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Lessons of History

  • September 28, 2018/
  • 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


Financial Readiness: As Critical as Fully Charged Batteries

  • September 11, 2018/
  • Posted By : admin/
  • 0 comments /
  • Under : Seeking Prudent Advice

In light of the threat of Hurricane Florence to the Southeast of the U.S. this week, we want to spotlight the following important FTC Consumer Alert:

Home is where most people feel safe and comfortable. But sometimes — say, when a hurricane, flood, tornado, wildfire, or other disaster strikes — it’s safest to pack up and go to another location.

The Federal Trade Commission (FTC), the nation’s consumer protection agency, says that when it comes to preparing for situations like weather emergencies, financial readiness is as important as a flashlight with fully charged batteries. Leaving your home can be stressful, but knowing that your financial documents are up-to-date, in one place, and portable can make a big difference at a tense time.

Here are some tips from the FTC for financial readiness in case of an emergency:

  • Conduct a household inventory. Make a list of your possessions and document it with photos or a video. This could help if you are filing insurance claims. Keep one copy of your inventory in your home on a shelf in a lockable, fireproof file box; keep another in a safe deposit box or another secure location.
  • Buy a lockable, fireproof file box. Place important documents in the box; keep the box in a secure, accessible location on a shelf in your home so that you can “grab it and go” if the need arises. Among the contents:
    • your household inventory
    • a list of emergency contacts, including family members who live outside your area
    • copies of current prescriptions
    • health insurance cards or information
    • policy numbers for auto, flood, renter’s, or homeowner’s insurance, and a list of telephone numbers of your insurance companies
    • copies of other important financial and family records — or notes about where they are — including deeds, titles, wills, birth and marriage certificates, passports, and relevant employee benefit and retirement documents. Except for wills, keep originals in a safe deposit box or some other location. If you have a will, ask your attorney to keep the
      original document.
    • a list of phone numbers or email addresses of your creditors, financial institutions, landlords, and utility companies (sewer, water, gas, electric, telephone, cable)
    • a list of bank, loan, credit card, mortgage, lease, debit and ATM, and investment account numbers
    • Social Security cards
    • backups of financial data you keep on your computer
    • an extra set of keys for your house and car
    • the key to your safe deposit box
    • a small amount of cash or traveler’s checks. ATMs or financial institutions may be closed.
  • Consider renting a safe deposit box for storage of important documents.Original documents to store in a safe deposit box might include:
    • deeds, titles, and other ownership records for your home, autos, RVs, or boats
    • credit, lease, and other financial and payment agreements
    • birth certificates, naturalization papers, and Social Security cards
    • marriage license/divorce papers and child custody papers
    • passports and military papers (if you need these regularly, you could place the originals in your fireproof box and a copy in your safe deposit box)
    • appraisals of expensive jewelry and heirlooms
    • certificates for stocks, bonds, and other investments and retirement accounts
    • trust agreements
    • living wills, powers of attorney, and health care powers of attorney
    • insurance policies
    • home improvement records
    • household inventory documentation
    • a copy of your will
  • Choose an out-of-town contact. Ask an out-of-town friend or relative to be the point of contact for your family, and make sure everyone in your family has the information. After some emergencies, it can be easier to make a long distance call than a local one.
  • Update all your information. Review the contents of your household inventory, your fireproof box, safe deposit box, and the information for your out-of-town contact at least once a year.

Source: Federal Trade Commission


Happy Money: The Science of Smarter Spending

  • September 7, 2018/
  • 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 Others

 

“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 than 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?


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FROM OUR BLOG
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