If the Stock Market is Depleting Your Investments, Your Strategy Is WRONG

If the Stock Market is Depleting Your Investments, Your Strategy Is WRONG

Let me first agree with the fact that our economy and stock market – and the global ones as well, in some respects – are not in a good shape, at present.

But here is what I find fascinating: investors like you are made to erroneously believe that, given the current economic situation and wild rides of the stock market, the evaporation of investment values is understandable – and, worse – unavoidable. Haven’t you heard so-called expert after expert, advisor after advisor (probably yours included), and one publication after the other creating that impression? The thing is, this impression is completely bogus and false. Personally, I believe the problem boils down to one thing.

How Realistic and Savvy Is Your Financial Advisor?

As pointed out by famed investor Warren Buffet, “Only when the tide goes out do you discover who’s been swimming naked.” In effect, the economic/stock market meltdown will do just that, exposing those investors with unrealistic and unsustainable strategies. How does yours stack up?

As an investor, would you place your nest egg into an investment if your advisor told you that it would do great as long as the economy/market did well, but was SURE to wither up your investment, without any limitations, should the economy fall into a recession? Savvy investors would have nothing to do with such an investment strategy!

The reality is that the economy and the stock market will do well sometimes and perform poorly at other times. That’s the nature of the process. No expert knew the market would crash in September 2008, and today the market is again struggling. My point is, the market goes up and comes down. And since we cannot ever know in advance when the ups and downs will occur, it makes sense to purse a simple, proven strategy I recommend which:

• Guarantees that your portfolio will not lose value as a result of stock market declines.
• When times are good and the markets are performing well, allows you to earn interest based on a stock market index – up to a predetermined cap.

Just imagine where your own nest egg – as well as those of the millions of other devastated investors – would be today if they had followed our counsel.

Frankly speaking, many investors seem to be following advisors who naively believe it’s okay to speculate and WISH it’ll all end up well when they’re finally ready to retire. How can I respond to that, except to say that it just doesn’t make any sense whatsoever! Don’t you agree?

As we celebrate Memorial Day, all of us here at Laser Financial would like to applaud and honor the heroism of those who have risked their lives and fallen, as well as those who continue to fight to protect our nation and freedom.

How Much of Your Retirement Money Do You Want to Keep Safe?

How Much of Your Retirement Money Do You Want to Keep Safe?

Today let’s take a moment to hypothetically compare two investment strategies that you might employ in growing your retirement nest egg. Let’s call them Strategy X and Strategy Y. Strategy X imposes no caps or floors – you simply earn whatever the stock market returns, whereas, with Strategy Y, your gains are capped at, say, 12 percent with a guaranteed minimum of, say, 2 percent. So in this example, you would make unlimited gains with Strategy X, along with unlimited losses, while with strategy Y, you’d be guaranteed 2 percent even if the stock market tanked, but your upside gains would not exceed 12 percent.

Which Strategy Would You or Your Financial Advisor Pursue?

Most so-called experts would likely implore you to go with Strategy X, with this explanation: “You never want to cap your gains. Besides, over the long haul, the stock market will deliver and your retirement nest egg will be fine. Simply make sure your portfolio is ‘well-diversified.’” Isn’t this exactly what most worried investors are being advised to do today?

Sure, this may sound good, until you actually start doing the math. Let us try to mimic what usually happens with the stock market – ups and downs. Assume that in Year1, the stock market index gains 20 percent. All other things being equal, a $100,000 investment would have grown to $120,000 under Strategy X, and it would have grown to $112,000 (capped at 12 percent) with Strategy Y.

Now assume the index loses 10 percent the following year. Strategy X would drop to $108,000 ($120,000 less 10 percent). Strategy Y, on the other hand, would increase to $114,240 ($112,000 plus the 2 percent guaranteed gain).

Wait to See Year 3 Before Making Any Conclusions

If in Year 3 the index were to gain 10 percent, Strategy X would grow to $118,800 (10 percent gain on $108,000), while Strategy Y would grow to $125,664 (10 percent gain on 114,240).

How soon, easy, and likely is it that Strategy X’s balance would catch up and overtake Strategy Y? Of course, no one knows with any certainty, but if the trend in the example (an up-and-down market) were to continue, it might take some time. Don’t you agree? I hope that the millions of diligent investors who are looking for a better retirement receive a little more information and wider options before making their investment decisions.

How many hard-working Americans are sick of losing sleep over the markets’ wild rides of late and could benefit from something like Strategy Y? Your traditional financial advisor has likely created the impression that your only viable option, as an investor, is Strategy X, but you now see there is another way. I wish every investor knew of all the other viable options available to them.
__________________________
To receive your free consultation and learn how something like Strategy Y might work for you, please call Laser Financial at 301-949-4449 or visit us on the Web.

