Long Term Means Life Long.

Some of you may notice that on occasion there are repeated messages.  Think of them more as reminders to success.  Repeating the same important message will help you internalize the message.  That said.

Most investors think that long term is five to ten years.  For the day trader it could mean ten minutes.  In reality a well thought out strategy may take a lifetime of patience, wisdom and discipline to work effectively. 

Think in terms of holding most of your investments over the remainder of your life.

You will change the risk level as you get older. However, you will continue to own a globally diversified portfolio with the right amount of high quality short term fixed income.

Remember the Wall Street bullies make most of their money when you trade. Their ability to predict the future is no better than yours.

The real problem is that there is always some money manager who makes the right call at the right time. The Wall Street bullies then advertise this manager’s success. Touting their ability to predict the future.

When you look back at their successful money managers’ ability to repeat you will be very disappointed.

Or I have heard of advisors luring new clients with the promise of successful market timing. These advisors claim they can get you into and out of the market at the right times. Again investors will be very disappointed in their long term results.

The secret to successful investing is not picking which stock or asset class will outperform, Nor is it trying to market time the market. this has been proven time and again not to work.  The secret to successful investing is choosing a proven strategy and sticking with it.

To succeed find a prudent process with evidence to back it up.

Remember own equities with the right amount of high quality short term fixed income…..globally diversify…..rebalance.

Fear of the Future!!

It all begins with the fear of the unknown. Fear of the Future. It is one of our most basic instincts, to fear the unknowable. This attribute keeps us alert for changes in the environment that could threaten our safety and well being.

It is the drive that keeps us plugged into the evening news and makes us ask many unanswerable questions, such as, “Will there be enough money to maintain my standard of living? What is the economy going to do next? Will I be able to keep my job?” or “What is the market going to do next?”

The news media often preys on this fear by showing clips of tragic events and doom and gloom predictions about the future. The newsroom motto is….If it bleeds it leads. Disaster sells.

It is not uncommon for this pervasive fear to cause stress, anxiety, and even sleepless nights. It is a chronic affliction in our modern age. 

Many of us see downturns of the past as buying opportunities, yet we see downturns of the future as risk. Why is this? Is it our innate fear of the future?

Since 1926 the S&P 500 has realized a nearly 10% return. During this time there have been downturns of 10% or more 90 times. So to earn the great long term return you need to deal with the downturns.

There is really no need to fear the future. Because we fear the unknown. If it’s unknown why try to predict it?

To successfully invest for our future, we must ignore the media hype and stay the course.  Traders seldom succeed in the long run, investors will prevail if they remain disciplined.

Do not fear the future… own equities….globally diversify …rebalance.

Investor Coach or DIY?

Recently the financial media has been extolling the need to cut expenses in your portfolio. Many experts claim if you find low cost investments and do it yourself you will improve results. While this is true most investors as evidenced by the Dalbar study would suggest otherwise.

Dalbar is an independent research organization that studies investor behavior. Each year they update their results. The 2018 results have not been published but I do not expect a substantial changes to the 2017 results. Please note the results are from 1998 thru 2017 average annual.

  • S&P 500                                                   7.20%
  • Dalbar Average Investor – Equity Funds   5.29%
  • CPI (representing inflation)                       2.15%

This is evidence that investor left on their own will sell during downturns or lows and buy in upswings or highs. This means they are buying high and selling low. This is not the result of high investments costs but rather the result of investor behavior.

Please do not get me wrong, excessive or unnecessary fees will hurt your overall performance. What I am trying to say is that do it yourselfers will undoubtedly make emotional decisions with their portfolio. These bad decisions will result in returns reflected in the Dalbar study. Without the help of an investor coach/fiduciary adviser investors will receive lower returns over the long term.

There is book I highly recommend for anyone considering retirement ‘The New Retirementaility’ by Mitch Anthony. In the book Mr. Anthony asks a number of questions including:

  1. Do I know everything I need to know about asset allocation and protection, and tax reduction strategies and estate management?
  2. Do I want to invest the time and effort to learn these issues?
  3. Do I want to continue to invest the time it takes to keep up with the markets and remain competent as an investor?

Even if you answer yes to these questions it is not enough to insure a successful long term investing experience. These questions do not address your behavior and your tendency to make emotional decisions with your money.

I like a quote by Warren Buffet “With enough insider information (hot tips) and a million dollars, you can go broke in a year.” While I don’t agree with his investment philosophy for most investors I do admire his discipline.

An investor coach/fiduciary adviser will keep you disciplined to your strategy in both up and down markets.

You may find a provider who tells you how cheap you can invest with them. If this provider will allow you to panic in down markets or buy the ‘hot’ asset class in up markets. No matter what this providers charges it is too high and excessive.

Avoiding excessive fees should be your goal as an investor. However cheapest is not always the best solution for all investors.

Find an investor coach/fiduciary adviser who will put you on the right path to a successful long term investing experience. An experience with less anxiety and improved performance, long term.

Do You Know The Right Things About Investing?

