Free Markets Work…..

This message bears repeating. Again and again.

It is so important for you, as an investor, to know what your investment philosophy is.

The Wall Street bullies want you to believe that the “markets fail” and that someone can tell you the best investments to invest in at all times. They will tell you they know when to get in and out of the market. These bullies want you to listen to their forecasts and move your money accordingly.

What the Wall Street bullies won’t tell you is they have no idea where the market is going or which asset classes will outperform.

Your beliefs have been formed by the financial media hype.  They lead you to believe there is someone who can predict the future.  No one can.

There are two camps to investment philosophy, “markets work” and “markets fail”…

On the “markets work” side, make sure to follow these action steps. If you are in this camp, you will need to:

  • Eliminate speculative investment techniques.
  • Work with a financial professional who believes that markets work.
  • Ignore media hype.
  • Set lifelong financial goals.
  • Prudently diversify.
  • Identify your risk tolerance.

On the “markets fail” side, consider the following.  If you believe that markets fail, then you are morally obligated to:

  • Pursue speculative techniques.
  • Work with the bullies who actively gamble with your money.
  • Stay connected to the internet, magazines, talk shows, news shows, internet shows, and download apps to your cell phone so you can track up-and-down markets.
  • Read every article about stocks and options that you can find, wonder and worry about the market, what might happen next—whatever you do, don’t miss the next hot stock tip.

It is up to you to determine how you want your money invested. Personally I believe “markets work”. I believe your time would be much better spent improving your job skills or learning a new job skill or spending time with family and friends than trying to beat the market.

Remember, there will always be someone who picks the hot stock and gets rich or finds the latest and greatest strategy/asset class etc., the problem for the investor is that this is luck rather than skill. Meaning this feat is unlikely to repeat.

Keep in mind every new ‘hot’ investment idea/strategy/asset class you hear on financial media has a vested interest in you investing all your money. The problem is the seller of these products makes most if not all the profits. Leaving you with a dream and no money.

To succeed long term, you should
own equities…globally diversify…..rebalance.

Actively Trading To Nowhere!!

Through many discussions with investors I have learned that when things go against them they want to take control.

Stock pickers and day-traders who are actively trading their investments have perceived control over their portfolio. Similarly, people who jump in or out of the market during up or down swings also mistake their activity for control.

In reality, the more activity and trading you generate in a portfolio, the more out of control the portfolio becomes. When an investor trades in their portfolio trying to time the market or find the “best” investment they are doing nothing but add costs and decrease return.

Actively trading your account by picking individual stocks or market timing or picking funds based on past performance is exactly what the Wall Street bullies want you to do.

Stop empowering Wall Street.

Remember, no one can predict the future, no matter how convincing someone is in the media they are only guessing.  In most cases the predictions are never broadcast by the same ‘experts’.

The “best” strategy is to have a prudent process and discipline in place   Stop trying to study the market to find bargains, statistics prove that it cannot be consistently done. You might get lucky in the short term but long term your results will suffer.

With the case of market timing, getting in and out of the market at the right time requires being right when you get out of the market AND be right when you re-enter the market. This again will result in lower returns.

To succeed long term and reach your financial goals you should
own equities…globally diversify …rebalance.

The problem investors have is that they do not know what long term really means.

Is it 1 year or 2 years or 5 years or ten years? I guess everyone has their own definition. What long term means to me is your entire life.  At some point, you will retire and stop accumulating funds. You will begin spending funds. Many believe that when you retire all your savings should be ‘safe’.

What these investors forget about is inflation. What seems like enough money today. May not be enough in 10 years or 20 years.

Let the free markets work for you. Remember since 1926 the S&P 500 has averaged 9.87% return.

Keep in mind this is not an arithmetic mean average but rather the compound average return. You can learn more by going to http://www.investopedia.com/articles/08/annualized-returns.asp

During that time, there has been down turns of 10% or more 89 times. So, if you want to earn the great returns the equity markets have to offer. You need to be patient. It helps to have a coach to help you through the ‘bad’ times.

Sure Thing….NOT!!

After watching Super Bowl LI I felt shocked as the game progressed. The ending was unexpected given the events of the first three quarters. All I can say is WOW….

Altanta was ahead 28 to 3 and was dominating. Anyone watching would have said an Atlanta win was a sure thing. The owner of the Falcons Arthur Blank was down on the field with 10 minutes to play. A championship was assured. His Atlanta Falcons would win the Super Bowl and be awarded the Lombardi Trophy. Being a Packer fan I had to mention our old coach Vince Lombardi.

Then Tom Brady and the Patriot defense took the game over. With one minute to play the score was tied 28 all. Atlanta had one last chance to win in regulation. The Patriot defense held and there was overtime. In overtime New England won the toss marched down the field to score a touchdown and win the Super Bowl.

What was once a sure thing for the Falcons turned into a devastating loss.

