Monday, November 21, 2016

Not Even the So-Called Geniuses Can Predict What the Stock Market Will Do!


Not even the so-called geniuses can predict what the stock market will do!


We
ll, let’s begin with some humor. In case you may have missed it, we just elected a new president.

Just a little after midnight on Election night, Dr. Paul Krugman in his capacity as a columnist for The New York Times wrote a column headlined, PaulKrugman: The Economic Fallout in reaction to the results of the of the Presidential election. Here are the first three paragraphs of that column:
It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover?
Frankly, I find it hard to care much, even though this is my specialty. The disaster for America and the world has so many aspects that the economic ramifications are way down my list of things to fear.
Still, I guess people want an answer: If the question is when markets will recover, a first-pass answer is never.
Okay. Now hear me out. If you’ve followed my work for any amount of time, you may have heard me say what I am about to repeat perhaps a few dozen times already, so pardon the repetition, but it seems like I am going to have to keep making this point. 

When it comes to precisely what the investment markets are going to do, no one anywhere on this planet knows. It doesn't matter their level of education, net worth, eloquence, or which TV network, magazine or newspaper they write for – they can’t predict the future. Period. End of story.

Please don't fall for any of this prognostication nonsense, as it is indeed one of the fastest ways to destroy your hard-earned wealth.

Now back to Dr. Krugman’s column. According to him, the markets will “never” recover. Wow – how scary. Did you know that the very markets about which he made that comment recovered within a matter of hours? By the very next morning when the sun came up, they had rebounded. Not only that, but on top of it all, they’ve hit an all-time high since then.
Talk about ridiculous assertions without any real basis in fact that couldn’t be further from reality. Imagine those unsuspecting folks who woke up the day after the elections to this column by a man who, in many respects, is an accomplished academic – an economics professor who has taught at prestigious institutions and a Nobel Prize recipient – and based on his column took action with their investments. They would have made a terrible mistake, wouldn’t they? Exactly. That is what I am cautioning you against. 
There are many people like Dr. Krugman out there. They have very impressive backgrounds, have won many accolades, and have really loud megaphones. But you should never, ever lose sight of the indisputable fact that none of these folks has ever won an award for accurately (and consistently) predicting investment markets. All they do is state their opinions.
Do not confuse opinions for facts, and certainly never make investment decisions based on them.
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Visit LaserFG.com or call 877.656.9111 right now to book your complimentary, 
confidential consultation with a financial professional who has your best interest at heart and who is willing to ask the right questions to help you make a plan that will get you where you want to go. Youll be paired with an experienced financial professional who can help you plan for a secure future, regardless of your current financial situation. Retirement planning means planning for ALL aspects of your life after retirement. If youre ready, were here to help.

Monday, October 31, 2016

Here’s Why Purchasing a CD at Your Bank is NOT Risk Free

Here’s Why Purchasing a CD at Your Bank is NOT Risk Free
There’s an advertising campaign being run on television by a credit union in the Maryland area. The essence of the message they’re trying to get across is that by investing in this institution’s certificates of deposit (CDs), you’d get to earn interest rates that exceed the national average without any risk – the ad specifically uses the words risk free, which I believe is totally preposterous. Why so?
You might be thinking there’s nothing inaccurate here. CDs are known to be safe, and therefore have no risk. I can understand that train of thought. However, it’s not an accurate portrayal of the real situation, because when it comes to saving/investing your money, risk comes in various forms. So that I don’t get overly technical, let’s consider risk from just two perspectives.
First of all, there’s the risk that is associated with the stock market’s movements that could drop the value of your account at any particular time. You could even end up losing everything. For most of us, this is what we think about when we hear the word risk as it relates to our money. That is correct and a very real risk, I might add. It’s why many people choose to go with CDs in the first place. But there is more to the risk than that.
The second type of risk I want to bring to your attention involves a situation where you could end up losing your money due to impropriety or bad management of a company that could result in it going out of business. This is also very real and happens all the time (especially with banks and credit unions), doesn’t it?
Now here’s the million dollar question. While it’s true that the first type of risk associated with fluctuations in the market is avoided when you buy a CD at a bank or credit union, isn’t the second type of risk still present? While you are thinking about it, have you ever wondered why in the world banks like to proudly remind us of the fact that our deposits are insured by the FDIC? Would we need FDIC protection on something that is “risk free”? Of course not.
As I have always maintained, people are smart and know exactly what they want for themselves and their loved ones. The financial industry as a whole owes it to the hard-working folks who depend on us to make sound decisions to give them pure, straightforward, factual information without any semantics. Is this too much to ask?  
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Visit LaserFG.com or call 877.656.9111 right now to book your complimentary, 
confidential consultation with a financial professional who has your best interest at heart and who is willing to ask the right questions to help you make a plan that will get you where you want to go. Youll be paired with an experienced financial professional who can help you plan for a secure future, regardless of your current financial situation. Retirement planning means planning for ALL aspects of your life after retirement. If youre ready, were here to help.

