One stop for content covering “Evidence-based Investing”

We’ll see how my little experiment works out. My goal – create a place where lots of varied content relating to evidence-based investing or “passive”  investing can be found.  Please use my e-mail at the bottom to alert me to additional content. Introduction What is evidence-based investing? If we analyze market data going back as far as we have accurate information  – there are a few persistent trends that are statistically significant:  Stocks beat bonds,  value beats growth,  small beats large, higher profitability beats lower profitability. What about “sage” investors who have the Midas touch? There are investment managers, a rare few among thousands that have had amazing streaks of investment success. But when studied, their efforts are not able to be identified with science/statistics as skill. If you put 100,000 people in a stadium flipping coins, about 80 people can toss 10 consecutive heads or ten consecutive tails. Skill or luck? No one talks about the investment managers that lost, whose funds were shut down due to performance or ineffective marketing. It’s important to say; you can only benefit if you find the successful active investment manager before their winning streak. This is future not present or past. Can I choose one of these managers whether they are lucky or skillful? Of course it’s possible! However, you have two daunting obstacles in your quest to find and experience 30 future years of that winning manager – and you won’t know if you’ve been successful until after the fact! Building wealth happens through compounding over many years. Let’s say our investing time horizon is 30 years. So you must find the manager...

401K, Supreme Court case, White House pushing Fiduciaries – What’s going on?

Lots of interesting news – at least to us financial nerds and the few of us real advisors (RIAs) willing and licensed to take on a fiduciary level of care for our clients. Heck, the Department of Labor even created a video to explain conflict of interest! The White House and DOL are marketing to push for a “fiduciary standard” – focusing on retirement assets like 401k plans. Personally I am on the fence for forcing the fiduciary standard especially for individuals/families. If an individual wants to work with someone that is willing to do exceptionally risky things, accept commissions, etc., then they need a non-fiduciary. Yes, it’s not in their best interest, but this is a free country. You can’t legislate smart common sense financial planning and investing. However, I have a different view for 401k plans. The non-fiduciaries, brokerage houses and big-box insurance companies are so strongly entrenched and bilking Americans out of billions of dollars of fees and even more in poor investing results.  Every attempt by the DOL to try to expose this thievery has failed. Americans have around $6 trillion in assets in 401k plans, 95% of it being mishandled. Unfortunately, in this case, something stronger is needed. Additional very interesting news is the escalating lawsuits on 401k plans. Not a big fan of lawyers and lawsuits – but this is good because they are going after the bad guys who are hurting Americans’ savings. A 401k lawsuit has made it to the Supreme Court which could be huge  – domino effect type issue! Finally here is a link to ERISA page of the law firm...

When Doing Nothing Counts!

Winston Churchill said, “I never worry about action, but only about inaction”.  In almost every endeavor, I would agree. But in investing patience and discipline pays off and lack of patience leads to disaster. It is because of this fundamental difference between most endeavors and investing, that causes a large majority of people to fail in investing. They treat it like other endeavors and fail. They are not patient and take action far too often. A classic proof of this problem is demonstrated by the Dalbar report published every year.  The 2014 version says that in equity funds over the last 30 years, the average investor earned 3.69% per year while the S&P500 earned 11.11%.  If an investor would have bought an S&P500 index fund in 1984 – and HELD ONTO IT through thick and thin — they could have enjoyed 11.11% annualized return but it requires loads of discipline. Doing nothing requires hard work – yes – you read correctly. At least in investing, resisting the temptation to act when you hear  about an investment at the water cooler at work, on the internet – or the market has a big scary drop – it’s very tempting to take action.  So stay strong America – resist the temptation! Assuming a long term investment, and that you are diversified broadly and deeply – then doing nothing counts! By demonstrating your discipline, you will earn the  market return which is better than the vast majority of investors – including the “sophisticated” investors....

Proud to be an Industry Rebel!

It’s extremely rare for an RIA (registered investment advisory firm) to start up from scratch by someone outside the financial services industry  – and we did it!  Why? What was the motivation? Why? I was recruited into the financial services industry because I have a combination of business sense, number sense and people sense. I loved the idea of using my varied skills and directly helping people have a better life. I begin pursuing in parallel joining a well known national brokerage firm and starting my own RIA firm. That led to a substantial offer to join the national brokerage firm. (They attempted to pressure me into accepting the offer but that’s a story for another day.)  Their unprofessional behavior was not unexpected and a another reason to go independent. As I researched the industry, I discovered that the financial services industry is falling way short of helping consumers with their financial success and well being. The industry mastered and still excels making money on the backs of consumers through hidden fees and deception. The only way to avoid the hidden fees and deception would be to start my own firm. The RIA model requires always placing your clients interests ahead of your own which is a fit to my beliefs. Here are a few of the gaps that we discovered in the financial services industry, that we have bridged with our firm’s services. Conflicts of Interest in Investing: Completely avoidable if you work with an independent RIA that refuses to use funds that provide kick-backs (commissions, transaction fees). Evidence Based Investing: Active investing is a monumental failure. Evidence-based investing ensure you get...

Don’t lose $400,000 in social security benefits!

Surveys have shown that a very large portion of households make very important social security decisions at random. Make these decisions incorrectly and maybe you receive $750,000 over your lifetime. Make smarter decisions and maybe you receive $1,150,000 over your lifetime. (These numbers based on average situation.) We can run social security projection scenarios for you, so you can maximize your social security received. Even more importantly is to make the decisions in the context of an overall comprehensive plan – social security is just one element of your overall plan. Many people do not know that you receive 132% of your base monthly benefit by waiting to age 70 to receive it. And you lose 25% of your base benefit if you take it at age 62. However, don’t always assume “age 70 is the answer”. There may be times it makes to start earlier. Furthermore, once you’ve made the decision, your ship has sailed – too late to change. Actually you can change your mind within one year but you must write the government a check for the full amount received so far. A lot of people also don’t know about the “spousal benefit”. Once one spouse begins receiving social security and the other is of social security age but have deferred their personal benefit to age 70 – they can opt for the spousal benefit until they reach age 70 which is 50% of their spouse’s amount. You don’t get it if you don’t ask! “Free” money! We would be happy to run your social security scenarios for you – just contact...