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Personal info is exceptionally vulnerable in 2014

TECHNO TALK

If we learned anything this past year, it’s that information we store online is exceptionally vulnerable. Our metadata (the data that describes who we are and what we do) is in the hands of people who are about as successful at protecting it as 1850s bankers were at protecting money in the Old West.

Sure, the metal safe looked strong and secure, but a motived bank robber with a stick of dynamite had all the tools required. In just the past few weeks hackers have had their way with Target Stores, Snapchat and thousands of other “targets of opportunity” that you will never hear about.

How do they do it? Every way you can imagine (and a bunch of ways you can’t).

We can start with the government. It’s not strictly hacking; it’s more like manhandling, but… by now it should be abundantly clear that the NSA has access to everything that it wants to have access to. Everything on your iPhone, your Wi-Fi signal, laptops you bought online, your private cell phone conversations, your email address books… the list goes on and on and on. At this point, anything the NSA wants to know about you, it will know about you.

I’m not making a political statement, nor am I suggesting that there is anything right or wrong with the government having access to virtually everything it wants to have access to. That said, there are all kinds of additional security issues caused by systems that allow certain information to be tracked by some systems, but not by others. To say nothing of the psychological issues caused by the knowledge that when you are connected, your electronic trail is available. And, for all practical purposes, cannot ever be erased.

Add to this, malicious hackers who are interested in profiting from the sale of your information, interested in making a name for themselves or simply trying to make a point about something. There’s nothing anyone can do about this group of hackers or these types of hacks. They are a fact of life in the Information Age. However, there are a few things you can do to protect yourself in 2014.

Target’s Black Friday Breach

Over 40 million credit cards were compromised after a massive attack on Target during the weeks leading up to Christmas. There’s nothing much Target can do to help you at this point. Sure, its CEO is offering free credit monitoring, the company is on the hook for $3.6 billion in fines and banks are capping cash withdrawals after it was announced that yes, the breach compromised PIN numbers, too, even though.

Target initially said they were safe — they’re not safe and you’re on your own.

If you shopped at Target between the middle of November and the middle of December, there’s a good chance your card is compromised. If your bank hasn’t canceled your card already, strongly consider calling up your credit card company and canceling it yourself. Here’s a helpful guide as to what to do if your credit card is stolen. Basically: cancel your card, monitor your statements, create a fraud alert, and move on.

Target’s breach was both better and worse than most other hacks we saw in 2013. It was worse because its repercussions could be of a greater impact than having your Yahoo password stolen, for instance. Having someone gain access to your credit card info could max out your credit cards and destroy your credit score. But it’s better because every financial institution is aware of the breach, and most credit cards have fraud protection, ensuring you won’t be stuck paying for anything you didn’t actually buy.

Target’s breach was also an example of just how helpless we are. All you did was buy Christmas presents, or maybe just some groceries, and suddenly your life became far more complicated and annoying. And, this is just the beginning — expect this kind of thing to happen on a regular basis – truly, nothing can stop it.

Snapchat’s Phone Number Leak

It’s already known that even though Snapchat is designed to make it seem like your snaps (the photos you send your friends and family) disappear once you open them, anyone can actually save them without you even knowing.

Forget a “Screenshot!” alert; you can sneak in through the back door of Snapchat and save anything and everything you receive. While it’s not a hack organized crime would bother with, it’s worth repeating that snaps and every other picture you ever take with a digital camera enter the body of knowledge of mankind and will be seen by everyone in the world. So, “Carlos Danger,” never take a picture of something you don’t want the world to see.

Back to bigger hacks. This past August, Gibson Security published a report that said the coding in Snapchat made it possible for anyone to find out a bunch of information about any account, including your username and phone number. Gibson published a new report about the same thing in December, which Snapchat addressed by saying that it wasn’t an issue. Well, it turns out that Snapchat was wrong and that it was, in fact, an issue. A website called snapchatDB posted SQL/CSV files that contain the username and associated phone number for a “vast majority” of the service’s users — over 4.6 million users, to be precise.

There’s not a lot of text-based private information on Snapchat — you don’t need to fill in too many fields to start texting selfies to your friends. But Snapchat’s user base is mostly teens and tweens, and Kevin Poulsen of Wired Magazine points out the biggest fallout from this leak: possible stalking. How’s that for your first tech life lesson? Don’t have fun with your friends or you might be harassed because bad men want to ruin your day!

