On Elections and Equities

Next month, Americans will head to the polls to elect the next president of the United States. While the outcome is unknown, one thing is for certain: There will be a steady stream of opinions from pundits and prognosticators about how the election will impact the stock market

Is It Really Guaranteed?

Often making smart investing decisions is more about knowing what not to believe. Take the term “guaranteed.” What does it mean for real investors? In reality, a guarantee is nothing more than a promise.

We Don't Know We Don't Know

In this political season, I’ve read multiple reports that we are politically ignorant with large percentages of American’s unable to even name the three branches of US government. While this knowledge gap might lead to poor election decisions, there is another lack of knowledge that can ruin your life, financial knowledge.

This has been a crazy summer with the creation of the first printed magazine in the country devoted to real investing. The first issue of real investing journal - the magazine went out in late June and the second quarterly issue just went to press.

Dimensional Fund Advisor's global market experience is unmatched in the money management business so their perspective of the Brexit referendum and its potential economic impact deserves attention.

After last week’s Brexit referendum and its surprising outcome, it’s hard to watch the news without feeling your stomach twist over what in the world is going on. Whenever the markets scream bloody murder, your instincts deliver a sense of unrest ranging from discontent to desperation. Resist those emotions!

Sometimes something is so sad, you just have to laugh. John Oliver of HBO's Last Week Tonight is one of the few people that can make a serious and sad situation laughable. We we excited to see him focus on the sorry state of the financial advisory industry in America. 

One of the tricks used by the actively managed mutual fund industry is to close down a poorly performing or merge it into a better fund, thus erasing that fund's performance from the group's performance history. This results in misleading results and claims about the manager's past through what is called "survivor bias."

I started researching indexed annuities back in 2009 when my wife alerted me to an ad she heard on the radio. It was for an investment that claimed to offer incredibly high returns, around 12%, with no risk to your principal. She stated that it sounded a lot like an ad that Bernie Madoff might have run if he had used radio advertising.

Is investing riskier than usual these days? In our experience, probably not. If there is such a thing as “normal” in this world of ours, risk is certainly built into the definition. Besides, investors often love and hate risk in a mixed up, messed up relationship. How so? Let us count the ways

Most of what passes for investing information and advice isn’t. The majority of what you hear, see, and read about building wealth is designed to encourage you to turn to experts who claim to be able to predict the future or generate high fees for Wall Street. Financial soothsaying has no basis in science. It is more like money alchemy. Like the alchemists of the past, those we have believed to be investing “experts” have consistently been proven wrong.

Rather than stretching for extra yield with stand-alone solutions, we typically suggest taking a total-return approach, seeking an appropriate risk/reward balance among all sources for earning and preserving your investment returns. These include tending to share value, interest and dividends, and aggressive cost management. 

When a hard-won historic milestone is achieved, it’s usually front-page news: Apollo 11’s “one giant leap for mankind.” The fall of the Berlin Wall. Martin Luther King’s “I have a dream.” … Last week’s fiduciary ruling by the Department of Labor (DOL) requiring that anyone offering you advice about your retirement assets will be legally required to do so according to your highest interests, regardless of any conflicting incentives or dual roles they may have.

The vast majority (over 99%) of those who provide investing advice are not always required to recommend what is best for you or act in your best interests. Most are product-peddlers, not true advisors. Costs can run over 5% of your assets up front and up to 3% every year. Rather than leave your future to the whims of a chance encounter, you must actively seek out those advisors who are likely to do the best job for you at a reasonable cost. Here are a few questions you must ask to help find the best investment advisor for your future.

As we discussed in the first two parts of this three-part series, we do not recommend turning to dividend-yielding stocks or high-yield (“junk”) bonds to buttress your retirement income, even in low-yield environments. So what do we recommend? Now we’ll answer that question by describing total-return investing. 

Here is a hard lesson that seems to be consistently ignored and yet gets repeated over and over again: If you don’t understand an investment, don’t invest in it. The pitfalls of these glowingly pitched products may not be readily apparent, but they often rear their ugly heads at some unexpected point in the future with disastrous results for investors.

If, on April 1st, someone offered you an investment that promised the higher returns of the stock market with no risk of loss, you would suspect a prank. I’d hope that if you heard this on any other day of the year you would would immediately think “scam.” Yet, every day of the year some stockbroker or insurance agent is making this outrageous claim about a product referred to as some variation on the term “indexed annuity” or “indexed life.”

In Part I of our three-part series on investing for retirement income in low-rate environments, we explained why we don’t advise bulking up on dividend-yielding stocks as a reliable way to generate retirement cash flow. Like the Three Little Pigs’ straw house, dividend-yielding stocks can disappoint you by exhibiting inherent risks just when you most need dependability instead. Another popular tactic is to move your retirement reserves into high-yield, low-quality bonds. Let’s explain why we don’t typically recommend this approach either.  

Equity markets have experienced a sharp decline to start 2016, leading some investors to reevaluate their asset allocation. As US stocks have outperformed developed international and emerging markets stocks over the last few years, some investors might consider reevaluating the benefits of investing outside the US.

We understand why bulking up on dividend-yielding stocks can seem like a tempting way to enhance your retirement income, especially when interest rates are low. You buy into select stocks that have been spinning off dependable dividends at prescribed times. The dividend payments appear to leave your principal intact, while promising better income than a low-yielding short-term government bond has to offer.