Being Smart with $$ - Letter to Clients and Friends: Fundamental reasons to be a stock-market investor despite the chaosBeing Smart with

Dear Clients and Friends:

It has been a tough year to be a stock market investor.  Therefore, I believe it is a good time to discuss the mechanics of the stock market and why the majority of experts believe that stocks are appropriate for most portfolios.  Forgive me if I make this too simplistic but a reminder of how we benefit from being an investor in stocks may be useful for everyone.

First, a quick reminder of stock market performance over periods we consider to be the worst of times.  I will reference the Dow Jones Industrial Average as the benchmark that the news channels seem to favor:

The Dow peaked in 2007 at 14,165.

It hit a low of 6,443 in 2009.

Today it is at approximately 22,400, almost 50% above its peak from before the crash 10 years ago despite being down almost 20% from its recent peak in October of this year.

 In 1987, the Dow reached 2,722.

On Black Monday October 19, 1987 it fell to 1739. 

Ten years later the Dow closed the year 1997 at 7,908, almost 3 times higher than the pre-crash peak. 

As a reminder, today the Dow is near 22,400. 

It should be noted that on top of price gains, some stockholders also received dividends each year. 

Now for stock market fundamentals:

When you buy stocks, you are an owner of the company.  As an owner, you share in the profits or losses of that company.  Profits are sometimes paid out in annual dividends so that even in the absence of a change in the stock price, you still might have a positive return.

America’s companies are quite profitable on average. Fortune.com reports that Fortune 500 companies as a group generated around $1 TRILLION in profits last year.  If the same occurs over the next 10 years, that might be $10 TRILLION in new value created that benefits the shareholders in these companies. Profits could be worse so you may prefer to assume they’ll generate $5-7 TRILLION.  When we hear that earnings will be poor in the future, don’t take that to mean corporate America will lose money.  It usually means that earnings might just be lower even though they will still be substantial. Even in 2008, an historically horrible year for the economy, Fortune 500 companies made a small profit.  And even though one year was quite bad, the years before and after saw far higher profits for these companies.

Stock prices can swing wildly for a variety of rational and irrational reasons.  But what happens over the next 10 years when $5-10 trillion of new profits are generated by these 500 companies which were recently worth approximately $21.6 trillion in market capitalization.  It might be reasonable to believe that the owners of these companies, the stockholders, will enjoy nice returns on their investments.

Is there a guarantee that stock prices will rise? Never.

Should you be invested in stocks if you need the money in the next few years?  Probably not since it can take a long cycle for the price of a stock to reflect the fundamental value of a company.

Should you be diversified? Certainly yes because while corporate America as a group is profitable, there will always be a few companies that don’t survive.  Add international exposure for even better diversification.

Are stocks right for everyone?  They are right for you for a portion of your portfolio if you have a long-term time horizon.  If you are retiring tomorrow, you will likely be drawing from your portfolio over the next 30 years and may benefit by having some of your money in the stock market.  If you are in your 80s and don’t expect ever to need a chunk of your money, you may want long-term growth for assets that will go to your kids.  Every investor’s needs are different and the appropriate allocation to stocks will vary for everyone.

Will you panic and bail out in tough times? If yes, stocks are probably not right for you as patience is how stock investors usually succeed.

Can you time the market and know when to get out and when to get in?  Research suggests that more people fail at this strategy than succeed.

I repeat that there are no guarantees in investing and past results may not be an indicator as to what to expect in the future. But consider this:  if you are able to earn an extra 2% on your investments, you might collect nearly double the money over 20 years. Avoiding assets that are volatile in the short term but usually offer higher long-term returns may be assuring yourself returns that don’t let you achieve your long-term goals.

As always, I am happy to discuss your individual circumstances in greater detail.

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com

Being smart with $$ - Stock Crash Consolation Prize #2

Stock Crash Consolation Prize #2:  Cheaper Roth Conversions.

