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How to Pick Between a Mutual Fund or ETF

Here at Ally Wealth Management, we know that investing and developing strategies can be difficult, puzzling, and downright frustrating. There seem to be a million secrets to investing. Whether it’s as investment advisors, retirement planners, or simply as your wealth manager, we want to help simplify that process by providing more information and wealth management news. Today, we want to focus on mutual funds and ETF’s (Exchange Traded Funds), two concepts that are very similar, and highlight the significant differences between the two, and how your investment and risk management strategy should reflect your choices between the two. Most importantly, we’re going to look at why these two types of investments matter over the course of constructing your portfolio.

Mutual Funds:

To start things off, let’s take a look at mutual funds. Mutual funds are an investment method that collectively compiles funds from a large group of investors. From there, the money is split up and largely invested in stocks, bonds, and money markets (which are essentially extremely safe, but low-return, investments on loans between financial institutions). This ensures a level of diversification that is not feasible for the average investor. Mutual funds can be actively managed; this can drive up fees, but also helps to reduce the risk they present when looking at the return on investment. As a whole, mutual funds are an extremely popular investment method because they put the money in the hands of those who study financial markets and look at the companies being invested in on a daily basis.  They enable individuals with expertise to make decisions with the management of money that often results in safe, steady, long-term returns.

Exchange-Traded Funds or ETF:

On the other hands, ETF’s, or exchange-traded funds, are securities that trade like a stock on an exchange but follows the value of indexes, commodities, or bonds. Think of them like “mutual fund stocks.” ETF’s are not as carefully managed as mutual funds, and this results in lower fees for them. ETF’s also have a more efficient tax structure than mutual funds. When mutual funds buy and sell stocks and bonds, the holders of the Fund are responsible for the fees incurred by these sales and purchases. However, with ETF’s the individual is reinvesting money with the buying and selling of stocks and bonds, so the result is a better tax structure. And while mutual funds are usually purchased through a financial management company, ETF’s are something that individual can purchase on their own, like a stock. Because of these factors, ETF’s are often bought by people who spend a lot of time handling their personal investments and feel highly confident in their abilities to predict the marketplace.

With these basics in mind, both mutual funds and ETF’s present a variety of benefits and drawbacks. There is no right or wrong choice when looking at mutual funds and ETF’s. What is more important is viewing how they fit with you and your investment strategy. Because ETF’s have a more tax-efficient structure and have low operating expenses, they tend to be sought after by people who are active traders, who want to invest in a particular niche of the market, or are specifically looking for more tax-efficient trading options. And while investors can directly purchase ETF’s, they must go through a brokerage or company such as Ally Investment Management to purchase registered mutual funds. Mutual funds do not carry trading commissions like ETF’s, but they will incur some fees, which are also known as loads.

Many mutual funds will charge commissions for fees when trading and these are known as load mutual funds. However, there is another option: no load funds.  At this point, you are probably wondering, “What are no load mutual funds”? No load mutual funds are funds where shares are sold without commissions or sales fees. You can find these types of funds with many different brokerages, and Ally Wealth Management is one of them.

There are also two main strategies within mutual funds. Some funds will try to beat benchmarks and earn very high returns on investments while others will just try to mirror index funds and provide safer steady returns. Again, there are so many different choices that are in the marketplace. What is most important is to invest in your strategy and make your decisions accordingly.

Ultimately, with the variety of options that both ETF’s and mutual funds offer, there is not going to be a right or wrong answer as to which one to pick. The trick to investing is designing a strategy that works to benefit your specific needs as an individual. Certain mutual funds may present greater risk and greater reward while other ETF’s might try to track the S&P500, an index fund with modest but steady gains. Ally Financial, in Little Rock AR, works to develop investment strategies that suit your wants and needs, backed by years of experience successfully helping clients turn their investment, retirement, and savings dreams into reality. We can help you avoid retirement planning mistakes, and explain the tough questions in-depth and in person such as what is index fund investing, how do I buy mutual funds, and what is a mutual fund initial investment? Ally Wealth Management prides itself on its dedication to solving the needs of our customers and centering our strategy on them. Our recommendation: determine your wants, your needs, and your level of knowledge about investing options and the investing marketplace. And if, from there, you need advice, just know that Ally is always there to provide strategies, explore options, and help you find the path to reaching your financial goals.



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The Most Important Things You Should Know about Retirement

Every hardworking person has retirement in mind. You work so hard in your youth with the hope that your later days will be as comfortable as your present or even better.

