Are you really looking for horrible investment advice?

Dear Mr. Market,

How great would it be to have a job where you could constantly deliver results short of expectations and never have to worry about being fired?  What if you could always simply blame your lack of performance on random external forces or global events?  Imagine if you had a yearly performance review that went something like this…

 “You missed your target goals by 28% and were wrong more often than you were right!  Nice work, we are going to give you a bonus and a 10% raise!”

pay performance

 This doesn’t happen in the real world…or does it?!  The financial services industry has become notorious for overpaying executives even when the company itself is struggling to survive or is even on the verge of declaring bankruptcy.  For example, Richard Fuld of Lehman Brothers was one of the 25 best-paid CEO’s for eight years straight – right up until his firm collapsed in 2008.  It has been called ‘”the largest bankruptcy in history”;  it triggered a chain reaction that produced the worst financial crisis and economic downturn in 70 years!  What about professionals in the financial industry that consistently underperform but are not at risk of losing their jobs? Continue reading

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

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 jargon 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

Making Cents of Investing…Really!?

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