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This issue is now available online along with an archive of past issues. To access past Condor Monthly and Condor Newsletters, just click on the link below or copy & paste the link into your favorite browser.

 

 

Please continue below to view the "From the Portfolio Manager" and "Financial Planning Corner" segments in this month's issue.

 

A stop loss order is an order to sell a security once its price has dropped by a certain percentage, or below a specified stop price. A stop loss is designed to limit an investor's loss on a security position. Once the stop price is reached, the stop order becomes a market order. While stop loss strategies may instinctively appear appealing to some investors, there are several disadvantages to be aware of:

 

 

One major disadvantage is that stop loss prices are often activated by a short-term fluctuation in a stock's price, as opposed to a damaging event that alters one's long-term thesis for wanting to own the stock. If a stock with solid prospects looked like a good buy at $50, it should look even more attractive at $45. Long-term investors should invest in stocks based on fundamentals.

 

 

Let's look at an example: Setting a stop-loss order for 10% below the price at which you bought a stock is designed to limit your loss to 10%. However, it is important to note that once your stop price is reached, your stop order becomes a market order, and the price at which you sell may be much different from the stop price. This is especially concerning when stocks are declining in a fast-moving market, where stock prices are changing rapidly. In this environment, your loss could be much greater than 10%. Additionally, stocks often tend to rebound swiftly after being punished by bad news. A study by Charles Schwab looked at the behavior of stock prices from March 1986 through March 2004, and analyzed prices for the largest 3,200 stocks at each month's end. Curiously, a good number of stocks that dropped at least 10-30% relative to the market (i.e. the S&P 500) over the previous 1-3 months,  rebounded to outperform the market on average over the following month.

 

The average volatility for the stock market overall can be 5-10%, while volatility for a single stock can be much higher. This means that an investor utilizing a stop loss strategy could wind up selling most of his/her stocks to cash during market corrections. This is a dangerous predicament, because you then need to time exactly when to redeploy the proceeds. Numerous studies over the years have illustrated that it is impossible to time the stock market. Missing just a handful of the "best days" in the stock market can significantly impact long-term performance. Over short periods of time, stocks (and the broader stock market for that matter) tend to trade based on investor emotions, while fundamentals prevail over the long-term. Stop loss strategies often lead investors to buy high and sell low.

 

 

Stop loss strategies lead to higher portfolio turn-over, and therefore, higher commissions. For taxable accounts, tax efficiency is an issue, as the shorter-term focused stop loss strategy can lead to higher short-term capital gains taxes.

 

Overall, we continue to manage risk for our clients by determining the appropriate equity and fixed income allocation that fits with their goals, objectives, and risk tolerance. This decision is one of the most important determinants of portfolio performance over the long-term.  

 

 

 

It's that time of the year again. Graduation parties, job searches, and big moves home are all underway for young college graduates across the country. It's a time for everyone to celebrate, but still one question remains: how will these graduates find health insurance? As 1.4 million graduates across the country return home, insurance companies will be dropping coverage of many of these young alumni from their parents' health insurance plans.

 

 

 

Most health insurance plans cover dependents until age 19 or 23, if they are full-time students. However, after the young adults are dropped from their parents' plans, it is up to them to find their own coverage. A weakening economy and a lack of entry-level jobs offering health insurance are just a couple of roadblocks hindering their ability to get coverage. National data shows that two out of every five college graduates will be uninsured at some point in their first year after graduation.
 
To address this problem, many states across the nation have enacted laws that require insurance companies to allow coverage to older dependents, whether or not they are enrolled in school. The extension of coverage may cause a family's premium to go up, but it allows coverage of young adults for several more years, depending on the state. In New Jersey, this law is Chapter 375 Under 30 Dependents Law and it can extend coverage of dependents until age 30, depending on different factors. This gives young adults the option to continue their coverage on their parents' group health plan. For those graduates that do not live in one of these states, and want to avoid disasters - both medical and financial - there are still some alternatives to finding health insurance:

 

 

 

• Get online. Many recent graduates can find coverage through online sites that offer short-term coverage for lower deductibles and even international coverage, for those graduates that choose to explore the world before settling down. One popular site for short-term coverage is eHealthInsurance.com, which gives quick price quotes without needing too much upfront information. Assurant Health (www.assuranthealth.com) offers individual plans and short-term insurance to young adults. GradInsurance.com offers plans for current students and recent graduates, and can provide coverage both in the US and abroad.

• Stay tied to your alma mater. Many alumni associations offer various types of insurance to their graduates. Short-term, catastrophic, and major medical insurance are all commonly offered by the associations. Alumni associations can usually be reached online or by phone and can give more information about each school's specific plan.

•Another option may be to continue coverage on the parents' plan through COBRA (Consolidated Omnibus Budget Reconciliation Act). COBRA legislation allows students who are losing their dependent status to extend coverage for up to 36 months. While COBRA can only be utilized when the parent is covered under group health insurance by an employer with more than 20 employees, many states have enacted 'mini' COBRA policies. These policies cover small businesses with 2-19 employees. Be aware that once a graduate enrolls in COBRA, they will have to pay the full cost of the premiums, which in most cases will be substantially higher than what the parent or student previously paid.

 

While losing health insurance at graduation is rough, this hurdle can be overcome with research and by paying a few extra dollars. Though this situation may be harsh for unemployed graduates with college loans looming over their heads, the cost of a trip to the emergency room is far more exorbitant.