Women Investors : Who Controls the Purse Strings?

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Women Investing

Dear Mr. Market:

Did you remember Mother’s Day and get her something special?  As we celebrated Mother’s Day earlier this month we would not be surprised if Mr. Market didn’t do much for his mother or for women in general.  The financial services industry has been notorious for overlooking women investors however, the ‘tides of change’ are quickly approaching and everyone needs to be aware of it.

Women have become major power players and are making a huge impact in today’s financial world.  The statistics speak for themselves; here are some eye opening facts: Continue reading →

Why you need to ignore “the Market”…

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stock quoteDear Mr. Market:

Here we go…Right off the bat we’re insulting you by suggesting that we ignore you! Well…it’s not really you, per se, that we’re telling folks to ignore but rather a stubborn “name calling” habit that 99% of people have.

Ask any financial advisor this question:  “How did the market do today?”

How he or she replies will tell you how they are trained to think. The same applies to any friend, neighbor, or colleague of yours. Anyone… Go ahead and try it. Whenever you ask someone how the market did or what they think of “the market”…they will inevitably tell you about the Dow Jones. The same goes for the media and just about anyone who reports financial news.

Guess what? They’re all wrong! Continue reading →

“The Retirement Gamble” : How to Tip the Odds in your Favor….

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retirement gambleDear Mr. Market:

How many times have we heard the comment that investing in the stock market is like gambling in Las Vegas?  The market allows people to build up their account balances and confidence only to watch it all be taken back and possibly more.  Many people experience this in ‘Sin City’ as their stacks of chips build up only to watch the casino take them all back in what seems like the blink of an eye.  While we could certainly debate the similarities and differences between Vegas casinos and the stock market there is no doubt that both have left investors feeling as though the system is rigged against them.

How nice would it be if you could tip the odds in your favor in Vegas?  What if you could see what the next card or roll of the dice would be or simply improve your chances of winning?  If investing is truly like gambling what if you could increase the odds that your retirement savings would grow more and be there for you when you need them in the future?

Recently we have heard from several investors about a very powerful and informative television report featured on Frontline titled “The Retirement Gamble”.  This presentation pulls back the curtains and exposes many of the dark and hidden secrets of the financial industry that the average investor is not aware of.  There are several factors that investors can control and limit the negative impact on their portfolio resulting in a profound difference on long-term portfolio returns.  We encourage everyone to watch the online presentation of “The Retirement Gamble” that first aired on April 23, 2013.  The presentation is approximately 50 minutes long however it could possibly be the most critical education you’ll ever receive on investing.

“The Retirement Gamble”, Frontline on PBS, April 23, 2013

This show does a tremendous job of getting down to the basics and avoiding all the financial jargons that clutters the industry.  It empowers the average investor to understand many of the key aspects of investing that they need to be aware of and more importantly what they can control.  Below are some of the key points that can be taken away from this program along with some charts and our thoughts: Continue reading →

Has Natural Gas Finally Hit Bottom?

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Natural Gas picDear Mr. Market:

Your market shenanigans have tempted investors millions of times with the promise of new technologies, advancements, and innovation. One topic that got us thinking recently has been what you’ve done to investors in the natural gas space. Let us explain more…

If you think the stock market clobbered investors in 2008, you can take some solace in knowing that it could have been worse elsewhere. If you had invested in natural gas back in 2008 when it traded at about $13 per thousand cubic feet (Mcf), you either sold it in frustration or are an extremely patient investor. Five years later natural gas is trading at just over $4 per Mcf. Could we be near a bottom though? Continue reading →

ABC’s of Investing in a 529 College Savings Plan

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Unknown-6Dear Mr. Market:

Most of the time that we write to you it’s about your temper or volatile behavior and how that affects the average investor. Sometimes, however, it might be good for us to refresh our memory on “why” we invest and put up with all your ups and downs! Most investors certainly don’t watch you just for chuckles ; ideally we all have a purpose and reason to put up with all of your unpredictability and potential promise. With that being said, we would like to review some basic information as well as the pros and cons of saving for college via 529 College Savings Plans.

First and foremost let’s not waste too much time on stating the obvious: College and all the costs that come with it are more expensive than they ever have been. That trend is not reversing anytime soon so if you’re a parent or a grandparent trying to prepare and plan for the future, you need to consider the enormous price tag most universities are charging. Are you sitting down? The average private college tuition in 18 years from now will cost north of $130,000…per year! OK…how about the more reasonable route of going to a public state school? That price tag is estimated to be about Continue reading →

Target Date Funds – is it time to refocus?

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Off TargetDear Mr. Market :

You certainly have a unique sense of humor! Your unpredictable personality often leaves investors scratching their heads as they attempt to figure out your next move and how they should be positioned.  You’ve reintroduced us to market volatility the last few weeks and left investors scrambling.  During the first quarter of this year, investors moved billions of dollars into the equity markets as they began to gain a sense of comfort based on recent performance.  As investors muddle through the overwhelming amount of investment options available to them, more and more continue to look for the ‘quick fix’ or the ‘one stop shop’ and invest in Target Date Funds.  By simply picking the fund that has a date corresponding to a time frame they have in mind for their investment goals, they can put their portfolio on cruise control and focus on more important things. Simple, right?