Tuesday, September 6, 2016

What Every Retirement Investor Must See (and Take Note) from the Recent EpiPen Saga


What Every Retirement Investor Must See (and Take Note) from the Recent EpiPen Saga


Mylan Pharmaceuticals, the maker of EpiPen, has been in the news lately regarding some astronomical increases in the price of its life-saving drug. My mission with this column is not to opine about the details of that move one way or the other. No doubt, a lot has been said in recent days to that end.

What I want to point out is a valuable lesson that every stock market investor must glean from this story. There is a fundamental principle to building a prudent investment portfolio that we can all learn from this situation – and I really do hope that people will not get complacent and ignore this lesson.

What exactly am I talking about? What does a decision by some company fatcats to jack up prices have to do with your retirement portfolio? Allow me to explain myself. Since you do not and cannot control any bad business decisions and/or actions that company executives might take which could, in turn, lead to serious stock price and revenue repercussions, it behooves you to pay particular attention to the good old rule about prudently diversifying your investments. Most of us tend to get carried away and ignore this rule.

But the fact of the matter is that on any given day, we may wake up to news of some event that could potentially depreciate a company’s stock price or even wipe it out all together – and with it could go our hard-earned wealth. In this particular case involving Mylan Pharmaceuticals, you may have heard reports that the company’s stock value sank by somewhere in the neighborhood of 3 billion dollars in just a matter of days; what you must understand is that every cent of that loss represents somebody’s wealth. My hope is that those folks have properly diversified their portfolios, rather than dedicating significant portions of their investments to this one company’s stock.

Is your portfolio heavily dependent on just one or a few companies? No company is inoculated from an event that could be catastrophic for its stock price. It does not matter how large, smart, or long any such company has been around. And it certainly doesn’t matter whether several generations of your family have been employed by this company.

What do WorldCom, Enron, Global Crossing, Washington Mutual, and Lehman Brothers have in common? They were all wiped out. It is however extremely crucial to note that right up until the very day and very moment that each of them basically evaporated from this planet, they were considered large and stable.

I hope that I’ve made my case. My very best to you.
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Visit LaserFG.com or call 877.656.9111 right now to book your complimentary, confidential consultation with a financial professional who has your best interest at heart and who is willing to ask the right questions to help you make a plan that will get you where you want to go. Youll be paired with an experienced financial professional who can help you plan for a secure future, regardless of your current financial situation. Retirement planning means planning for ALL aspects of your life after retirement. If youre ready, were here to help.

Monday, July 18, 2016

Why Passive Fund Management Outperforms Active Fund Management

Why Passive Fund Management Outperforms Active Fund Management



In my most recent post I made a broad ten-thousand-foot-level argument as to why making frequent changes to an investment portfolio – whether in reaction to or in anticipation of what the stock market/economy might do – is destructive behavior.

Today, I would like to get a little more technical and specific, because I believe this is such a serious issue that is the main driver in determining whether you’ll see tangible results from your years of hard work and investing or you’ll end up otherwise, without anything to show for your efforts.


Active vs. Passive Management


One of the main choices you must make as an investor is deciding the manner in which you want your portfolio to be managed: actively or passively. In active management, a mutual fund manager attempts to predict what will happen next and which stocks/bonds are going to win, so to speak. This is called active management because it involves constantly selling and buying stocks/bonds and changing things up in an attempt to “beat” the market. Personally, I don’t support this form of investing because in order for it to work, you’d need a fund manager who could actually precisely predict what the markets will do in the future. Common sense tells me that’s impossible. But let’s just leave it at that for the moment.

