Investor Coach vs. Investment Facilitator…Revisited!

March Madness is now behind us. And I would like to readdress the investment facilitator/salesperson vs. investor coach debate. Many in the financial services industry believe that to increase sales you must give the customer what he/she wants. In most cases this is an irresponsible conflict of interest.

Bullying (Photo credits:


The same financial services industry will ‘predict’ what will happen next to the economy, the equity markets, the bond markets, and on and on. They do this to feed the fear of the investing public. Remember the


Wall Street bullies make money when money moves from one asset class/product to another.


After this ‘prediction’ the bullies recommend a product which will deal with the fears they themselves generated. What the Wall Street bullies do not want is for investors to develop a prudent portfolio and remain disciplined to that strategy. Investors will be successful in reaching their long term goals by developing, understanding and believing in one strategy.


If you try to jump from one strategy to another you will inevitably fail.


When you accept the fact that the equity markets are invariably volatile.

And you understand that in the long term you will reap the benefits by remaining disciplined. You will reduce or eliminate your anxiety when equity markets are in down periods. This will also result in better performance going forward.


Since investing really is not an investment problem but rather a people problem. The help of a good coach is essential to your long term financial success. As my friend and fellow investor coach Dan Cuprill stated


Like a good physician, the coach does not confuse giving the client what he “wants” vs. what he “needs.” The salesman will sell anything. The coach does it right or walks away. Such rare conviction is liberating.

Ok Dan is from the Buckeye state but I forgive him.


The Wall Street bullies will continue to advertise that you can do this yourself with the help of their online ‘adviser’. The problem is these advisers will not understand you and only assist you in whatever behavior you want.


This is not coaching this is working with an investment facilitator or salesperson.


The value of a great coach can be seen in the NCAA basketball tournament going on right now. The teams with a process and the discipline will succeed long term. A great coach will have a plan in place to deal with any emotional issues.


The Wall Street bullies on the other hand will continue to use your emotions against you to sell more and different products. Products designed and sold by them to feed your fears. Do not empower these bullies, take control of your own finances, hire an investor coach not a facilitator.


To succeed in reaching your long term financial goals you need to:

  • Own equities
  • Globally diversify
  • Rebalance


Stay focused on the long term and ignore the short term volatility.

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Your 401(k): Why You Can’t Go It Alone

Most investors believe that the Wall Street bullies can predict the future. The Wall Street bullies know investors make their investment decisions based on emotions and not logic. Investors need to control their emotions to succeed long term in reaching their financial goals. This can not be done on your own. You need to fire your broker and hire an investor coach.

English: Wall Street sign on Wall Street
English: Wall Street sign on Wall Street (Photo credit: Wikipedia)

Most people in these plans have no idea how to manage them. That’s why your employer should help you. After all, there’s no point in providing employees with this benefit if you don’t help them get the most out of it. It’s like giving your son or daughter a car and never ensuring that they know how to drive safely. Most 401(k) accounts crash before reaching their destination. 

The Pension Protection Act of 2006 allows plan sponsors to automatically enroll their employees in age appropriate managed portfolios. This single feature will improve performance results and reduce fiduciary risks. Making the 401(k) plan more like a pension plan will be very attractive to current and prospective employees.

Please comment or call to discuss how this affects you and your company.

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Learn from the Pathetic Excuses of Active Managers

NO ONE can predict the future. Stock pickers and market timers fail more often than they succeed. In the long run you lose with active managers.

Active vs Passive
Active vs Passive (Photo credit: Wikipedia)

It’s hard to quarrel with the premise.  Jeff Cox, a Senior Writer at CNBC, notes that only 1 in 5 active managers are beating their benchmark year-to-date in 2012, even though this year was “…marked by the same type of headline volatility caused by events in Europe and fiscal concerns closer to home.” 

How could this be?  I thought market volatility was a benefit to active managers.  It was supposed to give them the opportunity to demonstrate their investing expertise.  One of the biggest active managers, Principal Global Investors, prepared a research report [hyperlink to:] extolling the virtues of active management.  Here’s one of its key findings:  “Market volatility will offer significant opportunities for active managers to deliver favorable returns.”


Edward Jones agrees.  In its view [hyperlink to:…]: “It appears that controlling volatility and helping to limit losses when times get rough are often the biggest potential benefits active managers may provide.”


So how do active managers explain their dismal performance in a volatile market?  Largely through double-talk.  Gary Flam, an active portfolio manager, notes that it has been “…a tough couple of years for active”.  He explains that investors have to have “a forward-looking view.”


