Nicholson Financial Services,Inc.David S. NicholsonFinancial Advisor89 Access RoadSte. CNorwood, MA 02062781-255-1101866-668-1101david@nicholsonfs.comwww.nicholsonfs.com

Year End 2015Patience

Investor, Know Thyself: How Your Biases CanAffect Investment Decisions

Quiz: Which Birthdays Are FinancialMilestones?

I'm thinking about storing financial documentsin the cloud. What should I know?

Nicholson Financial ServicesDid You Know...?Patience

See disclaimer on final page

2015 ended with a whimper as mostof the major equity averages finishedthe year flat or barley changed. Itwasn't a bad year, but it wasn'tparticularly good either. Years likethat can certainly try your patienceas an investor. I expand andcomment further on that in the firstarticle. What continues to amazeme, after almost 22 years as anadvisor, is how schizophrenic themarket (and investors) can be. Oneday the focus can seem verynegative. The very next day, onegood piece of news can change thewhole tone to a positive. My advice:don't underestimate the media'simpact on your thought process anddon't left it affect you.

Nicholson Financial Services, Inc. isan Independent Firm.

"The stock market is a vehicle for transferringwealth from the impatient to the patient." --Warren Buffett

Don't you just love Warren? I do. He makes myjob easier. This quote from him reallyexemplifies the past year and the currentenvironment. There are times as investorswhere it is harder to be patient than others.Now seems like one of those times, particularlyif you listen to the media. Here are my thoughtson a few points of concern:

Interest rates : The Federal Reserve finallyacted and raised the Fed Funds rate by 1/4%.The stock market will often initially reactnegatively to any rate hike, but history hasshown that stocks have tended to go higherafter the initial rate increase. My view: the factthat the FOMC was confident enough in theeconomy to raise rates is a positive. For severalyears, they left rates low out of fear that higherrates would push the economy back into arecession. Now, they appear more concernedabout inflation than a lagging economicrecovery.

China : Recent news out of China about growthconcerns has spooked the markets. The fear isthat a decline in the growth of China's economy(the world's second largest) could have anegative impact on global growth. My view: Ithink these concerns are overblown. That is,unless you are heavily investing in China. Overthe past few years, I have predominantlyadvised against investing directly in Chinesecompanies or in China country mutual funds.Why? Frankly, I don't trust them. I don't trusttheir accounting practices, which are notcomparable to those of the USA. I don't trusttheir business practices. Most important, I don'ttrust their communist government to stay out ofbusiness or to not make significant mistakes(see their recent issues with their currency asan example).

Oil : The decline in oil prices over the past yearhas been amazing. I continue to find itinteresting how some have the opinion that lowoil prices are bad for the economy. There is no

question that low oil prices are bad for some oilcompanies and countries where oil is theirprimary export (most OPEC nations and Russiaare examples). However, the US is aconsumer-driven economy. These low oil pricesare adding hundreds of dollars back into mostpeople's monthly budget as they paysignificantly less to heat their home or fuel theircars. That money will be used to pay downdebt, save or invest, or spend back into theeconomy. I could easily see that consumerspending offsetting any weakness due to low oilprices.

Sideways : Ever since mid-2014, the S&P 500has been in a sideways pattern. To me, thisisn't a surprise after the index went up roughly50% in 2012 and 2013. Looking at a chart, youcan see that the market has bounced betweena range. I view this as a positive as suchsideways consolidation patterns can becreating a base for the next rally in the market. Istill believe that rally will come, probably thisyear.

Volatility : Volatility has been an issue again asof last summer. Here is the important thing toremember: volatility is NORMAL. Also, we havebeen a bit spoiled. From 10/3/2011 to5/21/2015, we had the third longest periodwithout a 10% drop in the S&P 500 in the past85 years.

Election Year : A number of clients have askedme if they should be concerned that this is anelection year. Frankly, I don't think so. Electionyears have been overwhelmingly positive forthe markets. Since 1928, the market hasaveraged over 11% in election years. Since theend of World War 2, there has only been 2election years that have been "down years" forthe market. Those years, 2000 and 2008, hadmore to do with the bursting of the tech and realestate bubbles than the elections themselves.

