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What Does Labor Day Mean To You?

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Happy Labor Day!! I hope everyone enjoyed a safe and pleasant holiday. Sadly for many this is the last unofficial weekend of summer. The Labor Day holiday, which began in 1887, is to honor all the hard work of Americans.

English: Wall Street, Manhattan, New York, USA...
English: Wall Street, Manhattan, New York, USA Español: Wall Street, Manhattan, Nueva York, Estados Unidos (Photo credit: Wikipedia)

America has always been known as the land of opportunity. This opportunity will only result in success when combined with hard work and in  taking risks. There will always be risks, no matter what the path you take. Some of these risks will be apparent and some will be hidden. Even if you work for an employer you take the risk that the employer will no longer need you. Small business owners take on different and more apparent risks. But there will always be risks. Regardless of the type of risks you decide to take on the path to success, it will require hard work.

There is no short cut to success.

Keep in mind some will get ‘lucky’ and strike it rich quickly but the likelihood that these ‘lucky’ ones will hold on to these riches is slight. To appreciate your wealth it best to have earned it through hard work and taking the right kind of risks.

When we acquire our wealth through hard work and risk we should insist on having our money work hard with the right kind of risks.

The Wall Street bullies have convinced us that there is a short cut to investment success.  Why do we work hard and take risks to acquire our wealth and then think we can easily make a very high return? Why do we think that gambling and speculating with our money is the prudent thing to do?

Through research and proven concepts and theories we can make our money work hard for us with the right kind of risks. If you are working with a broker who is stock picking or market timing or using track records to invest you are gambling and speculating with your money not investing

Stop being a victim of the Wall Street bullies.

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Timing The Equity Markets Is Really Hard..

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It seems the financial media is full of ‘professionals’ proclaiming their ability to time the market. That is, get out of the market when their ‘signal’ says to and get back in when their ‘signal’ says to. These ‘experts’ proclaim that because it happened in the past when this or this happened it will happen again and again.

During my years of watching the equity markets I have found that history does NOT repeat itself.

In order for history to repeat itself thousands of variables would need to perfectly align. While I cannot say this is impossible I will say it is extremely unlikely.

Below is an excerpt of an article on market timing. Weston Wellington is Vice President at Dimensional Fund Advisors. In it Mr. Wellington discusses the folly of investors and advisors and money managers trying to market time.

All timing strategies face a fundamental problem: Since markets have generally gone up more often than they have gone down in the last 90 years, avoiding losses in a down market runs the risk of avoiding even heftier gains associated with an up market. A successful timing strategy is the fountain of youth of the investment world. For decades, financial researchers have explored dozens of quantitative indicators as well as various measures of investor sentiment in an effort to discover the ones with predictive value. The performance record of professional money managers over the past 50 years offers compelling evidence that this effort has failed. Despite this evidence, the potential rewards of successful market timing are so great that each new generation sees a fresh group of market participants eager to try. Searching for the key to outwitting other investors may be fun for those with a sense of adventure and time on their hands. For those seeking the highest probability of a successful investment experience, maintaining a consistent allocation strategy is likely to be the sounder choice.

Weston Wellington September 2014

Remember short term success is no substitute for long term research.

While avoiding losses and participating in most of the gain sounds enticing. It will lead to poor results over the long term. Investors are looking for stock market returns with Treasury bill risk what they end up with is Treasury bill returns with stock market risk.

In my opinion investors would be better served by firing their broker/agent and hiring an investor coach/fiduciary adviser.

Your coach will help you remain disciplined during the inevitable equity market downturns.

While there are those that believe they can do it themselves. Most if not all find that they do not have the emotional strength to go it alone. If you think professional advice is expensive wait until you find out how much free advice will cost you.

Prudent process beats predictions over the long term.

Stop empowering Wall Street and take control of your financial future.

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What Is The Best Investment For ‘Right Now’?

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During discussions with potential clients. I have learned most people have a very short time horizon. Most people are looking at short term results. They want to know what the best strategy is for right now.

In fact many advisers are guilty of this same thing. They are constantly marketing the latest ‘hot’ strategy or ‘hot’ investment class. These ‘advisers’ are actually investment salespeople. Constantly looking to market what people want right now.

