Monday, January 19, 2015

Do You and Your Financial Advisor Have the Right Expectations about the Stock Market?

Do You and Your Financial Advisor Have the Right Expectations about the Stock Market?

The stock market on recent days can be described as a anything but smooth for most investors. And that's somewhat understandable, because we all want to experience the continued growth of our investments.

Most advisors, on the other hand, are scrambling to manage clients emotions vis-a-vis encouraging them to hang in there. Isn't this all too familiar? Of course it is. Its precisely what happens every single time the market enters undesirable territory.

But is this what investing in the stock market is supposed to be? An uncomfortable, highly emotional rollercoaster journey that has you living on the edge pretty much the whole time?

I believe that investing in the stock market shouldn’t be a nerve-racking ordeal. But in order to free yourself from what basically amounts to unnecessary drama, you must adhere to the scientifically proven investing approach that dictates three simple rules:

1: Avoid stock picking and focus instead on capturing market returns by building an efficient, diversified portfolio with a risk level you can live with.

2: Understand that the market will always fluctuate! Sometimes it will go up and sometimes it will dip. There’s nothing that you or anyone can do about it.

3: Use the market’s volatility to rebalance your portfolio and move on with your life.

As simple and logical as these proven rules may sound, failing to adhere to them could end up costing you countless moments of sleeplessness and unnecessary panic. 
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Want help making and KEEPING your financial resolutions? Contact us so that we can help you to  objectively evaluate your current situation and hold you accountable to make the changes you want to make. Visit LaserFG.com or call 877.656.9111 right now to book your complimentary session

Monday, January 5, 2015

1 Step to Resolving to Save or Increase Your Savings in 2015

1 Step to resolving to save or increase your savings in 2015
Happy New year to you! We’ve made it, and I wish you and your family nothing but the absolute best of luck in the days and months ahead! Whatever your resolutions are, I hope that you accomplish them.

Right off the bat, I’d like to be crystal clear that what I’m going to talk about here is in no way, shape, or form intended as a condemnation. Not at all. Rather, my intention is to encourage the person who needs to hear the truth in no uncertain terms about making a resolution to change certain spending habits in order to start or increase their savings.

Having said all that, if you are one of those folks who’s hoping to change your spending habits, here are a few suggestions to help you put the nail in the coffin this time around.

First of all, I’d like to congratulate you for admitting that you need to change certain spending habits. That’s really significant, because many with this issue never admit that to be the case, and by so doing simply keep the cycle going, digging deeper and deeper. So kudos to you for making that admission in the first place.

Secondly, I would suggest that if you are really serious about making such a change, you find an experienced advisor who will actually help you to make things happen. I’m not implying that you are incapable of fixing things on your own, but here’s what you must understand: we are all creatures of habit, especially when it comes to spending control. Sometimes, the only effective way to turn things around is by actually forcing yourself to do it – by not having that money available to spend in your checking account.

In other words, if you expect to suddenly become disciplined with your spending habits simply because the clock rolled over to 12:01 a.m. on January 1st, with all due respect, you are kidding yourself. That’s probably not going to happen. I’m just guessing here, but you didn’t just realized all of a sudden that your spending habits need some work, did you? Of course, you’ve known or expected there might be some unwanted behavior happening. But why did you postpone making a change you know will be better for you until the New Year? I think you get the point. Changing your spending habits can certainly be challenging, so we need to encourage you (or, perhaps, force you) to do it.

The other reason you shouldn’t try it at home by yourself is that your mind will play tricks on you by coming up with bogus, fear-centered reasons not to make the change. For example, if you start/increase your savings, you won’t have enough money to pay other pressing bills. That’s why you need a good financial advisor to help you pull it off. He/she can and should show you exactly how much you have to work with by laying out your expenses versus income. This will let you see exactly how much discretionary money you have available.

