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What You Should Focus On

  • August 4, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Best Practices, Financial Planning, Live Well

What-you-should-focus-on-1200x914We all want to live a great life.  The path to achieve that life relies, in part, on knowing what to focus on and what to ignore.  Focusing on the things you can’t control is a waste: a waste of time, energy, and often, money.  Here’s a list of things that matter, things you can control, and the things you should focus on.

Things that matter:

  • Health
  • Human progress
  • Long-term market returns

Things that you can control:

  • How you treat people
  • Feeling good about yourself
  • Making smart financial decisions

What you should focus on:

  • Living a happy, productive life
  • Surrounding yourself with good people
  • Not letting a long-term plan be derailed by the current market environment

 

Source: Carl Richards, Michael Batick


5 Words of Advice for New Graduates

  • June 23, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Best Practices, Investing 101, Live Well, Seeking Prudent Advice

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

G
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”

  • 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.


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 Estate Planning Lessons From ‘Game of Thrones’

  • April 22, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Best Practices, Financial Planning

got-00

HBO’s “Game of Thrones” returns to the air for its sixth season on April 24th.  This unfolding epic entertains and provides a guide to the do’s and don’ts of estate planning.

Check out these 10 lessons as shared by Wealth Management. (SPOILER ALERT: several of these involve major plot points from all five seasons of “Game of Thrones.” Proceed at your own risk.)

got-01
1. Taking Inventory of Your Assets Is a Good Place to Start
Working with an advisor to periodically evaluate your assets saves time and frustration down the road. Daenerys Targaryen, the last Targaryen alive, while almost always cash-poor, has collected some very valuable assets over the course of her journey, not the least of which are her dragons.

got-02
2. DIY Wills Aren’t the Answer
There are many lessons people can take from Robert Baratheon (conquerors don’t make good kings, alcoholism can kill, etc.), but perhaps the most important: Don’t allow attempt to write your will yourself. It’s too easy to make a big, costly mistake. In Robert’s case, when writing the will, Ned Stark replaces “My son Joffrey” with “my heir” because the king’s eldest son is actually a bastard. The will, and Ned Stark’s subsequent actions, tip off a struggle for the throne that costs the lives of thousands.

got-03
3. Don’t Stop With a Will
A simple will is probably not sufficient in terms of a complete estate plan. Consider developing and funding trusts for your children to ensure they’re taken care of in the future. Had Ned Stark done so before he died, his daughters Sansa and Arya would’ve been at least financially secure. Instead, Sansa is left at the mercy of the Lannisters for years and Arya has to travel through the war-ravaged countryside on her own.

got-04
4. Assign More Than One Trustee
Since every trust must have at least one trustee, it’s a good idea to name successor trustees in your will, in case the original trustee passes away. Take, for example, the Stark family. Following Ned Stark’s death, his wife Catelyn was in charge of the children, scattered as they were. But her death, along with the heir Robb Stark’s death at the “Red Wedding,” means no one is watching out for the remaining Stark children and their assets.

got-05
5. Guardianships
Naming a guardian for children who are minors is essential, but perhaps even more important is notifying the potential guardian and others of your intentions to avoid conflicts in the future. In Season 2, Lady Catelyn Stark asks Brienne of Tarth to secure the safety of her daughters. Unfortunately, she didn’t think to write it down or draft a letter of instruction on how to accomplish the task, so when Brienne and Podrick stumble upon Arya and the Hound in Season 4 (after her mother’s demise), both are wary of Brienne’s promises. In the end, Arya escapes and Brienne is left bruised and frustrated.

got-07
6. Talk About the Future
Kids need to know what’s in store. Especially since inheritance can be a loaded issue. Be as up-front as possible about your intentions, to help alleviate conflicts after you’re gone. Ned Stark made sure his children, particularly Jon Snow, knew where they stood while he was alive. In fact, Stark sent Snow to live at the Wall, knowing his son would have a place within the ranks of the Night’s Watch.

got-09
7. Keep Your Plan Up to Date
An estate plan isn’t something that can be done once and then put in a drawer and forgotten. It has to be constantly updated and re-evaluated because laws, and people, change. Or die. And they die a lot in “Game of Thrones.” When (Season 4 spoiler alert) Joffrey dies of poison on his wedding day, his younger brother Tommen is slated to take over as the new king. But what happens if Tommen also dies (as predicted)? Someone should make sure that some King’s Landing scribes have been set to work on a solution … just in case.