What Can We Do?

The most important thing we can do is to remain vigilant. Keep track of everything, and if anything seems suspicious, act on it. Start getting a bunch of weird emails? Can’t log in to an account you should be able to? See some weird pending charges on your credit card statement? Take action!!! YOU are the best defense against the mean, awful, angry world of hacking.

If you suspect your accounts are compromised, change your passwords. Make them as secure as can be. Spending a few extra seconds typing in a password every once in a while is worth it to make your account more difficult to crack. Use the guidelines I laid out. It might seem like a hassle, but keeping unique passwords for every site you use (I know, you probably have accounts for dozens if not hundreds of sites) will keep all your other accounts secure. But it’s (arguably) better than the alternative: having one hacked site force you to change dozens of passwords at once.

If your credit card statement looks funky, call your bank immediately. Dispute any charges, then cancel your card. People can get your credit card information any number of ways; banks (usually) won’t hold that against you. Be proactive, rather than reactive, and make sure you’re protected.

Lastly, and most importantly, keep all of your credit card numbers and the associated contact information for canceling your cards in a place where you can quickly, securely get to them. Using a password wallet or other specialized software will make it much easier to go through the process. “Best practices” says to keep copies of this data in several different places (including on paper) and stored as safely as you store your household cash or jewelry. The goal is to be able to quickly contact every credit provider. That’s all you can do. The hacks we’re seeing now are being done by professionals who simply want to sell your information and defraud the financial institutions you patronize — they don’t care about you personally — it’s strictly business.

When opportunity knocks, open the door

Scott-Johnson---Head  If you’ve been around long-time investors, you’ll probably hear them say, ruefully, “If only I had gotten in on the ground floor of such-and-such computer or social media company, I’d be rich today.”
  That may be true — but is it really relevant to anyone? Do you have to be an early investor of a spectacular company to achieve investment success?
  Not really. Those early investors of the “next big thing” couldn’t have fully anticipated the tremendous results enjoyed by those companies. But these investors all had one thing in common: They were ready, willing and able to look for good opportunities.
  And that’s what you need to do, too. Of course, you may never snag the next big thing, but that’s not the point. If you’re going to be a successful investor, you need to be diligent in your search for new opportunities. And these opportunities don’t need to be brand-new to the financial markets — they can just be new to you.
  For example, when you look at your investment portfolio, do you see the same types of investments? If you own mostly aggressive growth stocks, you have the possibility of gains — but, at the same time, you do risk taking losses, from which it may take years to recover. On the other hand, if you’re “overloaded” with certificates of deposit (CDs) and Treasury bills, you may enjoy protection of principal but at the cost of growth potential, because these investments rarely offer much in the way of returns. In fact, they may not even keep up with inflation, which means that if you own too many of them, you will face purchasing-power risk. To avoid these problems, look for opportunities to broaden your holdings beyond just one or two asset classes.
  Here’s another way to take advantage of opportunities: Don’t take a “time out” from investing. When markets are down, people’s fears drive them to sell investments whose prices have declined — thereby immediately turning “paper” losses into real ones — rather than holding on to quality investment vehicles and waiting for the market to recover. But successful investors are often rewarded when they not only hold on to investments during declines but also increase their holdings by purchasing investments whose prices have fallen — or adding new shares to existing investments — thereby following the first rule of investing: Buy low. When the market rises again, these investors should see the value of their new investments, or the shares of their existing ones, increase in value. (Keep in mind, though, that, when investing in stocks, there are no guarantees; some stocks do lose value and may never recover.)
  Instead of looking for that one great “hit” in the form of an early investment in a skyrocketing stock, you’re better off by seeking good opportunities in the form of new investments that can broaden your existing portfolio or by adding additional shares, at good prices, to your existing investments. These moves are less glitzy and glamorous than getting in on the ground floor of the next big thing — but, in the long run, they may make you look pretty smart indeed.

Scott Johnson, CFP, is a financial advisor with Edward Jones, 8146 W. 111th St., Palos Hills, 974-1965. Edward Jones does not provide legal advice. This article was written by Edward Jones for use by your local Edward Jones financial advisor.