Converting a Traditional IRA to a Roth IRA means paying taxes now on your retirement account assets instead of paying taxes when you take the money out in retirement.  But once the money is in the Roth IRA account, it will grow tax free moving forward with all the money available to you in your golden years.  While a Roth conversion may or may not be right for you, it is cheaper to convert when the market is down.  Let’s say you have 100 shares of Apple in your Traditional IRA and were thinking about converting those shares in September.  If you did so, you would have to pay taxes based on the value of Apple at the time which was around $22,000.  But if you procrastinated and still want to convert the shares, now you can do so with the value of your Apple stock around $15,000 and only pay taxes on this much lower value.  Same shares converted, less taxes paid.  Stock crash: bad.  Cheaper Roth conversions: good.  There’s rules and nuances you should know before converting but at least you have another consolation prize from this stock market chaos.

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com 

Being smart with $$ -- Stock Crash Consolation Prize

Stock crash consolation prize:  Tax losses. 

Sell your losers to offset capital gains distributions from mutual funds and gains from winners you’ve sold this year. You can even use losses to offset up to $3,000 of regular income. You don’t even have to leave the market since you can sell one item and simultaneously buy a similar but not identical item. Just make sure not to buy back the loser within 30 days or else you won’t get to use the loss. Do you have a large-cap, actively-managed fund at a loss? Sell it and on the same same day buy a large-cap index fund. Voila. You’ll get the benefit of the loss and still have almost the same exposure to the market. (This does not work in retirement accounts.) Who said a market crash is all bad? 

Larry Pike, CFA

www.clientpriority.com

Being Smart with $$ -- Stocks are Down. Now What?

Stocks are down.  Now what?  First of all, to put in perspective, the US market is really only down about 5% for the year (including dividends.)  It’s easy to feel whiplash when the market is so volatile but if you had the TV off for 2018, you’d look today and be annoyed that you lost 5% though you wouldn’t think of this as the 1920s all over again.  And if you look at the average return over the last 5 years, you’ve realized better than 8% annual returns.  But the question is: what’s next?  We can’t go back to early October and sell at the artificial highs.  So do you sell now when the market is at a much cheaper level than October 1?  And while cheaper, is it cheap?  Nobody knows the answers to these questions but many have opinions.  It seems that a few months ago when the market was high every analyst predicted the market would scream higher.  Now the market has fallen and every analyst seems to predict more declines.  So often these opinions are late to the party.  Every investment decision must start from today and yesterday’s results don’t matter.  Historically speaking, most families that have achieved long term financial success did so by tuning out the drama on the business channels and holding steady through volatile times.  Those that timed the market, more often lost the bet than won it.  Don’t keep more in the stock market than is appropriate for your profile.  But sit tight and remember your stock portfolio is supposed to provide for your needs in 2030 or 2040, and not in 2018.

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com 

Being Smart with $$ - Bad Behavior by a Financial Adviser May Be Hard to Spot

I just read an article about a client suing their financial adviser because they lost money on what was supposed to be a conservative investment.  It’s easy to spot bad behavior when you lose money.  But MOST bad behavior is less obvious.  When you make money, you are happy.  But would you be happy if you found out you should have made TWICE as much and the difference went to your financial adviser?  You probably know 10 people this has happened to.  It’s simple.  The earnings on money invested over 20 years at 5% net of fees will be DOUBLE of what that same money would earn if the annual fees were 2% higher.  Maybe you are even paying a big, upfront commission AND high annual fees.  This is far more common than you think.  Be careful of the sales pitch from that adviser who seems like such a nice man or woman.  If you don’t understand what you’re being sold, you are probably one of the 10 people mentioned above.

Client Priority Financial Advisors LLC is an independent, fee-only, hourly-advice company. 

NO COMMISSIONS. NO AUTOMATIC RECURRING FEES.  WE CHOOSE INVESTMENTS WITH ULTRA-LOW EXPENSE RATIOS WHENEVER POSSIBLE.
www.clientpriority.com 

Being Smart with $$ -- SELL if you need your money soon.