True advisers show you what is right for you over the long term. While investment salespeople show you what is hot ‘right now’.

This is the result of everyone’s short term thinking. We base our decisions on short term emotions. We believe the truly successful investors are always in the investments that are always profitable ‘right now’.

This is far from the truth. Successful investors find a strategy that they believe in and stick with it. There will be times that their strategy will underperform others or even underperform the market in general.

A great example of this is Warren Buffet. Mr. Buffet has a strategy that he has stuck with throughout his very successful career.

During the late 90’s the tech stocks were earning extraordinary returns. In 1999 many funds were earning 80, 90% I even recall one fund earning 200% in 1999. At this same time Mr. Buffet stuck with his strategy and earned a negative 15%. That’s right while everyone else was doubling their money. Mr. Buffet’s fund LOST money.

As an investor with short term thinking. You would avoid his fund like the plague. Subsequently, the tech bubble burst and investors were devastated losing substantial amounts of money. Mr. Buffet on the other hand flourished.

Long term Mr. Buffet was proven correct.

Part of what I believe is a successful investment strategy includes the Three Factor Model developed by Doctors Eugene Fama of the University of Chicago and Kenneth French of Yale.

To make it short the Three Factor Model states that over the long term

  1. Equities have a premium over fixed income
  2. Small stocks have a premium over large stocks
  3. Value stocks have a premium over growth stocks.

Remember this is over the long term which is how investors should be thinking. Short term investing is really speculating and not investing.

‘Right now’ the small and value premiums are not being realized. This is a short term situation. Because over the long term, in my opinion, these premiums are real.  As true investors we must remain disciplined to our strategy and not seek out what is working for ‘right now’.

Ultimately you have to decide whether you are an investor or a speculator.

Because finding the strategy or investment class that is good for ‘right now’ will result in short term gain and long term pain.

To be a success investor, Long Term, you must own equities along with high quality short term fixed income…globally diversify….rebalance.

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Happy Thanksgiving …….2015!!!

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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, but still.

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

United States of America
United States of America (Photo credit: Wikipedia)

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.

Academia Or Wall Street…Who Has The Answer?

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As we approach the 2016 presidential elections. There are predictions popping up as to who will win. And how will it affect the equity markets?

English: 60 Wall Street
English: 60 Wall Street (Photo credit: Wikipedia)

What will happen to stocks if Hillary Clinton wins? Or what will happen to stocks if Bernie Sanders wins? Or Donald Trump? Or Ben Carson? Or Scott Walker? Or Marco Rubio? And the list goes on and on.

No one really knows.  Let’s pray that the American public makes the right choice. And the right choice is available.

More than at any time in our history….we need strong leadership.

That said, we must stop listening to Wall Street regarding what to do with our portfolio. Should we sell? Should we buy? What should we buy? What should we sell? Wall Street doesn’t really care. All they care about is that you trade. Most investors don’t know what to do.

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.

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 learn in order 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 investing strategy will outperform all trading strategies, long term.  Stop looking at your investments through the short term eye of a gambler.

Take control of your investments…don’t empower Wall Street.

Successful investing requires discipline along with following three simple rules, own equities…..globally diversify…..rebalance.

Although simple these rules have proven very difficult for investors to follow. In most cases it requires the help of an investor coach/fiduciary adviser.

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Happy Thanksgiving …….2013!!!

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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.

United States
United States (Photo credit: Moyan_Brenn)

Friends and Family.

OK the Packers are in a slump, 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.

Related articles
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How To Financially Prepare for Entrepreneurship

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Everyone wants to be their own boss, make the rules, stop living under the proverbial “man,” but it can be a scary plunge to take.  Owning your own business requires financial responsibility and risk that many people aren’t willing to take on, but if you are up for the challenge and are going to chase down that elusive American dream then there are a few ways to keep things from coming to a screeching halt before they even start.  The transition into the life of owning your own business can be an expensively slow and rocky road, but there are some things you can do put yourself on the right path, from the start.  Before you venture on this journey, here’s what you need to do prepare for the ride.

1.       Payoff all your credit cards.  If you can’t pay off the balances on your credit cards now, you certainly won’t be able to once you start your business.  You will also find yourself tempted to use those cards to cover the expenses of your business.  Use these as your last resort.  Paying off those cards now will give you some room to use them later, but relying on them for too many things in the startup process can quickly shut everything down.