Over the years, the retirement age has changed. Legally, the average retirement age in most countries is still between 60 and 65 years, but that has not stopped people from retiring at 50 or below. Of course, waiting until you hit the set retirement age in your State gets you 100% of your Social Security benefits and Medicare. The downside is that you spend more time working and less enjoying your retirement.

How Do You Ideally Plan Your Retirement?

Retirement planning needs a lot of thought as you do not want to get off work before you have set aside enough money to sustain your livelihood. Considering that you will no longer have your current annual income, you will need to start planning early enough.

  • Start Early

Youth is wasted on the young, and so is money. Tell a 25 year only today that they need to start planning for their retirement and you will be met with an ‘are you insane?’ look. When it comes to retirement planning, no one is too young to start. Actually, if you are over 25, then you made it to the other side. Open a 401k account and start setting aside some income to supplement your Social Security.

One other benefit of 401kk is that your employer kicks in some amount and so your monthly total will be higher. You can also count on compounded interest and tax deferral that will have made a vast difference by the time you are 40.

  • How Much Do You Need For Retirement?

It is not so surprising that half of the American working force does not know how much they need for retirement. Matter of fact, research by the National Institute on Retirement Security found that your average working household has virtually no retirement savings. The findings were primarily based on 401k account balances and total retirement assets of the participants.

Without knowledge of how much you need to retire, you will not have a basis for saving. The rule of thumb is that you will need 80% of your current annual income during retirement. However, the better thing would be to use a retirement calculator to figure how much you would need to set aside per month. These calculators take into account your preferred retirement age, your actual assets, the accumulated amount in your 401k and IRA’s account, the equity you are going to draw from your home, and the amount that is going to come from social security. Taxes are usually not included. And so your actual income will be less. With this knowledge, you can set a per-month target and start working towards it.

  • Step Up The Care Package

We all know that age brings disease and general weakness of the body. Unless you are Ernestine Shepherd, your body will need more money for healthcare than it will for food. It would be wise to revamp the healthcare kitty so that you are catered for even when you exhaust the State-covered medical benefit. In the event that you will need personal care (which most people do after 90), your family will not struggle to raise funds.

Whatever you do, do not touch your retirement kitty. Not even on a rainy day. Also, take note of the changing inflation rates and update your retirement planning accordingly.

How To Sustain Your Retirement

The first years of retirement are going to be spent making up for all the hours of hard work. Retirees are  stocked at the idea of having time on their hands that they spend most of it traveling, meeting other retirees, and eating out. Certainly, you will spend much of your money at this stage, which is allowed since you have the energy for it, but you should be keen not to overdo it.

  • Spend Wisely

Do not be tempted to spend more that you had planned. If you can, take some time to decide how much you will spend during the first, say, five years. Plan your trips well in advance so that you can benefit from early-bird bids, and choose your accommodation wisely.

  • Sweat The Small Stuff

The economy will not remain the same, and so it is ideal that you factor in inflation and taxes even as you inch closer to retirement. As you spend, think the 4% rule. You do not want to outlive your retirement kitty, and as such, it helps to be conscious of each withdrawal that you make against your portfolio. You should have your financier work out a withdrawal limit to minimize chances of spending more that your plan can sustain.

You Have Done The Work! Now Enjoy Your Retirement

You have done well and saved for the eventualities, and now it is time to live your retired life. Since you have put a good amount aside, and you aware of how much you should spend per year to live the rest of your time comfortably, you can now kick back and enjoy a little.

  • Travel World Over

If you have always wished to travel, but you haven’t had the time from your busy schedule, you can now explore the world. I would not mind gazing at the stars in the sandy beaches of Jamaica by night and kite surfing during the day if my health allowed it. A cruise to the Caribbean would not only be good for your health, but also for your pocket with all the duty-free shopping. Surprisingly, these Caribbean cruises are not too out of reach. A 2-night Caribbean cruise departing from Fort Lauderdale, Florida, could cost the two of you about $600!


  • Stay Active

An active body harbors an active mind and keeps diseases at bay. At this point in your life, joining a club not only benefits your body, but it also helps you meet other people to revamp your social life.

Mentor the Younglings

They could benefit from doing the things you did in your youth to get you the life you have at retirement. When you meet them at the health club, you could help them get started on retirement planning.

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Retirement Planning Mistakes And How You Can Avoid Them

For many people, thinking about retirement inevitably leads to feelings of great anxiety and emotional stress. According to a recent worldwide study, 88% of Malaysian pre-retirees were worried that they lacked sufficient funds to cater for their day-to-day needs after retirement-which clearly proves the state of unpreparedness among some of us.

Regardless of how daunting it seems, you will have to retire one day and face the consequences. This makes retirement planning one of the most critical financial goals in our lives. If you get it wrong, you may find yourself doomed to a life of poverty, dependence and general financial discomfort in your sunset years.

