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4 Great Strategies to Manage Investment Risk

Posted by Larry Jones on Jun 11, 2019 9:30:00 AM

Are you a risk taker?

If you have investments on Wall Street, you are. You might not be a skydiver, scuba diver, or venture capitalist, but you're a risk taker. Your money is at risk of loss. Investors know that the amount of money they are likely to earn on their investment is directly related to the amount of risk they are willing to accept to generate that return.

What continually amazes me, however, is how misinformed most investors have as to the amount of risk they actually have. I'd say that 75% of the folks I interview who tell me they are "very conservative" when it comes to their tolerance for risk, have no idea that their stockbroker has them heavily invested in high to moderate risk funds!

We know that we need to take some risk. What we don't seem to know is this: we should always take the least amount of risk necessary to generate a required return. In other words, if you can earn 8% a year taking a low risk, why on earth would you want to take a moderate risk to get that same 8%?

In a sane world, you wouldn't. Is your broker living in a sane world?

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Topics: Investment Advice

Wealth Accumulation Financial Services

Posted by Larry Jones on Jun 6, 2019 9:30:00 AM

It's Just Math (isn't it?)

Why on earth would anyone pay a fee to have a financial advisor help them? After all, isn't it just a matter of common sense? As one gentleman once exclaimed to me, "It's just math."

As someone who hates to pay for anything that I can do myself, I feel your pain. But it just may be that we need to turn this rock over a bit more and look under it. 

There's no reason to believe that just because you know how to quantitatively analyze a math problem with more than six variables, that you are familiar with the tax code, which even Albert Einstein said was "more philosophy than mathematics."

The typical electrical engineer would not be expected to understand how it's possible to generate a consistently positive growth in an IRA north of 7% without market risk.

Your average rocket scientist, if there is such a thing, might be surprised to find that there are ways to prevent the government from taking a large chunk of money from his family after he dies.

You see, the math is easy. It's the financial expertise that's missing. Just because you are a prodigy in your own field doesn't mean you are an expert in all the mysteries of the universe.

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Topics: Wealth Accumulation, Financial Services

Can Tactical Investing Save the Day for Your Investment Portfolio?

Posted by Larry Jones on Jun 4, 2019 9:35:00 AM

Have you ever wondered why your broker doesn't protect your portfolio when the market is crashing?

It seems like a reasonable question to me. In 2008-09 when the market was in a serious free-fall the protection that the average investor thought he had through diversification was absent. That's because diversifying your portfolio is no protection when the entire market is declining. Many portfolios declined by half. It wasn't pretty.

Yet, the mutual funds that constitute the vast majority of American investment remained 100% in the market. You'd think that a professional fund manager would move to protect his clients, but the investor usually expects his stockbroker to do that. The average stockbroker, however, is constrained by the firm he works for. It's a fact that most mutual funds stay at least 80% invested in the market, even when it's crashing.


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Topics: Investment Advice

Investment Advice for the Average Investor

Posted by Larry Jones on May 30, 2019 9:33:00 AM

Of all those reading this, half are below average!

Am I insulting my readers?

No, of course not! I'm making a mathematical statement. Half of any group is necessarily below the average of all of them. When it comes to investing, however, studies have shown that there is a huge gap between what the average investor should earn, and what they actually do. For example, the S&P 500 over the long term has historically earned north of 7%. The average investor doesn't quite reach that level, and comes in at around 3%!

What?! How can that be?

According to Terrance Odean, a finance professor at the University of California at Berkely,

"Many of the mistakes that investors make come from a lack of understanding of the innate disadvantages they face."

According to Odean, individual investors are anything but rational, and can be their own worst enemies. My experience also bears this out.

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Case Study - 81 Year Old Widow

Posted by Larry Jones on May 28, 2019 9:30:00 AM

Although the person I'll reference in this study is fictional (I'll call her Mary), her circumstances are certainly not. Let's take a look at Mary's financial situation:

Mary is a widow, and her husband Bud passed away five years ago. Her financial situation is still very similar to what it was before Bud died.

She has $350,000 in a brokerage account, which is an IRA, and another $50,000 in bank CD's. She has an accountant who does her taxes, a financial advisor from her bank, and an attorney who has helped her prepare legal documents, such as her will. She has no trusts. Her sources of income are social security, a survivors pension from Bud, and a 4% drawdown each year from her IRA. 

One afternoon Mary has a stroke. She loses the ability to speak and all mobility.

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Topics: Case Studies

Investment Advice: Five Things That Your Stockbroker Won't Say

Posted by Larry Jones on May 23, 2019 9:30:00 AM

Did you know...

that before 1980 less than 5% of Americans were invested in the stock market? That's kind of hard to believe when you've just seen the latest report on the Dow in the evening news, followed by several commercials from investment firms, and even a cable channel devoted to Wall Street!

But our parents were probably not part of all this. They accumulated wealth in more traditional ways, and took much less risk. Why do we take such risk with our money today? Because we have been educated by the Wall Street machine to believe that we have to.