2.       Find your monthly budget, and then reduce it.  You need to keep track of your basic expenses for the month: rent, food, insurance, gas and so on.  When you do this think about how this will change when you start your small business.  Will you save money on gas with a shorter commute?  Will you eat out more when you have less time?  Once you have a number in front of you that highlights your current expenses, try to make that number smaller.  This isn’t anyone’s favorite part, but you will appreciate the savings later.  Do you need the run the air conditioning at home, or can you open the windows?  Do you need the super fancy touch screen phone?  Do “Fruity O’s” really taste that different from the real thing? It’s cutting back on little things that can send money your way from places you never thought about before.  Also, it’s smart to make the transition to these saving habits months before you make your move into entrepreneurship to reduce the shock you may experience when you lose those extra 30 channels during hockey season.

3.       Fill your piggy bank.  Before you take a single step towards your new business, you need to have a stock of money saved up.  You should take the cost of your monthly expenses determined earlier, multiply that by six months, and set the bar there.  You should have at least six months of your expenses saved up before you begin.  With this, you need to make sure that you are realistic about how often you will be cracking into that piggy bank.  A lot of people get the “do-it-yourself-bug” when they start their own projects.  They think that they will do it all by themselves to save money.  Know what you can do, and what you will need others to do.  Will you hire an accountant? Will you need a handyman for small changes to your business space?  Think about these future expenses when you are saving for your plunge.

4.       Understand the benefits that you will lose.  One of the biggest changes that small business owners incur is the cost of individual health insurance.  Think about how to reduce this cost, for example switching your insurance plan before prior to your next birthday before they can increase the premiums based on age.  Look at your retirement plans and understand how your investments will change when you don’t have a 401(k) matching plan to double your contributions.  These changes don’t have to be life altering, but they are simple things that, if planned for in advance will remain simple.

5.       Don’t get hasty and quit your job.  You need to give yourself time to startup your small business, and keeping your source of income can be a huge help during this time.  There is a long list of expenses you need to pay before you can even think of opening up your doors, and it’s smart to keep your current job until you have those taken care of.

Entrepreneurs are some of the hardest working, committed individuals in the workforce.  It can be the most frustrating and rewarding experience at the same time, but taking the time to plan before you plunge can save you some of that frustration and bring forth more of the rewards.

Photo courtesy of: http://www.innovatrs.com

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“As Goes Small Business, So Goes The Nation”

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Small businesses are a staple in our society.  “They are the heart of America.” “They are the epitome of the American dream.” So on and so forth… Well for the past few years they have had a rough go of it.  Small businesses have been in the spotlight throughout the recession, and it’s no secret that it has been a long, hard road, but that road may be getting a little smoother. A recent report from the National Federation of Independent Business shows that the confidence of small business is rising to its highest levels in over a year.  The Small Business Optimism Index from the NFIB showed a 2 percentage point rise up to 94.5%.

 

So to most of us, that number doesn’t mean a whole lot.  You’re probably thinking, “94.5%, that would earn you a solid “A” back in your grammar school days.”  But there is a lot to examine inside of that number before we start putting “Superb” stickers on this test.   That number is the wizard, but we want to see what’s behind the curtain.  Here’s a quick breakdown of the numbers behind that 94.5% and what it means to you.

 

One large factor in the increase was in the net earnings of the companies.  The subindex in this category jumped 11 points, giving it the highest numbers we have seen since 2007.  This increase can claim half of that total increase for the overall optimism.  So the good news is that the 11 point jump was due mostly in part to increased sales, which means people are beginning to open their wallets back up as we approach what some hope to be a steep climb out of our recession.

 

But there’s bad news… the small businesses aren’t jumping on the recovery bandwagon as they continue to be slow to hire.   The net change in employment for the small businesses per firm remained at a dismal .10 for the third straight month.  Now that .10 maybe slightly misleading, but it essentially means that every small business in America hired one tenth of a person in April. It doesn’t seem very impressive, but we can take a quote out of President Obama’s book of wisdom “If you’re walking down the right path and you’re willing to keep walking, eventually you’ll make progress.”  As long as small business owners don’t get tired, they seem to be moving slowing in the right direction.