Were Mr. Flam and his active colleagues looking backwards for the past couple of years?  According to Mr. Flam, investors should seek advisors “who can see through the fog of politically driven markets with tight correlations…”  I guess the “fog” obscured the vision of 80 percent of active managers.


Even more nonsensical advice was offered by Jeff Coons, president and co-director of research at another active management firm.  Apparently with a straight face, he advises investors not to judge the industry as a whole but instead “focus on individual managers with sound strategies to navigate bubble and post-bubble markets.”


Do you think it makes sense to ignore the data indicating that 80 percent of active managers failed to beat their benchmarks?  Since you will be looking for a needle in a haystack, how exactly will you determine which individual fund manager is likely to outperform his benchmark prospectively?  Focusing on individual managers with “sound strategies” means you will be basing your decision on past performance.  That might be a good idea if past performance was a reliable indicator of future performance, but it isn’t.  There are numerous studies [hyperlink to:]   showing that manager performance does not persist. To my knowledge, no one has published a peer-reviewed paper showing a methodology for selecting outperforming active fund managers prospectively, with greater accuracy than you would expect from random chance.


Unfortunately, the predicted demise of stock picking (and with it, active management) is premature.  The securities industry has too much too lose.  The partnership between the securities industry and the financial media is too lucrative to change.  While progress is being made, we still have a long way to go until solid data triumphs over hype and pathetic excuses.

Active managers want you to believe that they can predict the future. Past performance proves they cannot. To succeed in investing you should own equities, globally diversify and rebalance. This requires the help of an investor coach to remain disciplined.

Please comment or call to discuss how this affects you and your financial future.

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Should You Rely on Stock Pickers or Market Timers?

The Wall Street bullies are continuously promoting stock picking, market timing and trading. We have all seen the commercials about the baby, using the brokers’ tools, picking stocks and making great returns. These commercials make us believe that it is an easy task to predict market movement.

The New York Stock Exchange, the world's large...
The New York Stock Exchange, the world’s largest stock exchange by market capitalization (Photo credit: Wikipedia)

The bullies know we are looking for a get rich scheme to make our lives easy.

Hit it right, they contend, and you will be on easy street.

When you bet on a long shot in gambling or assume excessive risk by trying to pick the “big winner”, your brain releases Dopamine. This chemical produces an euphoric feeling and is closely related to the high that cocaine and morphine produce.

For stock pickers, even thinking about placing an order for a stock they hope will bring them huge returns can produce this chemical.

All the while stock pickers ignore the real risks and likely losses in the speculative venture.

There will always be investors who get lucky and make unbelievable returns. We must realize that this is a matter of ‘luck’ and not ‘skill. These lucky investors will very seldom repeat in the future.

Successful investors have a long term plan when allocating their assets. They know there is an academic and scientific method available when building a prudent portfolio. Their strategy includes understanding the expected return and expected volatility of their portfolio.

Many investors believe that looking at past performance is a good indicator of future results.

This is exactly what the Wall Street bullies want you to believe.

As investors we must realize that if something happened in the past does not mean it will repeat in the future. The variables must be exactly the same for these situations to repeat.

During a meeting in Chicago I met with an active trader and his quote has stuck with me.

“Trading strategies work until they don’t.”

The problem for us investors we will never know when these strategies will stop work. Develop a prudent strategy and remain disciplined.

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

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It Has Been 25 Years Since the October 1987 Stock Market Crash.

October 19, 2012 was the twenty fifth anniversary of the 1987 stock market crash. On October 19, 1987 the S&P 500 dropped 20%.  It was a gut wrenching time for all investors.

The New York Stock Exchange, the world's large...
The New York Stock Exchange, the world’s largest stock exchange by market capitalization (Photo credit: Wikipedia)

Coincidentally or perhaps not, the prognosticators are predicting a similar crash will happen again. Granted we are experiencing some very turbulent times in the global economic environment. And we will experience a sharp downturn at some point, however, I nor anyone else can tell you when.

What these 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.

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.

What we must remember is that stock market or equity risk is only part of the problem. Inflation risk is the most destructive to your savings over the long term. It is constant and unrelentingly eating away at your purchasing power.

Owning equities or stocks may be the best way to combat inflation risk.

