advisors Financial Network did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors Financial Network or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy.


Questions You Were Afraid to Ask: Stocks vs Bonds

By Riley Financial Strategies Group

In the last entry of our ‘Questions You Were Afraid to Ask’ series, we spoke about the difference between the stock market indices known as the S&P 500 and the Dow Jones. But what is a stock, exactly? Even folks with a lot saved for retirement aren’t always sure.

Many Americans may have heard of different investment types – or asset classes, as they are also known – without truly knowing how they differ, or what the pros and cons of each type are. Over the next few entries, we’ll break down some of the most important investment types, starting with the two most well-known.

Today’s Topic: What’s better, stocks or bonds?

When you purchase a bond, you are essentially loaning a company, government, or organization money. When you buy stock, you are purchasing partial ownership in a company. For this reason, stocks are equity investments while bonds are debt investments.

How Stocks Work

When you buy a company’s stock, you buy a share in that company – and the more shares you buy, the more of the company you own. Generally speaking, stocks can be held for as short or as long of a time as you wish, but many experts recommend holding onto your shares for a longer-term if you anticipate their value will rise over time.

For example, let’s say ACME Corporation – which makes roadrunner traps – sells their stock for $50 per share. You invest $5000 into the company, which means you now own 100 shares. Now, fast forward five years. ACME’s business has grown, investors like what they see, which consequently puts their stock in higher demand. As a result, the stock price is now $75 per share. Because you own equity in the company, you benefit from its growth, too – and your investment is now worth $2,500 more, for a total of $7,500.

The Pros and Cons of Investing in Stocks

Every investment has its strengths and weaknesses, and stocks are no exception. The single biggest benefit to investing in stocks is that, historically, they outperform most types of investments over the long term. Because stocks represent partial ownership in a business, finding a strong company that performs well over the course of years and decades can be a powerful way to save for the future. Additionally, stocks are a fairly liquid investment. That means it can potentially be easier to both buy and sell them whenever you need cash. Many other investment types, like bonds, can be more difficult or costly to sell, in some cases locking you in for the long term.

But these pros are just one side of a double-edged sword. The possibility of a higher return comes with added risk. While the stock market has historically risen over the long-term, individual stock prices can be extremely volatile, climbing and falling daily, sometimes dramatically. For example, a company could underperform or even fail altogether. As the saying goes, risk nothing, gain nothing – but it’s equally true that if you risk too much, you can leave with less.

Furthermore, to actually realize any gains you’ve made (or cash out a potential increase in value), you must sell your stock, which can trigger a significant tax bill.

How Bonds Work

While they can rise in value and be sold for a profit, bond holders are generally hoping for something a bit more predictable: Fixed income in the form of regular interest payments.

Bonds are a loan from you to a company or government. That loan might last days or years – sometimes even up to 100 years – but when the bond matures, the company pays you back your initial investment. In the meantime, the company typically pays you regular interest, just like you would when you take out a loan. Depending on the type of bond you buy, these payments can be annual, quarterly, or monthly. Interest payments are why investors often look to bonds as a source of income.

The Pros and Cons of Bonds

Income isn’t the only “pro” when it comes to bonds. Bonds tend to be less volatile than stocks. Also, since the company that issued the bond is technically in your debt, you would be among the first in line to get at least some of your money back even if the company enters bankruptcy. That’s not the case with stocks.

However - just because bonds are less volatile doesn’t mean they’re risk-free. Bonds may rise or fall in face value as interest rates change. Face value is typically calculated by seeing what others would likely be willing to pay to take over that debt from you. If you bought a bond in Year 1 only to see interest rates go up in Year 2, the value of your bond will likely fall. That’s because you are missing out on the higher interest rate payments you would have had if you bought the bond in Year 2 instead. In that case, if you wanted to sell your bond before it reached maturity, you would probably have to settle for a lower price than what you initially paid.

Stocks and Bonds Together

All in all, stocks and bonds each have different advantages and disadvantages. The truth is: Neither is “better” than the other. In reality, stocks and bonds are actually considered complementary. Each brings something to the table the other doesn’t. Furthermore, stocks and bonds are what’s known as non-correlated assets, which means they don’t necessarily move in tandem. When the stock market falls, it doesn’t mean bond values will fall, too. They may, in fact, go up. The inverse is also true.

(Understand that this kind of non-correlated movement is not guaranteed. The point of diversifying between both stocks and bonds is to help mitigate risks.)

