Stick With The Plan!!

This past Sunday I was watching my beloved Green Bay Packers playing the winless Cleveland Browns in Cleveland. Based on the scenes of the crowd there were a number of Packer fans in attendance.

During most the game the Packers were trailing. In fact, they entered the fourth quarter trailing 21 to 7. It did not look good. But then the Packers scored 20 unanswered points and won in overtime. Keeping the Browns winless.

As I was watching the game I was following the comments on Twitter. There were many fans looking for answers, questioning nearly every play called. Asking for ‘heads to roll’. “Why aren’t throwing the ball longer’ or “why is Hundley still the quarterback?” or “this game is over” “Thompson, McCarthy, Capers all need to be fired.” The list of complaints was endless.

Admittedly I had my doubts. Our slim chance of getting in the playoffs would disappear.

In the fourth quarter comeback Twitter was nearly silent. There remained a large number of doubters. When the game ended. I read some comments like “I never really gave up” or “I always had faith”. WOW!

At the end I realized that the Packer coaching staff had a plan. They adjusted their plan slightly and went on to the win. They had a process and the discipline to follow it. Regardless of the criticisms the Packer organization had a philosophy and followed it.

Keep in mind you will not always be successful short-term. But you will succeed long-term.

Investors should learn from this. Investors need an investment philosophy they believe in. Then they need the discipline to follow it. In most, if not all cases, this will require the assistance of an investor coach/fiduciary adviser.

Investors need to ignore the financial media and the short-term noise of the market and stick to their plan. At times it will be very uncomfortable and scary. The media will try to scare you to move your money. After all Wall Street makes money when you trade in and out.

To be successful in investing you need to own equities and the right amount of high quality short-term fixed income, globally diversify and rebalance.

As I said, this requires the aid of an investor coach/fiduciary adviser.

Extraordinary Results!

While I do not agree with Warren Buffet’s approach to investing for most investors. He is a stock picker. However, what I do believe in is his discipline. He has a process and he sticks to it regardless of short term market noise.

Most investors would not be able to endure the volatility of a Warren Buffet portfolio.

This quote will help many investors realize extraordinary results.

It’s not necessary to do extraordinary things to get extraordinary results. Warren Buffet

Everyday there are new financial products generated by the Wall Street bullies. These products are designed to take advantage of the current situation on Wall Street. The short-term market noise should be ignored by successful investors.

Wall Street needs investors to continue moving money. From one product to another. Without regard to what is in the clients’ best interest.

Every day I read about the next great manager or next great strategy. These ‘greats’ are all the result of taking advantage of the current short-term noise in the equity markets.

Most investors need a process to follow, a game plan so to speak. Something to follow during both ups and downs in the markets.

But most importantly they need discipline. The discipline to follow their plan regardless. Many times, it will not look like the thing. However, over the long-term it will serve them well.

This is where a fiduciary adviser/investor coach adds value, or earns their fees if you will. During market extremes, both up and down, provides discipline to help avoid any major mistakes.

To succeed long-term own equities…globally diversify…rebalance.

What Makes A Great Investor?

Average players want to be left alone. Good players want to be coached. Great players want to be told the truth. – Doc Rivers.

Now I am not a fan of the NBA. But this quote by coach Doc Rivers struck me. What a message. This really can relate to investors as well as, many of life’s endeavors. The average want to be left alone because they fear the unknown. They fear loss, being taken advantage of and they have ‘too much to lose’.

The average seek answers to unanswerable questions. What is the best investment? Where is the best place to put my money? Will I have enough money to retire on? Will I outlive my savings?

Good investors want advice. They want to be coached. Unfortunately, the Wall Street bullies have convinced the good investors that predicting the future is right. They have been convinced that someone can get them into and out of the equity markets at the right time. They have been led to believe that someone can pick the right stocks.

Their goal is to earn stock market returns with treasury bill risk. What they get is Treasury bill returns with stock market risk.

Great investors have open minds. They seek the truth, not the propaganda the financial media spews, each and every day. They understand that Wall Street might not have their best interest in mind.

They believe that investing is a long term process. They believe that market timing, stock picking and track record investing do not work.