Here’s my challenge to you: Make the call, set the appointment, and let the paper do the talking – not your inner voice, which in this case might very well be corruptly biased.
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Want help making and KEEPING your financial resolutions? Contact us so that we can help you to  objectively evaluate your current situation and hold you accountable to make the changes you want to make. Visit LaserFG.com or call 877.656.9111 right now to book your complimentary session

Monday, December 22, 2014

Every time the market tumbles, people ask the SAME question

Every time the market tumbles, people ask the SAME question

On a fairly regular basis I get questions from folks – about financial planning, of course – either via the “Ask Your Question” portal on our website or through face-to-face interactions. Speaking of which, every once in a while such an interaction involves a total stranger walking up to me because they recognize me from one of the area magazines for which I write columns. I must mention that I find those moments to be refreshingly rewarding, not that I’m seeking them out.

This past week I stopped by a local coffee shop to grab my must-have chai latte. Out of nowhere, a woman walked up to me and asked if I was who she thought I was – the investment advisor guy in the magazine? After exchanging a few pleasantries, she got to the financial question of the day: What in the world is going on with the stock market? Look at what the DOW (Dow Jones Industrial Average) is doing – is this a sign of the next crash? Should I get out now?

That’s a fairly familiar line of questioning anytime things aren’t headed up, up, up with the stock market. And I understand folks’ desire to know exactly what the deal is, especially given that the past week or so has been pretty chaotic with the DOW sliding by 732 points. It was at 17,801 on December 9. A week later, on December 16, it was down to 17,069. Of course, as of last Friday, the DOW was back to 17,804 - My coffeehouse encounter happened prior to that.

Here was my response to her and, for that matter, to anyone with a similar question:

I don’t know what’s going to happen tomorrow. Never have and never will. And the same goes for every single financial advisor or expert you see in the media. Yes, no one knows exactly what’s going to happen.

And here’s the simple proof to back up my point: to date in the history of this planet, no one has been able to consistently and successfully predict the market’s exact path, beyond what everyone already knows – or more appropriately, must know by now – that sometimes the market goes up and sometimes it goes down. Period! And period again!

You may be wondering, but what about all these smart looking, eloquent folks you see on TV or hear about on the radio? They can’t predict the future either. I think what a lot of us tend to do is confuse someone telling you what has already happened in hindsight as forward–looking, but they are two completely different things. What most of these so-called media experts are doing doesn’t require any special powers, so to speak. There’s a reason we refer to that as Monday Morning quarterbacking.

So here’s the point I’m trying to get across. Don’t waste your emotions on the direction of the stock market, my dear friend, because the markets are going to do whatever they are meant to do. That doesn’t, however, mean to even suggest that you should simply buy a couple stocks or mutual funds and just forget about the rest.

There is such thing as a scientifically proven means to properly diversifying your investments so that you can capture market returns without needing to speculate and trying to do the impossible task of predicting (or worse, letting someone else fool you by telling you that they can predict) market movements.

I’d recommend that you work with someone who can help you to build an efficiently diversified portfolio with a volatility that you can live with. And then go about your daily life.
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Want an independent assessment to confirm that you are on the right track when it comes to saving for your retirement, including the money you will leave to your heirs? Come in so we can help you to  objectively evaluate your current approach. Visit LaserFG.com or call 877.656.9111 right now to book your complimentary session

Monday, December 8, 2014

If Your Financial Advisor Is Doing This, Tell Him/Her, “You’re Fired!”

If Your Financial Advisor Is Doing This, Tell Him/Her, “You’re Fired!”

Imagine a doctor who, when you consulted with him or her, allowed you, the patient, to tell him/her the medications you wanted, down to the exact dosage – and then pulled out a pad and wrote precisely that prescription. Should you – or would you – visit with such a physician? Of course, not! You’d be wise to stay as far away as you possibly could.

How about this other doctor? He or she speaks with you at length, makes a diagnosis, and decides that you need some antibiotics. However, he/she then gives you a list of say 15 to 20 different types of available medications, asks you, the patient, to choose, and then writes the prescription based on your choice. Would you deal with such a doctor?

Only a person who doesn’t value his or her life would have anything to do with either of these doctors. I’d even bet that if there were such doctors in real life, it wouldn’t be long before they’d lose their licenses to practice. I imagine they might even wind up behind bars.

