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

Summer 2017Test Your Investing IQ

Five Common Financial Aid Myths

How do economists measure inflation,and why does it matter to investors?

Chart: Young Adult Milestones, 1975 vs.2016

Nicholson Financial ServicesDid You Know...?From Data Breaches to Ransomware: How to Avoid Becomingthe Victim of a Cybercrime

See disclaimer on final page

As I am putting together this newsletter,we are approaching Labor day weekend.I can't believe that another summer isalmost over! Here is New England, theyalways seem to go by particularlyquickly. In the financial world, it has beena pretty quiet summer. The stockmarkets have shown a low amount ofvolatility and have generally trendedhigher through the past few months.What can we expect for the rest of theyear? Considering the business climateis strong and the economy continues toimprove, the markets could finish theyear on a positive note. That said, this isa great time to remind everyone of aquote from the great economist JohnKenneth Galbraith who said "The onlyfunction of economic forecasting is tomake astrology look respectable." Thatquote hangs in my office to alwaysremind me that none of us know thefuture. We all need to make prudentdecisions and always be mindful ofchange. Enjoy the end of the summer!

Each time youconnect to theInternet, you riskbecoming the victimof a cybercrime. It'sthe price we pay forliving in a digitalworld — whether it'sat home, at work, oron your smartphone.

According to theIdentity Theft Resource Institute, the number ofU.S. data breaches in 2016 increased by 40%.And as recently as May 2017, a widespread"ransomware" attack targeted personalcomputers across the globe. While softwarecompanies are continually developingstrategies to combat the latest cybercrimes,there are some steps you can take to helpprotect yourself online.

The stronger, the betterIt's a scary thought — most of us have a largeamount of financial and personal informationthat's readily accessible through the Internet, inmost cases protected by nothing more than ausername and password.

Create a strong password by using acombination of lower- and upper-case letters,numbers, and symbols or by using a randomphrase. Avoid using a password with yourpersonal information such as your name andaddress. In addition, have a separate andunique password for each account or websitethat you use.

If you have trouble keeping track of all yourpassword information or you want an extra levelof password protection, consider usingpassword management software. Passwordmanager programs generate strong, uniquepasswords that you control through a singlemaster password.

Follow the 3-2-1 ruleBacking up your online data is critical to avoidlosing valuable information due to a cyberattack. If you have digital assets that you don'twant to risk losing forever, you should back

them up regularly. This pertains to data storedon both personal computers and mobiledevices.

When backing up data, a good rule to follow isthe 3-2-1 rule. This rule helps reduce the riskthat any one event — such as a computer hackergaining access to your computer — willcompromise your primary data and backups. Inorder to follow the 3-2-1 rule:

• Have at least three copies of your data (thismeans a minimum of the original plus twobackups)

• Use at least two different formats (e.g., harddrive and cloud-based service)

• Ensure that at least one backup copy isstored in a separate location (e.g.,safe-deposit box)

Stay one step aheadFinally, the best way to avoid becoming thevictim of a cybercrime is to stay one step aheadof the cybercriminals. Here are some extraprecautions you can take before you go online:

Consider using two-step authentication.Two-step authentication, which involves using atext or email code along with your password,provides another layer of protection for yoursensitive data.

Keep an eye on your accounts. Notify yourfinancial institution immediately if you seesuspicious activity. Early notification not onlycan stop the cyber thief but may limit yourfinancial liability.

Think twice before clicking. Beware of emailscontaining links or asking for personalinformation. Never click on a link in an email ortext unless you know the sender and have aclear idea where the link will take you.

Be careful when you shop. When shoppingonline, look for the secure lock symbol in theaddress bar and the letters https: (as opposedto http: ) in the URL. Avoid using public Wi-Finetworks for shopping, as they lack secureconnections.

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Test Your Investing IQHow much do you know about market basics?Put your investing IQ to the test with this quizon stocks, bonds, and mutual funds.

Questions1. What does it mean to buy stock in acompany?

a. The investor loans money to the company

b. The investor becomes a part owner of thecompany

c. The investor is liable for the company's debts

2. Which of the following statements aboutstock indexes is correct?

a. A stock index is an indicator of stock pricemovements

b. There are many different types of stockindexes

c. They can be used as benchmarks tocompare the performance of an individualinvestment to a group of its peers

d. All of the above

3. What is a bond?

a. An equity security

b. A nonnegotiable note

c. A debt investment in which an investor loansmoney to an entity

4. What kind of bond pays no periodicinterest?

a. Zero-coupon

b. Floating-rate

c. Tax-exempt

5. What is a mutual fund?

a. A portfolio of securities assembled by aninvestment company

b. An investment technique of buying a fixeddollar amount of a particular investmentregularly

c. A legal document that provides details aboutan investment

6. What is the difference between mutualfund share classes?

a. The investment advisers responsible formanaging each class

b. The investments each class makes

c. The fees and expenses charged by eachfund class

Answers1. b. The investor becomes a part owner ofthe company. Stocks are often referred to asequities because they represent an ownershipposition. As part owners, shareholders assumeboth the potential financial risks and benefits ofthis position, but without the responsibility ofrunning the company.

