U.S. Consumers Increased Borrowing in March

U.S. Consumers Increased Borrowing in March

  • Posted on: 8 December 2015
  • By: admin

U.S. Consumers Increased Borrowing in March

This Chicago-Sun Times article discusses the recent increase in U.S. consumer debt. Data released by the Federal Reserve showed much of the increase in borrowing is attributable to student and auto loans plus an approximate $5.2 billion increase in credit card debt. Some economists would argue that the increase in consumer debt is indicative of improving confidence, but we don’t think it’s that cut and dry.



Consumer spending is the primary driver of the U.S. economy and although we would agree that confidence is vital and extremely important to economic expansion there are factors that need to be closely watched. First and foremost, expansion of consumer credit that exceeds growth in wages brings into question the sustainability of consumption driven growth.   In a fragile economy, growth in credit to fuel consumption can be challenging particularly if household debt levels are already lofty and job growth is slowing. While we are not predicting further slowdown of private sector job creation, we do recognize that consumption growth without wage growth is not perpetually sustainable. We would view a reversal of the improved household savings rates and debt ratios as a negative to continued economic expansion, which is why job numbers and consumption patterns are the data to keep a close eye on.

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French Elections Signal Shift in European Austerity Debate - See more at: http://pathlightinvestors.com/blog/french-elections-signal-shift-european-austerity-debate#sthash.8Xo3R34J.dpuf

French Elections Signal Shift in European Austerity Debate - See more at: http://pathlightinvestors.com/blog/french-elections-signal-shift-european-austerity-debate#sthash.8Xo3R34J.dpuf

  • Posted on: 8 December 2015
  • By: admin

French Elections Signal Shift in European Austerity Debate

Over the weekend, French voters elected the socialist candidate, Francois Hollande, as President, ousting Nicolas Sarkozy.  The move by French voters signals a potential shift in attitudes toward austerity in Europe.  A New York Times article summarizing the events can be found at www.nytimes.com/2012/05/08/world/europe/francois-hollandes-victory-sharpens-european-austerity-debate.html.


Although the politics of France may seem worlds away and insignificant as we in America deal with our own political and economic issues, the election of Hollande, and the potential shift in policy, is going to be impactful to all of us.  Europeans have been struggling under increasing sovereign bond yields and cutbacks in government budgets which have stifled economic growth.  The election over the weekend is a clear signal that the people of France have had enough austerity and are now ready to spend to help kickstart their economy. 

While the sentiment is easy to understand--if you're hurting you naturally want relief--the move away from austerity will put France, and other nations like Greece, Spain, Portugal, Ireland, and Italy, firmly at odds with Germany, and at the end of the day, Germany is the key to keeping the European Union together as they are the only nation that can afford to continue to help support the others monetarily.  In order to receive that aid however, and avoid default, Germany is going to fight to maintain current promises for budgetary cutbacks.

This election moves us one step closer to a potential fracturing of the European Union.  The flaw of this structure is that the only way to get out of a debt crisis is to devalue your currency and print, a luxury no member of the EU has at this point.  The intermediate step is likely printing of Euros by the European Central Bank which ultimately increases the value of the US dollar making our exports more expensive, at just the time we are beginning to see a revival in the manufacturing base of America. 

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Pathlight Investors 1Q12 Quarterly Letter

Pathlight Investors 1Q12 Quarterly Letter

  • Posted on: 8 December 2015
  • By: admin

Pathlight Investors 1Q12 Quarterly letter

What a difference three months makes! In 2011, equity markets were mired by excessive volatility and concerns over the stability of global financial systems due to a festering European debt crisis and slowing emerging market growth. Conversely, 2012 has started down a different path by posting the best returns for a first quarter since 1998 in what has been a relatively uninterrupted move higher by most global equity markets. Each day for the first 90 days of the year, markets more often than not finished in the green, and stocks that had been abandoned just three months earlier steamed ahead to lead the way in 2012.


This first quarter, we’ve seen economic data in the U.S. strengthen and the European Central Bank pump vast amounts of liquidity into the system to combat rising sovereign debt yields. The beginning of an easing trend in emerging market economies has also occurred that should help weather the slowdown in demand coming from Europe’s recession. But even with all of the stellar equity returns, improving U.S. economy, declining bond yields, and strong stock performance, people still don’t seem to believe this rally. For some reason, it doesn’t feel good because there is still a bad taste in our collective mouths from what happened to markets in 2011: double-digit percentage gains wiped out in the second half of the year.