Local weather forecasts have been lacking in accuracy as of late. This last weekend the forecast called for 8 to 12 inches. Thankfully we only receive 3 inches with extremely high winds and severe drifting. With this inaccuracy people continue to watch the forecast. A flip of the coin might work just as well. Right now I am extremely tired of moving snow. Not sure where to move it when we get more!!

Many individuals in the investing public also continue to watch for forecasts. Sometimes they might be right. But for the most part the flip of the coin might do just as good of a job.

Like anything to formulate a forecast you would need all the facts.

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

You just need to know the right things. There will be times when you do not do well. However, over the long term, if you remain disciplined you will succeed. And reach your goals.

No one can consistently predict the weather or the equity markets. Although I wish the groundhog is right and we have an early spring. We’ll see.

Along with discipline you will need a proven process. This process includes own equities with the right amount of high quality short duration fixed income.….globally diversify…..rebalance.

Treasury Bill Risk with Stock Market Returns!!

Investors are continually asking what is the main determinant of investment success? 

Wall Street and the financial media would like you to believe that.

  • Timing when to get in and out of the market
  • Picking the right stocks and bonds to own.
  • Using track record investing to find the next hot manager, will help you succeed in investing.

This is wrong! All the above factors actually negatively impact your portfolio in the long run. Any time you spend on the above activities is time wasted. 

Allocating your assets based on your acceptable level of risk is the main determinant of investing success.

More importantly time spend with your family and friends is much more valuable than time spent trying to beat the market.

It seems odd that crashes of the past are seen as buying opportunities. While current and future crashes are seen as risk.

In most cases the reason we look to beat the market is our emotions. When the market has down turns, we become nervous and scared. When there are markets upturns we become greedy and jealous.

During prolonged up markets Warren Buffet said it best FOMO. Fear of missing out.

We believe that when the market is going down it will always go down. Conversely, when the market is going up, we believe it will always go up.

The real problem is most investors are looking for stock market returns and Treasury bill risk. What they end up with is Treasury bill returns, (if they are lucky) and stock market risk.

Most investors miss out on market returns because they lack discipline. This is the main determinant of long-term investment success.

This recently became evident when a large number of investors got out of the market around Christmas time. And subsequently missed the January and first half of February rally.

This is where a true adviser can help. If your adviser allows you to panic during downturns or concentrate in the latest hot market. Any price you pay them is too much.

Fire your broker/agent and hire an investor coach/fiduciary adviser.

To be successful in reaching your long term goals you must own equities…globally diversify…..rebalance.

Does Market Timing Work?

Many investors are wondering what to do with their investments. Although many have a prudent portfolio, globally diversified with the right amount of risk for them. Over the long term they will succeed. However, during short term volatile environments these portfolios may underperform.

Many investors seem to believe that there is someone out there able to correctly time the market. That is, get out at the right times and get in at the right times. Unfortunately, that someone does not exist. At least not consistently.

Below is a link to an article providing proof that market timing does not beat dollar cost averaging. Even if the market timer got it perfectly right each and every time. Which is we all know impossible to consistently do.

https://www.marketwatch.com/story/this-is-the-last-article-youll-ever-need-to-read-on-market-timing-analyst-claims-2019-02-06?link=sfmw_fb&fbclid=IwAR1Fqhgqix6y2EL0pDgb7VF0aKrUPmgAdAMdb9B85UObEJh6nfYFyu2NVYU

(Hope the link works)

We must all decide if we want to be investors for the long term or gamblers for the short term.

If your goal is a secure retirement. I recommend deciding to be an investor with a long-term focus. You could be successful by being a gambler. However, your risks are extremely high that you will not succeed.

To succeed long term you must own equities with the correct amount of high quality short term fixed income…globally diversify…rebalance.

In most cases this will require retaining the assistance of an investor coach/fiduciary adviser.

Evidence Based Investing…

At this time of year experts are predicting what the equity markets will do for the coming year. We are continually looking for answers.

  • What will the future bring?
  • Where will the markets go in 2019?
  • Where is the best place for my investments?
  • How can I earn stock market returns with Treasury bill risk?

These are really all unanswerable questions. No one can predict the future with any consistency. However, we as humans continue to search. Many of us read our astrology message each day. Hoping we can learn what will happen to us each day. Even here there are times when these readings appear right but again there is no consistency. When these readings are right it is a matter coincidence rather than some psychic ability of the writer.

Investors continually look to someone on Wall Street or anywhere for that matter to tell them how and where to invest. This search continues regardless of the poor track record of these predictors. For example the prestigious magazine ‘The Economist’ made the following prediction at the beginning of 2013. The magazine noted that while investors were optimistic, the coming year was unlikely to be one to remember.

As 2013 came to a close the equity markets had a stellar year.

Regardless of these and other inaccurate predictions, investors continue to search for answers and continue to read and absorb these and other publications. Many investors tell me that the stock market is too risky for them. This is true when your strategy is to listen to the ‘expert’ forecasts and basing you investment allocation of those predictions. When you base your investment strategy based on a forecast of the future you are gambling and speculating with your money.