These great investors seek the truth. This includes Nobel Prize winning research such as, Modern Portfolio Theory and Efficient Market Hypothesis. It also includes the three-factor analysis.

Great investors not only seek coaches they also seek the truth.

Work with a fiduciary adviser/investor coach to become ‘great’.

Happy Thanksgiving …….2017!!!

As we approach the Thanksgiving holiday and the Christmas holiday, we must realize there is much to be thankful for.

The Men and Women Who Sacrifice and Fight for Us.

Friends and Family.

OK the Packers are in a slump, a bad slump, but still.

More importantly, we continue to live in the greatest country in the world despite how you feel about the political climate.

There is no political party that can change the fact that the free markets work and will overcome. People will continue to believe that hard work, discipline and prudent risk taking will lead to success.

Remember, during times like these there are increasing amounts of opportunity for all who are willing to look.

We continue to live in a free country one in which YOU determine how much success you desire. You are accountable for the level of success you will realize.

Regardless of the political climate the free markets and free enterprise will overcome.

Be thankful for this freedom, there are many in the world who are envious of the United States of America.

As always, do not empower the Wall Street bullies, to succeed in reaching your long term financial goals you should:

Own equities….globally diversify…..rebalance

Remember returns come from the markets not from a manager.

Be thankful for all you have.

It’s In The Stars!!

The mutual fund industry, ie, the Wall Street bullies, continues to generate new stock picking stars each year. These stars generate great returns that make the investor cringe in jealousy. ‘Why can’t I find these stars? Why doesn’t my broker find these stars for me?

These ‘investors’ are on an endless journey to find the stars before they become stars. This has been proven to be a fruitless search. Of course, some get lucky. But most end up disappointed.

Keep in mind most big brokerage firms have hundreds if not thousands of analysts picking stocks. Firms like Fidelity will hire a large number of analysts knowing that each year some will succeed. The firm then promotes the stars and entices investors to buy their stars.

In fact, the industry has a ranking system, through Morningstar you can determine the stars of the past. The best performers receive 5 stars the poorest 1 star.

Each year there are new 5 stars and new 1 stars. Unfortunately for investors the 5 stars seldom repeat. And this years’ 1 star could become next years’ 5 star. There is no reliable way to determine which will be the 5 star of the future.

In fact, in a recent Wall Street Journal story it was proved that relying on 5 star funds would result in disappointing performance relative to the overall market. Morningstar of course, tried to defend their system but to no avail. There is no predictive ability in the Morningstar methods.

We must always remember. The equity markets are random and unpredictable. Any attempt to beat the equity markets with predictions will lead to disappointing results. Unless of course, you are one of the lucky ones.

When you are relying on luck and predictions you are actually speculating and not investing.

Speculating is fine, don’t get me wrong. As long as you realize you are speculating. Many believe they do not need to save and prudently invest. They can and will be one of the lucky ones and hit it big.

When you have a long-term goal, like retirement. You should be prudently investing and not speculating. The stakes are far too high. Your future and your families’ future, depends on it.

You must protect the future you from the current you. You need to fire your broker/agent and hire an investor coach/fiduciary adviser.

There is Risk in Everything We Do!

Many saving for retirement or any long term financial goal consider risk a real four letter word right now. More specifically equity risk is to be avoided at all cost. We all want to avoid pain. The last decade has been more volatile than usual. Or has it?

Risk and the chance of experiencing negative returns in a portfolio of equities is a very real likelihood.  In fact, the longer you hold your portfolio, the more likely you are to experience some years of negative returns.  But holding longer also increases the probability that your compound annual returns will be positive.

I don’t know if the next 20% move will be UP or DOWN. What I do know is the next 100% move will be up.

When we invest for the long term we must accept risk. If we try to avoid equity risk, it is replaced with inflation risk or purchasing power risk.

Remember the real return of any investment whether it is equities, bonds, annuities, CDs, money market funds is the total return minus the rate of inflation.

For example, with a money market return of 0.2% minus inflation rate of 3.5% equals a negative return of -3.3%. This means that every year you hold your money in money market funds your purchasing power decreases 3.3%.  Compounding returns work in reverse as well.