SELL SELL SELL if you need your money soon, no matter how much you are down in the past month.  If you don’t need your money that’s in the stock market for another 10 years then turn off the TV and ignore the headlines.  But if the money you plan to use to buy a house in 3 months is sitting in a stock fund then you’re taking a big risk with cash that should instead be invested in something safe.  In the short term, the stock market can be quite volatile.  If your account falls by half does that kill your plan to buy a house and do you really want to take that risk?  Are you hoping to make back a few percentage points by staying in the market with money you can’t afford to lose?  Consider the upside and the downside and you might realize the stock market is no place to invest the money you absolutely must have in the next months.  And if it helps to put it in perspective, if you sell today, you are locking in gains of around 10% per year over the last three years.

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com 

Being Smart With $$ -- Keep your head!

Dear friends and clients:

A day like today can make you question whether you want to be a stock investor. The Dow was down more than 800 points today which was over 3%. That will surely be the top story on all news channels until we find out what happens tomorrow when the markets open again.  Analysts say that rising interest rates are spooking investors.  But a day like today can sometimes make us lose sight of what is happening in the stock market over longer periods of time. We may all be pleased to know that the US stock market is up over 8% in the last year and that is after accounting for today’s rout and other poor days recently.

The one thing we know about the stock market is that it is very volatile on a day-to-day basis. It’s a very poor place to keep your investments if you will need the money in the short term because you could easily have 30% less when you go to access the cash. But over longer periods of time, the stock market has been consistently generous to investors. We have no way of knowing what the stock market will do moving forward but as stock investors are owners in America’s companies, they share in the massive profits generated by these companies every year. And patient investors will likely see profits in their stock holdings as most of these companies generate genuine new value on a consistent basis.

If you are properly invested in the stock market, that means you own stocks for your long-term needs and should keep your head when the markets get crazy. If your exposure to the stock market is not appropriate for your needs, you need to quickly reevaluate your investments.

Investors regularly tell me they want to wait for a buying opportunity when the markets fall or a selling opportunity when the markets rise.  But market timing has taken too many victims and the right time to make an adjustment to your portfolio that suits your personal circumstances is now. A 3% drop today is not very relevant compared to the large gains provided by the stock market over the past years. Yes, the markets can drop more in the near term. But those who are considering selling their stock holdings for a short period of time could possibly find that they missed the next big jump in the market and it’s likely they would be unwilling to reenter at that higher price. More likely, they would hope and wait for the next crash that may never come to the degree they need and they could be sitting out the market for years because they tried to time the market for just this week.

The financial pages and business channels give us endless opinions on what the markets will do next, some insisting the markets will scream higher and others demanding that the markets will fall hard.  Those kinds of contradictory opinions have been expressed every month of every year since the markets existed. I don’t envy you if you are a trader and need to make money this week.  I do envy you if you are a long-term stock investor because you are likely to be far wealthier in the decades ahead when you want to spend those profits.

Keep your heads!

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com 

Being Smart with $$ -- It's Free to Freeze. Your Credit, That Is.

It’s 80 degrees out and I’m Freezing.  And the best part is that now it’s free to Freeze!

As of last Friday, we will no longer pay a fee to freeze or unfreeze our credit at the three major credit bureaus.  Freezing your credit may provide the highest level of protection against identity theft and should prevent anyone from accessing new credit in your name.  It may be inconvenient when you need to apply for new credit but the protection this action offers may be worth it.  Compare the inconvenience of freezing your credit to that of having your identity stolen.  And did I mention it’s now free?