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. This is evident during the 2008 crisis, there was a number of advisers who took their clients to cash. You must ask yourself.  Do you really believe these same advisers will be right again? Not only must they be right on getting out of the market, they must also be right about getting back in. Research has proven that this is NOT done consistently.

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.

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

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The Show Wall Street Doesn’t Want You to See

English: The corner of Wall Street and Broadwa...
English: The corner of Wall Street and Broadway, showing the limestone facade of One Wall Street in the background. (Photo credit: Wikipedia)

The Wall Street bullies continue to fool the investing public. Many investors continue to believe that someone on Wall Street can predict the future. Unfortunately, there is no one who can consistently forecast the next great investments. Your best strategy is to find a prudent strategy and remain disciplined to that strategy.

The daily grist of these shows consists of commentary by smug, highly confident, financial journalists and their guests, who manage money. They regale us with their views, not just on what is happening in the market, but what is likely to happen. The stock picks of the fund managers have the same possibility of being correct as calling a coin flip. Their real agenda is to convince you to invest your money with them.If the premise of these shows is to get you to trade, by “fleeing to safety” in volatile markets,” and trying to figure out when to return to stocks to capture the next bull market, it is working well for them, but not for you. According to Forbes magazine, a majority of investors “consistently buy high and sell low” — the exact opposite of profitable investing. While you end up holding the bag, Wall Street continues to profit.

You can patiently search the networks and hundreds of cable channels in vain for a responsible financial talk show that is premised on solid, peer-reviewed, academically based, information, geared to assist you in reaping market returns that are yours for the asking.

The information withheld from you is vast. It is set forth in my books, and in books authored by Burton Malkiel, William Bernstein, John Bogle, David Swensen, Jason Zweig, Mark Hebner and many others. Trillions of dollars of really smart money is invested based on the research set forth in these books. If you are like the majority of individual investors, you are clueless. You continue to try to time the market, pick individual stocks or hot fund managers, or purchase variable annuities because you are told they are the “best of both worlds” (protection of capital and participation in upside market potential.).

The Wall Street bullies do not want you to know any of this. It is a prudent strategy backed by scientific, academic research. You can reduce the anxiety you feel investing the way Wall Street wants you to invest. Most investors do not even come close to matching the returns the market provides.

Please comment or call to discuss how this affects you and your financial goals.

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The Big Flaw in Your 401(k) Plan

Wall Street makes more money on actively managed funds at the expense of the investor. There is no proof than any investment manager can consistently and predictably beat the market. When saving and investing for retirement, prudence must be a top priority.

English: Cropfield and Woodland near Bourton, ...
English: Cropfield and Woodland near Bourton, Shropshire At the end of the field, on the right is the Woodhousefield Plantation. That, and the smaller patch of woodland on the left are actively managed for pheasant. (Photo credit: Wikipedia)

Plan sponsors are typically not familiar with the data indicating the majority of actively managed funds underperform their benchmarks in any one year and over longer periods of time. They don’t know there is no credible, peer-reviewed data demonstrating that anyone has the expertise to prospectively select outperforming actively managed funds. This lack of basic due diligence makes them easy prey for advisers who claim to have an expertise that doesn’t exist.Take a look at your 401(k) plan investment options. They are most likely predominately actively managed funds, with management fees of 1 percent or higher. Ask your adviser to justify including these funds in the plan. Don’t accept the glib, patronizing response you are likely to get. Insist on a written answer detailing their methodology. Make them demonstrate their approach works by providing at least 10 years of data from their five or 10 largest clients, showing the dates when every fund entered and exited the plan. I can tell you with great confidence you won’t get it. If you do, and you don’t have the ability to analyze it, send it to me. I will do analysis and will publish the results without disclosing any names.

The Wall Street bullies want you to believe that they can pick the right stocks and time the market correctly. There is no evidence that anyone can actively trade and beat the market.

Please comment or call to discuss how this affects you and your company.

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Whose Side is Your Broker/Agent On?

The financial services industry has been debating the fiduciary standard for investors with no solution in sight. Investors should be wondering why this is such a difficult issue. Shouldn’t the interest of the client always come first? Why is Wall Street fighting the fiduciary standard?

Ben Bernanke (lower-right), Chairman of the Fe...
Ben Bernanke (lower-right), Chairman of the Federal Reserve Board of Governors, at a House Financial Services Committee hearing on February 10, 2009. (Photo credit: Wikipedia)


When I started in the financial services industry in 1992, yes it’s been 20 years, I was given what was considered the best training in the industry. What they do no tell you is that the training was exclusively focused on selling.  There was very little training on what was best for the client only what sold best at the time. During times like now, when safety was the top issue, we were taught sell bonds, annuities, gold, CDs etc. When times were good and optimism was everywhere sell growth stocks funds.