At Pathlight, it’s no different. We expected more from last year and found our positive thesis shipwrecked on the rocks because of turbulent investing seas. For the first quarter of 2012, we have tried to participate in the equity rally while remaining conservatively positioned to protect against a sudden shock to the system, which is still a possibility. In doing so, we have focused on building exposure to our core positions rather than committing capital to more volatile companies.


Our investing discipline is all about managing risk; looking out more than one quarter or one year and focusing on quality investments. Recently we’ve had to watch as riskier stocks have led the rally, but despite the outperformance of lower-quality, non-dividend paying stocks, we will not let one-quarter alter our discipline in order to chase returns. The short-sightedness of many investors and their clamoring for the recent best performers typically hinders long-term success; it’s a game we would rather not play.

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Expert's Corner - Being "Bankable": The 5 "C's" of Business Credit - See more at: http://pathlightinvestors.com/blog/experts-corner-being-bankable-5-cs-business-credit#sthash.PJ5e24NN.dpuf

Expert's Corner - Being "Bankable": The 5 "C's" of Business Credit - See more at: http://pathlightinvestors.com/blog/experts-corner-being-bankable-5-cs-business-credit#sthash.PJ5e24NN.dpuf

  • Posted on: 8 December 2015
  • By: admin

Greg Lehmann

Managing Director

Biltmore Bank of Arizona


In general banks (and bankers) do a poor job of informing businesses what it takes to get a loan approved. In the world of commercial bankers many of the most important considerations come down to the 5 C’s of Credit.


Following are brief descriptions of the 5 C’s:


1.      Capacity…to make the payments – The best predictor of a business’s likelihood of repaying a loan as planned, is a proven history of positive cash flows. This cash flow history needs to be adequate to cover existing debt payments and any future payments on the new loan request. Banks desire a “debt service coverage ratio” of something in the 1.30 times.


2.      Collateral…to support the loan – Unless you’re getting an unsecured loan (very rare in today’s banking environment) the bank will look to the assets of the business for two reasons: 1) to “margin” the loan amount, and 2) to serve as a back-up payment source if cash flow cannot cover the payments. Depending on the purpose of the loan, collateral takes many forms. Working capital loans typically rely on accounts receivable and inventory; term loans typically rely on fixed assets such as equipment and real estate. When a bank “margins” the collateral, it will typically look to lend up to a discounted level of the collateral value. A general rule of thumb is the less liquid the collateral, the less you can borrow.


3.      Capital…to support normal business operations – Every business starts with some level of capital investment. These are funds invested by the business owner (or others) to start and support the operations. It is augmented by the annual earnings retained by a business. A common misperception is that bank debt can substitute for “capital.” Debt is part of the overall capital structure of a business, but it should not take the place of invested capital. Typically banks will require a business to show something in the range of 30% capital/equity as a percentage of total assets.


4.      Conditions …what is affecting the business / industry – What internal and external factors are affecting the business? Internal issues typically include management, business strategy, and operational execution. External issues might include government regulations, economic conditions, and competition. Evaluating a business owners’ awareness of market conditions and demonstrating the ability to deal with them is critical to the bank.


5.      Character…integrity and commitment – As with anything in life, a good reputation goes a long way. Indications of good character are an important component in the loan approval process. In addition to community and personal opinions, credit history is an important indicator of whether or not a bank can rely on a party to honor their obligations.


In the end it’s really pretty simple; banks lend money to organizations and people who show the greatest likelihood of repaying them.  At the Biltmore Bank we will work with you to help you understand our lending criteria and help you to mitigate areas where your business may need help. The above factors are not all inclusive in helping a bank make the correct decision to approve a loan, but they are certainly some of the most important.

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What Really Affects Rising Gas Prices?

What Really Affects Rising Gas Prices?

  • Posted on: 8 December 2015
  • By: admin

What Really Affects Gas Prices?