To keep pace with inflation you need to be invested in equities. We must learn to live with the risk, we must remain disciplined and do not allow the Wall Street bullies to make us trade and speculate with our money.

There are ways to control the amount of risk you carry in your portfolio. Younger investors will likely take on higher levels of risk during the accumulation phase. While retirees might be more comfortable with reduced risk during the spending phase.

Regardless, it is important to understand the risk you are carrying. You should understand the best-case scenario and the worst-case scenario. The equity markets are random and unpredictable. There will be periods when the equity markets are down. Sometimes dramatically, like 2008.

If you understand the amount of risk in your portfolio. You will not allow short term volatility to cloud your judgement. You will not panic during the inevitable down markets.

You will understand that great returns are the result of discipline and understanding.

This is a process that requires the assistance of a fiduciary adviser/investor coach.

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

Your Philosophy Matters!!

As many of you may know I am a huge Green Bay Packer fan. Well the pack is going thru some tough times. Many of the Packer stars have been injured. Offensive line, cornerback, linebacker, safety, defensive line….But most notably the Packers have lost Aaron Rodgers possibly for the rest of the season.

They will regroup and Coach McCarthy will emphasize getting back to their plan. What makes them a great team needs to be reinforced to the players and staff. It requires discipline in both the good times as well as the bad times.

Many fans are calling for the signing of an emergency quarterback. The names Kaepernick (never), Romo, even Favre have been mentioned. What fans seem to forget is it takes time for any player to learn the current system.

There are different philosophies around the NFL. The Packers administration has their own philosophy. They as a group stick to this philosophy regardless of what the fans and the media say. When they deviate from this philosophy they probably should be replaced.

In my opinion when you change philosophies mid-stream you are giving up on what you believe. When this happens, there is no plan. You are making emotional decisions without a clear goal.

Remember when you believe in nothing you will fall for anything.

A change in philosophy would require a change in administration. That would mean Ted Thomson goes, Mark Murphy goes, followed by Mike McCarthy.

For now, we will follow the current administration and live with their decisions. Like it or not.

Investors have two main philosophies to choose from. One is that free markets work, and the other free markets fail.

If you believe the free market fail:

  • The market fails to price goods and services efficiently.
    It is possible for some individuals to identify in advance which prices are inaccurate.
  • Underpriced or overvalued markets can be forecasted or predicted.
  • Managers seek to increase returns and avoid losses by taking advantage of stock or market mispricing.
  • People with this view use traditional investment approaches.

If you believe the free markets work:

  • Free Market is best determinant of market prices based on Supply and Demand.
  • All available information is factored into the current price.
  • Only new and unknowable information and events change pricing.
  • The randomness of the market makes it impossible for any individual or entity to consistently predict market movements and capture additional returns unrelated to risk.
  • People with this view would utilize free market investment strategies

In my opinion, investors would be better served by following the free markets work philosophy.

Like the Packers we need to ignore the media hype and focus on their long-term goals.

Also like the Packers they need to understand what the process is and believe in it. Remember investors do not have to know everything about investing to succeed but they do need to know the right things.

To succeed long term in investing find an investor coach/fiduciary adviser that you believe in and learn whatever you can.

Then you must own equities…globally diversify…rebalance. And repeat until you die.

Should You Get Out of the Equity Markets or Is It Get In?

During conversations with investors I continue to hear apprehension when the subject of stocks is discussed. This apprehension or fear is completely understandable. We hear nothing but bad news from the media with the continuing battles in Washington DC.

It seems everyone is attacking everyone. When did Americans become so sensitive?

Through all this bad news the equity markets are posting solid returns. Will there be down markets in the future? Absolutely, there is no doubt. However, no one can tell you when and which countries and/or sectors will be involved.

The equity markets around the world are random and unpredictable.

This is undeniable. However, the equity markets remain the greatest wealth creator in the world, if properly used. This does NOT mean picking the right stocks or market timing, getting in and out of the market at the right time. Neither of these activities, (promoted by the Wall Street bullies), are in your best interest. These activities benefit the Wall Street bullies and will not improve your returns.

