Blog - Page 27 of 71 - NorthStar Capital Advisors

Thank You for Ten Years!

NorthStar Capital Advisors would like to take this special occasion to thank you, our loyal clients and friends, as Sunday we celebrate 10 years of financial planning and investment management. We have come a long way since we rolled out our objective and disciplined approach to investing in 2006. Our success is attributable to clients and friends who faithfully support our business and receive great service and advice in return.

We deeply appreciate your loyalty, support, and trust over the past 10 years. We hope you and your family have a safe and happy holiday!

With heartfelt thanks,
Chris Mullis, Jimmy Irwin & David Berger

5 Words of Advice for New Graduates

Congratulations to the 3 million young people who have graduated from high school over the past few weeks! Want to be happy and prosper? Consider these 5 words of advice from 20 thoughtful people:

Budget. Save. But enjoy yourself.
Ben Carlson, A Wealth of Common Sense

Live simply. Fees add up.
Kanyi Maqubela, Collaborative Fund

Buy every month, never stop.
Josh Brown, Reformed Broker

Save. A lot. Start immediately.
Bob Seawright, Madison Avenue Securities

Carl Richards, The New York Times

Your potential is an asset.
Noah Smith, Bloomberg

Sleep on it. Then decide.
Sam Ro, Yahoo! Finance

Live on less. Have more.
James Osborne, Bason Asset Management

The world owes you nothing.
Jason Moser, The Motley Fool

Savings is the best investment.
Tadas Viskanta, Abnormal Returns

Perpetually seek your true passions.
Tom Gardner, Motley Fool CEO

“No downside” means “run away.”
Bill Mann, CIO Motley Fool Asset Management

Time is your scarcest asset.
Bryan Hinmon, Motley Fool Asset Management:

Don’t carry credit card debt.
Eddy Elfenbein, Crossing Wall Street

It’s not a race. It’s a marathon.
Craig Shapiro, Collaborative Fund

Focus on what you control.
Phil Huber, Huber Financial Advisors

Invest as soon as feasible.
Matt Argersinger, Motley Fool analyst

Never stop asking questions. Ever.
Chris Hill, Motley Fool radio host

Your best investment is yourself.
Cullen Roche, Pragmatic Capitalism

Spend less than you make.
Matt Koppenheffer, Motley Fool

Source: TMF

The Best Advisors Will Tell You “NO”

As a fiduciary we’re obligated to put our clients’ interests first. This essential mandate can on occasion run into direct conflict with what a client wants. There are circumstances where an advisor knows that what the client is requesting defies common sense and is at odds with his or her long-term interest.

What kind of things are we talking about? Here’s a short list courtesy Barry Ritholtz:

• Taking on more risk than is prudent.

• Buying the hot new thing.

• Participating in an expensive, underperforming private investment (e.g., hedge funds, venture capital).

• Using excess leverage.

• Following the advice of pundits or talking heads.

• Overtrading.

• Pursuing the latest media fixation.

• Speculating in commodities.

• Allowing emotions to steer investments.

• Buying low-quality, high-yield “junk” fixed income paper.

• Buying non-liquid investments (private equity, gated private investments).

• Market timing.

• Buying IPOs.

• Cherry-picking portfolio allocations.

Our gently communicated but firm response to all of these is “NO.” All the academic research in the world suggests these are a bad bet. As Barry says, “if you want to make an expensive gamble, enjoy a lovely vacation to Monte Carlo, but please leave your retirement plans out of it.”

That’s our stance on this issue and we take it from a position of deep care and protection for our clients. But what’s your opinion? Should advisors do what a client wants, even when the advisor knows it is not in the client’s best interests?

P.S. In case you’re wondering…here’s what a big “YES” is in our book:
We invest through a broadly diversified set of indexes via a robust asset allocation model. It is global, inexpensive and primarily passive. It is statistically what is most likely to generate the highest returns for the least amount of risk over the long-term.

10 Signs You Own the Right Portfolio

The following elegant observation comes courtesy of Jonathan Clements.