In 2012, Americans are seeing and hearing more news about the rise in the cost of gasoline, something we can all relate to. But are we really feeling the pinch? And who’s to blame for the increase in gas costs?


With Presidential and Congressional elections slated for later this year, the finger pointing regarding gas prices has begun, each political party blaming the other for increasing costs. But is this really the case? Is the government, or the President, really to blame?


The answer, of course, is no. There are many factors that are responsible for rising oil costs, including:


-          Rising demand from foreign markets, particularly China and India

-          The costs of retrieving and refining from newfound oil sources are increasing

-          Oil speculation drives prices upwards

-          Internal and external volatility of certain oil producing nations, like Syria, Iran, Libya, and others

-          Increased participation by Japan, as nearly all nuclear power has been knocked off line by tsunamis

-          The decline of the dollar in world currency markets



And perhaps the most important factor in rising gas costs is… ourselves! Let’s face it, Americans use a massive amount of gasoline, more than any other nation. According to the Bureau of Economic Analysis, Americans spend 3.7% of their income per year on gasoline, and while prices are rising, so is demand. We're driving more than ever - 90% more than compared to the early '80s - according to the Federal Highway Administration.


And although there has been a recent spike in prices at the pumps, it’s wise to remember that gas prices are factored on an annual cycle, and if you look at the market from exactly one year ago, you’ll find that prices were exactly the same as they are now. This graphic from www.gasbuddy.com illustrates that point:

Source: http://www.gasbuddy.com/gb_retail_price_chart.aspx?time=12


Several factors are indeed out of our control. But until our behavior is affected by prices, and the demand is lessened, it’s likely that we’ll continue to see prices stay at or around $4 per gallon.

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The New Realities of Retirement

The New Realities of Retirement

  • Posted on: 8 December 2015
  • By: admin

The New Realities of Retirement


For years, many professionals were looking to the future with great anticipation, a chance to retire comfortably and enjoy the security that years of investing, as well as social security and pensions, would bring to their golden years.


Due to the economic downturn, a new retirement reality has fallen upon all generations and investors are starting to discover that they’re going to have to work longer and invest smarter in order to retire with a lifestyle that is similar to what they have been experiencing during their working years.


For many seniors, rather than enjoying time traveling or with hobbies, work is the new reality. After all, it’s not easy, and sometimes impossible, to maintain their current lifestyle with low interest rates, rising health care costs and an increased life expectancy. People are living longer, which means retirement funds must be spread out as income over a much longer period of time than many baby boomers had originally planned for. Due to this new reality, many boomers are finding themselves working far beyond the age of 65.

Additionally, the rate at which seniors are spending their retirement income must be adjusted to make that income last longer. Conventional wisdom was that seniors could spend 4% to 5% of their investment assets per year, but in this uncertain economy combined with increased life expectancy, many now believe that number should be reduced to 3%.  Understandably people should err on the side of caution, but at Pathlight, we are comfortable with the 4% withdrawal rate, particularly if investors have a growth component to their portfolios.


This same reality is hitting younger workers, too. With the baby boomers retiring, a significant depletion of the social security “pot” is set to occur, meaning that those about to retire, or those just starting careers, will have to fend for themselves as far as retirement income goes.


For younger workers, the common wisdom has been to take on risk with their retirement funds as the investment horizon is much longer for younger workers and therefore, in theory, they can handle more risk. Due to the recent economic climate, that school of thought is being replaced. Today, consistency of returns over a long period is more important than capturing the moves by the most aggressive investments.  Consistency allows you to stay with an investment, while volatility and risk of loss may cause you to abandon the investment without having a positive return. In addition, this puts more importance on the contributions to the plan (by far the most significant growth factor) than the way the funds are allocated.


Furthermore, the new retirement reality poses an uncertain future for younger workers who will not have a guarantee of a corporate pension or social security funding. Members of Generation X and Generation Y, as well as Millennials, will need to be creative and diligent with their investing program by turning to 401k and personal investments exclusively in order to fund their retirement plans.


The challenges of taking a lifetime of savings and converting it to a stream of income can be overwhelming. An increase in life expectancy and rising health care costs stretch your dollars even further. For a comprehensive plan to make sure you’re prepared to not just survive, but truly thrive, in your golden years, contact one of Pathlight Investors portfolio managers. They can give you a customized analysis of your retirement situation and make recommendations to help make your retirement vision your retirement reality!