As an investment advisor, and a financial planner, I would agree that over the long-term there isn't a better way to grow assets than in the market, which has traditionally returned north of 7% year after year OVER THE LONG HAUL. But what if you are a retiree, or getting close to retirement? Can you really be happy about losing half of your portfolio in a few months, and then waiting six years for it to come back? That's what happened in 2008-09. What if you suddenly had to pay for long-term care just as your portfolio hit bottom? Would you still be excited about Wall Street? By the way, in the 30's, after the stock market crash, an entire generation never trusted Wall Street again, or banks!

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Topics: Investment Advice

How About Financial Services That Come to You!

Posted by Larry Jones on May 21, 2019 9:30:00 AM

Is your time important to you?

Have you ever scheduled a service call only to have them tell you that someone will stop by your home sometime between 8AM and long as they can get to you that particular day? Aargh!!

If you're like me, your time is a very valuable resource to you. Few things get my goat like someone presuming that they know better how to spend my time than I do. Come on. In this day of instant communication can't we do better than this?

It might come as a surprise to your cable technician, but many TV viewers have jobs. We might even consider it more important to keep that job than to watch Dr. Phil's latest episode about gender-confused insecure college dropouts who hate their lives. 

When you need to see a doctor you must take time off from work. Your car needs repair and you have to be absent from work...again. Your aging parent needs care, and ...well, you get it.

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Topics: Financial Services

What should a good financial services firm offer it's clients?

Posted by Larry Jones on May 16, 2019 9:30:00 AM

Why are financial firms popping up everywhere?

I was driving recently and listening to a local radio station. In the space of half an hour there were at least four radio ads from financial firms. I got home and opened my mailbox to extract a couple of invitations to dinner seminars from other local financial firms, of which I get about 7 or 8 each and every month. I really believe that any retiree in this area could knock off several hundred dollars of food expense from their budget simply by attending these seminars regularly! 

What's up with all these financial firms? Are so many really necessary? Are some better than others? Do they all do the same thing?

We are the most prosperous nation in the history of the world. A constitutional framework of government, and an entrepeneurial spirit has produced the robust economy that benefits us all. With increased wealth, there is a greater need for intelligent decisions regarding that wealth, and I believe that the level of financial literacy is at an all time low. Hence, the rapid explosion of financial "advisors." It's simply supply and demand in action.

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Estate Planning Can Be A Matter of Trust

Posted by Larry Jones on May 14, 2019 9:30:00 AM

Is what you own really yours?

Walt Disney was valued at more than $23 million when he died. Yet, after estate taxes and probate costs nearly $7 million of that was lost to his descendants- nearly 30% of his net worth! Elvis Presley lost 73%.

If you are a high net worth individual, and the above examples make your stomach queasy, you have 3 viable options available to you. You can (1) spend everything you have and die just as you go broke, (2) give everything to charity, or (3) engage in advanced estate planning. 

I'm convinced that the only folks who have substantial amounts of their estates taken away at death are those who have chosen to remain ignorant in legal tax strategies, which are available to everyone who will take the time and trouble to investigate them.

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Topics: Estate Planning

Estate Planning Basics: Does it Matter How Assets Are Titled?

Posted by Larry Jones on May 9, 2019 9:30:00 AM


Will the death of your partner rock your financial world?

Did you know that the number one reason for widows to be in poverty is because their spouse died? In other words, before that person passed away everything was rosy. Your financial plan absolutely needs to take the death of your partner into account (as well as their long-term care needs). Failure to do this is simply negligence.

One of the things I'd like to talk about this time has to do with the subject of titling your assets. This is something that sometimes doesn't get as much attention as it should, but doing it wrong can have very undesirable consequences.

For example, suppose that you and your partner own a brokerage account worth $1 million dollars. Your partner's share in this account is $500,000. The account is titled as TOC, which means Tenancies in Common.

Life is beautiful. Then, one day your partner is bitten by a rabid dog, and after biting many of her old acquaintances, dies shortly thereafter. When the will is read, your partner has specified that she'd like to leave her portion of the brokerage account to her son, Otis, who is an alcoholic living in Mayberry, NC with his alcoholic wife Agnes. You haven't seen either of them in twenty years.

Can she do that?


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Topics: Estate Planning

What you don't know can hurt you!

As a fiduciary I am required to always act in your best interests, and as a professional planner, it's my job to be familiar with all types of possible solutions and financial vehicles. In short, I have no interest in selling any particular product or any affiliation with a particular company. I work for my clients.

Are you:

  • concerned that your tax bill is too high?
  • tired of watching your nest egg decline by significant amounts every 5-7 years?
  • wishing you could find more free time?
  • looking for ways to help protect yourself against litigation that could destroy all you have worked for?
  • worried that Uncle Sam is going to enjoy your retirement more than you are?

If any of the above describes you and you'd like to get a question answered then just click the button below and we'll be in touch.

Let's Meet!

p.s. we have the ability to meet virtually regardless of your location! Give us a shout!


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