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Temperament over Intellect

  • February 2, 2017/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior

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?

 


10 Life Lessons We Learn Too Late

  • January 26, 2017/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior, Best Practices, Live Well

life-lessons-small

A few years ago someone on Quora.com asked the question, “What are the lessons people most often learn too late in life?”  Jay Bazzinotti provided the following brilliantly insightful response:

1. Time passes much more quickly than you realize.

2. If you don’t take care of your body early then it won’t take care of you later. Your world becomes smaller each day as you lose mobility, continence and sight.

3. Sex and beauty may fade, but intimacy and friendship only grow.

4. People are far more important than any other thing in your life. No hobby, interest, book, work is going to be as important to you as the people you spend time with as you get older.

5. Money talks. It says “Goodbye.” If you don’t plan your finances for later in life, you’ll wish you had.

6. Any seeds you planted in the past, either good or bad, will begin to bear fruit and affect the quality of your life as you get older — for better or worse.

7. Jealousy is a wasted emotion. People you hate are going to succeed. People you like are going to sometimes do better than you did. Kids are going to be smarter and quicker than you are. Accept it with grace.

8. That big house you had to have becomes a bigger and bigger burden, even as the mortgage gets smaller. The cleaning, the maintenance, the stairs — all of it. Don’t let your possessions own you.

9. You will badly regret the things you didn’t do far more than the things you did that were “wrong” — the girl you didn’t kiss, the trip you didn’t take, the project you kept putting off, the time you could have helped someone. If you get the chance — do it. You may never get the chance again.

10. Every day you wake up is a victory.

 


Giving the Gift of Financial Planning

  • December 15, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : 401(k), Behavior, Fiduciary, Live Well, Personal Finance, Retirement, Seeking Prudent Advice

gift-of-financial-planning

A Lifetime of Financial Knowledge Wrapped Up in a Bow

Stuck for ideas on what to give newlyweds, graduates, or new parents for Christmas or Hanukkah? Consider something nontraditional this year that will last a lifetime and never go out of style: a visit with a financial planner.

Giving someone a financial planning consultation is a unique way to show you care, and it can help set up a loved one for a successful financial future. Newlyweds, graduates, and new parents all are at the start of a new phase of their lives. A financial planning gift provides them with something that may last for decades.

Those experiencing life’s transitions will also face financial challenges. Whether it’s learning to budget as a couple, understanding retirement plan options at the first job after graduation, or starting to think about paying for college, many important financial decisions await young people today. You can help by putting financial planning front and center.

Maintain the Wedded Bliss

Money and finances are among the top issues that cause marital discord. A financial planner can help strategize for a happily-ever-after financial life. A good planner will spend time talking to the couple, helping them determine their mutual financial goals. There are so many topics a financial planner can help with, including: managing household expenses; reviewing assets, debts, and credit reports; creating a budget; discussing future goals and creating mutual goals such as buying a home; analyzing benefits; updating wills; and reviewing insurance coverage.

Help Graduates Start Right

Once the diploma is hanging on the wall, it’s tempting for new grads to overspend, racking up credit card debt and a new car loan when what they really need to be worrying about is paying down student loans and planning for retirement. A gift of financial planning can help a new graduate establish short- and long-term financial goals and develop a budget to meet those goals. A financial planner may also help the grad deal with the new challenge of filing taxes and make recommendations on how to allocate investments into 401(k) or other retirement savings vehicles.

Bringing Up Baby, or Babies

The government estimates that a middle-income family will spend more than a quarter of a million dollars to raise a child until he or she is 18. New parents will benefit by working with a financial planner to figure out how much money they’ll need to raise their child. A financial planner can help them create a savings safety net, create and stick to a budget, advise about life insurance and wills, and talk about saving for college.

Purchase a financial planning gift certificate for someone you care about and know you’ve made a lasting contribution!

 


53 Smart-Sounding Reasons to Sell Stocks During 100x Market

  • December 8, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior, Best Practices, Market Outlook

Here are 53 smart-sounding reasons to sell stocks during a period in which the market went up 100x after inflation.

53-smart-reasonsThese days it seems all too easy to come up with a reason to be pessimistic. Be careful.

Optimism is the only realism. It’s the only worldview which squares with the facts, and with the historical record.

Source: Morgan Housel


Tune Out the Noise…your portfolio will thank you for it!