Now let’s look into the way so many financial advisors, consultants, specialists, or whatever fancy-schmancy title you can come up with, operate. They talk with you; you tell them which product you want, like an IRA or a mutual fund. And what happens next? You get a list of available funds from which to choose. So you do your thing and there you go, your account is all set up. Or maybe you answer some quick questions on a computer program and a nice pie chart pops up with your available options – from which, you the client, make the actual selections for your account.

That may sound fairly familiar and even normal, but here’s the unfortunate thing: It’s a horrible way to plan your future! How different is that from the bad doctor scenarios I mentioned earlier? Just think about it. If your so-called financial advisor is asking you to make all the nitty gritty selections regarding your investment portfolio, you’re basically writing your own prescription. And the most incredible part is that, the advisor, the one with the license and “expertise” to guide you, is ultimately letting you do their work – and he/she still gets paid from your money. Is that how things are supposed to work? Of course not! The sad thing is that this is exactly the way that easily 9 out of 10 advisor-client roles are playing out at this very moment. Is it any surprise, then, that more and more folks have practically nothing tangible to show after all their years of hard work and investing?

Just so we are clear, I’m not suggesting by any measure that you should simply hand over your money and have no input. Of course you should set boundaries regarding what you can live with and expect out of your investments. But if the person with the training and license to actually write the prescription is leaving all the decision-making up to you, simply based on your intuition, why are you paying them? Maybe these so-called advisors prefer this setup because it works in their favor when it comes to being held fully accountable: “Hey, if I let you make your own selections, you can’t blame me later if you’re not satisfied.”

My dear investor, are you working with a REAL advisor? Or are you just paying someone to watch you do eeny-meeny-miny-moe with your future?
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Want an independent assessment to confirm that you are on the right track when it comes to saving for your retirement, including the money you will leave to your heirs? Come in so we can help you to  objectively evaluate your current approach. Visit LaserFG.com or call 877.656.9111 right now to book your complimentary session

Monday, November 24, 2014

What has the BIGGEST impact on your portfolio returns? The answer might surprise you

What has the BIGGEST impact on your portfolio returns? The answer might surprise you

In my last column I made the case for why it’s such a terrible idea – a lost cause, even – for trying
to pinpoint the best times to get in and out of the stock market. I’m hoping I was able to convince you to take that impossible, wealth-eroding enterprise off of your must-do list.

Today, I want to continue that discussion, but from a slightly different angle: By how much would you enhance the returns on your portfolio if you were able to perfectly time the stock market’s movements?

I must point out that we both already know this isn’t possible, but for the sake of this discussion, let’s say you or your financial advisor somehow had the proverbial crystal ball.

I think it’s a fantastic question, because the answer will really help you to decide whether it’s even worth the effort. At the end of the day, what it all comes down to is getting a good return on your savings, period.

According to the widely used Brinson, Hood, and Beebower (BHB) study into what really makes up the returns on a portfolio, here’s how an investment portfolio’s return breaks down:

  • Market timing: 1.8%,
  • Stock selection: 4.6%,
  • Other factors: 2.1%,
  • Asset allocation: 91.5%.
So say that a given portfolio earned 10 percent. Market timing will have contributed 0.2%, stock selection 0.5%, other factors 0.2%, and asset allocation 9%.

Now let’s put things into perspective. All things being equal, if you (or your financial advisor) were able to perfectly time the market by accurately predicting its exact movements with no error whatsoever, choose the right stocks/bonds, as well as arrange every other detail you feel is essential for the perfect portfolio investment, but got your asset allocation wrong, you’d have ended up with only a 1% return.

On the other hand, if you nailed your asset allocation (the broad proportionate mix of equities/bonds/cash) but botched the other three areas – including market timing, because you went about your daily business without constantly trying to predict what’s going to happen in the market on the next day – you’d have earned 9% out of the 10% return in this example.