What does this mean to investors?

Many times, investors watch the markets and see an asset class(es) or individual stock or investment product charging ahead or even dropping ‘like a rock’. And think I need to put all my money into that….or sell everything I own in that….

It is a ‘sure’ thing. Can’t lose. It’s the new paradigm. Traditional investments are dead this is the new thing.

There are thousands of examples of just this kind of thinking.

Then something happens. The fourth quarter begins and everything falls apart. What was once a sure thing, is now dead in the water. No one wants to touch it. Losses keep mounting and investors have all their money in one thing.

Devastation ensues. Investors panic and decide to never invest again.

The problem is they were never investing in the first place. They were gambling and speculating with their investment money.

Investors need to realize that there is no such thing as a sure thing. Anything can and will happen. Many times, unexpectedly.

To succeed investing long term you need to own equities and high quality short term fixed income…globally diversify…rebalance.

Follow these three rules with the help of an investor coach/fiduciary adviser and success will be yours.

The Equity Markets Are Unpredictable…Really!!

When investors are looking for the best place to invest their money, they attempt to avoid the pain, the pain of down markets. Given the high volatility of the stock market many investors are avoiding placing their money in equities. They are looking for guarantees, ie, annuities, cash, CDs, bonds, etc.

Many others are seeking ‘experts’ to tell them when to get in and out of the market, which is market timing. As an example, many investors missed the latest market advance because the ‘experts’ said the market would decline if Trump were elected. This of course did not happen.

The equity markets will have down periods and these ’experts’ will blame somebody or something.

Others investors are looking for the next hot stock or hot asset class. Still others are looking for the hottest fund manager or track record investing.

What all these people are looking for is someone to predict the future.

All this is the result of us looking to avoid risk or loss of principal. All these efforts are sadly wasted because all markets are random and unpredictable.

There are different risks in all assets classes whether it’s stocks or annuities or CDs or cash or bonds or even gold. No matter where you put your money there is risk involved.

If you invest in the stock market, no one can “save” you from the down periods—NO ONE. If markets were not random and unpredictable, they wouldn’t offer higher expected returns. Markets randomly and unpredictably go up and down.

If there were no down markets, equities would not produce good returns long term.

The cost of capital results in good returns, over time. The stock market is efficient enough that no one can predict the future. By efficient I mean all the knowable information is already in the price of the security. Only new and unknowable information change prices in the future.

Anyone who tells you what will happen in the future is trying to fool you and perhaps fool themselves. The media Is full of financial pornography trying to sell you their product(s). Each season there is a new prediction. As an investor you must avoid the temptation to believe these hawkers.

To succeed long term you must develop a prudent strategy with the appropriate risk level and remain disciplined.

You must own equities……globally diversify…..rebalance.

Emotions Override Statistics…

When you read a daily financial publication like the Wall Street Journal you find an enormous amount of facts. These facts can lead to vastly different conclusions. I wager that each day, with the exception of 2008-9, I can find 5 reasons the market will go up and 5 reasons it will go down. All of these ‘facts’ occur in the same day.

You can justify almost any imprudent investment decision with “facts.”  Information is filtered by our emotions to create “fact” that support our decisions or beliefs. Without outside guidance, it is impossible to tell when and how this happens. Truth is the field of investing is elusive.

Remember the Wall Street bullies make money when we, the public, move money from one investment to another. Your broker has a vested interest in moving your money. They make more commission each time you move. The banking system loves to feed the fear.

If you are really interested in earning a good return on your investment dollars stop empowering the Wall Street bullies. Develop a sound, prudent portfolio, based on YOUR risk tolerance level and remain disciplined to that strategy. Jumping from one investment to another will cost you money and make tons of money for Wall Street.

As I have mentioned a number of times, NO ONE can predict the future. When you ask your broker what is the best stock for now? Or, when should I get in and out of the market? Or, who is the best fund manager(s)?  You are essentially asking them to predict the future.

A globally diversified portfolio eliminates the need to predict and allows you to relax and be assured you are properly invested to reach your long term goals. One of the main attributes investors need as well as advisers is discipline.

Many investors make the mistake of being in stocks or out of stocks. There is no in between for these ‘investors’. The truth is the answer is somewhere in between.

When a new investor in their 20s begins, their portfolio is 95% equities and 5% fixed income. As we age our portfolio needs to take on less risk. For example, for someone in their 50s and 60s a portfolio of 60% equities and 40% fixed income might be appropriate. For someone in their 70s 50% equities and 50% fixed income or even 40% equities and 60% fixed income might work.

To be specific your fixed income allocation should be high quality short duration. This adds stability to your portfolio.

The real answer is to maintain your purchasing power and provide reasonable growth you need equities in your portfolio. The level of risk you maintain is up to you and your spending habits.