The real problem is when one of these ‘forecaster’ is right, which is statistically inevitable. These predictors will market this fact extensively.  What investors don’t seem to realize is that there is no correlation between past performance and future results. Like I said some of these forecasters will be right but there is no reliable way to know which one(s) will be right going forward.

Dr. Eugene Fama of the University of Chicago won the Nobel Prize in Economics in 2013

for his work on efficient markets. Dr. Fama essentially proved that all knowable information is already in the price of the security. There is no reliable way to predict how the markets will perform going forward.

Throughout my career in financial services I have also continued to search for the ‘answer’ with some success followed by poor results. I finally remembered by finance courses in both college and graduate school. In my studies I learned that there is an academic and scientific method to investing that has proven to be successful in the long term. The issue is that these methods do not eliminate risk but rather work to control it.

Investors would be more successful with less anxiety if they worked with an investor coach. An investor coach will teach you among other things where returns really come from. HINT: it does not come from the hot stock picker or market timer or the manager with the best track record.

Trying to adjust your strategy based on current conditions will result in poor and disappointing results.

When you have a prudent process and the discipline which an investor coach will provide, success will be yours WITHOUT the need for an accurate forecast.

There Will Always Be Uncertainty In The Equity Markets!!

We are experiencing, among other things, some very tense and violent situations around the world right now. The situation in Ukraine, including the downed airliner, the Israel and Gaza battle. As well as our own battles within our country. There is uncertainty all around us. But OMG what should I do with my investments? Or is this a good time to invest? This are typical reactions to a short term down swing in the markets. Many of us forget to keep ourselves focused on the long term. We forget that the stock market does go down. It is the price we must pay for the great returns we realize, long term. Please remember a fact from Frederick C Taylor.  From 1926 thru 2012 the Standard & Poors 500 has earned a 9.75% average annual return. There have been 22,040 trading days during this time. Only 52% of those days were up days or 11,461 days. That means there were 10,579 down days. The down days are admittedly more painful, but necessary to earn the great market return. It is also important to remember that

There ain’t no such thing as a free lunch

(alternatively, “There’s no such thing as a free lunch” or other variants) is a popular adage communicating the idea that it is impossible to get something for nothing. We read or listen to the financial media telling us why a downturn is occurring. I’m not sure what the answer really is. Perhaps, it’s just the market looking for a reason to correct.  Again I do not know the answer. I do know that downturns are inevitable. They happen.

Dealing with these downturns is part of the reason the long term returns are so attractive.

For long term investors these downturns mean nothing. Anyone who tells you they can predict the market turns are gambling and speculating with your money not investing. In fact you are gambling and speculating with your money if you:
  • Pick stocks
  • Market time
  • Track record invest.
During a downturn in the markets if you become overwhelming uncomfortable. You should talk with your investor coach about reducing the level of risk in your portfolio. If the both of you decide a reduction in risk would be right for you then do it. However, do not expect to increase the risk level when market conditions improve. This would be market timing and therefore imprudent. Those of you that are already clients know that you are globally diversified with the right amount of risk for YOU. Each of you know the three simple rules of investing:
  • Own equities and fixed income.
  • Globally diversify
  • Rebalance
Keep in mind no one can predict the future with any degree of consistency. My suggestion to all of you is to relax and enjoy the summer weather. Stop watching all the ‘bad’ news. Do not allow the Wall Street bullies to make you do something you will regret long term. Selling or panicking during a downturn will result in  “Short term gain ….Long term pain’. Stay focused on the long term and with the help of an investor coach/fiduciary adviser your financial goals are attainable.

You Don’t Have to “Beat the Market” to Be a Highly Successful Investor.

We have been taught from a very young age that we can ‘beat’ the market. In fact, there are stock picking contests in school. Remember the contest? You are given a hypothetical portfolio and told to invest to win. These contests were for a relatively short period of time, a semester.

The ‘winner’ was given a prize. This instilled in all students that you can ‘beat’ the market. The real lesson is that investing in this way is nothing more than speculating and gambling with your money.

These contests are often sponsored by a local stock broker. Their motivation is obvious, get them young and turn them into lifelong speculators and gamblers.

If true investing was taught in school, it would require a much longer ‘teaching’ moment. True investing takes time and discipline.

Although successful stock picking is possible it is not true investing. ‘Beating’ the market is possible but highly unlikely. And most people will be disappointed.

Market returns are enough. Almost every major equity and stock market has consistently outperformed inflation and all the hyperactively trading professional money managers trying to outdo the market.

Most investors aren’t aware they have another option. Chances are you will beat all your friends and the vast majority of managers with the market returns from index funds and structured market portfolios. There is evidence proving this statement.

To become a true investor, you must own equities with short term high quality fixed income, globally diversify and rebalance.

To guide you, seek the help of an investor coach/fiduciary adviser.

Happy Thanksgiving …….2018!!!

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(AGAIN!), 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.