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.

Best August in 3o Years…Buy or Sell??

As August comes to a close and summer begins to disappear. The equity markets have had their best August in over 30 years. There are those that believe that after the markets will go make new highs, we should expect some down markets.

To go along with this, we are dealing with a pandemic and social unrest. The social unrest has become extremely violent.

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

During these times of crisis 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 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.

The stock market is forward looking and usually starts trending upwards between 6 to 9 months ahead of the economy actually 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.

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 crisis 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.

You Don’t Know What You Don’t Know..

There is one common thread within Wall Street, no matter what happens there is always opportunity for Wall Street to make money.  They will feed the fear by offering products which provide safety and guarantees. 

This safety and the guarantees come at a very high price to the investor.  In the long run the costs to the investor are high as well as the revenues to Wall Street. Higher costs to the investor directly affect performance in a negative way.

All that you know 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. 

Recently the large discount brokerage firms reduced their trading fees to $0 that’s right zero dollars to trade on their platform. This sounds very interesting to potential and current traders. But you must ask yourself if trading is ‘free’ how do they make money?

Perhaps it’s because they need you trading. This ‘free’ trading is costing you. Because they make money on every trade through the bid/ask spread.

They need you trading but is it in your best interest? I believe active trading is nothing more than gambling and speculating.

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.

Volatility is uncomfortable, at least the negative volatility but it is something you will have to live with to keep up with inflation and grow your wealth.

To succeed with investing for the long term you must own equities…..globally diversify……rebalance.

You Can’t Avoid Risk!!!

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.

2020 is the year of the health and safety 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.

Remember the inflation published by our government excludes food and fuel. With the possibility of excluding health care costs in the future.

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.

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

Diversification Is Your Buddy!!

Over the last 5 or so years the U.S. stock market has produced far superior results. To be more specific U.S. Large cap growth has produced superior results. Large and small value stocks have lagged behind. International stocks have been even worse,

As a result many investors are focusing their portfolios on U.S. Large cap growth stocks. Remember past performance is no indication of future results…

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.

Dealing With Crisis….

As we begin month number 5 in the coronavirus crisis and month 3 in the social protests. Many of us are dealing with each crisis differently. Some believe we should be required to wear a mask anytime we are in public. Many believe we should be able to choose if the mask if right for us.

The media shows us the social injustices in America on a daily basis. But ignore the violence and the riots. One politician believes the violence and riots are a myth. We as Americans need to observe what is going on and decide to handle the situation.

It seems everything today is being politicized. What will happen as a result? I have no idea. In the end the coronavirus will be resolved. Whether thru acceptance or a cure.

But what does this have to do with investing? Well, there an abundance of predictions. Some with valid points. Some not so much.

As in the investing, there no shortage of predictions. What the media neglects to inform us is that they have no idea which predictions will be found correct.

The investing world has an abundance of different opinions. The problem for investors is that no one can tell you which ones will be found correct.

OK I do not have a solution for the coronavirus nor the protests. However, I do have a recommendation for proper investing.

Own equities with the correct amount of high-quality fixed income, Globally diversify, Rebalance. To insure success hire an investor coach/fiduciary adviser.

What? Another Crisis and Then Back Again

The year 2020 has become the year of the crisis. First there was the coronavirus which continues. This was followed by the ‘racial equality protests, which continues. The coronavirus appeared to be reversing, until it came roaring back.

Then the protests turned into riots in many major cities. What is happening has been described as a war zone.

Let’s face it, 2020 has become the year to remember and one to forget at the same time.

The rest of this commentary has been repeated it seems far too many times. Going back, I don’t know how far.

There is constantly a crisis somewhere in the world. There will be other events both good and bad that will send shock waves, both up and down, into the stock markets.

That is the point, there is no way to consistently predict market movements over the short term.

Keep in mind that in order to realize the superior long term returns of the equity markets we must control our emotions in both up and down markets. Warren Buffet has a saying I find helpful.

“Be greedy when others are fearful and fearful when others are greedy”.

In other words control your emotions there is no get quick rich scheme. If the ‘experts’ actually could predict the future why would they tell you? Fund managers, hedge funds managers, stock pickers, market timers all need investors to believe that someone can and does beat the stock market.

This is all part of their marketing strategy. When a manager actually does beat the market, (luck will allow some to win), the marketing department goes to work.

Unfortunately for investors there is no evidence that past performance correlates into future success or future losses.

Investing is not a game as they make it appear. To succeed in investing for the long term you should own equities…..globally diversify….rebalance.

Any time or money you spend trying to beat the market is time wasted. Time which you could be spent improving your job skills or developing new job skills or spending time with family and friends.

So turn 2020 into the year you become an investor and not a speculator. Hire an investor coach and reduce your investing anxiety and improve your long term results.

Remember the Occupy Wall Street Protest in 2011?

After following the ‘Occupy Wall Street’ movement I was a bit confused. Were the protesters mad because Wall Street was successful or because they were not.

No system is perfect, however I do not believe any system will succeed long term, if success is punished.

Right now, there are a new group of protests around the country, some very violent. Racial justice is an understandable protest. However, when the protests become riots and property is destroyed, it becomes a national problem.

How does this affect your investments? Well when you combine the protests with the COVID 19 crisis and its effect on our economy as well as the world. The predictions are not good

Initially the COVID 19 crisis caused a historic 6-week crash of over 30%. As of today, we have recovered much of the downturn.

Going forward, the economic impact is really unknown. Because as we all know, consistently predicting the future is really hard.

The power of a free market capitalist system will work things out eventually. Many predictions state that the post-coronavirus world will be different. They are trying to predict which sectors will fail and which will thrive.

If some of you recall the mid to late 1990’s technology bubble. Many tried predicting the ‘right’ sectors, many failed.

The S&P500 and the global equity markets will adjust. Trying to predict specific sectors or markets will lead many to failure. Of course, some will succeed. But that is a gamble and speculation.

There will be downturns in the future, however no one can consistently predict when and how severe.

What you should do is find an investor coach/fiduciary advisor to help you build a prudent portfolio. A portfolio at the right level of risk for you.

Your coach will help you remain disciplined throughout this and all other ‘crisis’ events.

Long Term Thinking & Discipline Wins!!

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 is even more conversations about ‘safe’ investments. ‘Guaranteed’ is often used to describe their ‘solution’.

There are an increasingly amount of ‘experts’ extolling the underperformance of ……………….. for the near future. These ‘experts’ have an obvious conflict of interest as they recommend their own solution.  These ‘experts’ are using recent history as a sales gimmick. You will hear ‘look I would not have as much ………… or ………… will underperform for some time to come’. Or both.  As you can see the underperformers are interchangeable.

True investors are much better served using a passive management 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 re-balance 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.

In his 1993 letter to shareholders of Berkshire Hathaway, Warren Buffet counseled; “By periodically investing in a ‘passive’ fund….the know-nothing investor can actually outperform most investment professionals.

Paradoxically, when ‘dumb’ money acknowledges its limitations, it ceases to be dumb.” He repeated the advice 10 years later in the 2003 letter. Mr. Buffet, in my opinion, was saying that trying to stock pick, market time and track record investing was ‘dumb’.

Over the long term the properly coached investor will outperform the ‘sophisticated’ investor. These ‘sophisticated’ investors believe because of their wealth they will receive special advice. This may work over the short term. However, over the long term the properly coached investor will prevail.

To be successful, investors, no matter how large, would be far better off using a passive 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. Right now these strategies are under performing the U.S. Equity markets. 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.