Smart MoneyInsights

January 2013 Vol. No. 1 Investment Updates

Personal Note from Steve Stanganelli

Welcome to a New Year.

With the elections behind us andthe holidays over, now is a goodtime to get a fresh look andpossibly a fresh start at yourfamily's finances. This is why Inow offer the 13-pointWealthCare Tune Up. Visit mywebsite for more details or toarrange an evaluation meeting.

If you feel unnerved by potentialeconomic or political events or

there's been a recent life-changing event in your family,then arrange some time to getyour financial plans on track andprepared for the changes ahead.

I want to help you make sense ofyour money.

Please call me and we can set upa time for a no pressure chat toexplore the ways that we may beable to work together.

Let’s make a plan together toimprove your bottom line.

Risk, Not Volatility, Is the Real Enemy

What would you do if your investments lost 10% in asingle day? A) Add more money to my account. B)Hold steady with what I've got. C) Yank my money; Iwouldn't be able to stand any more losses.

If investors buy the right investments but sell them atthe wrong time because they can’t handle the pricefluctuations, they may have been better off avoidingthose investments in the first place. Most investors arepoor judges of their own risk tolerance, feeling morerisk-resilient in up markets and more risk-averse aftermarket losses. However, focusing on an investor'sresponse to short-term losses inappropriately confusesrisk and volatility. Understanding the differencebetween the two and focusing on the former is apotential way to make sure you reach your financialgoals.

Volatility encompasses the changes in the price of a

security, a portfolio, or a market segment, both on theupside and downside, during a short time period like aday, a month, or a year. Risk, by contrast, is thechance that you won't be able to meet your financialgoals or that you'll have to recalibrate your goalsbecause your investment comes up short. So how caninvestors focus on risk while putting volatility in itsplace? The first step is to know that volatility isinevitable, and if you have a long enough timehorizon, you may be able to harness it for your ownbenefit. Diversifying your portfolio among differentasset classes can also help mute the volatility. It helpsto articulate your real risks: your financial goals andthe possibility of falling short of them. Finally, plan tokeep money you need for near-term expenses out ofthe volatility mix altogether.

Investing in securities always involves risk of loss.Diversification does not eliminate the risk ofexperiencing investment losses.

Steve Stanganelli, MSF, CFP®Fee Only Planner & Tax Coach

steve@clearviewwealthadvisors.com978-388-0020www.ClearViewWealthAdvisors.com

Clear View Wealth Advisors LLC Investment Updates January 2013 2

Dividend Income During Downturns

During a recession, the stock market can losesignificant value. This could have a large impact onportfolio returns. Predicting the duration and extent ofrecessionary periods is almost impossible. During suchtimes, income-producing investments such as dividend-paying stocks and REITs may soften losses,particularly when investors incur negative returns. Thismeans that, if and when dividends are paid out, theyhave the potential to act as a cushion and are positivewhether stock returns are positive or negative.

The image compares the total return and incomereturn for the S&P 500 index, Dividend Compositeindex, Dividend Leaders index, and REITs for thepast two recessions in 2001 and 2007. As seen in theimage, dividend-paying stocks and REITs producedhigher income returns relative to the S&P 500 overthe given time periods (however, keep in mind thatREITs are far more risky than their typical commonstock counterparts). Stocks that pay dividends mayserve as an income source while also providinginvestors with exposure to the growth potential of thestock market.

Dividends are not guaranteed and are paid at thediscretion of the stock-issuing company.Diversification does not eliminate the risk ofexperiencing investment losses. Government bonds areguaranteed by the full faith and credit of the UnitedStates government as to the timely payment ofprincipal and interest, while stocks and REITs are notguaranteed and have been more volatile than the otherasset classes. REITs are subject to certain risks, such asrisks associated with general and local economicconditions, interest rate fluctuation, credit risks,liquidity risks and corporate structure. REITs mustdistribute at least 90% of taxable income annually toshareholders.

The Morningstar Dividend Composite Index capturesthe performance of all stocks in the U.S. Market Indexthat have a consistent record of dividend payment andhave the ability to sustain their dividend payment.Stocks in the index are weighted in proportion to thetotal pool of dividends available to investors. TheMorningstar Dividend Leaders Index captures theperformance of the 100 highest yielding stocks that

have a consistent record of dividend payment and havethe ability to sustain their dividend payments. Stocksin the index are weighted in proportion to the totalpool of dividends available to investors. Recession datais from National Bureau of Economic Research(NBER) and defined by the periods March2001–November 2001 and December 2007–June2009. NBER does not define a recession in terms oftwo consecutive quarters of decline in real GDP.Rather, a recession is a recurring period of decline intotal output, income, employment, and trade usuallylasting from six months to a year and marked bywidespread contractions in many sectors of theeconomy.

Clear View Wealth Advisors LLC Investment Updates January 2013 3

Assessing the Student LoanLandscape

These days, borrowing to pay for college has become alot more defensive. Not only may student-loan termsbe less attractive than they were in the past, but newgraduates may also get squeezed if they have to beginrepaying their loans before they land a job. Owing inno small part to the still-anemic economic recovery,the student loan default rate has been on the rise,according to the U.S. Department of Education(September 2012).