Financial resolutions for the New Year

Scott-Johnson---Head  About 45 percent of Americans usually make New Year’s resolutions, according to a survey from the University of Scranton.
  But the same survey shows that only 8 percent of us actually keep our resolutions. Perhaps this low success rate isn’t such a tragedy when our resolutions involve things like losing a little weight or learning a foreign language. But when we make financial resolutions — resolutions that, if achieved, could significantly help us in our pursuit of our important long-term goals — it’s clearly worthwhile to make every effort to follow through.
  So, what sorts of financial resolutions might you consider? Here are a few possibilities:
  • Boost your contributions to your retirement plans. Each year, try to put in a little more to your IRA and your 401(k) or other employer-sponsored retirement plans. These tax-advantaged accounts are good options for your retirement savings strategy.
  • Reduce your debts. It’s not always easy to reduce your debts, but make it a goal to finish 2014 with a smaller debt load than you had going into the new year. The lower your monthly debt payments, the more money you’ll have to invest for retirement, college for your children (or grandchildren) and other important objectives.
  • Build your emergency fund. Work on building an “emergency fund” containing six to 12 months’ worth of living expenses, with the money held in a liquid account that offers a high degree of preservation of principal. Without such a fund, you might be forced to dip into your long-term investments to pay for emergencies, such as a new furnace, a major car repair, and so on. You might not be able to finish creating your emergency fund in one year, but contribute as much as you can afford.
  • Plan for your protection needs. If you don’t already have the proper amounts of life and disability insurance in place, put it on your “To Do” list for 2014. Also, if you haven’t taken steps to protect yourself from the considerable costs of long-term care, such as an extended nursing home stay, consult with your financial professional, who can suggest the appropriate protection or investment vehicles. You may never need such care, but that’s a chance you may not want to take — and the longer you wait, the more expensive your protection options may become.
  • Don’t overreact to market volatility. Too many people head to the investment “sidelines” during market downturns. But if you’re not invested, then you miss any potential market gains— and the biggest gains are often realized at the early stages of the rally.
  • Focus on the long term. You can probably check your investment balance online, which means you can do it every day, or even several times a day — but should you? If you’re following a strategy that’s appropriate for your needs, goals, risk tolerance and time horizon, you’re already doing what you should be doing in the long run. So there’s no need to stress yourself over the short-term movements that show up in your investment statements.
  Do whatever you can to turn these New Year’s resolutions into realities. Your efforts could pay off well beyond 2014.

Scott Johnson, CFP, is a financial advisor with Edward Jones, 8146 W. 111th St., Palos Hills, 974-1965. Edward Jones does not provide legal advice. This article was written by Edward Jones for use by your local Edward Jones financial advisor.

Assumptions can be dangerous to investors

Scott-Johnson---Head  Every day of our lives, we make assumptions. We assume that the people we encounter regularly will behave in the manner to which we are accustomed. We assume that if we take care of our cars, they will get us to where we want to go. In fact, we need to make assumptions to bring order to our world. But in some parts of our life — such as investing — assumptions can prove dangerous.
  Of course, not all investment-related assumptions are bad. But here are a few that, at the least, may prove to be counter-productive:
  • “Real estate will always increase in value.” Up until the 2008 financial crisis, which was caused, at least partially, by the “housing bubble,” most people would probably have said that real estate is always a good investment. But since then, we’re all more painfully aware that housing prices can rise and fall. That isn’t to say that real estate is always a bad investment — as a relatively small part of a diversified portfolio, it can be appropriate, depending on your goals and risk tolerance. But don’t expect endless gains, with no setbacks.
  • “Gold will always glitter.” During periods of market volatility, investors often flee to gold, thereby driving its price up. But gold prices will fluctuate, sometimes greatly, and there are risks in all types of gold ownership, whether you’re investing in actual bars of gold or gold “futures” or the stocks of gold-mining companies.
  • “I can avoid all risks by sticking with CDs.” It’s true that Certificates of Deposit (CDs) offer a degree of preservation of principal. But they’re not risk-free; their rates of return may be so low that they don’t even keep up with inflation, which means you could incur purchasing-power risk. Again, having CDs in your portfolio is not a bad thing, but you’ll only want to own those amounts that are suitable for your objectives.
  • “The price of my investment has gone up — I must have made the right decision.”
  This assumption could also be made in reverse — that is, you might think that, since the price of your investment has dropped, you must have made the wrong choice. This type of thinking causes investors to hold on to some investments too long, in the hopes of recapturing early gains, or selling promising investments too soon, just to “cut their losses.” Don’t judge investments based on short-term performance; instead, look at fundamentals and long-term potential.
  • “If I need long-term care, Medicare will cover it.” You may never need any type of long-term care, but if you do, be prepared for some big expenses. The national average per year for a private room in a nursing home is nearly $84,000, according to a recent survey by Genworth, a financial security company. This cost, repeated over a period of years, could prove catastrophic to your financial security during your retirement. And, contrary to many people’s assumptions, Medicare may only pay a small percentage of long-term care costs. You can help yourself by consulting with a financial professional, who can provide you with strategies designed to help cope with long-term care costs.
  You can’t avoid all assumptions when you’re investing. But by staying away from questionable ones, you may avoid being tripped up on the road toward your financial goals.