The alternative is passive management which, in contrast, understands that since the market’s movements are random and unpredictable, the most effective thing to do is to invest in an entire asset class/index and leave the investments alone. The goal of this approach is to capture/duplicate the market’s returns, not attempt to beat it, as in the case of actively managed funds. 

Now let’s get back to the argument at stake. Is constantly trying to make changes to a portfolio based on day-to-day events (active management) really destructive for your investments?


The independent investment research firm Morningstar publishes a report called Active/Passive Barometer, which gives us a glimpse of how these two opposite approaches at managing investments hold up against each other. Here is a quote from the report’s executive summary:


…The report finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons, and experienced high mortality rates (that is, many are merged or closed)…
Now here’s my humble opinion: Attempting to actively manage investments hasn’t worked so far, which should not be surprising at all. Human beings cannot predict the day-by-day movements of a completely random and unpredictable market. As the report found, not only are these active funds failing miserably, but they also have “high mortality rates” – they have such bad results that they end up closing.
Think about it and invest your money prudently. My very best to you.


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Visit LaserFG.com or call 877.656.9111 right now to book your complimentary, confidential consultation with a financial professional who has your best interest at heart and who is willing to ask the right questions to help you make a plan that will get you where you want to go. Youll be paired with an experienced financial professional who can help you plan for a secure future, regardless of your current financial situation. Retirement planning means planning for ALL aspects of your life after retirement. If youre ready, were here to help.

Monday, June 13, 2016

Why You Should View Frequent Investment Portfolio Changes as a Sign of Serious Trouble

Why You Should View Frequent Investment Portfolio Changes as a Sign of Serious Trouble


Many unsuspecting investors do it all the time. Any time the stock market makes the news – good or bad – they react by making changes to their existing portfolios. Sometimes the changes are initiated by the investors themselves, but other times the advisor suggests the changes, convincing the investor to go along.

Am I implying that making changes to your investment portfolio is a bad thing? Essentially and for the most part, yes – except in the case of rebalancing your portfolio back to its targeted allocations, which technically speaking isn’t considered a change in your portfolio. Here’s why.

You visit an advisor. He or she helps you put together what virtually any financial professional would claim is the best possible portfolio to help you achieve your long-term financial goals, be it retirement or college funds for your child or grandchild. Then in a matter of just a relatively short period, without any significant changes in your life that necessitate altering your investing profile, you need to make changes?

Let’s think carefully about that picture. What does it tell you about an advisor if they are constantly moving funds around? I interpret it along these lines: they don't really know what they’re doing, where they’re going, or how to get there. They were hoping this portfolio they suggested might do the trick. But, now, based on what the stock market is doing, they think that other one will be better instead. Does this sound like what you want your advisor to be doing with your hard-earned investment money?

It’s interesting, but some people actually see this destructive behavior as a sign that a financial advisor is smart and on top of things. The opposite is true, in my opinion, simply because no one can predict what is going to happen tomorrow. So if your investment strategy revolves around reacting to short-term market movements, you should think twice. In fact, any time your advisor alters your portfolio in this manner, it is indicative of only one thing: that he or she got it all wrong previously. Isn’t it?

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Visit LaserFG.com or call 877.656.9111 right now to book your complimentary, confidential consultation with a financial professional who has your best interest at heart and who is willing to ask the right questions to help you make a plan that will get you where you want to go. Youll be paired with an experienced financial professional who can help you plan for a secure future, regardless of your current financial situation. Retirement planning means planning for ALL aspects of your life after retirement. If youre ready, were here to help.

Monday, May 16, 2016

Exaggeration or Cold Hard Truth that Most Financial Advisors are Full of Hot Air?

Exaggeration or cold, hard truth that most financial advisors are full of hot air?

I might be over-exaggerating things here, or perhaps the situation is just as dire as I perceive it – that so many hard-working people out there are getting what amounts to shoddy treatment from the so-called financial advisors, consultants, or what-have-yous they’ve turned to for guidance to secure their financial futures.

Here’s why I am saying this. Quite often, I meet and/or talk with folks who by any reasonable standard were given bad financial advice which led them to invest their hard-earned money in the wrong products – things that ended up giving them less than optimal benefit. On the other hand, however, the advisors always end up receiving their paychecks.

For these unsuspecting folks I have personally met, this usually is a wake-up call, but how many more out there aren’t even aware that they are not getting the best bang for their efforts and money? Unfortunately, I think many of these shady advisors are getting away with this unacceptable behavior.