As with mortgage borrowers, student-loan shoppersface a bewildering array of options that carry varyinginterest rates, fees, and terms. In all, it pays to do yourhomework and investigate other alternatives beforesigning on the dotted line for a student loan.

Determine Your Need: The first step in the college-funding process is to determine how much of yourchild's education expenses your family will likely be onthe hook for. Submitting the Free Application forFederal Student Aid (FAFSA) is the way to officiallycheck on financial aid eligibility, and your specificpackage will vary by school.

Discuss the Payoff: If it looks like you and/or yourchild will have to borrow a sizable sum to cover thecost of college, it's wise to begin discussing thosenumbers in the context of your child's expected careerpath. If your child will graduate with $100,000 instudent-loan debt but plans to venture into a fieldwhere starting salaries are in the $25,000 per yearrange, it doesn't take a math major to see that it willtake many years to retire that debt, and doing so couldimpede your child's ability to reach other financialgoals.

Know the Different Types: College loans come in anumber of different varieties, but there are a few keycategories to be aware of. The first choices for moststudents seeking additional funding are those extendedby the federal government. Perkins loans are availableexclusively to low-income students. Stafford loanscome in two key varieties. With subsidized Staffordloans, students aren't on the hook for interest untilafter graduation, but with unsubsidized Stafford loans,interest begins accruing immediately. Studentsapplying for subsidized Stafford loans must

demonstrate financial need, whereas students needn'tdemonstrate financial need to qualify for unsubsidizedStafford loans. The second key category is federalloans made directly to parents, usually called PLUSloans. On the positive side, parents can typicallyborrow much more than students. However, interestbegins accruing immediately and payments must alsobegin immediately. The final student-loan category isa private loan extended by a bank. In general, the costof a private student loan can be much higher than thatof a federal loan.

Don't Overestimate the Value of the InterestDeduction: You may have heard that you'll be eligibleto deduct the interest on student loan debt. That'strue, but don't overestimate the value of thatdeduction. In 2012, you can only deduct $2,500 instudent loan interest per year; single parents earningmore than $75,000 and married couples filing jointlywho earn more than $150,000 per year cannot deductthe interest at all.

Consider Additional Options: Rather than assumingstudent loans are the only way to cover the cost ofcollege, it's important to take a step back. Fullyexploring financial aid packages, scholarships, andwork-study programs can help reduce the strain thatsuch loans can impose on families and new graduates;some grandparents may also have the wherewithal tohelp defray college costs. Parents may alsocontemplate tapping home equity lines of credit orusing their own savings plans to fund college.

Please consult with a financial or tax professional foradvice specific to your situation.

Clear View Wealth Advisors LLC Investment Updates January 2013 4

Money Market Fund Basics

When you invest for the long haul, whether to fundretirement or your child’s college education, youshould also keep a cash reserve to meet short-termdemands and handle emergencies. In addition to yourbasic savings or checking accounts, money marketmutual funds can be a great place to park that cashreserve. Money market funds invest in short-term,high-quality debt, and are among the mostconservative funds available. They invest in bondsissued by extremely stable debtors, such as the U.S.government, and large, financially sound companies.

Money market funds typically pay a percentage pointmore than money market accounts from banks. You'dget even less interest if you put your cash in a checkingor savings account. Keep in mind, though, that unlikeconsumer bank accounts, money market funds are notinsured by the Federal Deposit Insurance Corporation(FDIC). However, they are regulated by the UnitedStates Securities and Exchange Commission (SEC),

which enforces strict limits on the types of investmentsthese funds can make. Consequently, it is unusual for afund to take a hit to its principal, but, like with anyother investment vehicle, it is still possible to losemoney. When choosing a money market fund, be sureto bargain hunt: Low-expense funds have an edgethat's hard to beat. Also, be sure to find a package thatworks for you. In general, money market funds havelow minimum investment requirements and may offerlimited check-writing privileges, but thesecharacteristics vary widely from fund to fund.

Investors should read the prospectus and carefullyconsider a fund’s investment objectives, risks, fees, andexpenses before investing. Money market funds areportfolios that invest in short-term money marketsecurities in order to provide a level of current incomethat is consistent with the preservation of capital.

©2012 Morningstar, Inc. All Rights Reserved. The information contained herein (1) is intended solely for informational purposes; (2) is proprietary to Morningstar and/or the content providers; (3) is notwarranted to be accurate, complete, or timely; and (4) does not constitute investment advice of any kind. Neither Morningstar nor the content providers are responsible for any damages or losses arisingfrom any use of this information. Past performance is no guarantee of future results. "Morningstar" and the Morningstar logo are registered trademarks of Morningstar, Inc. Morningstar MarketCommentary originally published by Robert Johnson, CFA, Director of Economic Analysis with Morningstar and has been modified for Morningstar Newsletter Builder.

Steve Stanganelli, MSF, CFP®Fee Only Planner & Tax Coach

Clear View Wealth Advisors LLC12 Amidon AvenueAmesbury, Massachusetts 01913

steve@clearviewwealthadvisors.comwww.ClearViewWealthAdvisors.com

Tel:978-388-0020