  • December 1, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior, Best Practices, Market Outlook, Seeking Prudent Advice

noise

One Day in Mainstream Media Market Headlines…

6:00 AM MarketWatch US Futures Down As Euro Pressures Mount

6:30 AM TheStreet.com US Stock Futures Recover on Amazon Tablet Expectation

7:15 AM MarketWatch Stocks Fall in Pre-Market Amid Global Concerns

8:00 AM Minyanville Stocks Buoyant Ahead of August Durable Goods Orders

8:10 Wall Street Journal US Marts Down Briefly, Techs Remain Higher

9:15 AM TheStreet.com US Stocks Mixed Ahead of Open After Durable Goods Orders

9:45 AM MarketWatch Stocks Decline Slightly On Economic Concerns

10:15 AM MarketWatch US Stocks Fall on European Woes

11:00 AM Minyanville Stocks Up After Morning in Which They Were Slightly Down

11:30 AM TheStreet.com Stocks Exist  at Half Past 11 AM this Morning

12:00 PM  MarketWatch Stocks Slightly Higher at Mid-Day as I Pick Up My Dry Cleaning

12:15 PM Bloomberg Markets Stabilize as Japanese PM Explains Proclivity for Vending Machine Pornography

12:30 PM Minyanville US Markets Rally Modestly as Stocks Don’t Be Down

1:00 PM TheStreet.com Stocks Off Slightly After Cloud Passes Briefly in Front of the Sun

1:30 PM Reuters We are Better than You and You Probably Realise that by Now

1:50 PM Wall Street Journal US Stocks Extend Advance after Not Extending Decline

2:15 PM Minyanville Markets in Retreat as Euro Pressures Threaten Global Recovery

3:10 PM TheStreet.com US Stocks Unchanged, We Are Seriously Running Out of Reasons for Random Things You Guys

3:11 PM TheStreet.com US Stocks Still Unchanged, We Just Checked For You

3:34 PM Bloomberg Markets Neutral Into the Close

3:37 PM MarketWatch Neutral Markets Into the Close

3:50 PM Wall Street Journal Stocks Set to Close Flat on Session as European Woes Continue to Cause Concern

3:56 PM Reuters US Stock Market Flat on Close

4:01 PM MarketWatch No Change in US Stocks Today on Excessive Nonsensical Headlines, Tune in Tomorrow

Avoid getting caught up in the hype and drama of media’s talking heads.


Your Investments Don’t Care Who Wins

  • October 27, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior, Best Practices, Bonds, Live Well, Market Outlook, Seeking Prudent Advice

Countless words and boundless time have been expended over the ages debating which political party is best for the investment markets. Good news! You can stop worrying and wasting your time because 160 years of history are very clear on this question.

markets-dont-careVanguard research going back to 1853 demonstrates that stock market returns are virtually identical regardless of which party is in the White House (see chart above).  Similarly, Vanguard finds the political party of the president has little impact on the bond market as well.

So take a deep breath and relax because your investments* don’t care who wins on November 8th.
(* “your investments” should be a diverse portfolio of assets that serves a long-term investment discipline that is goal focused and planning driven) 

Source: Vanguard


The Best Advisors Will Tell You “NO”

  • June 16, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior, Best Practices, Seeking Prudent Advice

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

  • June 9, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior, Investing 101, Seeking Prudent Advice

ten

The following elegant observation comes courtesy of Jonathan Clements.

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

Source:  JC


Class of 2016: Financial Advice That will CHANGE YOUR LIFE

  • June 2, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior, Best Practices, Personal Finance, Saving Money

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.


10 Cognitive Biases That Affect Your Investment & Everyday Decisions

  • May 19, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior

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.

cb01Bandwagon Effect: Believing or doing something because people around you believe or do it

 

cb02Availability Heuristic: Overestimating the importance of information that is easiest to recall

 

cb03Dunning-Kruger Effect: Unskilled individuals overestimating their
 abilities and experts underestimating theirs

 

cb04Framing Effect: Drawing different conclusions from the
 same information presented differently

 

cb05Confirmation Bias: Seeking and prioritizing information
 that confirms your existing beliefs

 

cb06Curse of Knowledge: Struggling to see a problem from the perspective of someone with less knowledge than you

 

cb07Reactance: The desire to do the opposite of what is requested or
 advised, due to a perceived threat to freedom of choice

 cb08The Sunk Cost Fallacy: Refusing to abandon something unrewarding because you’ve already invested in it

cb09Hindsight Bias: Believing that you could have predicted an event after it has occurred

 

cb10Anchoring Effect: Excessively focusing on the first piece of
 information you receive when making a decision

Source:  Towergate


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