Why Stock Diversification Doesn’t Work

Why Stock Diversification Doesn’t Work

In the aftermath of the 2008 stock market meltdown, many investors – perhaps yourself included – have rightfully begun to seriously question the validity of the strategies they have been pursuing with their nest-eggs, courtesy of the advice they’ve been receiving from their financial advisors, books, magazines, websites, TV, and radio shows.

In their usual attempt to calm frayed nerves, so-called investment experts claim that investors could have somehow magically escaped the beating their portfolios received if they had “diversified” among different classes of stocks and bonds, both domestically and across the globe.

What About Those Investors Who Did Exactly That and Still Suffered Significant Losses?

My common-sense view is that the only viable solution is to not invest your serious cash (like your retirement money) directly in the market, period! None of our clients had to change anything of their strategies because their portfolios did not suffer any losses. In fact, they actually EARNED money during the exact same period that other investors could barely muster the courage to open their investment account statements.

One thing I know for sure – and that every rational investor and advisor also knows, or should know – is that stocks fluctuate, and no one – I repeat, no one – knows exactly when the market will turn south. The sad truth, though, is that most peoples’ portfolios reflect the exact opposite position.

Three Baffling FACTS

First, those same advisors/experts advised, encouraged, and designed the “diversified” portfolios their clients owned just before the bottom fell out. Then, after the disaster which no one saw coming, they claim that if the investors had better/differently/more smartly diversified, their portfolios would not have been devastated. No wonder they call it Monday-morning quarterbacking – who can’t assess what went wrong in hindsight?

Second, in 2008 the S&P 500 lost 38.5 percent, the Dow dropped by 33.8 percent, and the NASDAQ fell by 40.5 percent. But the majority of the investors whose retirement portfolios were devastated had already diversified, so why did they still suffer such huge losses? It is extremely important for you to understand that every major market in the world dropped significantly at the same time. Actually, European and Asian stocks did even worse than U.S. stocks. So what does that say about those gurus who insist that investors should have diversified across multiple geographies in order to avoid the beating their nest eggs received?

Finally, the other critically important thing that 2008 taught – or should have taught – investors is that bonds are not safe haven either, because the largest bond fund on the planet lost about 36 percent.

Diversification could reduce the impact of your loss in the instance that you owned Enron stock in a proportion small enough that when it collapsed, those losses were overshadowed by gains from other well-performing stocks in your portfolio. But why would you take the chance of ruining your retirement by investing directly in the market, when it is completely unnecessary?

At the end of the day, it’s as plain and simple as this: You can diversify your stock portfolio all you want to, but you’ll also have to pray that the market doesn’t experience any massive losses like it did in 2008. The harsh reality is that millions of Americans lost significant portions of the retirement savings it took them years to build. Meanwhile, the stock market continues to fluctuate as you read this, and will continue to do so. Don’t you find this platitude of “just diversify, and you’ll do great” offensive? I do.
____________
Call Laser Financial at 301.949.4449 or visit our Web site to set up your personal consultation with a strategist who can explain why diversity may or may not be the best option for you at this time.

The Only Real Lesson from the Dow’s Crazy Plunge

The Only Real Lesson from the Dow’s Crazy Plunge

Last Thursday afternoon, while most people were at work, the Dow Jones Industrial Average – for lack of a better phrase – fell off a cliff. It eventually recovered some of those losses, coming back from being about 1,000 points down to close down about 348 points. What makes this episode particularly noteworthy – and just plain scary – is that all of this meltdown madness happened within a matter of minutes – literally 30 minutes.

Of course, the “stock experts” immediately went to work and cable news flew into a frenzy. It was actually fun to watch and listen to all the pundits trying to figure it out for the rest of us, and I am sure additional analyses are happening at this very moment. However, buried in all the excitement is an incredibly important lesson that almost no one has pointed out, until now.

So, What Happened?

Here’s what happened: Institutional investors went on a sell-off spree of 348 points. Yes, there are reports suggesting that this entire fiasco occurred because some guy or gal at a major firm mistyped a trade as a billion instead of a million. Here’s the thing though – a typographical error of that nature would have left the sell-off in the neighborhood of 900 points, not 300 points. So this is a classic case of whether Jonah swallowed the whale or vice versa, because at the end of the day, someone definitely got swallowed.