2. d. All of the above. A stock index measuresand reports value changes in representativestock groupings. A broad-based stock indexrepresents a diverse cross-section of stocksand reflects movements in the market as awhole. The Dow Jones Industrial Average,NASDAQ Composite Index, and S&P 500 arethree of the most widely used U.S. stockindexes. There are also more narrowly focusedindexes that track stocks in a particular industryor market segment.

3. c. A debt investment in which an investorloans money to an entity. Unlikeshareholders, bondholders do not haveownership rights in a company. Instead,investors who buy bonds are lending theirmoney to the issuer (such as a municipality or acorporation) and thus become the issuer'screditors.

4. a. Zero-coupon. Unlike many types ofbonds, zero-coupon bonds pay no periodicinterest. They are purchased at a discount,meaning the purchase price is lower than theface value. When the bond matures, thedifference between the purchase price and thatface value is the investment's return.

5. a. A portfolio of securities assembled byan investment company. A mutual fund is apooled investment that may combine dozens tohundreds of stocks, bonds, and other securitiesinto one portfolio shared by many investors.

6. c. The fees and expenses charged byeach fund class. A mutual fund may offervarious share classes to investors, mostcommonly A, B, and C. This gives an investorthe opportunity to select a share class bestsuited to his or her investment goals.

Mutual funds are sold by prospectus. Pleaseconsider the investment objectives, risks,charges, and expenses carefully beforeinvesting. The prospectus, which contains thisand other information about the investmentcompany, can be obtained from your financialprofessional. Be sure to read the prospectuscarefully before deciding whether to invest.

All investing involves risk,including the possible loss ofprincipal, and there can be noassurance that any investmentstrategy will be successful.Generally, the more potentialfor growth offered by aninvestment, the more risk itcarries.

The performance of anunmanaged index is notindicative of the performance ofany specific security.Individuals cannot investdirectly in such an index.

Because zero-coupon bondsdo not pay interest untilmaturity, their prices tend to bemore volatile than bonds thatpay interest regularly. Interestincome is subject to ordinaryincome tax each year, eventhough the investor does notreceive any income payments.

The return and principal valueof stocks, bonds, and mutualfunds may fluctuate withmarket conditions. Shares,when sold, and bondsredeemed prior to maturity maybe worth more or less thantheir original cost.

Page 2 of 4, see disclaimer on final page

Five Common Financial Aid MythsWith some private colleges now crossing theonce unthinkable $70,000-per-year mark in the2017/2018 school year, and higher costs atpublic colleges, too, financial aid is essential formany families. How much do you know aboutthis important piece of the college financingpuzzle? Consider these financial aid myths.

1. My child won't qualify for aid becausewe make too much moneyNot necessarily. While it's true that familyincome is the main factor in determining aideligibility, it's not the only factor. The number ofchildren you'll have in college at the same timeis a significant factor — for example, having twochildren in college will cut your expected familycontribution (EFC) in half. Your assets, overallfamily size, and age of the older parent alsoplay into the equation.

Side note: Even if you think your child won'tqualify for aid, you should still consider filing thegovernment's Free Application for FederalStudent Aid (FAFSA) for two reasons. First, allstudents — regardless of income — who attendschool at least half-time are eligible forunsubsidized federal Direct Loans, and theFAFSA is a prerequisite for these loans.("Unsubsidized" means the student pays theinterest during college, the grace period, andany loan deferment periods.) So if you wantyour child to have some "skin in the game" bytaking on a small student loan, you'll need to filethe FAFSA. Second, the FAFSA is always aprerequisite for college need-based aid and issometimes a prerequisite for collegemerit-based aid. Bottom line? It's usually agood idea to file this form.

2. The form is too hard to fill outNot really. Years ago, the FAFSA wascumbersome to fill out. But now that it's onlineat fafsa.ed.gov, it is much easier to complete.The online version has detailed instructions andguides you step by step. There is also atoll-free number you can call with questions:1-800-4-FED-AID. All advice is free. In addition,a recent change has made the FAFSA eveneaser to fill out: The FASFA now relies on yourtax information from two years prior rather thanone year prior (referred to as the "prior-prioryear" or the "base year"). For example, the2017/2018 FAFSA relies on your 2015 taxinformation, the 2018/2019 FAFSA relies onyour 2016 tax information, and so on. Thismeans that your necessary tax numbers will behandy as you answer questions on the FAFSA.The first time you file the FAFSA, you and yourchild will need to create an FSA ID, whichconsists of a username and password.