You’re so well diversified that you always own at least one disappointing investment.
Your livelihood isn’t riding on both your paycheck and your employer’s stock.
If the stock market’s performance over the next five years was miserable, you wouldn’t be.
You can remember the last time you rebalanced.
You have no clue how your investments will perform, but a great handle on how much they’ll cost you.
You don’t have any hot stocks to boast about.
For every dollar you’ve salted away, you have an eventual use in mind—and the dollars are invested accordingly.
Jim Cramer? Who’s that?
A year from now, you plan to own the same investments.
You never say to yourself, “Wow, I didn’t expect that.”

Source: JC

NorthStar Client Family Featured in AARP The Magazine

Debra and Gary Wilhoit, a NorthStar client family, are featured in the June/July 2016 issue of AARP The Magazine. Dr. Chris Mullis, CEO and senior planner at NorthStar, is quoted in the article alongside senior advisors from Charles Schwab and T. Rowe Price.

Kudos to the Wilhoits for candidly sharing their early-retirement anxieties and the actions they have taken to ultimately reach greater peace of mind and long-term success. Millions of Americans who are transitioning toward and into retirement can immediately relate to the Wilhoits’ experience. And millions of Americans can benefit by adopting the Wilhoits’ long-term perspective and positive investor behavior.

AARP The Magazine addresses the evolving life stages of 50+ Americans and is the largest circulation magazine in the United States (35.9 million readers).

Class of 2016: Financial Advice That will CHANGE YOUR LIFE

The 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.

Where Not to Die

Federal estate taxes are no longer a problem for all but the extremely wealthy. In 2016, as much as $5.45 million in assets will be exempt from federal estate taxes—double that for a married couple. However, state estate taxes, which kick in for estates valued at only $1 million or less in several states, could take a big bite out of your legacy.

Nineteen states and the District of Columbia—home to about one-third of the U.S. population—levy an estate tax on the assets of people who die or an inheritance tax on those receiving the assets, or both.

Source: WSJ

10 Cognitive Biases That Affect Your Investment & Everyday Decisions

Research suggests that we make up to 35,000 decisions every single day. Emotions, experiences, and environment can strongly influence our decision making process. Enjoy the cartoons below and learn more about common cognitive biases that impact your everyday life and your investing behavior.

Bandwagon Effect: Believing or doing something because people around you believe or do it

Availability Heuristic: Overestimating the importance of information that is easiest to recall

Dunning-Kruger Effect: Unskilled individuals overestimating their  abilities and experts underestimating theirs

Framing Effect: Drawing different conclusions from the  same information presented differently

Confirmation Bias: Seeking and prioritizing information  that confirms your existing beliefs

Curse of Knowledge: Struggling to see a problem from the perspective of someone with less knowledge than you

Reactance: The desire to do the opposite of what is requested or  advised, due to a perceived threat to freedom of choice

The Sunk Cost Fallacy: Refusing to abandon something unrewarding because you’ve already invested in it

Hindsight Bias: Believing that you could have predicted an event after it has occurred

Anchoring Effect: Excessively focusing on the first piece of  information you receive when making a decision

Source: Towergate

Advice for New (and soon-to-be) Retirees

Dr. Glyn Cowlishaw (right), Head of School, stands with 9 of the 10 retiring faculty and staff honored during a reception in the McMahon Fine Arts Center theater May 12 at Providence Day School. Pictured (from left) are Middle School Head Sam Caudill, Summer Programs Director Nancy Stockton, Admissions Associate Director Barbara Bodycott, Lower School Computer Science Department Chair Beth Hunter, Lower School Librarian Debra Wilhoit, Extended Day teacher Judy Bennett, Lower School Head Kay Montross, 3rd-grade teacher Marsha Small and Middle School math teacher Beth Ralston. Not pictured is Janis Roten of the Business Office. (Photo credit: Mike McCarn / Providence Day School)

Yesterday I had the honor to attend the retirement ceremony for two of my former & beloved teachers and seven additional educators that came after my time as a student. These nine individuals provided great leadership & passion over many decades and impacted thousands of students’ lives, including my own. The level of professional and personal adoration expressed by the school community for this exceptional group of educators was incredibly moving. One presenter captured the moment perfectly saying to effect, these retiring teachers are Mount Rushmore figures in the field of master educators! Inspired by their greatness and to honor the start of their next great adventures, we share the following advice for new retirees. Congratulations and thank you to the newest members of the “Golden Chargers” at Providence Day School. — Chris Mullis

Some years ago the consulting firm PricewaterhouseCoopers conducted a survey to reveal what new retirees need to understand to make their retirement more meaningful and to ease this major life transition. The following are excerpts from the survey results.