So, my friend, you’ve got to focus on where the money is really going to come from – your broad asset allocation strategy – instead of wasting your time, energy, and emotions trying to time/predict the market for negligible results. And while on the subject, let me remind you once again that you shouldn’t allow the talking heads on TV, radio, or in print media to take you on a rollercoaster ride that could potentially rob you of what matters most.
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Want an independent assessment to confirm that you are on the right track when it comes to saving for your retirement, including the money you will leave to your heirs? Come in so we can help you to  objectively evaluate your current approach. Visit LaserFG.com or call 877.656.9111 right now to book your complimentary session

Monday, November 10, 2014

Now is a TERRIBLE time to get back in the stock market

Now is a TERRIBLE time to get back in the stock market

No, this is not intended as a joke, and I’m fully aware that it runs completely counter to the conventional “wisdom” of the media these days. Perhaps your own financial advisor is even busy encouraging you to take the plunge you’ve been resisting up until now, but if you’re one of the folks who, for one reason or another, are wondering whether or not now may be the right time to get in the stock market, my unequivocal answer to you is no, no, and no! Please don’t!

Here’s why. Trying to pinpoint a good time to get into and, for that matter, out of the stock market is an impossible task. No one has ever had the ability to predict that, nor will they ever be able to do that. If anyone tells you otherwise – that they know the specific times for you to get in and/or out of the stock market – I’d suggest you don’t walk, but run as fast as you can away from him/her. Whether it’s a website or an app or a TV “expert,” run, because if you don’t, you’ll end up destroying the very thing you’re trying to enhance: your financial future.

If you cannot handle the gyrations of your portfolio that led you to get out of the stock market in the first place, I suggest you simply stay out, because trying to time the market is not possible and you’re more likely to end up derailing your future. According to a recent study released by the independent research firm DALBAR, although the S&P 500 Index has averaged an 11.10 percent annual return over the past 30 years (1983 through 2013), the average person who owned an equity-based mutual fund over the exact same period earned only 3.69 percent!

Of course, many things may account for this dismal outcome. However, the data clearly points to a telling revelation that trying to time the market has failed terribly – as it always has and will continue to do. Over the 30-year period the survey covered, the average individual held any particular fund position for only 3.31 years.

Now here’s what has worked beautifully for our clients. Work with your advisor to design a broadly diversified portfolio with a risk tolerance you can live with and clear benchmarks/expectations to measure your progress along the way, and rebalance when appropriate.  Then let the portfolio actually do what it’s supposed to do. The real hurdle for you as an investor is finding a financial advisor who’s disciplined enough and has the guts to help you stay disciplined so that you can achieve your goals.
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Want an independent assessment to confirm that you are on the right track when it comes to saving for your retirement, including the money you will leave to your heirs? Come in so we can help you to  objectively evaluate your current approach. Visit LaserFG.com or call 877.656.9111 right now to book your complimentary session

Monday, October 27, 2014

What's The Biggest Mistake That Will Affect Your Retirement?

What's the biggest mistake that will affect your retirement?
This past week I found myself in a conversation with someone who, upon learning about my line  of work, asked what I believe to be an extremely crucial question. I’d even venture to say that, in my humble opinion, it is the most important question every single person accumulating a retirement nest egg needs to ponder:

What is the one prevalent mistake
most folks make to hurt their retirement aspirations?

I’ll admit that the question came as a bit of a surprise to me, because the line of questions I usually hear in such settings has more to do with which stocks/funds people should own or what my thoughts are about folks’ current investment allocations.

That said, here is my answer to the current – and crucial – question.

Most folks spend their entire working years believing that all it will take to have the retirements of their dreams – moneywise, of course – is to focus on saving as much money as they possibly can.

Make no mistake: I’m not saying that saving as much money as you can is not a good thing. It is very important, but it’s not all you’ll need to do if you intend to hit a financial home run. The KINDS of investments you’re pouring your contributions into is far more important, in the sense that if you have a bunch of lousy underlying securities/funds, no amount of money is going to change that reality. Instead, you are likely going to end up wasting most or all of the money and the effort you put in.

What if you discovered that your investment vehicle had unusually high fees that were draining your money? Should you (or would you) still contribute as much money as you could to it?

While the virtue of saving the most you can is definitely a great idea without any reservations whatsoever, I’d suggest that WHERE your money is actually is much more crucial. What I’m trying to tell you here is that before you make the next contribution into your retirement nest egg, make sure it doesn’t have any holes you’re unaware of. One of the most devastating things anyone can face is discovering that they’ve been financing someone else’s lavish lifestyle, instead of supporting their own retirement, only after it’s too late to do anything about it.

Happy retirement!