Happy Thanksgiving…2020!!!

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.

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

The year 2020 also stands out as the year of the coronavirus

However, there is no political party nor virus that can change the fact that the free markets work and we will overcome. People will continue to believe that hard work, discipline and prudent risk taking will lead to success.

I continue to believe that the majority of Americans believe in the American dream. As I have said before the only thing that doesn’t change is that things change. The path to the American dream may change but it is still there.

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.

Refuse To Be A Victim!!

Every day we hear more news, usually bad.  The media has a belief that if “it bleeds it leads”. Somehow people enjoy hearing bad things happening to other people.

How many times have you heard, “I’m glad that I do not have to deal with this generation”? “They are lazy, with no work ethic, no ambition, entitled…….”

I believe everything generation does not approve of the next generation. think about it, what did your parents’ generation say about you and your generation?

What we have to accept is that every generation is different, thankfully. We must believe that the free markets work, and the next generation will figure it out.

Unfortunately, the free markets do not guarantee anything. Some will win and some will lose. However, losing is not the end. It only determines what does not work for you.

No matter how much we believe that the free markets work and how much faith we have in the underlying system there will be stress in our lives about the future. 

We must refuse to be a victim.

In his book former General Electric CEO, Jack Welch points out that feeling sorry for ourselves in one of the most destructive and energy sapping behaviors you can engage in. yes, it’s unfair that the markets are insane and some people are unreasonable. 

We must accept this for the reality that it is and move on.

Every minute engaged in self-pity is one too many.  In the words of Jack Welch, “Refuse to be a victim”.  Develop a scientific strategy for investing and we believe that the “bad times” will not last forever.  Believe it or not we must also remember that “good times” will not last forever.

Remember the only thing that does not change is that things change.

For all of us this will involve keeping our emotions in check. This proves impossible for most investors. The solution is to work with an investor coach/fiduciary adviser.

It is during down markets as well as extreme up markets that your coach will earn their fees. Allow them to earn these fees by being ‘coachable’

To succeed in investing for the long term we must own equities…..globally diversify …rebalance!

Predictions, What Are They Good For?

Well the election appears to be over. However there appears to be a court battle looming.  For those of you who remember the 2000 election, Al Gore fought the results for 37 days and that was for one state, Florida. Remember the hanging shard.

In the end George Bush was inaugurated, I really expect the same result.

In the meantime, today it was announced that there was been very promising result in the Pfizer in a 90% effective coronavirus vaccine. The equity markets have reacted extremely positively. This is probably overdone, but I’ll take it.

I recall many predictions, depending on the election results. I wonder how many got this one right. I doubt there were many. I had many clients asking to get out of the market until things ‘settle down”.

As many of you know I do not believe in market timing. In that an investor can get out of the market at the right time AND get back in at the right time.

This has been proven to result in poor outcomes.

I also do not believe in stock picking or track record investing. There are examples of good stock pickers, Peter Lynch of Fidelity Magellan Fund averaged 29% per year for 13 years. Even with this stellar performance, Mr Lynch state3d he believed most investors of hos fund lost money.

Why? Because they bought at a high and then sold during the inevitable down turns.

There are of course, other examples of successful stock picking. But the average investor will not beat the market over the long term.

Which leads me to track record investing. This is using past performance to predict future results. NOT! Is possible? Yes. But not very likely. There is very little evidence that past performance predicts future results. This is why there is a disclaimer on all financial literature.  Past performance is no indication of future results.

To receive the best long term results you should

  • Own equities with the correct amount of high quality, low duration fixed income for you.
  • Globally diversify
  • Rebalance

This with the help of a fiduciary/investor coach will help you succeed, lomg term

Election Day 2020!

Well today is election day. A long waited and anticipated election. Controversy seems like an understatement. Regardless of which side you favor. You have to be happy its almost over. At least I hope its almost over!

I received many calls telling me that they want out of the market if this guy wins. They believe the markets will crash. Well let me tell you a little secret. The market does not care who wins. There may be short term volatility. But in short order we will get back to normal.

OK this year nothing is normal. COVID has everyone gripped in fear. No one likes the unknown.

But we must be reminded, the equity markets are random and unpredictable.