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Would Your Investment Plan Be Final Four Worthy?

Would Your Investment Plan Be Final Four Worthy?

  • Posted on: 8 December 2015
  • By: admin

Would Your Investment Plan Be Final Four Worthy?


By the time you are reading this, March has passed, the Final Four is complete, and a new National Champion has been crowned. As a former participant in the greatest sporting event in the world (apologies to the World Cup), I completely understand the passion and excitement over the NCAA Men’s Basketball Tournament, I get it. More commonly known as March Madness, this exciting test of skill, attrition, excellence, and luck often provides some of the most memorable sporting moments of the year. I am confident that this 2012 experience was no different. 

The NCAA Basketball Tournament is a platform for the underdog, for David to beat Goliath, because in one game, in one moment, anything can happen. Remember Georgetown’s narrow escape vs. Princeton in ’89? How about Richmond over Syracuse ’91? Santa Clara (and a freshman named Steve Nash) beating Arizona in ‘93? And who could forget Villanova beating Georgetown in the ‘85 championship game (anyone remember Ed Pickney)? Those moments are the reasons why we love the tournament, but do you REALLY need to treat your bracket selections like a college final exam? How much time did you spend last month filling out your bracket and how many did you submit? Do you think that extra bracket really enhanced your odds in the office pool?

In 2011, more than 5.9 million brackets were entered on ESPN.com and only 2 people correctly picked the final four. That’s right, only 2 out of 5.9 million got the final four teams right. And how much time did those other 5,899,998 people spend on futility? 

Chicago-based placement firm Challenger, Gray, and Christmas estimate that more than 8.4 million hours are spent preparing brackets and viewing games on-line in the workplace. Even President Obama took time out of his busy schedule to do a televised bracket selection. The 8.4 million hours does not even include the time outside of work, which must be at least equal to the 8.4 million. By that calculation that is 16.8 million hours spent on the tournament. So here is the question I want you to contemplate.

Did you spend more time this year preparing your brackets than you will making investment, savings, or retirement planning?   

If the answer is yes, then it’s time to meet with your advisor. If you don’t have an advisor, pick up the phone and give us a call. There’s a tendency to put off things, I understand, but don’t neglect your future for the excitement of March. Trust me, The Tournament will be here again next year and will be just as good, if not better. Unfortunately, Andre Miller and Rick Majerus squashed my March Madness dreams in the first round, but it was a privilege just to be a part of the Madness and something I will never forget. 

Ask yourself these 5 questions and find out if your Investment Plan is Final Four-worthy:

1.       Do you understand your investment strategy?

2.       Do you believe the investments are aligned with your goals & objectives?

3.       What is the true time frame for your investments?

4.       Can you explain to a friend how you are invested and why?

5.       Do you know what investments you own and why?

-MJ Nodilo

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Expert's Corner - HARP 2.0

Expert's Corner - HARP 2.0

  • Posted on: 8 December 2015
  • By: admin

Expert's Corner - HARP 2.0


Due to the economic downturn of 2008, millions of homeowners throughout the U.S. and Arizona are currently in a negative equity position on their home mortgage. With the hopes of putting a stop to some foreclosures and allowing people to stay in their homes, the Obama Administration is in the process of launching a revised version of the HARP program called HARP 2.0. In order to gain a better understanding of what HARP 2.0 is and how it may affect you, a brief overview courtesy of Eric Wright, Senior Loan Officer at Amerifirst Financial, can be found here:

What is the Home Affordable Refinance Program (HARP 2.0)?

Originally announced in March 2009, HARP is a federal government program designed to help five million underwater or near-underwater homeowners refinance into a fixed loan with a lower monthly payment.

On Oct. 24, 2011, President Obama announced an overhaul to the HARP program with the intent of reaching more underwater homeowners. The expanded HARP program - also referred to as HARP 2.0 - will take effect in the first quarter of 2012 for borrowers with a loan-to-value ratio of greater than 125 percent.

Why didn't the original version of the HARP program work?