In order to ensure that this does not happen, you need to avoid making some common retirement planning mistakes that people make. Remember that when it comes to your retirement, mistakes can be very costly and you will not get any second chances. Here are seven retirement mistakes and how you can avoid them:

Mistake #1: Failure to formulate a retirement plan

As the common adage goes, failing to plan is planning to fail. It is imperative that you set your retirement goal, and then formulate a plan of how to attain it. This entails setting financial objectives that are both specific and measurable and then setting in motion a progressive plan to achieve them. Typical issues that you must address as you embark on your retirement planning include making a commitment to saving regularly and setting up of step-by-step action plans that are founded on proven principles and are geared towards financial success. Note that each day that you put off making your retirement plan will be very costly in the long term.

Mistake #2: Having insufficient savings

Every one of us finds saving more money to be a big challenge. We would rather splurge on that luxury sports car or go on an exotic holiday. The choices you make today will certainly have far-reaching implications on the kind of retirement that you will have.
Because of compound interest, making a few seemingly insignificant financial sacrifices can ensure that your life will be comfortable when retirement comes. For example if you saved the money that you spend on that luxury RM10 coffee that you buy daily at 10 percent for 30 years, this will yield a tidy retirement sum of RM600,000 when compounded. In order to save enough money for retirement you must have discipline- but the fruits are well worth the effort.

A useful rule of thumb that you can apply is to ensure that 33 percent (a third) of you salary is set aside for your retirement. Your employee provident fund (EPF) contribution, which comprises of your contribution combined with that of your employer, should account for about 23 percent. The remaining 10 percent can be made up of other personal investments like stocks, unit trusts, private retirement schemes or a mix of investments that yield reasonable and consistent returns with minimal risks.

Mistake #3: Procrastinating

Many people mistakenly think that there will be enough time to plan for their retirement after for instance they buy a home or raise and educate their children. If you are in your twenties, you assume that you still have forty years until retirement, and you put off saving for retirement until you are in your thirties and forties. Unfortunately, that is the time when you have your hands full-when you are paying off your mortgages, trying to clear your car loans or funding your children’s education. Before you know it, you are in your fifties and the time for saving for your retirement is gone.

Time is the most precious asset when it comes to saving for retirement. Consequently, when you delay to get started, you are putting your retirement in great jeopardy. Every delay of six years before you start saving means you will have to save double every month to attain the retirement income that you would have got if you had started on time. Procrastination is a costly and painful mistake since it denies you the advantages of compounding. It is therefore absolutely vital that you start saving now.

Mistake #4: Making a wrong retirement income assumption

A lot of us simply do not know the income levels that we need in order to maintain the same lifestyle that we have now when we retire. Even those people who have an idea will most likely make an incorrect assumption. Making an assumption that is too high will result in setting a retirement goal that appears hard to attain, which will have discouraging effect on the whole process of retirement planning. If it is set too low, this will translate to financial challenges and unfavorable compromises when you retire.

A helpful rule of thumb would be to take two thirds of your last net salary as the income you will need when you retire. But remember that retirees generally spend more money on travel, dining out and entertainment particularly during the early stages of their retirement when they are healthier and have more time. As they get older, the medical bills can escalate. Ensure that you have factored in all the various expenditure elements so that your retirement income assumption is as accurate as possible.

Mistake #5: Ignoring the increase in healthcare costs

People often overlook to include the estimated cost of healthcare when they are calculating their income needs. Planning for the cost of healthcare on top of the normal daily expenses is a huge undertaking. Spending on healthcare is different from other discretionary expenses like entertainment because you have no option but to be treated when you are injured or sick.

Statistics in Malaysia indicate that medical costs are rising by 10 to 15 percent each year-and treating elderly patients for diseases and injuries can be quite expensive. Therefore, having sufficient reserves and a solid medical cover is the best way of ensuring that your retirement is as comfortable as possible. Always make sure that you obtain medical insurance before you get sick. In addition, medical insurance is cheaper when you are younger.

Mistake #6: Failure to make provisions for extended care

It is common knowledge that caring for aging parents requires immense effort, time and money. Due to an increase in life expectancy in Malaysia, more and more people may require extended nursing care in the final stages of their lives. So that you do not inconvenience your family with the burden of caring for you, it is important that you make extra provisions in case you need such facilities as nursing homes, dementia care or even hospice care. The cost of such care facilities may range from RM1, 000 to RM5, 000 each month.