 

Unfortunately, there is another famous quote, this one from Dr. Martin Luther King, that is just as applicable. “All progress is precarious, and the solution of one problem brings us face to face with another problem.”  That other problem is inflation.  More and more small businesses are raising their prices to cover the increasing costs of labor and supplies.  The net percent of businesses raising selling prices jumped 2 points to 8% for the month of April. The Federal Reserve is depending on low inflation rates to support their policy for future years, but trends show that small businesses are fading away from price cutting and are being forced to push their prices higher and higher.  This inflation is something that will be of concern for small business owners in the coming months.

 

Speaking of those coming months, the portion of the study that measures the expected business conditions for the next six months increased 3 points, bringing that percentage up to only -5%.  It’s a step in the right direction, although many Americans are tired of steps and are looking for the giant leaps they have been waiting for.

 

What may be the most important factor stemming from these numbers is the effect that they will have on voters come November.  The economy has been, and will continue to be, the central issue around which the presidential election will revolve.  These numbers are extremely suggestive as to how small business owners, and people on Main Street in general, are feeling about the economy and the direction that they believe it is headed.

 

So, we return to the old adage, “As goes small business, so goes the nation!”  Small business owners are still on their long and arduous journey through our economic struggles but they continue to make moves toward success.  We aren’t quite ready to hand out that “Superb” sticker just yet, but a “Good Effort” or “Keep It Up” stamp would be well deserved.

Photo courtesy of: http://www.growmap.com
http://www.nfib.com/research-foundation/surveys/small-business-economic-trends

 

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The “Sandwich Generation” and the Changing Family Dynamic

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The “Sandwich Generation” is becoming a more commonly used term as more and more individuals begin caring for not only their aging parents, but their children as well, all the while planning for their own personal retirement.  According to an April 2010 Merrill Lynch Affluent Insights Quarterly survey, more than one-third of affluent Americans financially support their children and parents while trying to maintain and build upon what they have set aside for retirement.  According to the Pew Research Center, 1 of every 8 Americans aged 40 to 60 is both raising a child and caring for a parent, in addition to between 7 to 10 million adults caring for their aging parents from a long distance.  The US Census Bureau statistics indicate that the number of older Americans aged 65 or older will double by the year 2030, to over 70 million.

With the complex equation of most individuals within the sandwich generation being baby boomers, added to the intricate family dynamics, financial advisors are finding themselves advising over three generations.  What is the family dynamic like?  Many boomers work full time jobs while raising a family or supporting children in college, in addition to serving as the primary caregiver to one or both parents.  How do these families cope with the changing dynamic?  Most consider trade-offs, such as significantly cutting back on personal luxuries, making lifestyle sacrifices to support their family’s needs, and even cutting back on their own personal retirement.

So, what kind of help can advisors give to those facing the pending or already existent sandwich generation?  First and foremost, ease the stress of competing demands by identifying core values and priorities to find balance in life.  Always keep open lines of communication – of course it’s difficult to discuss the financial impact of diminishing health and the eventual loss of a loved one, but putting off that conversation can leave you unprepared for the consequences.  Implementing a plan of affairs for aging parents can off-set the negative consequences of a life-changing event.  Be sure to know where your family members keep important financial and medical documents, as well as the contact information of doctors, lawyers and advisors.  Always know the type of long term care, and how much it will cost.

When it comes to financing children’s education, only 12% of the sandwich generation said they were cutting back on contributions.  What’s the biggest tip for parents?  Start saving early.  Teach your children early on the skills necessary to embrace financial independence, budgeting, and the importance of credit and planning for retirement.  You can even bring your kids with you to an advisor meeting to discuss all these great education finance tips.

I’m sure you’re thinking: but what about me?  Get with an advisor and review your investment strategy, as well as home financing, asset allocation, insurance, securities, your portfolio, and your general retirement strategy in general.  This way, advisors can help shift financial securities based on the family’s specific dynamic.  According to the survey, 54% of the members of the sandwich generation work with an adviser, and among them, 32% wish that they had started working with one sooner.  Among the remaining 46% who don’t work with an adviser, 83% think that they would benefit from such a relationship.

 

Photo courtesy of: http://i.telegraph.co.uk

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