Despite Headwinds, Big Tobacco Stocks May Continue To Be A Good Investment

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Are Big Tobacco Stocks a Good Investment?

The question now is: was last week's earning announcement enough to send Philip Morris stock down more than 16% and Altria stock down 8%? More importantly, are they good entry points to buy, and which company is a better buy?

Patrick McDowell, Wealth Manager at Arbor Wealth Management in Miramar Beach, Florida likes Philip Morris. "If you had to choose one of the two, Philip Morris is probably the better buy simply due to the international focus. The data is always tricky but it looks like international smoking is flat to growing slightly while US smoking is slowly declining."

Another potential source of growth (though still just a pipe dream at the moment) is the burgeoning cannabis industry. With legalization nearing reality on the federal level, Big Tobacco companies have the distribution capabilities in place to package and sell marijuana once it's officially legal. "Imagine Marlboro Reds next to Marlboro 'Greens' at the gas station!" joked McDowell.

Don't Fall Into the Past-Performance Trap

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Past performance is just one piece of the puzzle when evaluating investments. Understanding how performance fits in with your overall investing strategy – and what else should be considered – can keep you from developing tunnel vision.

It's future performance that counts. If you’re investing long term, your perspective should reflect that. Look ahead, rather than backward, says Patrick McDowell, a certified financial planner and accredited investment fiduciary with Arbor Wealth Management in Miramar Beach, Florida. “Most financial reports represent the past, but almost all of the value of a business is in the future.”

The difficult part of investing, he says, is trying to bridge the gap between what’s happened and what lies ahead. That entails asking the right questions. Investors often aim for the same rate of return that an investment has delivered in the past. Instead they should consider why the company earned such high returns in the past, and how likely it is that those same factors will continue enabling the business to outperform.

What's the Best Investing Model?

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Age factors into the 60-40 equation as well, especially as Americans are living longer.

"A 60-40 portfolio doesn't make a whole lot of sense for a 20-something investor," says Patrick McDowell, a financial advisor with Arbor Wealth Management in Miramar Beach, Florida. "They have plenty of time for equity volatility and they are likely to be net contributors to investment (and) retirement accounts for the next 20, 30 or 40 years."

But for a 70-year-old retiree, McDowell would want to have at least a quarter of his or her portfolio in fixed income investments.

"Some folks want that number much higher, in the 40 to 50 percent range," he says. "Basically if you can't afford to take a 40 percent equity hit, you should own some bonds simply for portfolio diversification. The average retiree is withdrawing funds from their investment accounts (and no longer contributing) and therefore keeping a stable portfolio balance matters a whole lot more."

The 60-40 calculus may have worked when portfolio balance was underplayed by both investors and money managers. But times change, investment experts say.

Burned Out Advisers No Help to Clients

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One good habit that therapists recommend: Think regularly and consciously about why you are in the advising business.

Patrick McDowell, an adviser in Miramar Beach, Fla., uses a version of this tactic when he starts to feel the burn. He leafs through photographs of his clients on his customer-relationship management software. “When I actually see the faces of the people I’m trying to help, it brings me back to why I do it,” he says. His firm, Arbor Wealth Management, manages about $110 million in client assets.

Modern Family Finances

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Biggest Challenge: Unpacking all that financial baggage

Four decades after Mike and Carol Brady joined their broods in cutting-edge TV matrimony, blended families—a couple and their kids from current and previous unions—have become utterly commonplace. While only 23% of the boomers who grew up watching the Bradys have a step-sibling, 44% of millennials do.

What hasn’t changed: how the financial baggage that remarrying spouses carry, combined with the tensions of providing for both biological children and stepkids, can weigh down even the happiest bunch. In the Allianz survey, 43% of blended families said that they have difficulty overcoming issues with money that they or their partner brought into the relationship; a third reported that inadequate support from an ex makes it hard to save. “Most people want to ‘do right’ by all parties involved, but it’s tough to do that without alienating someone,” says planner McDowell.