Initial Thoughts
Most of the new retirees strongly recommended keeping active, whether in volunteer work, hobbies, travel, reading, or new business ventures. Words of wisdom included:

Use your talents and realize this is a “new beginning” and not an end.
Set goals two to three years in advance. Good planning is helpful … focus on financial and emotional issues.
You should develop a routine (daily) and not just allow things to happen or not happen—you really are on your own—work, family, etc.
Learn to relax without feeling guilty about it! Stay busy, mentally and physically. Remember, it’s never too late to learn new things and improve old things.
Make a priority list of the things you’ve always wanted to do but didn’t have the time to do. Start doing the highest-priority items immediately.
Consider retirement a process rather than an event.
Don’t worry about how you will fill your day. If you are reasonably active physically, have outside interests and are willing to be involved in your community affairs … you will wonder where the time flies. But nail down the finances.

Your Significant Other
A frequently overlooked but important aspect of retirement is the new or different relationship with one’s spouse. A new retiree may need to be careful not to intrude or tread on a spouse’s independent lifestyle. Spouses offered the following comments:

Retirement is great but not for lunch.
Remember we have lives that are already full, and don’t expect to be waited on all the time.
Spouses have their own life in community activities. Make sure you don’t make them feel guilty when they continue their own lives.
Be prepared for a lot of togetherness. [One wife described it as half the money, twice the husband.]
Continue to pursue and respect other interests; take care of your health.
Sit down and review life’s priorities. Develop a jointly agreed-upon plan, together with benchmarks concerning the high-priority items. Allow plenty of time to relax together.

Expectations
Most retirees were surprised at how easy it was to fall into a new routine. Common sentiments included:

Instead of being bored and frustrated I found a new sense of freedom. For the first time in years I was my own boss and totally accountable for my state of mind.
The first six months [were] lonely and depressing that your successors never ask for your advice … followed by bliss!
How hard I thought it would be and how easy it really is.
[I was surprised that] my handicap did not drop by 10 strokes.
[You will be surprised by] how much you will miss the relationships and connections that you leave behind at work.

What They Would Do Differently
Lastly, new retirees were asked what they would have done differently before retiring. Most respondents said they would begin retirement planning, including financial and tax planning, at an earlier stage. Here are some insightful comments on this topic:

Put as much of the financial/administrative side of life on automatic pilot as soon as possible. Simplify and try to get out of the middle of all the minutiae.
We traveled extensively the first year. I would spread it out, but highly recommend travel.
Develop a greater understanding of the income tax considerations in the year of retirement.
I would have said appropriate farewells (good-byes) to all colleagues.
Would have done advance planning (for post-retirement activities) one to two years before actually retiring.

Source: PwC

Hedge Funds — Exceptional Complexity, Exceptional Underperformance

The chart above compares hedge fund returns to the S&P 500 Stock Index (blue) and the Barclays/Lehman Aggregate Bond Index (red) since 2011. Various popular hedge fund strategies are portrayed by the four colorful lines that occupy the zero-to-negative return space! In both an absolute and a relative sense, this is stunning underperformance. Moreover, those hedge fund returns are before fees, so the investor return is even worse. Hedge funds traditionally charge a management fee that’s 2% of assets, plus 20% on any profits.

Despite this dismal five-year run, complex and expensive hedge funds are more popular than ever. In the Internet era, interesting, persuasive, and money-losing commentary is just a click away!

At last Saturday’s annual meeting of Berkshire Hathaway, legendary investor Warren Buffett unloaded: “There’s been far, far, far more money made by people in Wall Street through salesmanship abilities than through investment abilities.” Buffet added that hedge funds operate with “a compensation scheme that is unbelievable to me.”

Our brains are naturally attracted to “shiny objects” and our intuition suggests success requires a complex solution. Nonetheless, empirical data such as the chart above demonstrate that wealth can be achieved through simple investments combined with simple discipline.

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