The "wall of worry" : There is an old saying,"Bull markets climb a wall of worry." This time isno different. If you want to discuss why youshould be patient with your investments, call oremail me.

Page 1 of 4

Investor, Know Thyself: How Your Biases Can Affect InvestmentDecisionsTraditional economic models are based on asimple premise: people make rational financialdecisions that are designed to maximize theireconomic benefits. In reality, however, mosthumans don't make decisions based on asterile analysis of the pros and cons. Whilemost of us do think carefully about financialdecisions, it is nearly impossible to completelydisconnect from our "gut feelings," that naggingintuition that seems to have been deeplyimplanted in the recesses of our brain.

Over the past few decades, another school ofthought has emerged that examines howhuman psychological factors influenceeconomic and financial decisions. Thisfield--known as behavioral economics, or in theinvesting arena, behavioral finance--hasidentified several biases that can unnerve eventhe most stoic investor. Understanding thesebiases may help you avoid questionable calls inthe heat of the financial moment.

Sound familiar?Following is a brief summary of some commonbiases influencing even the most experiencedinvestors. Can you relate to any of these?

1. Anchoring refers to the tendency tobecome attached to something, even when itmay not make sense. Examples include apiece of furniture that has outlived itsusefulness, a home or car that one can nolonger afford, or a piece of information that isbelieved to be true, but is in fact, false. Ininvesting, it can refer to the tendency toeither hold an investment too long or placetoo much reliance on a certain piece of dataor information.

2. Loss-aversion bias is the term used todescribe the tendency to fear losses morethan celebrate equivalent gains. Forexample, you may experience joy at thethought of finding yourself $5,000 richer, butthe thought of losing $5,000 might provoke afar greater fear. Similar to anchoring, lossaversion could cause you to hold onto alosing investment too long, with the fear ofturning a paper loss into a real loss.

3. Endowment bias is also similar toloss-aversion bias and anchoring in that itencourages investors to "endow" a greatervalue in what they currently own over otherpossibilities. You may presume theinvestments in your portfolio are of higherquality than other available alternatives,simply because you own them.

4. Overconfidence is simply having so muchconfidence in your own ability to selectinvestments for your portfolio that you might

ignore warning signals.5. Confirmation bias is the tendency to latch

onto, and assign more authority to, opinionsthat agree with your own. For example, youmight give more credence to an analystreport that favors a stock you recentlypurchased, in spite of several other reportsindicating a neutral or negative outlook.

6. The bandwagon effect, also known as herdbehavior, happens when decisions aremade simply because "everyone else isdoing it." For an example of this, one mightlook no further than a fairly recent andmuch-hyped social media company's initialpublic offering (IPO). Many a discouragedinvestor jumped at that IPO only to sell at asignificant loss a few months later. (Some ofthese investors may have also suffered fromoverconfidence bias.)

7. Recency bias refers to the fact that recentevents can have a stronger influence onyour decisions than other, more distantevents. For example, if you were severelyburned by the market downturn in 2008, youmay have been hesitant about continuing orincreasing your investments once themarkets settled down. Conversely, if youwere encouraged by the stock market'ssubsequent bull run, you may haveincreased the money you put into equities,hoping to take advantage of any furthergains. Consider that neither of theseperspectives may be entirely rational giventhat investment decisions should be basedon your individual goals, time horizon, andrisk tolerance.

8. A negativity bias indicates the tendency togive more importance to negative news thanpositive news, which can cause you to bemore risk-averse than appropriate for yoursituation.

An objective view can helpThe human brain has evolved over millenniainto a complex decision-making tool, allowingus to retrieve past experiences and processinformation so quickly that we can respondalmost instantaneously to perceived threats andopportunities. However, when it comes to yourfinances, these gut feelings may not be yourstrongest ally, and in fact may work againstyou. Before jumping to any conclusions aboutyour finances, consider what biases may be atwork beneath your conscious radar. It mightalso help to consider the opinions of anobjective third party, such as a qualifiedfinancial professional, who could help identifyany biases that may be clouding your judgment.