1. Equifax            https://www.freeze.equifax.com

2. Experian          https://www.experian.com/freeze/center.html

3. TransUnion     https://freeze.transunion.com

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com 

Being Smart With $$ -- Your Choice: Smoke or Have $1,000,000

I saw someone spend $1,000,000 on cigarettes yesterday!!  Well, more correctly, yesterday I saw someone buy cigarettes and over their lifetime it will probably cost them about $1,000,000.  This 20-something smoker paid $11 for the pack.  If they smoke a pack daily between now and retirement, that is $11 per day not going into their long-term stock market account.  That cigarette money would likely be worth over $1,000,000 for them in retirement even at below historical, stock-market returns.  I hope that cigarette tastes REALLY good! Isn’t it time to make a plan for spending and saving?

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com 

Being Smart with $$ -- Does Talent Get You Higher Mutual Fund Returns?

When choosing a mutual fund, it is often said that you should pick a manager with talent who has proven that he or she can stand above the pack and give you superior returns.  It is said that talented managers can beat an unmanaged low-cost index fund even if most managers in a category cannot.  Investors may have followed this rule when choosing Janus Henderson Global Unconstrained Bond Fund managed by legendary bond manager Bill Gross.  Some argue that talent is worth the extra fee paid to the fund manager (about 0.68% extra versus a 75%/25% mix of a US bond index fund and an international bond index fund, a similar mix to how Mr. Gross’s fund is invested.)  But that extra fee is a hurdle an active manager must overcome before his fund can outperform.  You may already have guessed that you would have done better by buying the low-cost, unmanaged index-tracking funds.  Buying the Janus fund instead of the index funds cost you about 3/4% of performance annually over the last 3 years, a loss surprisingly close to the extra fee paid to the fund manager.  It was much worse in the last year where you lost over 4% of performance in the Janus fund vs. the index funds.  Additionally, Mr. Gross’s fund was more volatile. When choosing a mutual fund, perhaps your better bet is to opt for the low-cost, index fund that has a head start right out of the gate because it takes less of your money out of the fund.  That advantage has allowed index funds to outperform more often than not, and even talented fund managers know that index funds are hard to beat.

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com 

Being Smart with $$ -- Morningstar Report Shows Low-Cost Funds Outperform Again

Morningstar reports that in the first half of 2018, low-cost, unmanaged index funds (investment funds that simply track an investment benchmark but no human is deciding what to buy and sell) beat 64% of actively-managed funds in 9 categories, where a manager is paid to try to outperform. How is this possible? The active managers charge a high fee and they must do so well that they make up for the fee just to break even, and more often than not they don't succeed. Morningstar adds that managers keep some money in cash and when the markets rise that is a disadvantage. Morningstar’s report says that investors improve their odds of investment success by favoring low-cost funds over high-cost funds. A CNBC commentator (on 8/24) said that most mutual fund managers are afraid to trail their benchmark so they largely buy what’s in an index fund and then they are very likely to underperform because they are almost the same fund as the index fund except they have higher fees. Other managers have portfolios that are not close to their benchmark but investors in these funds not only have risky exposure to the markets but now they have additional risk that the manager will do poorly even if the markets do well. Low-cost index funds are looking pretty good for long-term, buy-and-hold investors. Choose your advisor and your investments wisely.

https://www.morningstar.com/blog/2018/08/23/actively-managed.html,

Larry Pike, CFA

Client Priority Financial Advisors LLC

Hourly, Fee-based Financial Planning and Advice

Being Smart With $$ -- Is your or your parent's trusted advisor really trustworthy?

Just because your parent trusted their financial advisor, doesn’t mean YOU should.  Many parents know no more about finance than their kids even though we think our parents know everything.  (Or if you’re a teenager, you think they know nothing.)  You may think your parents are in good hands with a trusted, long-term advisor.  You may even inherit money from your parent and stay with the trusted advisor.  But perhaps it’s time to find out.  Is the advisor trading daily in your account and generating commissions for him/herself?  Is he/she recommending appropriate investments that you can hold for the long term?  Are you being moved from one “load” fund to another that generates a fee every time?  Read this article for a cautionary tale.

https://www.nytimes.com/2018/08/24/business/brokers-excessive-trading-retirement.html