If you have a properly diversified portfolio at the correct level of risk you have nothing to fear. The markets will go down on occasion, but they always recover.

What we cannot do is predict what sectors will over perform and which sectors will underperform.

The days ahead may be quite volatile. But have comfort in the fact you are invested for a long-term goal. And a properly diversified portfolio is your friend.

Diversification Is Still Your Buddy!

It seems like every day someone wants to market time, that is, get out of the market until after the 2020 election. There are some that are so insistent that they close their accounts. Given that 2020 has been a year many of us would like to forget. I can understand their anxiety about the future.

There is no shortage of ‘experts’ giving advice on market timing. That is getting out at the right time and getting back in at the right time.

Since no one can predict the future, this is a huge mistake.

You must decide if you are a gambler/speculator or an investor. Gamblers believe they can out guess the market and avoid all losses. The gamblers have proven numerous times to be wrong in the long run. One may get ‘lucky’ but no one can consistently market time.

In markets like these, diversification is your buddy.

Proper diversification spreads risk across various asset classes with varying return characteristics or dissimilar price movement. Simply said: they don’t do the same thing at the same time.

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

To be diversified means including 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’.

Those of you which are my clients own portfolios which are professionally diversified and rebalanced much like the large pension funds.

Over time these portfolios will help you successfully accomplish your investment goals.

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

What Should I Do Now?

This message bears repeating now. Many of us are making emotional decisions based on our ‘facts’.

We all believe that we make important decisions based on fact. Our research, typically, is quite limited. We ask our friends, neighbors, co-workers, family or a trusted adviser their opinion. If it aligns with what we believe our decision is made.

Many times, we make decisions based on current events. These short-term based decisions are very emotional and are not evidence based.

Right now, there is great concern about the upcoming presidential election. Who will win? Should I wait to invest? Should I get out of the market? When should I get back into the market?

You can never overcome your own humanity. As much as we would prefer to think that we make investment decisions based purely on logic, advertiser and journalists are well aware that emotion ultimately drives most investment decisions.

As a quick demonstration, consider the statements below. See if you can match each statement with the emotion being expressed. (Answers listed in the key below.)

greed regret trust loyalty envy

  1. “It doesn’t matter how sophisticated his charts are     or how much sense he makes, I just don’t feel comfortable letting him handle my money.”

2. “I’m not sure I should have put my money in that fund. It lost 15% already. Maybe I’ll sell some of it tomorrow.”

3. “My boss got 25% on his money. I only made 8%! I wish I got 25%.”

4. “I’d wish I’d known that stock was going up, I would have bought more shares.”

5. “My dad worked in that company all of his life and he left his shares to me in his will. It would be wrong to sell it just to diversify my portfolio.”

Answer key: 1. Trust 2. Regret 3. Envy 4. greed 5. Loyalty

We as people are naturally predisposed toward or against specific investing tactics. What is interesting is that no matter what our emotional tendency maybe, we can almost always find what looks like purely factual data to support our view.

It is easy to overweight information that validates our perspective while minimizing any information that goes against what we inherently believe.

The Good News: Simple awareness of your emotions when it comes to financial and investing matters can make the difference between good and bad investment decisions.

The recent up and now down markets and then up again have many investors on edge, asking….should I get out of the market for good? This is really, what the financial institutions want…they make money when money moves.

Because we make emotional decisions with our investments. We need the help and guidance of an investor coach/fiduciary adviser.

Together you and your coach will develop a customized plan for YOU. Then going forward your coach will keep you disciplined to your plan.

This is where a true adviser really, earns their fees.

As an investor you must remain disciplined to your strategy…you must own equities…globally diversify…..rebalance.

Picking The Winners….

Prior to the Sunday night NFL game between San Francisco 49ers and the Philadelphia Eagles the ‘experts’ gave their predictions on the outcome. Keep in mind both teams have significant injuries to key players.

Every ‘expert’ picked San Francisco to win. Each had their own reasons, strong team, last week’s performance, this player is better, that player is not playing well…….

Well guess what? Philadelphia won.

This proves that predicting the future is really, really hard. Each week the ‘experts’ make predictions and sometimes they get it right.

This is much like the investment field. There are predictors and forecasters, some get it right and some wrong.

