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Lessons of History

  • August 25, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Best Practices, Seeking Prudent Advice

historyHistory provides a huge wealth of wisdom for helping us grow and protect our money.  Trader-turned-educator-turned-financial planner Tony Isola provides an awesome analysis of the application of history lessons:

How can investors act as applied historians and use this skill set to create wealth?

There are several minefields that could easily be avoided with some knowledge of the past:

  • Most market corrections don’t turn into bear markets.
  • Using leverage to boost investment returns often ends badly.
  • The president has very little control over the global economy.
  • Buying new financial products at market peaks is a poor idea.
  • Bull markets last much longer than bear markets.
  • Stocks are six times more likely to be up 20% than down the same amount.
  • Uncertainty is always present and it is not a wise choice to use it as an excuse not to invest.
  • Stocks will do the best job of protecting future purchasing power over long periods of time.
  • Investing in the fastest growing world economies will not guarantee higher investment returns.
  • Most recessions haven’t turned into depressions.
  • Investment costs, savings rates and time in the market are the biggest components in generating healthy investment returns.
  • Factor investing won’t work for most people because of their cognitive deficiencies.
  • There is a large behavior gap between total mutual fund returns and what investors actually receive.
  • The great majority of mutual fund managers will underperform low-cost index funds because of costs.
  • Diversification works, just not every year.
  • Stocks can stay massively over- and undervalued for very long periods of time.
  • Real returns after inflation are the only returns that matter.
  • Stocks are in a bull market 85% of the time.

All of the following can be proven with applied historical analysis. This is a much better strategy than relying on your gut, or believing a compelling story, when allocating money.

Source: Teachable Moment


Happy Money: The Science of Smarter Spending

  • August 18, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Live Well

happy-moneyIf you think money can’t buy happiness, you’re not spending it right. Two rising stars in behavioral science explain how money can buy happiness—if you follow five core principles of smarter spending:

1. Buy Experiences
2. Make it a Treat
3. Buy Time
4. Pay Now, Consume Later
5. Invest in Otheres

 

“Buy Experiences” essentially means to spend money on memorable experiences instead of expensive toys, because you are able to relate to those experiences on an emotional level for much longer that with objects.

“Make It A Treat” focuses on the concept of over-consumption creating a weakening of the enjoyment factor. If you have something every day, even if it’s something you love, it becomes routine rather than fully enjoyable.

“Buy Time”: The idea that you make life decisions that allow you to have more free time. Suggestions include outsourcing unnecessary tasks.

“Pay Now, Consume Later” is a fascinating concept. In society today, we’re more apt to do the reverse, thanks to credit cards. Essentially, it’s sort of like half the fun of a road trip is getting there. When consummation is delayed, from something as simple as eating candy to attending an event, the enjoyment is increased. When something’s already paid for, if enough time passes, it seems “free” when it’s actually consumed.

“Invest In Others” hits on how donating or spending money on others feels better than buying things for yourself.

Happy Money (by Elizabeth Dunn and Michael Norton) offers a tour of new research on the science of spending. Most people recognize that they need professional advice on how to earn, save, and invest their money. When it comes to spending that money, most people just follow their intuitions. But scientific research shows that those intuitions are often wrong.

Happy Money explains why you can get more happiness for your money by following five principles, from choosing experiences over stuff to spending money on others. And the five principles can be used not only by individuals, but by companies seeking to create happier employees and provide “happier products” to their customers.

By the end of this book, readers will ask themselves one simple question whenever they reach for their wallets: Am I getting the biggest happiness bang for my buck?


Most Underfunded State Pension Plans

  • August 11, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Retirement

underfunded


What You Should Focus On

  • August 4, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Best Practices, Financial Planning, Live Well

What-you-should-focus-on-1200x914We all want to live a great life.  The path to achieve that life relies, in part, on knowing what to focus on and what to ignore.  Focusing on the things you can’t control is a waste: a waste of time, energy, and often, money.  Here’s a list of things that matter, things you can control, and the things you should focus on.

Things that matter:

  • Health
  • Human progress
  • Long-term market returns

Things that you can control:

  • How you treat people
  • Feeling good about yourself
  • Making smart financial decisions

What you should focus on:

  • Living a happy, productive life
  • Surrounding yourself with good people
  • Not letting a long-term plan be derailed by the current market environment

 

Source: Carl Richards, Michael Batick


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