February 2017 - NorthStar Capital Advisors

The (Alternative) Facts of Investing

How well do you know the “alternative facts” of investing? Phil Huber, CIO at Huber Financial, recently penned a great piece where he laid out what can appropriately be interpreted as the investing equivalent of FAKE NEWS:

Past performance is indicative of future results. Period!

Risk and return are NOT related. Period!

There is a direct correlation between how much a fund manager charges and how skilled they are. Period!

Standard deviation is risk. Period!

Nothing bad will happen if you mix your politics and your portfolio. Period!

Price is what you get, value is what you pay. Period!

The United States is the only capital market in the world and any attempts at investing in international stocks and bonds for diversification should be met with ridicule. Period!

Some investments are so great that they should be bought at any price. Period!

Three years is a statistically appropriate timeframe to judge the performance of an investment. Period!

Be greedy when others are greedy and fearful when others are fearful. Period!

Your calls for hyperinflation and currency debasement were not wrong, they were just early. Period!

If you can predict the outcome of an event, surely you can also predict how millions of other people will react to said outcome. Period!

The Dow is an accurate representation of the entire stock market. Period!

Price returns matter more than total returns. Period!

You can remain solvent longer than the market can remain irrational. Period!

The time to buy is when there’s a party in the street. Period!

Timing the market is more important than time in the market. Period!

Hedge Funds are an asset class. Period!

The perfect portfolio exists. Period!

It’s OK to let the tax tail wag the investment dog. Period!

It’s a stock picker’s market. Really, I mean it this time. Period!

Markets are perfectly efficient. Period!

Markets are wildly inefficient. Period!

This time is different. Period!

Phil goes on to point out that in many cases, the opposite is a closer approximation of reality and good behavior. He recommends the following ways to prevent “alternative facts” of investing from seeping into your portfolio:

Work with financial professionals that act as your fiduciary and put your interests ahead of their own.
Implement an investment philosophy that isn’t predicated on forecasting an unknowable future.
Have a written investment policy statement that governs how you or your advisor is going to manage your portfolio ahead of time. Refer back to that document when the going gets tough.
Remember that the plural of anecdote isn’t data.

Source: B&P

Will Ferrell & Amy Poehler’s Awesome Approach to Funding College

Leave it to Will Ferrell and Amy Poehler to transform one of the most emotion-driven dilemmas of financial planning into hilarity! How do you prioritize funding your own retirement versus funding your children’s education? The short version of the prudent response follows the airline safety briefing: put on your oxygen mask first before helping others.

Hope you get a good laugh from the movie trailer below. Of course one of our favorite parts of the script is the following exchange:

Financial Advisor: “You don’t have enough money.”

Will Ferrell: “It says right here we have 401 thousand dollars.”

Amy Poehler: “Jackpot!”

Will Ferrell: “You missed it.”

Financial Advisor: “Ah, that says you have a 401(k) account.”

If you want to take a more deliberate (and legal) route to funding your children’s college education and balancing the other demands of your life, give us call 😉

Putting Clients Second (!?!)

Although the following makes reference to politicians and political decisions, it’s not meant to be political. The intent is to inform you and to help protect you and your family’s best interest.

Today the founder and former chief executive of Vanguard, John C. Bogle, penned an article in the New York Times. It starts off:

THE Trump administration recently announced that it intends to review, and presumably overturn, the Obama-era fiduciary duty rule that is scheduled to take effect in April. The administration’s case was articulated by Gary Cohn, the new director of the National Economic Council.

Mr. Cohn, most recently the president of Goldman Sachs, called it “a bad rule” and likened it to “putting only healthy food on the menu, because unhealthy food tastes good but you still shouldn’t eat it because you might die younger.” Comparing healthy and unhealthy food to healthy and unhealthy investments is an interesting analogy.

The now-endangered fiduciary rule is based on a simple — and seemingly unarguable — principle: that in giving advice to clients with retirement funds, stockbrokers, registered investment advisers and insurance agents must act in the best interests of their clients. Honestly, it seems counterproductive to go to war against such a fundamental principle. It simply doesn’t seem like a good business practice for Wall Street to tell its client-investors, “We put your interests second, after our firm’s, but it’s close.”

To learn more, see Mr. Bogle’s article and The Freedom To be Fleeced — How Donald Trump Made Financial Hustles Great Again

It’s easy to get lost in the details and let our minds glaze over, but what you should know is very simple:

An advisor that is a fiduciary has a legal obligation to put your best interests first, always.
Most people think that all or most advisors are fiduciaries (WRONG!).
Most purveyors of financial products and services are NOT fiduciaries. They comply with a much lower “suitability standard.”
To assure you and your family are getting the most trustworthy care, always ask your advisor or financial salesperson the following:
“Are you a fiduciary? Are you always acting in a fiduciary capacity when working with me?”

When we formed our advisory practice many years ago we purposefully chose to be a fiduciary because it’s the right thing to do. Incredibly that ethos is counter-cultural in financial services. It’s bemusing to watch the delicate public-relations dance and contortions that many big institutions are making around or in avoidance of doing the right thing.

Temperament over Intellect

Warren Buffett once said, “The most important quality for an investor is temperament not intellect.”

Investors very often buy at high prices when the market is hot and attractive, and sell at low prices after observing periods of poor performance.

This leads average investors to severely trail both the S&P 500 index and the Barclays Aggregate Bond Index over long time periods. This is why investors are very often their own worst enemy.

CBS MoneyWatch author Larry Swedroe recommends in a this article that you ask yourself if you believe that you’re best served by being your own advisor:

Do I have the temperament and the emotional discipline needed to adhere to a plan in the face of the many crises I will almost certainly face?
Am I confident that I have the fortitude to withstand a severe drop in the value of my portfolio without panicking?
Will I be able to re-balance back to my target allocations (keeping my head while most others are losing theirs), buying more stocks when the light at the end of the tunnel seems to be a truck coming the other way?

The (Alternative) Facts of Investing

Will Ferrell & Amy Poehler’s Awesome Approach to Funding College

Putting Clients Second (!?!)

Temperament over Intellect

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