The original version of HARP had many roadblocks that made it difficult for homeowners to refinance. For example, the program only assisted those with mortgages with a loan-to-value ratio between 80 percent and 125 percent, but in many hard-hit housing markets across the country, homes have lost more than 50 percent in value making those homeowners ineligible for the program.

How will the HARP 2.0 program change things?

Some of the major changes to the HARP 2.0 program include:

  • The program has been extended until December 31, 2013
  • The maximum Loan to Value (LTV) cap has been removed on home owners looking to refinance in to a fixed rate mortgage. (Previous loan-to-value limits were set at 125 percent.)
  • However for homeowners looking to refinance into an adjustable rate mortgage, the maximum LTV is set at 105%
  • The appraisal process has been streamlined; in cases where an Automated Value Method can be determined an appraisal would not be required
  • Each mortgage lender will enact its own schedule for implementing these enhancements. Lenders should receive instructions from Fannie Mae and Freddie Mac by March 17, 2012
  •  Other lenders may need extra time to accommodate the changes

The following criteria must be met to qualify for the HARP 2.0:

  • A HARP 2.0 refinance only applies to Fannie Mae or Freddie Mac mortgages
  • HARP 2.0 is available for owner occupied homes, second homes, and investment properties
  • The homeowner must be able to afford the new lower payment
  • The current mortgage must be up- to-date with no late payments in the past twelve months
  • Payments on the new loan must be more affordable or more stable than on the existing loan

How do I find out who holds my mortgage?

To be eligible for the HARP program, your mortgage must be held by either Fannie Mae or Freddie Mac. To "look up" your mortgage check the following websites:

·         Fannie Mae - http://www.fanniemae.com/loanlookup/

·         Freddie Mac - https://www.freddiemac.com/corporate/

How do I know if I am eligible for HARP?

It is best to work with an experienced mortgage banker to determine which option is best for you. You can find out if you are eligible for HARP calling by Eric Wright at 602-326-3628 or via email at ewright@amerifirst.us


The views and opinions expressed are not those of Pathlight Investors and are intended to be for educational purposes only. Pathlight Investors does not provide advice related to the mortgage industry and cannot vouch for the accuracy of the information presented. Please contact Eric Wright at Amerifirst Financial to determine how this information pertains to your specific situation.

Is Your 401k Gathering Dust?

Is Your 401k Gathering Dust?

  • Posted on: 8 December 2015
  • By: admin

Is Your 401k Gathering Dust?


Many of us know down to the penny the status of our checking and savings accounts, but when was the last time you checked on the status of your 401k investment? Do you know how much you have in this account, or how its been performing? If the answer is “no,” then it’s time to dust off your 401k and understand how your retirement investments are working for you!


Here are a few things to keep in mind as you dive into your 401k:

·        Check on your investment regularly -401k plans become stagnant because of the “set it and forget it” mentality that has been created by the industry; you cannot simply ignore your investments and hope that they perform well. Too many people set an allocation when they enroll in their company 401k plan and never review those allocations. They don’t review how the chosen funds performed during the year, and don’t evaluate potentially better investment alternatives. Take the time to understand what investment options your company offers, and how potentially reallocating your funds could improve the performance of your account, both in the short and long term.


·        You CAN take it with you! - A recent Fidelity survey found about two-thirds of retirement plan participants left their retirement savings with their former employer's plan after they left their jobs. But that's often the wrong move. The same way that people forget about their investments in their 401k, they often forget, or don’t want to be bothered, to roll their 401k out of their old plan when they leave a job. If you are going to monitor the old 401k regularly, then it is ok to leave it in the old plan, but many people simply forget about their 401k account once they leave a job and fail to properly monitor it. Additionally, there may be fees associated with a 401k plan administration that you could avoid by rolling into an IRA.


·        Read your statements & research your situation - You should review your account when you receive your statement, checking to see how your investments are performing as well as review their suitability to your current situation. Take the time to understand and assess how your 401k fits into your overall investment allocation, and pay close attention to how it fits with your non-401k investment account. Ask yourself if it is in harmony with your overall investment picture, or if you are hurting yourself by potentially taking on too much risk. Also, consider asking your financial advisor to monitor your 401k and provide opinions on the various investment opportunities in the plan.


