Prior to the new fiduciary rule. The Wall Street bully brokerage firm would use their payout structure to their brokers to generate more trading. They would pay a higher fee for the stock portion of a clients portfolio. For example, pay 1% on the stock portion and 0.50% on the fixed income portion.

This would result in their brokers using higher risk portfolios for their clients. Naturally they get paid more for a riskier portfolio. When there was a downturn in the market their clients realized more volatility than was right for their situation.

This issue may have been corrected with the fiduciary standard. However, right now, there is debate about ‘watering’ down the fiduciary standard

Not sure where the fiduciary standard is going within our industry. But I believe the Wall Street bully brokerage firms will find ways to generate more fees by trading more stocks within their clients’ portfolios.

A broker’s “job” is to get you to buy and sell as much as possible.  That is the primary way he or she gets paid.  This is a huge conflict of interest because what is good for you is bad for the broker.

The Wall Street bully brokerage firms do not make money buying the right stocks at the right time. This is a great misperception by the investing public. They believe the brokerage firms have the right information to ‘beat’ the market.

This is wrong. Because, like you, they cannot predict the future.

These brokerage firms make money when you trade stocks. There is a spread that they earn on every trade plus a commission. For example the bid is the amount someone is willing to pay, say $10 and the ask the amount someone is willing to sell, say $12. When the trade is completed the brokerage firm earns the $2 difference plus commission.

Therefore being an active trader in the long run will cause you to lose money.

By employing a scientifically designed strategy and remaining disciplined to that strategy, over the long term you will win.  Remember you portfolio is like a bar of soap, the more you touch it the smaller it gets.

Own equities….globally diversify…….rebalance.

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 (even then I could find some facts supporting an up day), 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.

Have you ever had someone tell you something and they told you the reasons why? Only to find out they left out something that changed the entire situation. Well the financial media does this every day.

These Wall Street bullies play on our emotions every 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 in 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.

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.

This last weekend Northeast Wisconsin was hit with a record snow storm. The measurement last I saw in Green Bay was nearly 24 inches. Second most in recorded history.  It beat a record set in 1889. I also saw that Shawano received 33 inches this weekend. WOW!

I for one, have had enough snow and cold and wind…

This can teach us something about investing. Over the years we can expect the S&P 500 to earn an average of a little less than ten per cent. These facts also say that most of the time the return will vary from -6% and +22%. There are of course exceptions, 2008 saw a -40% loss.

This is comparable to the snow event we experienced this last weekend. They give us average snow falls for Wisconsin. Some years are below and some are above the stated averages. Then there are the exceptional years, like April 2018.

During years of exceptional snow we experience inconvenience, we probably need to stay off the roads, we probably need to wait longer for the roads to be cleared. There is also power outages to deal with. The list goes on for many.

The question becomes should we prepare of these rare events by investing in more snow removal equipment? Or keep more people on staff? Or should everyone invest in personal power generators?

The answer, in my opinion, is no. These rare events are part of life. Soon the roads will be cleared, our lives will go back to normal. Since it is April this snow will soon melt. OK it may not seem like winter will ever end but it will.

Like the economic downturn, we will recover. During 2008 many said this was the end. Our finances would never be the same. Many felt the downturn would never end. They panicked and sold.  But eventually the economy did recover. The pain went away for those that remained disciplined.

Unfortunately those that panicked locked in their losses and lost out on the eventual recovery.

It is April 2018 and we are digging out. There is a light at the end of the tunnel.

Will there be another event such as 2008? I have no idea. However I know if you work with an adviser that builds a prudent portfolio designed for you. You can go ahead with confidence that eventually the bad times will disappear.

Remember you don’t have to know everything about investing but you do need to know the right things.

In most cases this means the adviser you hired needs to keep you disciplined and focused on the long term.

Every week I talk with investors about how they invest their money. While listening to many I can hear the influence of the Wall Street bullies by the questions they ask.