Equities are one of the greatest wealth creation tools available, if properly used. To reach you long term financial goals own equities…..globally diversify….rebalance.

Nobody Knows Anything….in Advance!

As we begin 2017 there are many questions about the future. The future of the equity markets, the future of the political arena and many other questions. Questions that cannot be answered with any degree of certainty.

You will hear many ‘guesses’ and they are guesses. No matter what their credentials are or what their track record. Any predictions are simple guesses.

As to investors predictions are abundant but accountability is rare.

John Bogle, inventor of the index fund and past chairman of Vanguard Investments was speaking at an advisor conference. Now 80 years young, Mr. Bogle, shared the best investing advice he ever got while a young man working as a runner for a brokerage firm, a fellow runner, about the same age as Bogle is now told him the secret ‘Nobody knows anything’.

During his interview Mr. Bogle warned attendees that “we give too much credence to past returns; past is not prologue,” saying instead “it’s the source of the returns” that is more important. He then quoted Samuel Taylor Coleridge that history is like “a lantern on the stern, which shines only on the waves behind us.”

Discussing investing opportunities, Bogle pooh-poohed private equity, saying that there are “a lot of sellers, but not many buyers.” He still believes that “performance chasing” is one of the most deadly of investing sins, that “I grow more concerned about target-date funds every day,” is skeptical about 130/30 funds–“it’s not that easy”–and on exchange traded funds, “my skepticism is increasing,” saying that his reading of the data shows that “ETF investors do badly relative to mutual fund investors.” The problem is not the product but the investor. They need a coach to guide them through the maze of financial media and hype.

Basically what Mr. Bogle is saying is that stock picking, market timing and performance chasing do not work.

Developing a customized portfolio, with regard to your comfortable risk level. Using a scientific approach and remaining disciplined will maximize your opportunity for a successful outcome. My clients understand this and will succeed in the long run.

We must remain diligent and stay focused. Own equities…… diversify…..rebalance.

Should Your Investment Research be Based on Academia or the Wall Street Bullies?

There were numerous predictions depending on the outcome of the presidential election. What will happen to stocks now that Donald Trump has won?  No one really knows. This election has been one of the most contentious if not the most contentious election in our history.

So far, the stock market has had a very positive response to his election. Will this continue? I really have no idea. And no one knows with any degree of certainty.

More than at any time in our history….we need strong leadership.

That said, we must stop listening to the Wall Street bullies regarding what to do with our portfolio. Should we sell? Should we buy? What should we buy? What should we sell? The Wall Street bullies don’t really care. All they care about is that you trade. Most investors don’t know what to do.

As an example, one of the predictions about what to do and when. Jim Cramer says buy. But his track record is very poor. Maybe we just do the opposite of anything Jim Cramer recommends. Then again Jim Cramer might get lucky this time and be right. No one knows for sure, not even Jim Cramer.

Remember the main reason for his TV success is his entertainment value. Following his investment advice will lead to poor results.

All that you know for sure is what the brokerage community or financial press wants you to know. They have trained you to accept their version of reality – over the span of your entire life.

There is a complete body of investing knowledge developed in the halls of academia.

Most people do not even know that it exists. This is the real wisdom you need to create wealth and abundance.

Rather than looking for the next great trade or asset class, invest in a portfolio based on Nobel Prize winning research. Instead of researching investments, your time will be much more efficiently spent on improving your job skills, or learn a new skill set leading to a new career, or even better, spending time with the important people in your life.

Perhaps you should look at your investments with a goal in mind rather than short term performance results.

Taking a long term view of your portfolio will reduce and perhaps even eliminate your anxiety.  Remember a disciplined saving strategy will outperform all trading strategies, long term.

Take control of your investments don’t empower the Wall Street bullies.

Successful investing requires discipline along with following three simple rules, own equities…..globally diversify…..rebalance.

Are You In Control of Your Portfolio??

Through many discussions with investors I have learned that when things go against them they want to take control.

Stock pickers and day-traders who are actively trading their investments have perceived control over their portfolio. Similarly, people who jump in or out of the market during up or down swings also mistake their activity for control.

In reality, the more activity and trading you generate in a portfolio, the more out of control the portfolio becomes. When an investor trades in their portfolio trying to time the market or find the “best” investment they are doing nothing but add costs and decrease return.

Actively trading your account by picking individual stocks or market timing or picking funds based on past performance is exactly what the Wall Street bullies want you to do.

Stop empowering Wall Street.

Remember, no one can predict the future, no matter how convincing someone is in the media they are only guessing.  In most cases the predictions are never broadcast by the same ‘experts’.

The “best” strategy is to have a prudent process and discipline in place   Stop trying to study the market to find bargains, statistics prove that it cannot be consistently done. You might get lucky in the short term but long term your results will suffer.

With the case of market timing, getting in and out of the market at the right time requires being right when you get out of the market AND be right when you re-enter the market. This again will result in lower returns.