When you go to talk to a financial professional about your retirement, you would expect to get only the best suggestions. However, based on what I see in my practice on an almost-daily basis, it seems to me that the vast majority of people tend to end up with some cookie-cutter, off-the-shelf advice and products without any real emphasis on their unique set of circumstances.

So, again, I ask: Am I over-exaggerating what’s happening out there? Of course this doesn’t apply to every financial advisor. There are certainly some great advisors out there who are actually going above and beyond to help their clients get the best possible outcomes. In fact, isn’t this exactly and precisely what people should expect from any financial professional they might talk to? Why should that be the exception instead of the norm?

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Visit LaserFG.com or call 877.656.9111 right now to book your complimentary, confidential consultation with a financial professional who has your best interest at heart and who is willing to ask the right questions to help you make a plan that will get you where you want to go. Youll be paired with an experienced financial professional who can help you plan for a secure future, regardless of your current financial situation. Retirement planning means planning for ALL aspects of your life after retirement. If youre ready, were here to help.

Monday, April 18, 2016

Unfortunately, Your Old 401k Isn’t Just Sitting There

Unfortunately, Your Old 401k Isn’t Just Sitting There

Your old 401(k)s isn’t just sitting there. And that is not unique to you — no one’s 401(k) ever just stays put, whether you are actively contributing to it, no longer contributing to it, or no longer employed by the employer offering it. This is the gist of a conversation that I had with someone a few weeks back.

This individual was under the impression that her 401(k) from her previous employer was simply going to stay put, now that she was no longer a part of that organization. In her estimation, nothing would happen to her money except that over the years she could expect to see some growth.

Based on my interactions throughout the years, many unsuspecting folks unfortunately seem to operate under this same erroneous assumption that could potentially lead to costly unintended consequences — as you are about to see in just a moment.

401(k)s, like any other similar investment vehicles, have certain fees associated with them.
In my opinion, one of the most dreadful things surrounding these plans is that these fees are not disclosed anywhere on the statements you receive as being deducted from your account balance, because they are deducted directly from your returns.

For example, say that the fees associated with your 401(k) were 1.5 percent a year. If your investments earned, say, a 6 percent return for the year, you’d only end up seeing an increase of 4.5 percent (6% minus the 1.5% fee). Yes, you can say that the fees get paid on the back end.

In the case of the individual with whom I had the above mentioned discussion, I was able to dig out the associated fees on her old 401(k) from her former employer’s Summary Plan Description document.
And it wasn’t great news. As an employee, her fee was approximately 1.5 percent annually. However, once she was no longer actively employed by the organization, it increased to 2.5 percent. I must note here that this practice isn’t unusual in the 401(k) world. It’s pretty standard for your fees to increase when you are no longer part of the sponsoring employer’s workforce. A good question is: How many folks out there are aware of this? Do you know how much you are paying in fees? The fact is that these fees matter a lot, because they directly affect the outcome you’ll end up having when the rubber finally meets the road.

Let’s assume this individual had about $100, 000 in this old 401(k), and it will earn a return (before fees) of 8 percent a year for the next 10 years. If she were still employed at the company offering the plan, her net return after deducting the 1.5 percent in fees would be 6.5 percent. In 10 years, her money would have grown to about $191, 218. Unfortunately, however, since she is no longer an active employee, her fee goes up to 2.5 percent, meaning her net return comes down to 5.5 percent, which equates to a balance of $173, 107 at the end of those 10 years. That comes to about $1, 811 extra fees a year ($18, 111 over those 10 years).

This lady thought all along that her money was just sitting there; she learned the hard way that this isn’t the case because that is not how investment accounts of any kind work. This realization gives her the opportunity to seek an alternate investment account that will get her the same or a potentially better return, but with a lower fee structure so she’ll come out ahead and end up keeping more of her money. And from where I am sitting, isn’t that the goal of every hard working investor?

When it comes to your old — or current — 401(k), are you asking the right questions, or simply making assumptions?

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Visit LaserFG.com or call 877.656.9111 right now to book your complimentary, confidential consultation with a financial professional who has your best interest at heart and who is willing to ask the right questions to help you make a plan that will get you where you want to go. Youll be paired with an experienced financial professional who can help you plan for a secure future, regardless of your current financial situation. Retirement planning means planning for ALL aspects of your life after retirement. If youre ready, were here to help.