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com

Being Smart with $$ -- You Can Go Broke

You can go broke no matter how rich you are.  Kyrie Irving of the Boston Celtics seems to know that which is why he drives a $29,000 Jeep Wrangler even though he’ll make over $20 million this year (per GoCompare and CNBC).  He may have heard that 60% of NBA players are broke within 5 years of retirement and it’s similar for players of other sports (per a 2009 Sports Illustrated story).  How does it happen? The easy answer is that they spend too much.  Their situation is no different than for any of us; only the numbers vary.  Figure out how much you have, how much you make and how much you’ll need when you retire (whatever your retirement age is) and then you can determine how much you are able to spend.  Spend more than that and you’ll go broke. Spend less and you’ll probably be okay.  Whether you have $100,000 in savings or $10 million, the math is the same.  So follow Kyrie Irving’s example and remember that the future is expensive and it’s best to plan ahead.

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com 

Being Smart With $$ -- Poverty is More Fun Than Being Rich...But....

Being Rich is No Fun! In many cases, we have the option to be rich but many of us choose to be poor because it is far more fun! Poverty is more fun if it means spending all your money on everything you want day to day. Being rich often means foregoing all those great toys and experiences we are offered. What does it mean to be rich? It varies in opinion but let’s say it’s having $2 million or more saved. If you power save starting at age 40 and invest $25,000 a year in the stock market earning 8% annually, by the time you retire at 67 you’ll have almost $2.2 million. VOILA! You’re rich! But only at the expense of missing out on that big house, fancy car and awesome vacations your peers may have had. So why would we want to be rich? So that in retirement you can maintain your normal standard of living and not have to work until you’re 90 (if you are even able to).  Reaching the age of 60 in a panic and realizing you have nothing saved is a high price to pay for enjoying decades of self-imposed poverty. Going from lobster today to Spam in retirement won’t be easy.  30 years of retirement requires a lot of money and a lifetime of saving can get you through it. And no matter how old you are and how far behind you may be, now is the time to create a plan to get you to your goals.

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com 

Being Smart with $$ -- Investors Make Mistakes but Guidance Helps

Investors make so many mistakes. We panic and sell at the wrong time, we jump on a hot sector often right at the end of its hot run, we fail to diversify properly and we time the market mistakenly believing we can generate excess returns when research shows that usually the opposite happens. A good financial advisor can help you avoid making these mistakes. My clients tell me that sensible guidance and having a voice of reason helps keep them on track. Consider if you are making mistakes and whether you need some guidance to achieve your long-term financial goals.

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com 

Being Smart with $$ -- Street Fair Visitors Understand the Benefits of an Hourly Financial Advice Model

Great Needham Town Fair yesterday and good conversations at the Client Priority Financial table.  Visitors understood the benefits of an Hourly, Fee-Based Financial Planning and Advice model.  No commissions.  No automatic, recurring fees.  No poorly-performing, in-house products.  Only your best interests are considered.  And an adviser who has studied or worked in finance for 30 years.  When choosing a financial adviser, always ask what the total fees will be over 5 years.  Ask about any payments or compensation the adviser may receive when choosing an investment for you (such as will he or she win a vacation for selling a certain product.) And ask about the adviser’s background.  Then you will understand the benefit of the hourly model and experience offered by Client Priority Financial.

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com 

Being Smart With $$ -- What Kind of Adviser is Right For You?

The Editor in Chief of Kiplinger’s Personal Finance Magazine was seeking a financial planner.  He dismissed planners who work on commission because some push high-cost products.  So he spoke to three fee-based planners.  The first was an adviser who charges 1% of assets but realized that can add up to thousands of dollars in year-after-year fees.  He spoke to an advisor who charges a large up-front sum and dismissed that idea as too expensive. Then he settled on a third advisor who was just what he was looking for: an Hourly, Fee-Based Financial Planner with no minimum time requirements and who acts as a Fiduciary, only considering what is in his family’s best interests.  The advisor keeps her overhead low and therefore does not need to charge you thousands just to cover expensive office space.  What kind of adviser is best for you? (Kip Mag 05/2018)

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com

Hourly, Fee-Based Financial Planning and Advice.