got-10
8. Trust Is Hard to Earn and Easy to Lose
Even the very best advice is worthless if you refuse to listen. Advisors must work hard to earn your trust, through patience and competence, and be constantly vigilant of how fleeting said faith can be. This struggle is illustrated in the show when Daenerys learns that her closest advisor, Jorah, had previously spied on her. Though no harm ultimately came from his indiscretion, she sent him away nonetheless. He could no longer be trusted.

got-12
9. Managing Wealth Can Be More Difficult Than Amassing It
Often we can become so focused on making money that we ignore certain dangers that can siphon it away even faster than we can earn it. In the context of estate planning, the risks of loss are greatest in times of transfer, be it wealth transfer, through gifts or bequests, or power transfer, through a succession event. If these scenarios aren’t properly planned and executed, a lifetime of work can be undone in an instant. Daenerys is currently learning this lesson as, after finding such success liberating the various cities of Slaver’s Bay, she’s struggling mightily now that she’s attempting to settle in and actually rule the city of Meereen.

got-14
10. Keep Things Flexible
The only certainty in life (other than death) is change, and estate planners need to equip their clients with the tools to deal with change when it inevitably occurs. Though it’s tempting to try and include language addressing every possible eventuality, this impulse is both impossible to accomplish (you’ll always miss something) and actively destructive, because the more hard-line rules are baked into an estate plan, the less flexible it becomes. For documents meant, in many cases, to reach far into the future, inflexibility is a fatal flaw. The best plans manage to walk the difficult tightrope of covering as many bases as possible while somehow not becoming prescriptive. The characters in “Game of Thrones” have plans for seemingly every eventuality. Yet none are prepared for the impending threat represented by the White Walkers, which dwarfs their petty succession squabbles. It would have been ridiculous for them to anticipate the possibility of a frozen zombie invasion, but their plans will have to survive one nonetheless.

Source: Wealth Management


4 Weeks Until an Important Deadline

  • March 17, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Best Practices, Investing 101, Retirement

Here’s an important reminder if you have an individual retirement account (IRA) or are considering opening an IRA. 2015 contributions to IRAs can still be made up through April 15, 2016.

Make it a double? If you really want to make the most of the growth potential that retirement accounts offer, you should consider making a double contribution this year: a last-minute one for the 2015 tax year and an additional one for 2016, which you’ll claim on the tax return you file next year. That strategy can add much more to your retirement nest egg than you’d think.

 

2015/2016 Annual IRA Contribution Limits*

  • Traditional/IRA Rollover: $5,500 ($6,500 if you are 50 years old or older)
  • Roth IRA: $5,500 ($6,500 if you are 50 years old or older)
  • SIMPLE IRA: $12,500 ($15,500 if you are 50 years old or older)
  • SEP IRA: $53,000

*Note: The maximum contribution limit is affected by your taxable compensation for the year. Refer to IRS Publication 590 for full details.

The savings, tax deferral, and earnings opportunities of an IRA make good financial sense. The sooner you make your contributions, the more your money can grow.

If you have any questions or would like to make an IRA contribution give us a call at (704) 350-5028 or email info@nstarcaptical.com.


Misconduct! 10 Worst & 10 Best Behaving Advisory Firms

  • March 4, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Best Practices, Scams & Schemes, Seeking Prudent Advice

New research shows the level of financial advisor misconduct is alarmingly high.  “It’s everywhere, not just small firms. It is pervasive,” said Dr. Amit Seru, a finance professor at the University of Chicago’s Booth School of Business and a co-author  of “The Market for Financial Adviser Misconduct” (Egan, Matvos, and Seru 2016).

These researchers data mined the FINRA database to aggregate and measure the misconduct data for all U.S. firms with at least 1,000 advisors.  The industry-wide average was 7% of all advisors have records of misconduct.

Oppenheimer ranked #1 in the “bad behavior” list. Nearly 20% of the advisors at Oppenheimer & Co. have been disciplined for misconduct that varies from placing clients in unsuitable investments to trading client accounts without permission.  This rate is ~25 times higher than the “best behaving” firm, Morgan Stanley.

The following excerpt from Table 6 of this landmark study lists the 10 firms with the highest rate of “bad behavior”:

highest-misconduct-adivsory-firmsOn the flip side, here is the list of the “best behaving” firms from the study:

lowest-misconduct-adivsory-firmsHere are some other key findings from this research:

  • Roughly 7% of advisors have misconduct records
  • Prior offenders are 5 times as likely to engage in new misconduct as the average financial adivsor
  • Approximately 50% of financial advisors lose their job after misconduct
  • 44% of those advisors are re-employed in finance within a year (!)
  • Misconduct is concentrated in firms with retail customers and in counties with low education, elderly populations, and high incomes
  • Some firms “specialize” in misconduct and cater to unsophisticated consumers

Run, don’t walk, to the FINRA search page to immediately review your advisor’s regulatory disclosures!