In psychology, "heuristics"refers to the mentaldecision-making short-cutsthat individuals developover time based on pastexperiences. Whileheuristics can be helpful inavoiding unnecessarydeliberation, they can alsolead to misleading biasesthat can derail even themost well-thought-outfinancial plan.

Page 2 of 4, see disclaimer on final page

Quiz: Which Birthdays Are Financial Milestones?When it comes to your finances, somebirthdays are more important than others. Takethis quiz to see if you can identify the ages thatmight trigger financial changes.

Questions1. Eligibility for Medicare coverage begins atwhat age?

a. 62

b. 65

c. 66

2. A child can stay on a parent's healthinsurance plan until what age?

a. 18

b. 21

c. 26

3. At this age individuals who are makingcontributions to a traditional or Roth IRA oran employer-sponsored retirement plan canbegin making "catch-up" contributions.

a. 50

b. 55

c. 60

d. 66

4. This age is most often associated withdrops in auto insurance premiums.

a. 18

b. 25

c. 40

d. 50

5. Individuals who have contributed enoughto Social Security to qualify for retirementbenefits become eligible to begin collectingreduced benefits starting at what age?

a. 62

b. 65

c. 66

d. 70

6. To obtain a credit card, applicants underthis age must demonstrate an independentability to make account payments or have acosigner.

a. 16

b. 18

c. 21

Answers1. b. 65. Medicare eligibility begins at age 65,although people with certain conditions ordisabilities may be able to enroll at a youngerage. You'll be automatically enrolled inMedicare when you turn 65 if you're alreadyreceiving Social Security benefits, or you cansign up on your own if you meet eligibilityrequirements.

2. c. 26. Under the Affordable Care Act, a childmay retain his or her status as a dependent ona parent's health insurance plan until age 26. Ifyour child is covered by your employer-basedplan, coverage will typically end during themonth of your child's 26th birthday. Check withthe plan or your employer to find out exactlywhen coverage ends.

3. a. 50. If you're 50 or older, you may be ableto make contributions to your IRA oremployer-sponsored retirement plan above thenormal contribution limit. These "catch-up"contributions are designed to help you make upa retirement savings shortfall by bumping upthe amount you can save in the years leadingup to retirement. If you participate in anemployer-sponsored retirement plan, checkplan rules--not all plans allow catch-upcontributions.

4. b. 25. By age 25, drivers generally see theirpremiums decrease because, statistically,drivers younger than this age have higheraccident rates. Gaining experience andmaintaining a clean driving record should leadto lower premiums over time. However, there'sno age when auto insurance rates automaticallydrop because rates are based on many factors,including type of vehicle and claims history, andvary by state and insurer; each individual'ssituation is unique.

5. a. 62. You can begin receiving SocialSecurity retirement benefits as early as age 62.However, your benefits will be reduced by asmuch as 30% below what you would havereceived if you had waited until your fullretirement age (66 to 67, depending on youryear of birth).

6. c. 21. As a result of the Credit Card Act of2009, credit card companies cannot issue cardsto those under age 21 unless they can showproof that they can repay the debt themselvesor unless someone age 21 or older with theability to make payments cosigns the creditcard agreement.

What is the birthday rule?

The birthday rule may be usedby health insurers to coordinatebenefits when a dependentchild is covered by the healthplans of both parents and theparents are married or livingtogether. The plan of theparent whose birthday fallsearlier in the calendar year isgenerally the primary plan,providing benefits and payingclaims first, and the plan of theother parent providessecondary coverage. If theparents share the samebirthday, primary coverage isprovided by the plan that hascovered one parent thelongest.