No Commissions, No Automatic, Recurring Fees.

The Client is Always the Priority.

Being Smart with $$ -- Rent or buy a home? Renting is NOT throwing away money compared to buying.

Rent or buy? When you ask this in public, you are sure to hear someone ask why you would throw away money on rent when you can build equity through ownership.  In fact, one real estate firm has a marketing piece saying that you are throwing away $240,000 over 10 years if you rent for $2,000 per month.  But that completely misses the point that ownership costs money too.  If you buy something for $500,000 (that is similar to what you might rent for $2,000 per month) then you might pay $200,000 over the same 10 years for interest costs that you don’t get back.  Plus, you’ll likely pay $60,000 in real estate taxes that you don’t get back.  This doesn’t even get to the annual cost of maintenance and repairs when you are an owner.  And the recent tax law changes might mean you don’t even get the tax deductions from ownership anymore.  So is renting really throwing away money and owning is not?  Apparently not. The difference may come when or if the value of your home rises and in the long run, it likely will.  But real estate can also fall in value.  Today, real estate research firm CoreLogic said that half of the country’s top 50 markets are overvalued so that may be an ominous sign for future price gains.  Whether you pay cash to buy a home or take out a mortgage or use some combination, the calculation is about the same.  Homeownership can be wonderful but it is not all “win” versus all “loss” for renting, like many people insist on a daily basis.  Ask me about the math if you’re not convinced.

Larry Pike, CFA
www.clientpriority.com

Being Smart with $$ -- Long Term Stock Market Investors Do Well Without Worrying

The stock market has been crazy this year! If you are an avid watcher of the business channels it may be keeping you up at night with worry.  And yet, if you slept through the first 119 days of the year you would be bored to read that the market is barely changed for the year. And you would likely be very pleased to notice that it is up over 10% annualized for the last 3 years and up over 13% annualized for the last 5 years.  As a long-term investor, you could not complain about your 5-year results even if the market dropped 10%-20% this year.  But you have to be a long-term investor to enjoy these kinds of results without dreading short-term volatility.  Investors who worry about short-term results will likely miss the long-term benefit of being in the stock market.  Which kind of investor are you?  If you need a better plan, maybe it’s time to contact an hourly, fee-based financial planner.  I can help.

Larry Pike, CFA
www.clientpriority.com

Being smart with $$ -- Can Fund Managers Avoid Losses in a Falling Market?

"Actively-managed funds are good in a falling market because they can avoid losses.” Is this true and will stock index funds do worse as the stock market tanks? Many believe that fund managers have a crystal ball and know when stocks are going to rise and when they are going to fall. We have seen that historically stock index funds beat the average return of actively-managed funds over the long term because of the lower fees of the index funds. So how about in a falling market? In the last month, the market has been unkind with S&P 500 Index funds down about 4.4%. How about some respected brand-name actively-managed funds? Fidelity Contrafund, T. Rowe Price Blue Chip Growth and American Funds Growth Fund of America have all underperformed their benchmark index funds in this falling market.  For sure, others have done better.  But perhaps fund managers do NOT have crystal balls and aren’t the panacea for falling markets. What to do? Remember that your stock holdings are for your needs a decade or more from now and stop worrying about this week’s performance.
Larry Pike, CFA
www.clientpriority.com

Being Smart with $$ - Local Banks' May Be Good for Distant College Students

Nice tip for Metrowest Boston families that will soon be sending a child to college out of the area. My friend at Needham Bank told me of their no-fee ATM accounts that allow students to use any bank ATM around the world and get reimbursed for the fees that bank may charge.  If your current bank doesn’t have multiple branches near the new school you could get hit with many ATM fees.  And the most convenient part of the Needham Bank account is that the parent can fund the account locally anytime more cash is needed (such as for that emergency kegger in the dorm. 21 and older please to tip that cup! And NO driving!)  Not in Metrowest Boston? Check your own small, local banks for a similar deal.

