Independent Review of the Fidelity Contrafund (FCNTX)

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fidelity logoDear Mr. Market:

You need to hear about another mutual fund like you need a new hole in your head. That being said, however, how about we talk about one that’s been around for a long time? They must be doing something well….right?

We’ve certainly not held back with our opinion in the past when it comes to mutual funds. While they certainly can warrant a spot in many portfolios, they need to be reviewed and compared carefully to their peers and other investment options. Today we are going to take an in-depth look at a fund we see in many portfolios but very few individuals actually understand what it is. The Fidelity Contrafund (FCNTX) is one of the largest actively managed equity mutual funds there is with assets just under $110 billion! Continue reading →

More than a Client …

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photo[287]Dear Mr. Market:

Like most Mondays you begin the week with your flucuations of going up and down. All the companies that make up your identity are digesting the news from over the weekend as well as what’s on tap for the week ahead. As of this writing investors are scared and don’t completely trust you but conversely they’re also almost bored since you have yet to provide any meaningful direction or hint as to what your real plans are.

You could continue to break out and go higher or you could do what you’re supposed to do which is sell-off by at least -10% to -20% within the next few months. Guess what? We don’t care…at least not today. After some sunsets, both literal and figurative ones, there is so much more to them than what happened with the market. Yesterday, June 22, 2014 was such a day.

Driving over to the Long Beach Yacht club was pleasant and relaxing. On this first day of summer I looked out over the bridge leading into Naples and Belmont Shore and I could see tons of people splashing in the water, kids building sand castles, and nearby boats sailing in and out of the marina. As I parked my car however, the reality of why I was going to the yacht club struck me harder than expected. I was going to see a client, or at least one of them. For the third time this month our firm lost another client to cancer. Today was to be a celebration of her life and although that’s what she and her family wanted, it sure was difficult to “celebrate”. After all these years a client becomes a friend and a part of your extended family. Continue reading →

3 Common Diversification Mistakes

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Dear Mr. Market:Diversification 2

Whether you handle your portfolio or hire a professional to manage it, there is no way you have not heard of the importance of diversifying your investments. The reality is, however, most investors fall prey to one of three major diversification mistakes; which of the three is your issue?

First and foremost, let’s briefly review what diversification is:

Investopedia defines Diversification as: ‘A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.’

At first glance this makes sense and doesn’t appear to be complex, right? We find that investors typically appear to be in one of three different camps when it comes to diversification:

  1. Under Diversification
  2. Improper Diversification
  3. Over Diversification

Let’s take a moment to look at each and how investors can get their portfolios back on track. Continue reading →

MPG Core Tactical 60/40: May 2014 Performance Update

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MW-BB798_sm6040_20130422180557_MDDear Mr. Market:

Where have you been? Whenever you get quiet like this it makes us even a bit more nervous.

Hopefully you didn’t succumb to the alluring sounds coming from those in the “bear camp” last month. If you were tempted to “sell in May and go away” it still just wasn’t meant to be. As cute and trendy as that old investment adage is, we must remind you that it doesn’t necessarily have a specific date in mind. Proponents of this theme merely imply that the summer months are the ones to avoid and if there ever was a month of May to make this move…it was now. Or was it?

Now that the “sell in May” adage looks flat out stupid, you can perhaps resort to a “June Swoon” for the eye candy headline of the day. After all, June is the 10th worst calendar month of the year. Since 1950 it’s basically been a flat month but more recent history points to June losing an average of -1.33% over the past 10 years.

It’s not so much the market or serious investors that love catchy phrases but it’s those that feed you the news who are the perpetrators. If this article were being written in November we would have many of the same concerns as we do now. Many of the catch phrases will be stale by then but in the interim…much like a broken clock tells time correctly twice a day…eventually the bears will be right. Contrarian investors will point to this immediate period as the market climbing the proverbial “wall of worry”… or is it now a “slope of hope”?

Here’s the current summary of the MPG Core Tactical 60/40 portfolio mix, which is updated as of this writing (June 9, 2014).