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.

The True Enemy of The Investor…

Each week I try to put a different spin on the same problem. Investor/people behavior during times of crisis as well as the good times.

Over the years I have learned that everyone if unique when dealing with adversity. The most efficient way is to have a prudent process and remain disciplined to it.

Recently I met with an investor and he said money should only go into large U.S. stocks. International, small and value stocks should be avoided because of poor performance. This is a great example of market timing. Market timing has been proven to result in poor outcomes over the long term.

That said, successful investing is not, per se, a portfolio problem, but rather a people problem. No matter how well designed and engineered a portfolio is, it can easily be destroyed by imprudent investor behavior.

Unfortunately, the true enemy of every investor lies within.

The instincts, emotions, and even biochemical makeup of human beings drives them to gamble and speculate with their money, even when they don’t mean to. This problem is multiplied exponentially by financial institutions that profit from this self-destructive cycle. You will see that this cycle is hard wired into every human being in the world. No one is exempt.

In recent conversations with investors these tendencies to gamble and speculate are becoming evident. It sounds something like ‘if this asset class is doing well and this one is not why not transfer all of our money into the better performing asset class?’ This is a classic case of market timing. Getting into and out of the market/asset class at the right time.

We are emotional beings and when our friends/relatives tell us how they are making ‘tons’ of money investing a certain way. We become envious and wonder why we can’t get a ‘piece of the action’?

Just because the ‘hot’ asset class is doing well does not mean this trend will continue. It may for a while but eventually the ‘hot’ trend will end. Leaving the investor with a sick feeling and even more skeptical of the markets.

The markets are not the problem you are. This is where an investor coach/fiduciary adviser can help. Your fiduciary adviser will help you build a prudent, globally diversified portfolio with the right amount of equities and fixed income for you. Most importantly your coach will keep you disciplined when your emotions tell you to invest the ‘hot’ way.

To succeed in investing for the long term you must  

  • Own equities and high quality short term fixed income.
  • Globally diversify
  • Rebalance.

Here We Go Again….

We are experiencing a great equity market up turn with virtually no end in sight. Many in the financial field are predicting an overdue downturn. There is no doubt that there will be a downturn. However, no one can tell you when.

(I wrote this in 2018…so here we go again) We experienced a good up turn and lately we are realizing some negative volatility.

Wall Street prognosticators are trying to do is strike fear into the investing public. These Wall Street bullies are looking for an increase in trading. These bullies want you to move your money from one asset class to another.

Remember they make money on every transaction, whether you make money or not. Even though most brokerage now offer zero-dollar commission. These brokerage firms make money on the bid/ask spread. Please call if you would like this explained.

Wall Street has a product for every situation. And they know the investing public is constantly searching for the next big ‘thing’.  

Investors’ real goal is stock market returns with Treasury bill risk.

This is unattainable. Remember, where there is no risk there is no reward. This is true in all other areas of our lives, not just the stock market.

The most successful investors of all time have one strategy, a strategy that does not always look great, but over time leads to success. These successful investors are not always looking for the next great strategy. At times they will look like they do not know what they are doing.  These successful investors know risk is unavoidable.

It has been proven time and again that market timing DOES NOT work, at least not consistently. Not only must you be right getting out of the market, you must also be right about getting back in. Research has proven that this is NOT done consistently.

I find it curious that investors see past ‘crashes’ as buying opportunities while current or future ‘crashes’ are seen as risk.

So if you want to keep control of your money and earn good market returns you must live with downturns. Because with downside volatility there is the upside volatility.

There are ways to control your risk while earning good market returns, long term.

Of course, you will be tempted to concentrate on the hot strategy or asset class. But remember the large successful pension plans focus on controlling risk. They know that controlling risk will lead to success long term.

Investing for a long-term goal such as retirement requires patience, a prudent strategy and discipline. This, in most cases, requires the assistance of a good coach. A good coach will guide you in following these three simple investing rules.

Own equities….globally diversify…..rebalance.

If you panic and sell you are locking in any losses you have. This is a huge mistake.

To succeed in reaching your long term financial goals you don’t need to know everything about investing, but you do need to know the right things.

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. Will it matter for stocks if Trump or Biden wins?  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.