Insights from Longevity Village

There’s a village in China where centenarians are ten times more common than in the United States. Bapan, China is called “Longevity Village” thanks to this density of  90+ and 100+ year old residents. Most of these older villagers are living long and healthy lives. Aging very slowly, there is essentially no signs of obesity, cancer, heart disease, or dementia.

Dr. John Day has written a book on Longevity Village that shares insights for living a long and healthy life. The villagers of Bapan have diet that is free of added sugars and processed foods. They get plenty of exercise with many 90 and 100 year olds still working in their gardens.

But four attitudinal elements are key as well:

  • Smile more (baseball players who smile in their playing card photographs live 7 years longer on average than those that don’t smile)
  • Rethink stress (70% of doctor visits in the US are stress-related)
  • Don’t forget to play (exercising in itself is not playing)
  • Look forward to aging (people who embrace the aging process live 8 years longer than those that don’t)

Source: WSJ

The Pitfalls of Investing

pitfall

Pitfall? Get it? I couldn’t resist.

Ben Carlson has a great piece on how avoiding the crippling mistakes of investing will greatly improve your results.

Here is Carlson’s list of the biggest mistakes to avoid:

  • Making investment decisions based on your political views.
  • Confusing your risk profile and time horizon with someone else’s.
  • Consistently trying to time the market.
  • Losing site of your long term financial goals.
  • Paying high fees on investments.
  • Having high trading activity.
  • Letting fear and greed take over at the extremes in market sentiment.
  • Having the majority of your investments tied up in one asset (company stock, your house, etc.).
  • Basing your decisions on what you heard on CNBC or Fox Business News.
  • Following every tick in the market and constantly checking the value of your portfolio.
  • Making too many short term moves with long term capital.
  • Basing your investments on the most recent performance.
  • Not saving enough.

For the ultimate backstop, Jason Zweig of the Wall Street Journal has a piece of advice most investors would be wise to follow:

Approximately 99% of the time, the single most important thing investors should do is absolutely nothing.

Be safe out there!

Hedgerows of Retirement

“We were rehearsed endlessly for attacking beach defenses but not one day was given to the terrain behind the beaches, which was no less difficult and deadly.”
— D-Day Battalion Commander

Coincident with the 73rd anniversary of the Normandy Invasion, Tony Isola wrote a great article highlighting the unexpected challenges the Allied forces encountered after they crossed the beaches.  The farm lands of Normandy were carved up and fenced off by a dense network of difficult-to-penetrate hedgerows.  Allied Forces were incredibly trained and prepared for the beach landings, but hardly a thought was given to the next stage of the battle.

As Tony points out, investors have their own hedgerow fortifications to surmount.  There is great focus and effort put forth around saving for retirement, but what about the next stage of life? Questions and decision points include:

  • How long do I need to work so my money won’t run out?
  • What would be considered a “safe” withdrawal percentage from my funds?
  • When should I take Social Security; and what strategy should I use?
  • Do I need long-term care insurance?
  • Now that I am retired, should I invest my money differently?
  • How much will Medicare cost and what programs should I enroll in?
  • Can I afford to give cash to family members; and if I can, how much?
  • Have I updated all my beneficiaries and picked the right people to take over my finances to make the best decisions regarding my health if I cannot?
  • What am I going to do all day if my retirement is fully funded?
  • Should I take a cash balance or turn my funds into an annuity from my workplace retirement plan?
  • Do I own too much of my company’s stock?
  • Will my plan still work if we have another “Great Recession?”
  • When should I start taking money from my tax-deferred accounts; and how will this affect my taxes?

Answering these with confidence, constructing a solid plan based on these answers, and executing that plan with discipline are the real reasons why people who have accumulated wealth work with a trusted advisor.

Source: TM

Code Red! 8 Ways to Permanently Wipe Out Your Retirement Savings

code-redDana Anspach at MarketWatch wrote about 8 financially devastating mistakes (aka “Code Reds”) that must be avoided:

1. Believe in a stock
The company you work for is doing well. You understand the potential of the business. You should own a lot of company stock. After all, it shows your level of commitment, right? 
WRONG! CODE RED!
You can lock in lifestyle by taking risk off the table. If trusted advisers are telling you to reduce risk, listen. You can’t take your “belief” in your company stock to the bank. Owning a lot of company stock doesn’t demonstrate a commitment to your company; it demonstrates a lack of commitment to your own personal financial planning.