Mistake #7: Failure to revisit and adjust your retirement plan

As you progress through various phases of your life, the different experiences that you undergo may make it necessary to adjust your retirement plan. It is therefore crucial to revisit and update your retirement plan after a number of years to reflect these new realities. For example you may be promoted, your father may require nursing care or you may get a new baby. It is advisable to revisit your retirement after three to five years so that you can make the appropriate adjustments. This ensures that you remain on course for a fulfilling, stress-free retirement.


It is patently clear that a lot of people do not prioritize retirement planning. Instead, they prefer to spend their time and effort researching and planning where they want to go on vacations, how they can buy a new home or how they can finance their children’s education. However, like death and taxes,retirement is inevitable, and it is therefore of utmost importance that you learn how you can secure your retirement plan.

Every single decision you make puts your savings and everything you have worked for in your entire life at risk. It is therefore essential that you learn about these retirement planning mistakes and how to avoid them. As a result, you will hopefully be equipped with the tools you need to effectively and confidently chart the course towards a comfortable and fulfilling retirement.

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Top 7 Retirement Considerations

As time goes by, life expectancies have continued to go up. This means that, as a whole, humans are living for longer than ever before. That means retirement planning and pensions are becoming more important than ever, as nobody wants to spend their leisure years struggling to pay bills and meet other expenditures. To make sure you aren’t caught in this type of situation, you need to keep on top of retirement planning. Let’s take a look today at important factors you need to consider for your retirement plan.

The Earlier You Start, the Better

The simple way to look at this is the earlier you start planning and saving, the easier it will be for you to meet your desired goals. Starting to save and plan for retirement in your 50s is not as ideal as starting in your late 20’s, when you should have around 40 years to get debts sorted out, plans made, and a secure amount of savings put away.

Don’t Rely on Social Security

Too many Americans think they can retire without savings and simply rely on Social Security payments. Payouts from Social Security are only enough to meet costs for a very basic lifestyle. This means you can forget about a comfortable, retired life, and many people find themselves still trying to get some form of work at times, just to meet their financial needs. Retirement is supposed to be a relaxing and enjoyable time of your life, so don’t make the mistake of not planning for it.

Don’t Rely 100% on Secure Investments & Cash

This is an area where good advice and pre-planning becomes an invaluable asset. Most of us don’t have the kind of large funds available to us where we can simply plan to sit on the cash and last out our lifetimes in comfort and style.

In order to increase our gains, ready for retirement, it’s a good idea to keep some of your funds invested in some type of equities. This allows you to reap bigger rewards in exchange for a little risk, which can of course be calculated carefully to a level you are comfortable with.

Increasing the funds available to you in this way is a great idea, though it’s generally a good idea to also keep some more secure funds available, especially for earlier retirement periods. The risk associated with equities can be mitigated further by holding them for a prolonged period, which means using these types of funds for later retirement is generally a good idea.

Make Clear Goals

To know how much you actually do need to save, and what budget you will need for your retirement, you should make clear goals and what you want to do and how you want to live. An adviser can help you figure this out by creating a budget based on the lifestyle you want, and working out the actual costs of achieving these goals. Remember, it’s hard to budget for something if you don’t know what you’re budgeting for!

Get Advice on Different Investments

As mentioned earlier, some investments are more secure than others. Generally speaking, the safer the investment is, the smaller the returns are likely to be. Cash held on to for long time periods is always going to lose value, due to inflation. This means investments are almost always going to be a better idea, as they can at least hope to keep up with inflation and hold their value over time. The riskier investments could pay out a lot more and create a nice profit rather than just holding value.

An adviser can help you to consider a variety of different options, and although they are very useful for this reason, you should also always be keeping an eye on the investments themselves. Any personal expertise you might have can also come into play here, and open up different avenues of investment for your retirement.

Get a Pension

Less people than ever before have an actual pension plan given to them by their employer. This type of plan can often give you a good enough payout in later life to cover a chunk of your expenses. If you aren’t one of the lucky people with a workplace pension, look into getting a plan of your own created. Also, consider how you will want it to pay out (lump sum or payments).

Keep Your Overall Plan Flexible

Another consideration is that your plan, your needs, and also your potential payoffs might change over time. This makes it a good idea to not only spread the ways in which you hope to pay your way through retirement, but also to vary them by time periods so you can adjust if an investment doesn’t perform as well as you had hoped for, or if life throws you a sudden curve ball and you need to cash in an investment early to deal with the costs.

Of course, there are a number of other considerations you should make as well, which is why retirement planning is such an important thing for all of us. The help and advice of a professional is always recommended, even if only as a side consultation. Specialists will always be able to help you with extra knowledge on how to make the most out of what you have, and how to keep it as safe & flexible as possible.