Recently I worked with a prospect’s retirement plan. During our discussion, I learned that during the 3rd quarter they exited stocks and  bought fixed income. I learned it was the result of all the media hype on the presidential election.

Many in the media predicted that if Donald Trump were elected the markets in the U.S. as well as the rest of the world would react very negatively.

There was uncertainty in the equity markets and they reacted by running to safety, ie, fixed income. Safety in fixed income is not real safety but that is for another discussion.

This is a classic case of market timing. And market timing has been proven over time to hurt investor performance. And the losses can be significant.

Remember the Wall Street bullies make their money when you trade in and out of stocks. This may seem like control but you are actually ‘out of control’.

To succeed long term and reach your financial goals you should
own equities…globally diversify …rebalance.

You Have to Look Different To Succeed Long Term.

Many times, when I meet with investors I am asked ‘where is the best place to put my money?’  The financial institutions have taught investors that there is someone who can tell them what to do in every circumstance.

These institutions lead you to believe they know what you need. In fact these institutions sell you ‘product’ to feed your fear in every environment.

A true adviser will often tell you things you do not want to hear. Remember if your adviser only provides the product you ask for they are not an adviser but rather a salesperson or broker.

These salespeople are really facilitators. You tell them what you want or what scares you and they provide the product.

The result is, in many cases, a portfolio that is concentrated in the ‘hot’ asset classes of the day.

To succeed in investing being diversified means looking different.

Most investors are narrowly diversified into top performing funds or asset classes of the last five to ten years.  They often feel diversified but aren’t.

It might be gold or annuities or cash or commodities or insurance guarantees or U.S. large cap growth or large cap value or small cap and then even internationals equities. The list is endless as Wall Street continues to generate new ‘product(s)’.

Gambler and speculators are always looking for the next ‘hot’ investment. These speculators are looking to get rich quick. They want to substitute disciplined savings and a prudent portfolio with a get rich quick scheme.

Remember the Wall Street bullies make money when you trade. They need you moving from one asset class to another. This makes the bullies money and costs you big.

To be truly diversified means including asset classes or types of funds in your portfolio that did poorly over the last five to ten years.  If you do this, your portfolio will look and perform very differently from your neighbors’ or friends’.

Don’t empower these bullies and be different. Act more like you are managing a pension fund. Pension funds control risk and prudently diversify. That means some of the funds are poorly performing now or in the recent past.

From worst to first many times applies here.

Of course, there are examples of pension funds ‘juicing’ up returns to avoid contributing the necessary funds. This often has disastrous results.

To succeed in investing you must own equities…globally diversify …rebalance.

Think long term and avoid making emotional decisions during short term volatility.

This is best accomplished with the aid of an investor coach/fiduciary adviser. Not a facilitator bit rather a true adviser.

Does Your Portfolio Care Who The Next President Is?

Well it is finally election day..all the back stabbing and fighting will finally end….RIGHT!!

At the end of this day we will know who will be the leader of the free world. Will it be Hillary Clinton or Donald Trump? Regardless the fighting will continue.

There are those that believe that the markets will go down regardless of whoever is voted our next president.  And we should exit the market. At least until things calm down.

Since there are over six billion people on this planet. There is always conflict somewhere. And there always will.

During these times of uncertainty, we have a tendency to make emotional decisions. Decisions that are NOT in our own best interests.

Ideally, we should all just time the market cycles and only buy when the market is low and sell when the market is high. Unfortunately, few, if any investors, are able to do this with any degree of consistency.

We tend to make our investment decisions based on recent past events and how we feel about those events.

If the market has done well lately, we wish, we are comfortable buying stocks. If the market has done poorly, however, we avoid them. Unfortunately, this is the exact opposite of what we should do if our goal is to maximize our long-term return.

Once we feel “comfortable” with the market, we have usually already passed up large potential gains. The stock market is forward looking and usually starts trending upwards between 6 to 9 months ahead of the economy recovering from a down cycle.

There is an unholy alliance between the media and the large financial institutions to convince the investing public to continue trading by spreading fear and panic.

Many investors mistakenly believe that the big brokerage firms make money by trading in and out of the ‘right’ investments

The large financial institutions make money when YOU trade in and out, making money on every trade.

Remember the equity markets around the globe are random and unpredictable.

You should own equities…globally diversify…rebalance and believe that America and the capital markets will recover and prosper. We as a country have been thru much worse and we recovered and became stronger.

The problem is no one can consistently predict what will happen and when.

During times of uncertainty should we cut and run or should we stand and fight? Historically the fighters are the ones that profit and prosper. Those that cut and run grasp unto their ‘guarantees’ and wonder why they are always behind.

To best deal with the inevitable ‘bad’ times fire your broker/agent and hire an investor coach/fiduciary adviser.