If only it were truly that easy…“If it seems to good to be true, it probably is”

Investors need to take a step back and not allow ‘Mr. Market’ to play with their hard earned dollars and take a look if these funds are in fact too good to be true.  While the underlying premise of the fund appears sound, investors definitely need to kick the tires on these funds before buying them.  The typical Target Fund intends to be much more aggressive in the early years and as the years pass and the ‘target date’ approaches, they will become more conservative.  They do this through the asset allocation within the fund. Simply put, in the earlier years the portfolio has a higher percentage in stocks which then get trimmed with a reallocation and more exposure to fixed income or bonds.

Sounds perfect doesn’t it?! Continue reading →

Fool’s Gold

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images-2Dear Mr. Market:

It’s been a while since we saw you get so upset with the gold bugs. Today marked the worst two day slide to gold in 30 years. Your temper really punished holders of gold with a 13% hit.

Do you remember August 23, 2011? What happened that day? Maybe if you were a Virginia resident you might remember since that was the day a 5.8 magnitude earthquake hit the area. For those wondering, that was the strongest earthquake in the United States east of the Rocky Mountains since 1897. Back to our question though…What’s so important about August 23, 2011?

Investors sometimes have short memories but nothing specific really happened on this day; it’s what was happening that summer that we want to bring back into focus. Since we recently wrote an article about “Sell in May and Go Away” let’s actually go back to that very point in time.  After a positive month of stock market returns in April of 2011, the S&P 500 dropped -1.35% in May, -1.83% in June, and another -2.15% in July. Continue reading →

The trend is NOT always your friend….

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BitcoinDear Mr. Market:

How is it that through both bull and bear markets, you are constantly able to create new products and services that entice investors to take on risk beyond what they need in their investment portfolios?   Time after time, we’ve seen investors rush to get involved in the next great investment opportunity. Just looking at the last few years alone we’ve seen the Facebook IPO, Leveraged ETF’s, Day Trading, Managed Futures… and the list goes on and on.  Most recently we’ve seen a new “currency” hit the headlines and attract investors … Bitcoins.

This new digital currency has caught plenty of media attention with the price hitting extreme highs and lows.  Just in the last two weeks Bitcoins were worth as much as $260 apiece and then within days they dropped down to $100 a piece.  This decentralized digital currency allows for exchange without any regulations or protection.  It is based on an online programming code written by a group or an individual that operate under the name “Satoshi Nakamoto”.  If that doesn’t make individuals feel secure then knowing that they can never hold these ‘coins’ in their hands but instead can hold them in their online digital wallet definitely should! Continue reading →

Why You Might want to “Sell in May and go Away”…in April

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Sell in May and Go Away?

Dear Mr. Market:

Are you finally about to let off some steam and come back down? Everybody has been talking about this market correction but until last week you’ve been awfully stubborn and just keep inching higher. It’s now April 8th, so albeit a few weeks early, can we at least ask you about this whole “Sell in May and Go Away” concept?

For those that may not be aware of the old Wall Street adage, “sell in May and go away”, it is a belief that the market performs better in the months of November to April. Those that follow this strategy ideally sell their stocks in May and stay in cash until about Halloween. Does this have any merit? We wrote about this last year and wondered if it was once again data mining and essentially a statistical fluke. Analysis by Ben Bouman and Sven Jacobsen (2002) actually confirmed about 10% percentage points of stronger performance in 36 of the 37 markets they studied for the November-April time period. These results were more pronounced in the European economies. Other studies also point to the Dow Jones averaging about a gain of 7.5% in the Winter months while the Summer months lost 0.1%.

There are a number of factors on why this trend seems to have been fairly reliable dating all the way back to 1950. Year-end bonuses and the proverbial “Santa Claus rally” can sometimes help bump the markets up in the Winter months. Barring any unexpected negative catalyst and a typically mild Spring, the “summer doldrums” set in after all the first-quarter results are announced. Like it or not the extensive media coverage can really amplify an earnings miss or a hit and it’s not inconceivable to see a company drop or rise by 20% during this time. Today will bring us Alcoa Inc.’s results and officially kick off the earnings season. Continue reading →

Making Cents of Investing…Really!?

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Dear Mr. Market:

Making centsAs we close out the first quarter of 2013 investors are intrigued with impressive returns on top of the double-digit results posted for 2012.  Throughout the first quarter mutual funds set records for the amount of money invested in them.  The sad truth is that while investors watch the market continue this upward trend, breaking records in the process, the average investor is not seeing the same results in their accounts. In a recent report published by Goldman Sachs, nearly two thirds of the actively managed mutual funds underperformed the broad markets (S&P 1500 – consisting of large, mid and small cap stocks) last year.  While only a third of the funds beat the market last year the results are even more disappointing in 2011 as 84% of the funds couldn’t beat the broad markets.  While the so-called ‘experts’ have not posted impressive results what is even more shocking is what investors are paying these underperforming managers on a yearly basis.

According to ‘The Motley Fools’ the average actively managed equity fund charges an expense ratio of approximately 1.5%.   If you sit back and really think about this the numbers are eye opening.  If you invested $10,000, into an average actively managed fund, you paid $150 a year every year whether the fund performed well or underperformed (like the majority of them did the last several years).  This is like paying a private tutor to teach your children and being satisfied when they come home with straight “D’s” on their report card the majority of the time. Continue reading →