Larry Pike, CFA
www.clientpriority.com
Blog: clientpriority.blogspot.com

Being Smart with $$ - Wall Street Victims

Which is worse? To be invested in stocks and lose money as the market falls, or to not be invested in stocks and watch the market rise?  Neither are fun. Sitting out the market means your cash stash buys less every year because of inflation. And if you’re in the market and it falls, you just have less money. But unlike gambling in a casino, your money is likely to increase in stocks over the long term because most big companies earn profits every year that adds to their value and stock prices should eventually reflect all that new value created. So while you may be a Wall Street victim for being in the market on a bad day, in the long term you are more likely to be a victim for NOT being in the market.
Larry Pike, CFA
www.clientpriority.com
Blog: clientpriority.blogspot.com

Being Smart with $$ - Part of You Wants to Sell & Part of You Wants to Buy

The Stock Market!  Admit it.  Part of you wants to sell all your stocks because you think the markets might crash more and you’ll be a genius if you buy back at the lower levels.  And part of you wants to buy more stocks because this could be a dip that is a classic buying opportunity.  But the truth is, we have no idea which of the two scenarios is ahead of us in the short term.  Market timing has victimized so many before you and that includes many professional traders.  Keep your eye on the prize and invest for your long-term needs rather than guessing and gambling on the short term. 

- Larry Pike, CFA, Client Priority Financial Advisors LLC

- www.clientpriority.com 

Being Smart with $$ -- Buy? SELL? Maybe Turn Off the Business Channel

BUY! No…SELL! No wait, BUY!  That’s the message you may get if you watch the business channels long enough.  Well-respected analyst Jim Paulsen was recently on CNBC saying the market is significantly overvalued and may fall 15%.  Yet, Ed Yardeni, who is equally highly regarded, believes the market will be 9% higher by year end.  These statements were in two different articles side-by-side on CNBC.com.  Who will be right? Time will tell.  But a proper investment plan doesn’t bet on where the market is going in the next months.  I know too many investors who believed the doom and gloom story and missed the last couple of years of huge investment returns.  Maybe Paulsen will be right about a correction and they’ll get another chance to buy low.  But they’re missing the point.  It’s not about where the market will be a year from now; it’s about where it will be in 10 years or 20 years or whenever it is that you are retiring.  Waiting for a crash that puts stocks below 2016 levels may keep you on the sidelines for the rest of your life.  If you believe the market will be higher in 2028 then worry less about 2018 and turn off those business channels!  Instead, consult an hourly, fee-based advisor who can help you reach your goals.

- Larry Pike, CFA, Client Priority Financial Advisors LLC

- www.clientpriority.com 

Being Smart With $$ - Did Your Advisor Make You Enough Money?

“My financial advisor made me money so I don’t mind the fees I paid.”  But did she make you as much as she should have?  If not, that $5,000 fee you paid on a $500k retirement account doesn’t seem like a good investment.  A simple balanced portfolio of low-cost Vanguard funds returned over 17% in 2017.  So if you made 15% for example last year then you paid a $5,000 fee to lose $10,000 relative to what you should have made.  Don’t be fooled by advisors who tell you that you had a great year and made 10%. Of course the right portfolio is different for each person and someone requiring a lower-risk portfolio would have earned less but the return above is what many 50-something couples should have earned in 2017.  (This hypothetical starting portfolio is 50% US stocks/20% international stocks/25% bonds/5% REITs.)  The Vanguard Target Retirement 2035 Fund did even better with a 19% return.  The bottom line: If you’re paying high fees, make sure you are getting your money’s worth.  And ask me how sensible advice from an hourly, fee-based advisor may provide you with a different option.

- Larry Pike, CFA, Client Priority Financial Advisors LLC

- www.clientpriority.com