Click here to compare the MPG Core Tactical Portfolio against the 60/40 benchmark.

What adjustments did we make? Continue reading →

Building Your Financial Team – The Road to Success

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Teamwork arrowDear Mr. Market:

How ‘fit’ is your financial team? Putting together a financial team to help you meet your financial goals is like building a winning sports team. Each member of your financial team needs to know what their responsibility is and what they are contributing to your financial success.   With tax-season behind us and the equity and fixed income markets experiencing volatility, now is a great time to assess your team and see if it is truly making the grade!

There is no single approach to building your team or a guide on how to assemble one. The key is the team needs to work for you, they need to give you a sense of comfort and they need to work together. Whether you work with individuals or utilize software solutions it is important that an assessment takes place so that you don’t suddenly find yourself in a hole that you need to dig out of.

In this article we will discuss how to build your “Team of Trust”. We will look at three key areas that every investor should consider: Estate Planning, Tax Planning and Financial Advice. We will discuss some key elements with each member of the team: Why? Who? What? How Much? Continue reading →

InvenSense (INVN) : Motley Fool’s Secret Wearable Technology Stock!?

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INVN #2Dear Mr. Market:

Technology is a bit like true love. You have to believe in it but it can also bite you in the ass.
Read through this article and you’ll see how this relates to a particular investment!

The technology Industry can be a challenging sector for investors. Perhaps the best way to describe it is with a popular saying … “the one constant is change itself.” Plenty of analysts and investment firms scour through stock ticker symbols looking for the next Apple (AAPL), Amazon (AMZN) or Google (GOOG).

We couldn’t help but notice the Motley Fool’s recent …shall we say, “stock pitch” about a company that could be your next homerun! If you’re a die-hard Apple fan, wouldn’t you like to know who their next HUGE inside supplier is? Rewind the clock and take for example the desktop computer or the cell phone you have within inches of your hand right now…

Put Apple, Sony or IBM on the shelf for a minute and think about investing in the next company that has a stake in every sale regardless of the brand you choose? In other words, buy the “chip” or technology that’s inside of each device instead of trying to figure out which phone or computer manufacturer is going to win the battle. Continue reading →

MPG Core Tactical 60/40: April 2014 Performance Update

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MW-BB798_sm6040_20130422180557_MDDear Mr. Market:

Unless you’ve never picked up a financial magazine or read the business section of any newspaper, you have undoubtedly heard of the old investment adage “Sell in May and go away”. Many financial “experts” and journalists do their best to paint the summer months as those that are primed to underperform. Does history always repeat itself in exactly the same way? Nope. It’s not hard to find investors who sold last spring (or even the one prior) in anticipation of a nasty summer and they are still in cash or underweight equities. If you’re in that boat and don’t trust the stock market, you may sleep better at night for now but in the interim you’ve lost opportunity cost and missed another bull market.

The flip side to this is that bearish investors will eventually be right! The S&P 500 has not had a correction of -10% or more since October 3, 2011. Like many investors out there we firmly believe a correction of -10% to -20% is coming this year but we don’t think it will be the start of a bear market. The challenge behind all of this, however, is that the longer we go without a healthy correction the deeper and more severe the inevitable sell-off will be. Continue reading →

What’s the Asset Allocation of your Investing Freeway?

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Dear Mr. Market:

Nobody likes traffic but it’s without question a part of our daily lives. Being stuck behind a long line of cars and seeing nothing but red taillights is even more aggravating when you are short on time and need to be somewhere soon. Many of us try to do whatever we can to avoid traffic; whether it be leaving earlier, taking side streets, carpooling, or relying on tools like GPS apps that show us the best routes to take. What does this have to do with investing? Everything…

If you haven’t yet learned or heard why the freeway is perhaps the most important analogy for the success of your portfolio…you need to commit this article to memory. Your local freeway can teach you why 90% of your portfolio’s performance is dependent on what lanes you choose to drive in and only 10% on how fast your car is.

