Planning Ahead

Planning Ahead – September 15, 2015


August 27th was the day before the “Maine Hello”, when the University of Maine welcomed its freshman class. Upperclassmen and their families flocked to Orono to beat the rush and get moved in with some time to settle. Bags were unpacked, apartments were cleaned, and furniture was moved in. Tuition checks were handed over. Text books and school supplies were purchased, and maybe some university “swag” for students to proudly wear Maine colors. Security deposits and first month’s rent had to be paid. What about club dues and spending money? The costs mount quickly.

Besides being the day before the Maine Hello and a beautiful summer day, August 27th also happened to be a historic day on Wall Street. In the run up to that day, the S&P 500 dropped 200 points; the market entered correction territory. This sparked wild price swings that resulted in roughly 1,000 trading halts on ETF’s (Exchange Traded Funds). Like a mutual fund, ETF’s hold a basket of individual securities; unlike a mutual fund, ETF’s trade like a common stock. Because ETF’s are exchange traded throughout the day, they are considered more liquid than mutual funds. Eighty-eight ETF’s had five or more trading halts on that day, the longest of which lasted 303 seconds. Several ETF’s experienced pricing problems where the cost of the ETF shares differed substantially from the value of the underlying portfolio of securities. Arbitrage opportunities existed for fleeting moments, which was great for lucky buyers, but not so great for sellers when ETF share prices traded well below the combined value of their underlying securities.

We’ve often talked about the ebbs and flows of the markets. The timing of client requests to raise cash in portfolios can mean the difference between locking in losses and realizing gains. However, with recent market volatility, minutes can make a difference. This scenario illustrates the importance of planning in advance and keeping us here at Deighan Wealth Advisors apprised of your current situation. We cannot emphasize enough the importance of letting us know of any big expenses you may have on the horizon. We understand that “life happens”. Whenever possible, call in advance if you anticipate significant cash needs. This will allow us ample opportunity to re-balance your portfolio to raise the needed cash. We want to help you “live your best life”; planning ahead as much as possible will make that easier. If you have any issues, cash flow or otherwise, that you would like to discuss, please call us. We are here for you!

The Deighan Wealth Advisors Team