Side note: The CSS/Financial Aid PROFILE, anadditional aid form required by most privatecolleges, is more detailed than the FAFSA andthus harder to fill out. It essentially takes afinancial snapshot of your family's past year,current year, and upcoming year (it asks forestimates for the latter).

3. If my child applies to a moreexpensive school, we'll get more aidNot necessarily. Colleges determine your EFCbased on the income and asset information youprovide on the FAFSA and, where applicable,the CSS PROFILE. Your EFC stays the sameno matter what college your child applies to.The difference between the cost of a particularcollege and your EFC equals your child'sfinancial need (sometimes referred to as"demonstrated need"). The more expensive acollege is, the greater your child's financialneed. But a greater financial need doesn'tautomatically translate into a bigger financialaid package — colleges aren't obligated to meet100% of your child's financial need.

Side note: When making a college list, yourchild can research a particular college'sgenerosity, including whether it meets 100% ofdemonstrated need and if it replaces federalloan awards with college grants in its aidpackages.

4. We own our home, so my child won'tqualify for aidThe FAFSA does not take home equity intoaccount when determining a family's expectedfamily contribution (it also does not consider thevalue of retirement accounts, cash value lifeinsurance, and annuities).

Side note: The CSS PROFILE does collecthome equity and vacation home information,and some colleges may use it when distributingtheir own institutional aid.

5. I lost my job after I submitted aidforms, but there's nothing I can do nowNot true. If your financial circumstances changeafter you file the FAFSA — and you can supportthis with documentation — you can politely askthe financial aid officer at your child's school torevisit your aid package; the officer has theauthority to make adjustments if there havebeen material changes to your family's incomeor assets.

Side note: A blanket statement of "I can't affordmy family contribution" is unlikely to besuccessful unless it is accompanied by asignificant changed circumstance that affectsyour ability to pay.

Net price calculators

Net price calculators, availableon all college websites, providefamilies with an advanceestimate of what their "net"price will be at a particularcollege based on their income,assets, and personal familyinformation. The net price isthe price after grants andscholarships are factored in.This figure gives families amuch better idea of the realcost of a particular college sothey can make well-informedfinancial decisions.

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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 2017

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.

Chart: Young Adult Milestones, 1975 vs. 2016The following pie charts compare four common milestones of adulthood — getting married, havingchildren, working, and living independently — achieved by young adults ages 25 to 34 in 1975 and2016. The data indicates that the experiences of young people today are more diverse, withfewer accomplishing all four milestones in young adulthood. Instead, many young adults aredelaying or forgoing some experiences (marrying and having children) in favor of others (livingindependently and gaining work experience).

Source: U.S. Census Bureau, "The Changing Economics and Demographics of Young Adulthood:1975-2016," April 2017

How do economists measure inflation, and why does itmatter to investors?The Federal Open MarketCommittee (FOMC) adjustsinterest rates to help keepinflation near a 2% target. The

FOMC's preferred measure of inflation is thePrice Index for Personal ConsumptionExpenditures (PCE), primarily because itcovers a broad range of prices and picks upshifts in consumer behavior. The Fed alsofocuses on core inflation measures, which stripout volatile food and energy categories that areless likely to respond to monetary policy.

The typical American might be more familiarwith the Consumer Price Index (CPI), whichwas the Fed's favorite inflation gauge until2012. The Consumer Price Index for All UrbanConsumers (CPI-U) is used to determinecost-of-living adjustments for federal incometaxes and Social Security.

The CPI only measures the prices thatconsumers actually pay for a fixed basket ofgoods, whereas the PCE tracks the prices ofeverything that is consumed, regardless of whopays. For example, the CPI includes a patient'sout-of-pocket costs for a doctor's visit, while thePCE considers the total charge billed to

insurance companies, the government, and thepatient.

The PCE methodology uses current and pastexpenditures to adjust category weights,capturing consumers' tendency to substituteless expensive goods for more expensiveitems. The weighting of CPI categories is onlyadjusted every two years, so the index does notrespond quickly to changes in consumerspending habits, but it provides a goodcomparison of prices over time.

According to the CPI, inflation rose 2.1% in2016 — right in line with the 20-year average of2.13%.1 This level of inflation may not be a bigstrain on the family budget, but even moderateinflation can have a negative impact on thepurchasing power of fixed-income investments.For example, a hypothetical investment earning5% annually would have a "real return" of only3% during a period of 2% annual inflation.

Of course, if inflation picks up speed, it couldbecome a more pressing concern forconsumers and investors.1 U.S. Bureau of Labor Statistics, 2017 (data throughDecember 2016)

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