As of the close of business Friday, the following day, all the gains investors had made so far this year had been wiped out. I must say I am not at all surprised, because that is precisely how the stock market works. If you decide to play the market, you’ve got to expect fluctuations, period!

Who Are These Institutional Investors?

In laymen’s terms, institutional investors are institutions like pension funds, hedge funds, mutual funds, and investment advisors acting on behalf of others, like yourself when you select the funds in your 401K or 403B. As you might expect, these investors are assumed to be more knowledgeable and better able to protect themselves – and you, when they’re handling your interests.

Basically they are the big dogs of the investment world. As a matter of fact, Investopedia.com believes that watching what the big money is buying – meaning these institutional investors – can sometimes be a good indicator, as they supposedly know what they are doing.

I am sure you have heard these big cats – or Kahunas – admonishing the average investor to take a long-term view of investing, somehow simply ignoring the short-term or day-to-day happenings of the stock market. Investors are told time and again that in the long run, the market will deliver and their retirements will be just fine.

So why in the world would these financially savvy, incredibly huge professional investors have such an extreme reaction and opt out of the very market they supposedly believe in so strongly? The only logical explanation is that these institutional investors (who are probably investing your money) are nervous as heck about the stock market. So why shouldn’t you be, too?

Perhaps now you’ll begin to understand why Laser Financial Group simply links our clients’ portfolios to the stock market. That way, when the market is up, they make money – up to a cap – but when days like last Thursday, Friday, and God only knows when in the future happen, they do not lose even a dime.

It’s true that life brings much uncertainty with it, but your retirement is one thing you can count on, so it behooves you to introduce some certainty into your investment strategy, rather than leaving things in the hands of the open market, hoping that in the long run, whenever that is, you’ll be just fine.
______
For your free consultation and assistance in clarifying the certainty of your financial situation at retirement, please call us at 301.949.4449 or visit us on the Web.

How Do You Determine When Your Financial Advisor Is Being Even Sort-of Dishonest?

How Do You Determine When Your Financial Advisor Is Being Even Sort-of Dishonest?

Is it when he/she fails to tell you all that you need to know – also known as the whole story – before you make a decision, or when they actually make false verbal statements?

We are living in the 21^st century, so there are perhaps a million and one intellectual arguments to be made about what actually constitutes guilt and dishonesty. But I am pretty sure that at the end of the day, when we wind down, an overwhelming number of us would arrive at the same answer.

Over the past several days, you very likely have heard some of the discussions about the allegations against Goldman Sachs, and the attendant back-and-forth. One side claims, “You knew things would blow up and you sold those products to investors anyway.” The other side argues, “We followed the law and correct procedures.” Without taking sides – because, frankly, I don’t care much for either side – I must say that it is sad but true that there is widespread dishonesty in the financial industry.

Not long ago, I wrote a very simple, easy-to-read little book, called 5 Mistakes Your Financial Advisor is Making  in which I make my case regarding each of these mistakes. At the end of each segment, I pose specific questions for investors to propose to their advisors, suggesting that they request specific answers. Oh, boy! I knew those simple questions would invite the opportunity for discussion, but I honestly didn’t envision the can of worms the questions would open in many people’s relationships with their financial advisors. Of course, the majority of these so-called advisors defend themselves by arguing that since they did not actually verbalize “anything” they were not dishonest.

Is your financial advisor ethically bound to tell you about an investment product they know would be better for you, even if they cannot offer it to you? How would your advisor react if you were to mention a strategy and/or product you believe might work well for you, but they were unfamiliar with it or unable to offer it to you? Should your advisor simply sell you the products they have available?

I am fairly certain that at some point during our childhoods, we were all strongly admonished to tell the truth – regardless of the situation. What’s happened to that advice over the years? Actually, last Friday, April 30, was National Honesty Day, a day when we were all encouraged to be honest – no matter what. Here’s an idea: Why not make it 365 days per year?

One thing I know for sure is that here at Laser Financial Group, we pride ourselves in basing ALL of our clients’ strategies and recommendations on FACTS. Silence is not an option – and just because something is legal doesn’t mean it passes our test for honesty. We are dealing with the financial lives of families; should that include any room for creative dishonesty – non verbal or otherwise? Absolutely NOT!

Another thing I know is that while the moment of dishonesty is fleeting, it always has a way of catching up to you. I’m sure you’ve had your own experiences and don’t need any examples here.

And the last thing I know – for now – making the conscious decision to be honest allows an individual a strong level of confidence, because you never have a need to second guess or cover anything up.

For an honest, straight-forward evaluation of your current financial situation, please call Laser Financial Group at 301.949.4449 or visit us on the web.