May God bless you and the United States of America.
Samuel and the team at LaserFG
Monday, May 28, 2012
On this Memorial Day...
May God bless you and the United States of America.
Samuel and the team at LaserFG
Monday, May 21, 2012
Putting “Long Term” Under the Common-Sense Microscope
Putting
“Long Term” Under the Common-Sense Microscope
We hear it preached all
the time in the investing world: if you want to be successful (and retire rich),
you must take a “long term” view of the stock market. In other words, insofar
as you invest in the market for a long term, you’ll do great.
Quick question: Do you buy that? I don’t! Of course, I’ll explain my contention.
Meet Senior and Junior
Senior has been investing in the stock market for the past 35 years and has accumulated $500,000. Junior, on the other hand, started out 3 years ago and has just $15,000 in his account. I think we’d both agree that Senior definitely qualifies as a long-term investor, but Junior doesn’t pass that test, right? Good!
Now, all things being equal, let’s say their investment increases this year by 10 percent. Senior would gain $50,000 (10 percent on his $500,000), ending up with $550,000. Junior’s investment would increase by the same 10 percent (note the key word same), earning him $1,500 on his beginning $15,000, for an ending balance of $16,500.
Since the stock market sometimes dips, let’s say the following year it loses 10 percent. Don’t panic! It’s just an example to drive home a critical point. Junior would lose 10 percent of his $16,500 which is $1,650, so he’d end up with a new balance $14,850. But how about Senior? How much would he lose? He’s been investing for the “long term,” so did he lose anything? Of course he did. And how much was his loss, compared to Junior’s?
Yes, this is pretty basic stuff (or shall we say it should be?), but bear with me for a moment as I drive home a valuable lesson.
The indisputable fact is that Senior’s account would experience the exact same 10 percent decline, regardless of his 35+ years in the market. Here’s how his numbers look: Losing 10 percent of $550,000, or $55,000, would whittle his balance down to $495,000.
It’s now pretty obvious that both Junior and Senior gained – and lost – the same percentages. However, in absolute dollar terms, Senior lost $53,350 more than Junior ($55,000 versus $1,650). Who do you suspect would feel more anxious about their retirement? Senior, the long-termer? You see, this concept is not specific to this example – that’s how variable investing works, period!
I have a rather simple request for those investing experts who believe strongly that investing for the long term is the key to a successful retirement: please define for us, once and for all, when exactly this so-called long term is. I’d like to know, as I think a lot of other folks would, too. I’m confused because it’s all over the map – depending on what’s happening in the market and who you’re talking to, the definition keeps changing.
I bet you’d tell Junior to think about the long term, like say 10 or more years. As for Senior, you’re probably more likely meaning 40 or more years, right? But what about those folks who’ve been investing for that long already? Gee, things are getting pretty tight here, right?
My dear, hard-working retirement investor, something tells me that investing your nest egg in the stock market is just plain risky – no amount of time will ever change the rule: it sometimes goes up and sometimes dips. And something also tells me that may not be the best approach at ensuring you’re going to have a secure retirement.
_______________________
Quick question: Do you buy that? I don’t! Of course, I’ll explain my contention.
Meet Senior and Junior
Senior has been investing in the stock market for the past 35 years and has accumulated $500,000. Junior, on the other hand, started out 3 years ago and has just $15,000 in his account. I think we’d both agree that Senior definitely qualifies as a long-term investor, but Junior doesn’t pass that test, right? Good!
Now, all things being equal, let’s say their investment increases this year by 10 percent. Senior would gain $50,000 (10 percent on his $500,000), ending up with $550,000. Junior’s investment would increase by the same 10 percent (note the key word same), earning him $1,500 on his beginning $15,000, for an ending balance of $16,500.
Since the stock market sometimes dips, let’s say the following year it loses 10 percent. Don’t panic! It’s just an example to drive home a critical point. Junior would lose 10 percent of his $16,500 which is $1,650, so he’d end up with a new balance $14,850. But how about Senior? How much would he lose? He’s been investing for the “long term,” so did he lose anything? Of course he did. And how much was his loss, compared to Junior’s?
Yes, this is pretty basic stuff (or shall we say it should be?), but bear with me for a moment as I drive home a valuable lesson.
The indisputable fact is that Senior’s account would experience the exact same 10 percent decline, regardless of his 35+ years in the market. Here’s how his numbers look: Losing 10 percent of $550,000, or $55,000, would whittle his balance down to $495,000.
It’s now pretty obvious that both Junior and Senior gained – and lost – the same percentages. However, in absolute dollar terms, Senior lost $53,350 more than Junior ($55,000 versus $1,650). Who do you suspect would feel more anxious about their retirement? Senior, the long-termer? You see, this concept is not specific to this example – that’s how variable investing works, period!
I have a rather simple request for those investing experts who believe strongly that investing for the long term is the key to a successful retirement: please define for us, once and for all, when exactly this so-called long term is. I’d like to know, as I think a lot of other folks would, too. I’m confused because it’s all over the map – depending on what’s happening in the market and who you’re talking to, the definition keeps changing.
I bet you’d tell Junior to think about the long term, like say 10 or more years. As for Senior, you’re probably more likely meaning 40 or more years, right? But what about those folks who’ve been investing for that long already? Gee, things are getting pretty tight here, right?
My dear, hard-working retirement investor, something tells me that investing your nest egg in the stock market is just plain risky – no amount of time will ever change the rule: it sometimes goes up and sometimes dips. And something also tells me that may not be the best approach at ensuring you’re going to have a secure retirement.