The Wall Street bullies have an ongoing marketing campaign to convince investors that they have the answer to investing success.

These bullies have trained you to ask the following questions:

• What stocks or investments do you like? These bullies need you to believe that there is some investment advisor who can consistently and predictably add value to your portfolio by exercising “superior skill” in individual stock selection.
• Who are the best fund managers? In other words track record investing is finding the funds or managers that did well in the past is a reliable method of indicating which funds will do well in the future.
• When should I get into and out of the market? Market timing is any attempt to alter or change the mix of assets in a portfolio based on a prediction or forecast about the future.

When investors ask these questions what they are really asking for is a prediction about how our investments will do in the future.

All studies done on the success of these strategies have indicated that they do not work.

You cannot predict the future because the markets are random and unpredictable.

Rather than trying to predict what the markets will do next investors would be better served by developing a prudent portfolio and remain disciplined.

The questions we should ask are something like:

• What is your portfolio’s expected return?
• What is your portfolio’s expected volatility?
• Have you defined your investment philosophy?
• How do you measure diversification in your portfolio?

An investor coach can help you answer these and other relevant questions.

Remember you are investing to reach a long term financial goal. This goal cannot be achieved if you continuously change strategies. Or try to get in and out of the market at the right time.

These tactics very seldom lead to success in the short term. Over the long term you will not reach your financial goals because they rely on ‘luck’ and not ‘skill’.

Most pension funds are  managed to control risk through proper diversification. Why shouldn’t you?

The fundamentals of successful long term investing involve:

• Own equities
• Globally diversify
• Rebalance

It is more about controlling your emotions during both down AND up markets. Controlling your emotions cannot not be done alone.

OK I have been about the Green Bay Packers a bit much. Right? Well I am a diehard fan so …Tough!!

Sunday, I watched the end of the Packers playoff chances with a loss to The Carolina Panthers. The Packer defense continues to a major disappointment year after year.

Events leading up to Sunday’s loss are what I find interesting about past experiences.

As everyone knows Aaron Rodgers is the Packer quarterback. He is considered one of the best quarterbacks in the game today, if not the best.

So when Rodgers talk people listen. A few years ago, the Packers had a very slow start. Aaron came out and said R-E-L-A-X and Packers went on a winning streak winning the division and earning a spot in the playoffs.

Last year the Packers again started very slow. With a record of 4 and 6 Rodgers came out and said we will run the table. The Packers did just that winning the division again and earning another spot in the playoffs.

This year Aaron was injured on October 15 with a broken collar bone. His replacement did not do well. Of course, the weak defense was of no help. This last Sunday Rodgers came back. All Packer fans assumed we would win the rest of our games and earn another spot in the playoffs.

Well that did not happen. The loss all but ended our playoff hopes. Packer fans are shocked Rodgers did not save them again.

But, Tony, what does this have to do with investing? Well, many investors look at a manager’s or market predictor’s past performance and assume they will repeat this stellar performance.

Remember when you look at investment products. There is a disclaimer that states ‘past performance is no indication of future results’.

Using an investment manager’s past performance as a predictor will in most cases lead to disappointment.

Always remember, the equity markets around the world are random and unpredictable.

Rather than looking for the ‘hot’ investment manager or the latest market predictor. You should develop a prudent portfolio and allow the market to reward you with the great long-term reruns they provide.

In most, if not all cases you will need the assistance of an investor coach/fiduciary adviser you keep you disciplined.

To succeed long term in your investing, you must own equities…globally diversify…rebalance.

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.

There continues to be more and more media attention that the ‘buy and hold’ strategy is dead. That Modern Portfolio Theory no longer works. This is another attempt by the Wall Street bullies to keep your money on the move.

There are an increasingly amount of ‘experts’ extolling the underperformance of international and small equities for the near future. These ‘experts’ have an obvious conflict of interest as they recommend their own solution.