There was a product for every situation. The main goal of the brokerage and insurance industries is to maintain sales, not necessarily recommend what is best for the client. Contrary to what most people believe successful stock brokers do not make their wealth trading stock. Their wealth is generated from commissions and fees. Whether you make money or not is irrelevant.


This went against everything I learned in finance classes in undergraduate and graduate school. When I asked why we didn’t use the processes recommended and proven by academia. I was told academia did not apply in the real world. Despite the fact that academia proved stock picking and market timing did not work.


I, like a good employee, did as I was told. It was the 1990’s times were great so I looked for the best stocks to make as much money as I could for my clients. This was a huge mistake on my part. I was devastated when I had to tell a client that the stock I recommended failed and they lost a good portion of their money. Of course, I bought the same stock and was hugely disappointed as well.


I knew there was a better way. The academics were right. No one can consistently predict the future. The markets are far too efficient to predict what will happen next.

Getting rich quick is a matter of luck and not skill.


To succeed in investing you must think long term, develop a prudent process and finally remain disciplined.


A fiduciary adviser will follow three simple rules,

own equities……globally diversify……rebalance.

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What Does It Mean To Rebalance Your Portfolio?

Price-Earnings ratios as a predictor of twenty...
Price-Earnings ratios as a predictor of twenty-year returns. From Irrational Exuberance, 2d ed. source (Photo credit: Wikipedia)

There are three simple rules to successful investing

  • Own Equities
  • Globally Diversify
  • Rebalance

Although these are simple in theory, they are very difficult for individual investors to diligently follow. To own equities seems the easiest to understand. However, when the stock markets around the globe are volatile, as they are now, equities are emotionally difficult to own. We need help to maintain our discipline.

To globally diversify your portfolio with low correlated asset classes is much more difficult to understand and beyond the scope of this short message.  At some point you should understand how a prudent portfolio is built to gain peace of mind in building your financial future.

This brings us to rebalance. What does it mean to rebalance your portfolio? Essentially it means buy low and sell high. As an example if international stocks in your portfolio are down, as they are now, and fixed income is up.  We will sell fixed income and buy international stocks. Sell high and buy low. There is no prediction of the future involved while the rebalance brings the portfolio back to its initial target allocations.

Remember no one can consistently predict the future. To succeed in investing we must follow an academically backed scientific strategy when building the right portfolio for each of us. Once built, we must remain disciplined to our plan.

Please send me any questions or comments.

As always we should own equities….globally diversify……rebalance.

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Barton Biggs is ‘Evolving’

English: PRIVATE EQUITY ΚΑΙ HEDGE FUNDS (Photo credit: Wikipedia)

Any investment strategy that requires an accurate prediction of the future is doomed to failure. Investors must be aware that no matter what the financial institutions say in TV commercials or other financial media no one can predict the future consiitently. There is no evidence that marketing timing, stock picking or track record investing work. Work with an advisor who develops a prudent strategy for you and keeps you disciplined to that strategy. This will drastically improve your opportunity for success.

Given this background, I read with interest Biggs’ views on those who attempt to predict the future of the market. They are set forth in his 2009 book, Wealth, War & Wisdom.Biggs noted the “increasing evidence” that relying on expert opinion for advice is “a loser’s game.” He set forth with approval studies showing expert opinions on various subjects, including business, should be ignored “as random blather.” He correctly observed “… that pundits who appear regularly on television are particularly unreliable… because they become obsessed with showmanship.” Their focus is not on accuracy but “on their entertainment shock value.”

He is, in my view, spot on with these observations, although I suspect Jim Cramer might take issue with them. Yet, there is an irony that a “premier prognosticator”, who runs a hedge fund, would caution investors to ignore those who purport to have the ability to predict the twists and turns of the market.

Maybe the final phase of his evolving views will be a recognition that trying to beat the market is also a loser’s game. The main beneficiaries of actively managed mutual and hedge funds are typically those who run them. Those who invest in them are often not so fortunate.

The financial services institutions spends millions every year convincing you that they can predict the future. This is more evidence that they cannot. Your ability to proper allocate your assets and remain disciplined to your strategy will determine your success.

Please comment or call to discuss how this affects you and your portfolio.

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