_______________________
Contact a professional at Laser
Financial Group TODAY to set up your complimentary, no-obligation consultation
and discover ways to make sure you're protected from the only sure thing we know
about the stock market: its unpredictability! 877.656.9111 or
LaserFG.com
Monday, May 14, 2012
Why Stock Diversification Should Scare the Heck Out of You
Why
Stock Diversification Should Scare the Heck Out of You
One
of the most popular pieces of conventional retirement planning advice is to
make sure your portfolio is properly diversified,
with the right mix of stocks and mutual funds because, in the long run, that’s what
will give you the retirement lifestyle you desire. I say that’s pure baloney.
Variable investments
will forever remain variable, no matter
how many of them you lump together. To think that by purchasing bits and pieces
of stocks you’re somehow eliminating market risk is simply laughable. Sure, diversification may reduce your market risk,
but it will never, ever eliminate it.
Veteran trader, renowned risk expert, and New York Times best-selling author Nassim Nicholas Taleb in his book Fooled
by Randomness echoed the famous
quip about Shakespeare, that if you set an infinite number of monkeys in front
of an infinite number of typewriters, one of them would produce an exact
version of Homer’s Iliad
(notice
the key word here is infinite). However, Taleb added, “Now that
we have found that hero among monkeys, would any reader invest his life’s
savings on a bet that the monkey would write the Odyssey next?”
What I find amusing is
that with all the exotic, fancy computer models and “expert market predictors” to
date (you know, those folks who know exactly where the market is headed?), no
one has yet been able to help any investor that I know of come up with that
killer diversified stock portfolio that has escaped fairly regular beatings
from the market. That’s why I wholeheartedly agree with the assertion of Burton Malkiel, a Princeton University
economist, that “a blindfolded
chimpanzee throwing darts at the Wall Street Journal can select a portfolio that performs as
well as those managed by the experts.”
In case you haven’t
noticed, every time the market plummets
and investors who thought they were properly “diversified” lose significant
portions of their nest eggs, these so-called experts – the very ones who came
up with the “diversified portfolios” these investors
were using – cite “improper
diversification” as the reason their clients lost money. So would our
esteemed experts kindly tell us, once and for all, what that magic mix is,
instead of always playing Monday morning quarterback?
Oh, wait. They can’t. Folks,
these experts don’t have crystal balls; they’re just like us, with no idea how the market will shift next until it happens. I guess what I’m trying
to say is that this hindsight business isn’t working!
Here’s what I can tell
you after nearly two decades of working with lots of successfully retired
clients from all across America: since its origins, the stock market has been a
pure gamble. But hey, it’s your money and your retirement, so you’re free to invest
it whichever way you want to. All the best!
_______________________
Contact a professional at Laser Financial Group TODAY to set up your complimentary, no-obligation consultation and discover ways to make sure you're protected from the only sure thing we know about the stock market: its unpredictability! 877.656.9111 or LaserFG.com
Contact a professional at Laser Financial Group TODAY to set up your complimentary, no-obligation consultation and discover ways to make sure you're protected from the only sure thing we know about the stock market: its unpredictability! 877.656.9111 or LaserFG.com
Monday, May 7, 2012
Are You Following "everybody else" Off a Retirement Cliff?
Are you following "everybody else" off a retirement cliff?
But I thought it was the best thing for me
because everyone around me was doing it.
because everyone around me was doing it.
Ever say (or think)
something like that when you finally discovered that a product or a strategy you’d
bought into wasn’t exactly as you expected?
By virtue of my
practice – between the public speaking and private consultations – I interact
with a fairly large number of people, most of whom are either very close to
retirement age or already retired, and I tend to hear statements like the one
above quite frequently from those who’ve been duped and/or disappointed by their
retirement plan choices.
It’s just human nature
to feel comfortable when something we are considering is already being adopted
or used by lots of people around us – which is not necessarily a bad thing, by
the way. However, when it comes to your retirement money, you’re more likely to
end up regretting going along with the majority. I understand that this may be
a somewhat contrarian view, but I’m speaking from the real-life experiences of
people just like you who I continue to meet almost daily!
If you’re interpreting this
to mean that a strategy that seems to be working well for your neighbor or
coworker might end up screwing up your entire retirement, then you definitely got
my point. You’re not those other people, are you? I believe one of the main
reasons every statistic today points to the sad reality that the overwhelming
majority of Americans (a recent survey by the National Institute on
Retirement Security has the figure at 84 percent) are in a bad
shape retirement-wise is because “everybody” seems to be following “everybody
else.” The problem is that they follow without even knowing exactly why.
On the other hand, the “minority”
who apparently are NOT doing what seems to be “popular” are ending up
achieving the goal of comfortable, stress-free retirements. So, my dear
retirement investor, maybe you should start entertaining the concept that being
“financially UN-popular” is not such a bad idea after all.
I look forward to seeing
you on the good side of the retirement spectrum!
_______________________
Contact a professional at Laser Financial Group TODAY to set up your complimentary, no-obligation consultation and discover the easiest way to make sure you're not following the crowd right off a cliff when it comes to your retirement savings. 877.656.9111 or LaserFG.com
_______________________
Contact a professional at Laser Financial Group TODAY to set up your complimentary, no-obligation consultation and discover the easiest way to make sure you're not following the crowd right off a cliff when it comes to your retirement savings. 877.656.9111 or LaserFG.com
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