Take for example, Interstate 405 in Los Angeles…which happens to be the busiest stretch of highway there is in the nation. Let’s say you need to get from Long Beach to LA in what normally takes about 30 minutes. You hop in your car and hit the fast lane and seem to be making great time averaging 65 mph. No sooner than about 10 minutes into your drive your lane comes to a screeching halt. After about almost a mile of grinding away at five mph you decide to switch into the lane to your right which is now flowing much faster. Almost within seconds of doing this, the lane you were just in passes you by! Your 30 minute trip to LA will now take you at least an hour and possibly more at this pace.

This simple but nightmarish traffic scenario happens daily to over 400,000 drivers along the 405 but it also absolutely ruins millions of portfolio every year! Pretend each lane of the freeway represents an asset class. (ex: Large Caps, Small Caps, International, and Bonds) On any given year one “lane” (or asset class) will lead the markets but the likelihood of it doing so the next is rare and if you look at historical returns there is no discernible pattern. CLICK HERE to review how asset classes have performed each year from 1994 to 2013:

One of the better examples of this is Emerging Markets in the early 2000’s.

The BRIC’s (Brazil, Russia, India, and China) were all the rage from 2003 until 2007. Hardly any investors had the courage to step in until late 2007 because they were still licking their wounds from the “dot com” crash. Many people hid in cash or gravitated to Bonds which turned in a +10.26% year in 2002.

Over the next four years Bonds Continue reading →

What is the difference between Fee-Only and Fee-Based advisors?

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Compensation #3Dear Mr. Market:

Last week I had lunch with an old colleague of mine. It’s always good to catch up with others in the same profession but sometimes it also truly helps you understand why so many consumers are confused. Here’s a brief background and then a summary of an actual conversation between two financial advisors:

Both financial advisors began their careers working for major wirehouse firms (think Morgan Stanley, Prudential, UBS, Smith Barney, etc…). They each then worked at Charles Schwab as part of the Retail Branch Network and Schwab Private Client (SPC) group. Thereafter, Advisor #1 (who we will call Fee-Based Advisor) left Schwab to join one of the advisors that is in their Schwab Advisor Network program.  This is a network that has made certain firms wildly successful as Charles Schwab branch representatives get compensated to vector investors and Schwab account holders to meet with advisors who pay to be in their program. Advisor #2 (who we will call Fee-Only Advisor) is not part of any network and is not affiliated with any brokerage firm, mutual fund company, or insurance company. “Fee-Only Advisor” is a Registered Investment Advisor (RIA).

Fee-Based Advisor: So…how are things out there?

Fee-Only Advisor: Good…I keep plugging away but sometimes it’s frustrating to see how undereducated the general public is about this industry. Continue reading →

Top Tax Tips for 2014

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Unknown-51
Dear Mr. Market:

Your whole world is about investing and the stock market. Stick to what you’re good at, and leave things like repairing your car, fixing that leaky faucet, or doing your taxes to someone else-

(1) Don’t take investment advice from a CPA and vice versa.

Notice how we practice what we preach. Our first “tax tip” will be to let you know that for specific tax advice you should NOT go to your investment advisor. We’re not CPA’s and even though we understand a great deal about taxation (specifically with regard to investments) our job is to manage investments, not tax codes.

Why is it then that we see so many accountants, tax preparers, CPA’s, and even “enrolled agents” dole out investment advice around this time of year? Investors naturally gravitate to the professional that sees the majority of their financial house and by default it’s typically a CPA. We’re not bashing CPA’s but allow us to be crystal clear on this point: A CPA has no formal training nor better understanding of investments or the portfolio strategy you or your financial advisor has put together.

Look to Tip #2 on what your CPA should know about your investment situation:

(2) If the introduction hasn’t been made yet…Make it happen!

In the case of investments and taxes one old adage couldn’t be more true: ”The right hand should always know what the left hand is doing.”

If your investment advisor has not met or interacted with your CPA an introduction needs to be made. They don’t have to become best friends but your overall financial situation will be enhanced when key professionals that help you know each other.

(3) What type of tax professional do you need?

Do you simply need Continue reading →