Sources:
The Market for Financial Adviser Misconduct (Egan, Matvos & Seru, 2016)
Bloomberg


Don’t Mix Your Politics and Your Investments

  • February 11, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior, Best Practices, Scams & Schemes

money-in-politicsSalespeople and product-sales organizations are very astute at selling during political stress.  They usually find a hook to sell their products…products that in most cases are not really in your best interest.

As Mike Piper points out in the Oblivious Investor, fear is a powerful sales tool.  Salespeople exploit a person’s political views to instill fear and ultimately sell undesirable financial products. Those products are not only intrinsically bad, they come with a huge cost.

The pitch goes something like this,

  1. [Political event X] just happened or is likely to happen.
  2. As a result, the economy will take a nosedive.
  3. You should buy my product to protect yourself.

This strategy is popular because it appeals to people of vastly different political views.  To lure in investors with left-leaning views, the pitch evokes a narrative that the markets are rigged by the financial elite.  To draw in the right end of the spectrum, the pitch emphasizes over taxation, over regulation, or excess government spending.

The technique is also popular because it can be used to sell just about anything…

  • The economy is going to hell, and that’s why you should buy gold.
  • The economy is going to hell, and that’s why you should buy my market-timing newsletter.
  • The economy is going to hell, and that’s why you should buy this annuity.
  • The economy is going to hell, and that’s why you should invest in my hedge fund.

If the fact that someone is trying to play you with a sales pitch designed to sell any product to two contradictory sets of beliefs isn’t enough to drive you away, consider this.  For the recommended product to be right for YOU the following conditions have to be met:

  1. The salesperson’s political prediction must be right
  2. The salesperson’s economic prediction must be right
  3. The salesperson’s product must indeed be a good solution to the proposed scenario

Good luck getting all that to be true!

Source: OI


Index Card of Personal Finance Essentials

  • January 28, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior, Best Practices

Simplicity is a great foundation and powerful foil to unnecessary complexity.  University of Chicago professor Harold Pollack champions this approach to personal finance and dashed out this index card to make his point.

pollack-card-800x600

We work with our clients to go above and beyond the common sense, but it’s built upon a strong foundation of essentials similar to Dr. Pollack’s.


Bear Market Truths

  • January 7, 2016/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior, Best Practices, Investing 101

10truthsWith the new year off to an anxious start for investors, perhaps it’s a good time to remember some essential facts about down markets.  Ben Carlson provide a great run down of 10 bear market truths:

1. They happen. Sometimes stocks go down. That’s why they’re called risk assets. Half of all years since 1950 have seen a double-digit correction in stocks. Get used to it.

2.  They’re a natural outcome of a complex system run by emotions and divergent opinions. Humans tend to take things too far, so losses are inevitable.

3. Everyone says they’re healthy until they actually happen. Then they’re scary and investors who were looking for a better entry point begin to panic.

4. The majority of the people who have been scaring investors by predicting a bear market every single month for the past seven years will be the last ones to put their money to work when one actually hits.

5. It’s an arbitrary number. I have no idea why everyone decided that a 20% loss constitutes a bear market. The media will pay a lot of attention to this definition while it doesn’t matter at all to investors. The 1990s saw zero 20% corrections but two 19% drawdowns. Stocks also lost 19% in 2011. Does that extra 1% really matter?

6. Buy and hold feels great during a long bull market. It only works as a strategy if you continue to buy and hold when stocks fall. Both are much easier to do when stocks rise.

7. Your favorite pundit isn’t going to be able to help you make it through the next one. Perspective and context can help, but there’s nothing that can prepare an investor for the gut-punch you feel when seeing a chunk of your portfolio fall in value.

8. History is a broad outline of what can happen in the markets, not what will happen. Every cycle is different.

9. They’re very difficult to predict. All of the valuations, fundamentals, technicals and sentiment data in the world won’t help you predict when or why investors decide it’s time to panic.

10. These are the times that successful investors separate themselves from the pack. Most investors mistakenly assume that you make all of your money during bull markets. The reason so many investors fail is because they make poor decisions when markets fall.

Source: AWCS


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