Scott Johnson, CFP, is a financial advisor with Edward Jones, 8146 W. 111th St., Palos Hills, 974-1965. Edward Jones does not provide legal advice. This article was written by Edward Jones for use by your local Edward Jones financial advisor.

Reinvesting dividends could be a smart move

Scott-Johnson---Head As an investor, you’ll eventually need to make all sorts of decisions — and some will be difficult. But there’s one choice you can make that can be relatively easy: reinvesting stock dividends.
  It’s simple to reinvest dividends — you just need to sign up for a dividend reinvestment plan. Once you do, you won’t receive dividends directly as cash; instead, your dividends will be directly reinvested in the underlying equity. Be aware, though, that you may incur a fee when reinvesting dividends.
  By doing some research, you can find companies that have not only consistently paid dividends year after year but also increased those dividend payments regularly. (Keep in mind that companies are not obligated to pay dividends and can reduce or discontinue them at any time.)
  By reinvesting dividends, you may be able to realize some key benefits. First, you’ll be building your share ownership, which can help you build wealth. No matter what the market is doing, adding shares can be beneficial — but may be especially valuable when the market is down. When share prices are low, reinvesting dividends — which don’t typically fluctuate with share price — can help boost your investment reach further, simply because each reinvested dividend can buy more shares than at the previous higher share price.
  Consider this: It took investors 25 years to recover from the Crash of 1929 if they did not reinvest their dividends — but it only took them 15 years to recover from the crash if they did reinvest dividends, according to Ned Davis Research. And we’ve seen the same phenomenon in more recent years, too. Since 1987, according to Ned Davis Research, we’ve had three major market corrections: Black Monday in 1987; the bursting of the dot-com bubble from 2000 to 2002; and the bursting of the subprime and credit bubbles in 2008. The S&P 500 rose following those market corrections. Investors who stayed invested during those corrections had the opportunity to participate in rising markets. Those investors participating in a dividend reinvestment plan may have been able to buy more shares at a lower price. Of course, past performance doesn’t guarantee future results and the value of your stock shares can fluctuate, including the loss of principal.
  While reinvesting your dividends clearly can be beneficial, you do have to be aware that, even if you aren’t receiving the dividends as cash, you will be taxed on them. But the dividend tax rate remains quite favorable — if you’re in the 25%, 28%, 33% or 35% brackets, your dividends will be taxed at 15%. If your taxable income is more than $400,000 (or $450,000 for couples), your dividend tax rate is 20%. If your adjusted gross income is $250,000 or more (for married couples filing jointly) or $200,000 or more (if you’re single), you’ll also have to pay a 3.8% Medicare tax on your dividends.
  While taxes are a consideration when investing, they should never be thedriving factor. Consider also that investing in dividend-paying stocks does carry some risk — specifically, the value of your investment may fluctuate, causing you to lose some, or all, of your principal. But you may be able to reduce the impact of this possible volatility by sticking with quality stocks as part of a diversified portfolio.
  As we’ve seen, reinvesting dividends can help you build your investment portfolio — so consider putting this technique to work in your investment strategy.

Scott Johnson, CFP, is a financial advisor with Edward Jones, 8146 W. 111th St., Palos Hills, 974-1965. Edward Jones does not provide legal advice. This article was written by Edward Jones for use by your local Edward Jones financial advisor.