The market returns are there for the taking, they are waiting for you to take advantage.

Listening and taking the advice of the Wall Street bullies is not in your best interest.  These bullies include shows like Hannity or Limbaugh or OReilly (fired) who tell you how horrible everything is and try to instill fear.

Worrying about the direction of the equity markets does you no good. Actually, worrying in general will do you no good.

If you have developed a prudent portfolio and remain disciplined, you will succeed long term. This will require the help of an investor coach who will keep you from letting your emotions take control.

Remember the Equity Markets are forward looking:

  • Expectations about the future are in today’s price.
  • Market returns are not strongly correlated with macroeconomic variables such as GDP
  • Markets can provide positive returns even during periods of poor economic performance.
  • Timing markets is difficult.

A study was done looking a past recessions and stock returns. The conclusion there is no correlation between recessions and stock returns.

To succeed in reaching your long term financial goals you need to own equities, as scary as this may seem, globally diversify, no one can tell you which countries and/or sectors will outperform and rebalance, buy low sell high.

If you these simple rules you will stop gambling and speculating with your investments and improve your results with less anxiety about the future. If you are younger growth must be your goal, a retiree your goal is to keep pace with inflation. Owning equities in your portfolio is a great solution to accomplish both.

Focus on Market Returns!

Most investors have failed by a long shot to achieve market rates of return. Based on the Dalbar Study, the average investor has failed significantly to achieve market returns. While the S&P 500 has earned 7.68%

the last 20 years ending 2016  the average mutual fund investor has earned 4.79% during this same period.

 

This is a stunning failure. Research shows the average actively managed mutual fund underperforms the market by two to three percent per year. Accepting this fact, the investor’s job of allocating assets is greatly simplified.

 

The investor only needs to allocate his/her assets into various asset categories to achieve market returns and remain disciplined over long periods of time.

 

This is easier said than done and most often requires the aid of a coach. By focusing on market returns, there is no stock picking at all. No forecast, no prediction. There is no gambling on beating the market. You just own every single stock in that asset category. That’s what we talk about when we refer to market rates of return.

 

Remember it’s not about picking the “best funds” rather it’s about maintaining a disciplined approach.

 

Investing success requires owning

equities….globally diversify…..rebalance.

 

The Wall Street bullies continue to lure investors with the ‘hot’ managers sterling performance. These investors then buy and in most cases are disappointed with the results.

 

We investors have been convinced that someone out there can beat the market. They have been convinced that someone can help them avoid losses and only participate in the gains.

 

These investors are looking for stock market returns with Treasury bill risk. What the Dalbar study shows us is that they end up with Treasury bill returns and stock market risk.

 

Stop the madness. Although it has been proven people are more motivated by the pain of losing than they are with the pleasure of gains. We need to focus on market returns and avoid listening to short term noise. Without downturns there would be no or lower returns.

 

The markets reward the taking of risk. Accept this and allow your investor coach to guide you through the turbulence.

 

Always remember the markets are random and unpredictable.

Predicting The Future Is Hard!

There has never been a shortage of predictions in any field. Let alone the financial markets. If you google investments. There are approximately 382,000,000 results.

There is no shortage of Wall Street bullies offering their prediction of the future. Unfortunately, most, if not all of these predictions do not come true. Mostly because predicting the future is really, really, hard.

No individual, committee, or money management company can ever hope to know “everything” about investing.

All the facts, data, statistics and information about stocks and the market are infinite.  They are also ever changing.  The free market system itself is the only mechanism known to effectively incorporate this into a pricing system.

The good news is, if you know the guiding principles of successful investing and work with a coach, you don’t have to know everything just the right things.

One of those things is be successful in investing you need to own equities….globally diversify…rebalance.

As investors we need to ignore all the ‘noise’ the bullies try to sell us. We need to realize these predictions are nothing more than enticements for us to move our money. They will enrich themselves and not you.

Yes, your best interests are secondary to their goals.

Of course, if you wish to speculate then listen away. But investors need a prudent process and discipline.

This is best accomplished with the assistance of an investor coach/fiduciary adviser.