2. Get reeled into real estate
Rental real estate is a good way to build wealth with someone else’s money, isn’t it? I mean, that’s what the infomercials say.
WRONG! CODE RED!
Investing in real estate is a profession in and of itself. With real estate prices on the rise again, don’t get reeled in with the lure of easy passive income. It isn’t as easy as it looks.

3. Follow a Tip
An opportunity to double your money is an investment opportunity worth pursuing. It could change your life, right?
WRONG! CODE RED!
Tips are great for your waiter or waitress. But where you family’s future is concerned, avoid the tips, and stick with a disciplined and diversified approach.

4. Change lanes — every year
Smart investors watch the market and frequently move money into the latest high performing investment, right?
WRONG! CODE RED!
You’ve probably noticed if you constantly changes lanes on a backed up highway, always trying to inch ahead, you usually end up farther behind. Driving this way isn’t effective; investing this way isn’t effective either. Pick a disciplined strategy and stick to it. Jumping from investment to investment is only going to slow you down.

5. Play the currency cards
Experts can deliver higher returns, right? Find someone who knows how to trade, and you’ll be set.
WRONG! CODE RED!
If experts could generate such high returns, why would they need your business? Don’t play the currency cards, the expert cards, or fall for any kind of outlandish promises. I’ve yet to see one of these programs work the way it was marketed.

6. Follow your ego
Better investments are available to those with more money, right? If you get the opportunity to participate in something exclusive, it is likely to deliver better returns.
WRONG! CODE RED!
If someone appeals to your ego, walk away. When it comes to investing, the only thing I’ve seen egos do is help someone lose money.

7. Follow their ego
You can trust prestigious people in your community. That’s why you should do business with them, right?
WRONG! CODE RED!
Checks and balances are good in government and in investing. One way to make sure checks and balances are in place is to work with an investment adviser that uses a third party custodian. The third party custodian sends account statements directly to you. The investment adviser can make changes in your account, but the transactions are reported to you directly by the custodian, who isn’t and should not be affiliated with the investment adviser.

8. Leverage up
Borrowing at low interest rates and investing in high growth assets is an excellent way to accumulate wealth, isn’t it?
WRONG! CODE RED!
Think twice before borrowing to invest. It causes ruin more often than it causes riches.

Visit MarketWatch to read Anspach’s full article.

Class of 2017: Financial Advice That will CHANGE YOUR LIFE

PDS-CommencementThe following is a brief excerpt from the commencement address by Dr. Chris Mullis to the graduating class of Providence Day School on May 31, 2013. The full text of Dr. Mullis’ speech, that includes career advice, financial guidance, and a few pearls of wisdom, can be found here.

At my investment advisory firm, we developed complex computer algorithms and use them to manage our clients’ investment portfolios. But the basic steps you need to take to manage your own money well are deceptively simple. First, live within your means and avoid being caught up in rapid lifestyle inflation. You will not live like your parents when you first start out. Second, save and invest your money wisely. Let me elaborate on this point.

Wealth accumulation depends on three factors: how much you save, the rate at which your money grows, and how long you save. That last factor, time, is very, very important. There’s an urban legend that Albert Einstein once said that compounding interest is the most powerful force in the Universe. That quote is likely misattributed but the message is spot on. If you save $5,000 a year for 40 years and earn 8% annually, you will eventually have $1.3M. But if you delay starting for merely 5 years, your results after 35 years will be only $860k. That 5-year delay preserved $25k of short-term capital but ultimately cost you >$400k in the long run. Time is the most powerful lever in the machinery of investing. Nothing else comes close to it.

So what do you need to do? Start saving and investing right out of high school regardless of how hard you think it hurts or how unpleasant the tradeoffs. Even if you set aside only 5% of your paycheck starting out, do it to get into the habit of saving. Delaying getting serious about investing until my 30s was a significant financial mistake on my part. No one ever sat me down and explained how important it is to start investing early. Now that we’ve had this little talk, you’ll never be able to say that no one told you.

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