Source: National Association ofInsurance Commissioners,naic.org

Page 3 of 4, see disclaimer on final page

Nicholson FinancialServices, Inc.David S. NicholsonFinancial Advisor89 Access RoadSte. CNorwood, MA 02062781-255-1101866-668-1101david@nicholsonfs.comwww.nicholsonfs.com

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016

This information, developed by anindependent third party, has been obtainedfrom sources considered to be reliable, butRaymond James Financial Services, Inc.does not guarantee that the foregoingmaterial is accurate or complete. Thisinformation is not a complete summary orstatement of all available data necessary formaking an investment decision and does notconstitute a recommendation. Theinformation contained in this report does notpurport to be a complete description of thesecurities, markets, or developments referredto in this material. This information is notintended as a solicitation or an offer to buy orsell any security referred to herein.Investments mentioned may not be suitablefor all investors. The material is general innature. Past performance may not beindicative of future results. Raymond JamesFinancial Services, Inc. does not provideadvice on tax, legal or mortgage issues.These matters should be discussed with theappropriate professional.

Securities offered through Raymond JamesFinancial Services, Inc., memberFINRA/SIPC, an independent broker/dealer,and are not insured by FDIC, NCUA or anyother government agency, are not deposits orobligations of the financial institution, are notguaranteed by the financial institution, andare subject to risks, including the possibleloss of principal.

What's the best way to back up my digital information?In writing or speaking,redundancy is typically notrecommended unless you'rereally trying to drive a pointhome. When it comes to your

digital life, however, redundancy is not onlyrecommended, it's critical.

Redundancy is the term used to refer to databackups. If you have digital assets that youdon't want to risk losing forever--includingphotos, videos, original recordings, financialdocuments, and other materials--you'll want tobe sure to back them up regularly. And it's notjust materials on your personal computer, butyour mobile devices as well. Depending on howmuch you use your devices, you may want toback them up as frequently as every few days.

A good rule to follow is the 3-2-1 rule. This rulehelps reduce the risk that any one event--suchas a fire, theft, or hack--will destroy orcompromise both your primary data and all yourbackups.

1. Have at least three copies of your data. Thismeans a minimum of the original plus twobackups. In the world of computerredundancy, more is definitely better.

2. Use at least two different formats. Forexample, you might have one copy on anexternal hard drive and another on a flashdrive, or one copy on a flash drive andanother using a cloud-based service.

3. Ensure that at least one backup copy isstored offsite. You could store your externalhard drive in a safe-deposit box or at atrusted friend or family member's house.Cloud storage is also considered offsite.

If a cloud service is one of your backup tactics,be sure to review carefully its policies andprocedures for security and backup of itsservers. Another good idea is to encrypt (thatis, create strong passwords that only you know)to protect sensitive documents and yourexternal drives.

So at the risk of sounding redundant (or drivingthe point home?), a good rule for data backupis to have at least three copies on at least twodifferent formats, with at least one copy storedoffsite. And more is always better.

I'm thinking about storing financial documents in thecloud. What should I know?Cloud storage--usingInternet-based serviceproviders to store digitalassets such as books, music,

videos, photos, and even important documentsincluding financial statements andcontracts--has become increasingly popular inrecent years. But is it right for you?

Opinions vary on whether to store your mostsensitive information in the cloud. While someexperts say you should physically store itemsyou're not willing to lose or expose publicly,others contend that high-security cloud optionsare available.

If you're thinking about cloud storage for yourfinancial documents, consider the following:

• Evaluate the provider's reputation. Is theservice well known, well tested, and wellreviewed by information security experts?

• Consider the provider's own security andredundancy procedures. Look for suchfeatures as two-factor authentication andcomplex password requirements. Does ithave copies of your data on servers atmultiple geographic locations, so that a

disaster in one area won't result in anirretrievable loss of data?

• Review the provider's service agreement andterms and conditions. Make sure youunderstand how your data will be protectedand what recourse you have in the event of abreach or loss. Also understand whathappens when you delete a file--will it becompletely removed from all servers? In theevent a government subpoena is issued,must the service provider hand over thedata?

• Consider encryption processes, whichprevent access to your data without yourpersonal password (including access bypeople who work for the service provider).Will you be using a browser or app thatprovides for data encryption during transfer?And once your data is stored on the cloudservers, will it continue to be encrypted?

• Make sure you have a complex system forcreating passwords and never share yourpasswords with anyone.

Page 4 of 4