Obviously, there are a lot more to stocks & bonds than just what is listed here. The idea is to help you distinguish between these two important asset classes and why it’s important to consider both when it comes to investing for the future. What questions do you still have? Click here or call the Riley Financial Strategies Group at 800.677.4556 to get our insights! And stay tuned for our next subject – solving the problem of choosing which stocks and bonds to buy by putting money in funds.


Questions You Were Afraid to Ask – Pricing Differences in the S&P 500 & Dow

By Riley Financial Strategies Group

In our first edition of our ‘Questions You Were Afraid to Ask’ series, we explored how different stock market indexes track different things. For example, the Dow tracks the performance of 30 of the most prominent companies listed on stock exchanges in America. (Think Apple, Coca Cola, and Walmart.) The S&P 500, meanwhile, measures 500 of the largest companies listed on the American stock exchanges.

But why is the Dow’s total price so much higher than the S&P? The latter contains hundreds more companies! The answer has to do with how these two indices are calculated. So, for the second edition of our ‘Questions You Were Afraid to Ask,’ series, we’re doing some math.

Today’s Topic: “Why is the price of the Dow so much higher than the S&P 500?”

The Dow

The Dow, for example, is calculated by taking 30 stocks in the average, adding up their prices, and then dividing the total by the “Dow Divisor.” Early in the Dow’s history, this divisor was simply the number of companies within the average. Today, the divisor is adjusted regularly to factor in changes to the list of companies, stock splits, and other events that could have an impact on the overall average.

As of this writing, the Dow Divisor is 0.15172752595384.1 Since the divisor is less than one, that means it technically functions as a multiplier. Seems counterintuitive, but that’s math! In effect, calculating the Dow’s value essentially means multiplying the sum of each company’s price by roughly 6.5. Every $1 change in price to a particular stock within the Dow equates to a movement of 6.59 points on the Dow.

This multiplication effect is partly why the Dow’s value is so much higher than the S&P 500’s. You see, even though the S&P contains hundreds more companies, its overall price is lower because of how it’s weighted.

Weighted vs Unweighted Indexes

In an unweighted index, every company has the same impact on the overall index, no matter its price or how many shares are available. The price of the index is determined by simply adding up every company’s stock price, then dividing by the total number of companies in the index. For example, imagine an unweighted index containing only three companies. If Company A went up 15%, Company B went up 10%, and Company C went up 5%, the index itself would be up 10%. (15+10+5=30, and 30 divided by 3 equals 10.)

Still with us?

Most indices don’t work like this, however. That’s because not all companies are equal. Some are worth much more than others or have a much higher volume of shares available to buy or sell. For that reason, a simple mean average is a pretty unnuanced way of looking at the overall index. This is also why most indices are weighted. This means the average is calculated by putting more importance – or weight – on some numbers than others. It’s a more accurate way of looking at data.

Calculating the S&P 500

The S&P is a capitalization-weighted index. (The Dow, by contrast, is a much simpler price-weighted index.) Each company is weighted according to its market capitalization, which is the company’s share price multiplied by the number of shares available to buy or sell. Some companies are simply bigger than others, which typically means they have more outstanding shares – giving them a higher market capitalization and more weight within the S&P 500. The result? The price movement of these companies has a much bigger impact on the S&P than that of smaller companies.

For these reasons, the divisor that the S&P 500 uses is much higher than for the Dow. In fact, it’s currently higher than 8,000.2 The equation the S&P uses is much more complex, so we’ll spare you the algebra! This is all done to keep the value of the index down to a more manageable level, and to prevent the price movement of a few companies from having an even bigger impact on the overall index than they already do.

Wrapping Up

Whew! That was a lot of information to cover in one blog post, wasn’t it? This has also been a much more technical post than we usually try to write. But we hope it gave you a glimpse into the numbers you see reported every day in the news. That way, when the media says, “The Dow finished at X today,” or “The S&P 500 opened at Y”, you’ll have a better understanding of what that actually means. Because, after all, that’s a big part of what life is all about, isn’t it? Increasing our understanding of how the world works – and why.

Next time, we’ll cover a simpler – but broader – topic: The difference between stocks, bonds, funds, and other types of investments. If you have further questions about today’s topic or would like us to demystify any other questions you have, call 800.677.4556 or click here!

1 “Market Lab” from November 8th, retrieved on 11/17/22.

2 ”S&P 500 Divisor”, YCharts,
CAR # 0123-00373

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