David Hultstrom of Financial Architects puts out a great quarterly newsletter for financial advisors (and a great one for investors as well). In the most recent version of his advisor newsletter, he posted the following chart below with some great commentary that I wanted to share with you. The average compound return (i.e. geometric) is 9.75% (red line). Only in 1992 did an annual return round to 10%. In only 5 out of the 93 years was it even within…
I’m going to continue my poker theme. Last week, I drew a comparison between poker and your odds of success as an individual versus the best in the world. This time, we’ll discuss how fund managers compete against each other and where you might have an advantage over these fund managers. Let’s say you had the opportunity to walk the floor at the World Series of Poker. The final table is all set, so all that’s left is the best…
Imagine your friend invites you out to play a friendly game of poker. You agree to go, because why not, right? Should be fun! Once you sit down at the table that evening, you find out that the players you’ve just sat down with are the best poker players in the world. They are the stars from the World Series of Poker – each of them accumulating millions of dollars in winnings. Like your chances to win the game? That’s…
Putting cash to work rather than waiting for things to “settle down.” Being patient during flat markets. Staying optimistic when the market seems to be burning down around you. Selling out of a winning company or fund that you’ve held for a long time to diversify your risk. Voluntarily recognizing capital gains and paying the associated taxes to de-risk your portfolio. Evaluating your portfolio based on where you stand in relation to your goals rather than comparing it to a…
In a recent Morningstar article titled, “Do Investors See Financial Advisors As Behavioral Coaches?“, Samantha Lamas discussed survey results regarding what investors find most valuable about financial advisors. What I found most interesting wasn’t what rated highly, but what rated poorly. In the survey, Morningstar asked individual investors to rank a specific set of attributes by order of importance. The list of attributes is here: In particular, many planners (myself included) believe one of the most valuable things we bring…
As a Retirement Planner, I eagerly await the release of J.P. Morgan’s Guide to Retirement. It is essentially a booklet of slides filled with a ton of great information impacting retirees. Making it even better, it often highlights things that are regularly overlooked by just about anyone (including professionals) planning for retirement today. With that in mind, I’ve selected 10 charts that I think everyone transitioning into retirement should see with a little commentary on each. Every chart comes directly…
As I insinuated in my post three weeks ago, the media has a dichotomistic (made that word up) way of looking at the market. We’re either nowhere near the top or it’s all going to hell in a handbasket. The middle ground is pretty much nonexistent because it doesn’t sell advertising. So, each day, they choose one of two templates – pander to fear or cater to greed. Given the typical information diet of retirees, making smart financial decisions during the media’s…
This one is a bit of a softball, and you can probably guess what my answer is. But given that the end of the year was yet another apocalypse du jour and that retirees often worry themselves into making poor portfolio decisions during that sort of event, I wanted to discuss it in more detail. During the final quarter of 2018, the S&P 500 declined almost 14%. Just prior to 4Q 2018, the financial media was naturally (conveniently?) bullish as…
A friend of mine has a client that inquired with disappointment that his account was down 2.5% when the S&P was up 0.5%. He wanted to know why his portfolio was performing so poorly by comparison to the S&P. At the time of this inquiry, the S&P was up 0.5%, Small Cap was down 5% and International was down about 15%. This has been a pretty typical refrain for many investors over the past 10 years as the S&P has…
The words we use are important. When you hear the term “stock market,” what immediately comes to mind? Recently, I completed an informal survey asking that very question of various non-financial industry connections and the number one response was “risky.” I think part of the reason people view investing as risky has something to do with the term we use when referring to the assets we are purchasing — stocks. “Stocks” at an emotional level have no personalities, no balance…