·        One size does NOT fit all - There is no “one size fits all” for how you should allocate your 401k funds, but rather your investment choices should be made based on your unique financial situation. If you actively contribute to your 401k, choose suitable investments and monitor their progress, you will have a better chance of reaching retirement with meaningful assets in your 401k account. 


If you’re not pleased with how your current retirement plan is performing, contact us today at 602-795-7600 for a complimentary review of your portfolio. Our knowledgeable team would be happy to give you some ideas on how you can help maximize your investments.

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The Social Media IPO Gamble - To Buy or Not to Buy?

The Social Media IPO Gamble - To Buy or Not to Buy?

  • Posted on: 8 December 2015
  • By: admin

The Social Media IPO Gamble - To Buy or Not to Buy?

Recently, social media giant Facebook announced it will become a publicly traded company, with an initial public offering (IPO) slated for later this year. With over 845 million users in all corners of the world, Facebook has penetrated the market and established itself like no other social media site before it, quickly becoming the social media site of choice across all demographics.


Sure, Facebook has changed how we use the internet and how we communicate with each other, but will Facebook be a good investment?


If you’re thinking of investing your money in social media companies, here are a few things to keep in mind before putting all your chips in:


1. Social media IPOs, like social media itself, moves at a rapid speed - If we look to prior social media site IPOs, trends show that while these stocks nearly all have an initial “pop” upon release, and most have had difficulty building upon that first day trading momentum. Thomson Reuters reports trends in 12 recent social media companies that have gone public in the last year, and as of March 13, 2012:

  • Six are trading BELOW their IPO price
  • Nine are trading below the first trading day’s closing price, meaning that if you weren’t able to get in on the IPO and bought the stock in the secondary market the day shares started trading, then nine out of 12 times, you are probably losing money if you still hold the stock today
  • Five out of 12 social media companies that have offered an IPO are yet to turn a profit
  • Shares of Groupon, which was the most celebrated Social Media company to have gone public, are currently trading ~16% below their offering price as they have struggled to communicate the benefits of their business model


IPO Price

%Chg First Day Close v. IPO

%Change First Week Close v. IPO

%Change as of 3/13/12 Close v. IPO

%Change as of 3/13/12 v. First Day Close





































Jive Software






Angie’s List


















Demand Media












Source: Thomson Reuters


2. Not all social media sites are created equally – As everybody knows, Facebook is the 800-pound gorilla of the social media world, and as such, this will have a major impact on its valuation and market capitalization. Similarly, LinkedIn, which has been described as Facebook for business, has been able to hold onto gains since its IPO on May 19, 2011 and currently trades at roughly $94 as of March 13, 2012, a 109.6% increase over its IPO price of $45. While Facebook and LinkedIn are seen as social media sites with continued growth potential, many others are not, and have yet to prove their value.


3. Being “connected” has its benefits – Just like your friends on Facebook who turn you on to a special at a local restaurant or share a social media promotional deal at a local business, success in social media IPOs also requires a connection to an opportunity to purchase stock at the initial offering price. Usually, the initial offering price is secured by institutional investors and large investment bank clients, and often, by the time the general public goes to purchase shares, the price has increased significantly.


4. Is it a “real” business or just the latest buzz? – Social media stocks will likely experience a path similar to the dot.com stocks of 15 years ago – websites with a “real business” are likely to succeed over time, but social media companies with flawed business plans, or worse yet, no real business plan at all, are just as likely to lose money over time. The upcoming Facebook IPO has been compared to Google’s IPO in 2004, as Facebook has Google-like dominance in their particular niche of the social media world. While other social media sites bill themselves as “The Facebook of (fill in the blank)”, it’s important to remember that there is still only one Facebook, and most other unproven social media stocks may ultimately make for a bad investment.


5. Don’t put all your eggs in one basket – As tempting as it may be to invest all of your money in a social media IPO looking for the “home run,” wise investment strategy tells you to never invest all of your money in one company or industry. While short term gains can be made, if the stock value plateaus, or worse, plummets, you’ll stand to lose everything. Diversify your investments, and work with your investment advisor to keep track of your portfolio’s performance over long-term periods to monitor steady growth.
- See more at: http://pathlightinvestors.com/blog/social-media-ipo-gamble-buy-or-not-bu...

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