These ‘experts’ are using 2014-2016 and into 2017 as a sales gimmick. You will hear ‘look I would not have as much small stocks’ or ‘international stocks will underperform for some time to come’. Or both.

Many of us have short memories. In the late 1990’s U.S. Large Cap Growth  stocks including tech stocks were out performing nearly all other assets classes. Like Large Value, small stocks, international stocks.

Most ‘investors’ or should I say speculators had portfolios concentrated in U.S. large cap growth stocks. Specifically, tech stocks or ‘dot’ com stocks.

It was said that it was a new paradigm. Things had changed, permanently, they said. Small stocks, value stocks and international stocks were no longer relevant, they said. Fed chairman Ben Bernanke had the famous quote ‘irrational exuberance’. This only slowed the market for a short time.

Then in 2000 the tech bubble burst. U.S. Large cap growth stocks were crushed.

Warren Buffet who had lagged the tech stock market badly during the 1990’s was back.

A globally diversified portfolio saved many investors. While the speculators were left picking up the pieces.

Investors think long term while speculators think month to month.

True investors are much better served using a free market strategy and utilizing Modern Portfolio Theory and ‘buy and hold’. This strategy, over the long term will lead to success.

It should be emphasized that ‘buy and hold’ should really be ‘buy and rebalance’.  ‘Buy and hold’ might signify set and forget and we must rebalance back to our target allocation periodically. This entails buying low and selling high, automatically.

When we rebalance we sell asset classes that have done well and buy asset classes that have done poorly, short term. Buy low, sell high. This is done periodically and eliminates the need to forecast the future.

When we control risk in our portfolio we can look to our future with confidence. The ‘all-in’ attitude will lead to disappointment over the long term.

To be successful, investors, no matter how large, would be far better off using a free market strategy with Modern Portfolio Theory as part of the process. Modern Portfolio Theory is actually part of a larger strategy called Free Market Portfolio Theory.

Remember no strategy always looks like the right thing to do. We must continue to believe the free markets do work.  Most importantly we must believe in our strategy and remain disciplined.

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

We continue to experience civil unrest here in the United States. The intolerances displayed are hateful. During these turbulent times there will be ‘experts’ telling you what is the best place for your money.

It could be gold, annuities, real estate or even a pyramid scheme…….. Whenever there is fear in the air someone has the answer for your investments.  This is a very dangerous time to be speculating.

If an investment strategy is on the cover of every magazine, and all of your friends and associates are doing it, it’s reckless to follow suit.  Only hot, sexy, and speculative techniques make the cover.  Don’t follow your friends!

Remember the most successful businesses have one strategy and they stick to it. Such as McDonald’s, if you visit a McDonald’s anywhere in the country they are all set up the same. They know there may be a better way to run a restaurant but their systems works.

Warren Buffet is another example, he has one way of investing and it has made him the most successful investor of our time. There are times when he losses more money than most but over the long term he wins. He does not fall for the latest fad.

U.S. stocks continue to outperform, well, all other asset classes. The large U.S. stock more specifically is the number one asset class for 2017.

Many clients are looking at their globally diversified portfolios and asking themselves. Why if the U.S. Large stock is doing so well is my portfolio lagging behind? If I just invested all my money in the S&P 500 I would be beating my portfolio.

Why am I paying my adviser/coach to earn a poorer performance than the S&P500?

As investors, we have very short memories. In the late 1990s U.S. Large Cap Growth stocks were outperforming all other asset classes. Four straight years this was the case.

Then the bursting of the tech stock bubble devastated the investors with concentrated portfolios in U.S. Large Cap Growth.

I am not saying this will repeat.

As an investor, you may be tempted to change your investment mix to accommodate current events. This is called market timing and it has been proven not to work. You may get lucky in the short term but you will eventually fail.

To succeed in investing for the long term you should own equities….globally diversify….rebalance.  The key is to remain disciplined to this strategy.