Is Financial Engines right for you?

financial enginesDear Mr. Market:

If you were asked to list two or three of the largest Registered Investment Advisory (RIA) firms in the country which ones would come to mind first? You’d definitely hear many of the names associated with Wall Street and the investment industry. Names like: Merrill Lynch, Charles Schwab, Fidelity and Wells Fargo – while these are certainly large firms none of them are RIA’s. We’ve written on several occasions what an RIA is and how they are driven by their fiduciary responsibility to their clients. A simple online search of RIA’s will show that the largest firm is nearly 40% larger than any its closest competitor. It specializes in assisting individuals in managing their company retirement accounts and has become a behemoth in the investment industry. Financial Engines, Inc. has risen out of relative obscurity and is quickly becoming a household name.

Financial Engines is based out of Sunnyvale, CA, is publicly traded under the ticker symbol FNGN, and currently manages over $90 billion in assets! To put this in perspective the second largest RIA firm is Fisher Investments with assets under management of just over $50 billion. Fisher Investments is a marketing machine and if you have a portfolio over $500,000 in value, you’ve most likely received one of their post card mailings or solicitation emails.

Financial Engines, on the other hand, is a relatively young company and is the creation of some of the brightest minds in the industry that made their mark in the late 1990’s. The founders of the firm are Nobel Prize winning economist William Sharpe, Stanford Law Professor Joseph Grundfest, Attorney Craig Johnson and Jeff Maggioncalda. While the firm went through some minor growing pains, they have certainly found their target market – working with individuals and managing the investments in their company retirement plans. Continue reading

Are you allowing the “tax tail” to wag the “investment dog”?

Dear Mr. Market:Tax tail dog 1

Not only do you toy with the emotions of every investor; you also have a partner that often surprises them and hits investors where it hurts the most… their pocketbook. Making money in the stock market is great but so many forget that eventually they have to reconcile with Uncle Sam come tax time. Look for example at some investments that we have recently discussed: Under Armour (UA) and InvenSense (INVN).   If you had purchased these stocks on the first trading day of this year (1/2/2014) you would be up 58% with Under Armour and up 20% with InvenSense. These numbers are impressive and would certainly make any investor happy but what happens when they are sold? How will they impact your tax return and how much of the gain will you have to pay?

Nothing is certain except death and taxes.

                            Benjamin Franklin 

*** Before we move any further in this discussion it is important to note that we are not tax advisors. In this article we will be discussing general guidelines. Every investor’s situation is unique and deserves personal attention. If you have questions we would encourage you to talk with a qualified tax professional.

Let’s take a moment to go over some of the basics when it comes to investor tax issues. Continue reading

MPG Core Tactical 60/40: July 2014 Performance Update

MW-BB798_sm6040_20130422180557_MDDear Mr. Market:

Have you ever woken up long before your alarm clock was set to go off? Put yourself in that state of mind for a minute. You see the alarm clock, take a pleasant mental check that you still have some time to sleep and you pleasantly roll over and shut your eyes; it’s almost like you just were rewarded free time which is the one thing we can never get back!

CLANK, BANG, SCREECH, HONK!?!?! What on earth?? Something that is NOT your alarm clock rattles you awake and spoils this momentary feeling of pure relaxation.

That’s basically what Mr. Market did to everyone in July. The last day of July brought people a wicked reminder of what the market can do if you let it put you to sleep. We haven’t seen a sharp drop like this in a few years and it certainly got your attention, didn’t it?

We actually saw a rather sharp selloff in some of the technology and momentum stocks in April of this year but this time it is broad based and appears to be signaling something more. Before we talk further about the markets and how they may have finally awoken some of you, let’s refresh our often short-term memories on why we run this monthly series of articles.

Click here to revisit the first edition of the MPG Core Tactical 60/40 Portfolio.

Here’s the current summary of the MPG Core Tactical 60/40 portfolio mix, which is updated as of this writing (August 4, 2014).

Click here to compare our portfolio against the benchmark.

What adjustments did we make?

One thing we try to avoid when it comes to managing money is to “pat yourself on the back without breaking your arm”. We did very little this month aside from clearly communicate that we thought not only was the stock market ready to correct but we also laid out what we planned to do about it. Read and click here to see exactly what we said. The moves we made in advance of the worst down day of the year were as follows: Continue reading

Here comes the stock market correction…What should you do?

Unknown-61Dear Mr. Market:

You’ve been messing and toying with the brightest minds since 1792, when the New York Stock Exchange was created under a buttonwood tree on Wall Street. Your latest bull market run has as many investors as puzzled as it does nervous. The longer we go on without a stock market correction the potentially worse it will be when it eventually hits. At this point, it’s clearly not a matter of “if” but “when” it is coming. Continue reading

High Frequency Trading – How does it impact you?

HTF robotsDear Mr. Market:

The markets are constantly moving from one headline to the next – some of them having a profound impact on the markets. Last Sunday night “60 Minutes” aired a topic that has been lurking in the shadows for years, suddenly it jumped up and grabbed headlines raising concerns and paranoia with investors. High Frequency Trading (HFT) has dominated headlines over the last week prompting a federal investigation and hours of debate.

Michael Lewis, author of “Flash Boys”, has been on a publicity tour claiming the U.S. Stock Market is ‘rigged’. Is the average investor at a disadvantage, on the outside looking in at the security exchanges? This week we encourage you to view a letter being sent to our clients and friends of the firm (High Frequency Trading letter) Continue reading

MPG Core Tactical 60 /40: March 2014 Performance Update

MW-BB798_sm6040_20130422180557_MDDear Mr. Market:

March has turned in another month of stubborn market defiance as the investment world is waiting for a correction yet it never seems to come or fully develop! It’s without question that many of the warning signs continue to lurk below the surface but the S&P 500 has still managed to tack on about another +1%. Year to date we’re just about 1% of where we started 2014 but it sure feels uncomfortable for many.

If this is your first time reading about our MPG Core Tactical Portfolio please refer back to our first post. (click here) In short you will see what adjustments we make throughout the year on a $1 million dollar portfolio and how that performs relative to a portfolio that is rebalanced once per month with an allocation of 60% Stocks and 40% Bonds. Continue reading

Update: March Madness: Final Four Investing Bracket 2014

March MadnessThe 2014 NCAA Basketball Tournament certainly had an eventful weekend!  52 games have been played across the country with 5 of them going into overtime. The $1 Billion that Warren Buffet offered to anyone that had a perfect bracket is now a distant memory. Every year there are plenty of surprises and this year has been no different:

  • 3 of the 4 teams that were seeded as #12 in their brackets posted wins over teams seeded #5! The one team that lost was beaten by only 3 points in overtime!
  • #1 seed and ‘media darling’ Wichita State lost to #8 Kentucky in the 2nd round.
  • The 2 longest winning streaks in the country have both come to an abrupt end – Wichita State with 35 and S.F. Austin with 29.

 Here are some other mind boggling numbers to take into consideration with the NCAA Tournament:

  • The odds of winning Buffet’s $1 Billion prize was 1 in 4,294,967,296!
  • It is estimated that Vegas takes in over $100 Million from bets on the NCAA Tournament – experts think this represents only 4% of all the money wagered on games!
  • The NCAA tournament costs businesses $1.7 Billion in lost productivity during the month of March.

Continue reading