Being Smart With $$ - Financial Advisers Act Emotionally and Shouldn't

Financial advisers buy and sell at the wrong time based on emotion says legendary billionaire investor Ron Baron and he takes advantage of this and increases his purchases when they are panicking.  Don’t let your financial adviser manage your portfolio with emotion rather than rationality.  A proper long-term investment plan does not include panic selling. 

https://www.cnbc.com/2019/08/20/ron-baron-says-he-tripled-normal-stock-buys-during-recent-wild-swings.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Mail

Larry Pike, CFA

Client Priority Financial Advisors LLC

Timing was the subject of an old Steve Martin joke where he said it is the basis of success in comedy.  Of course, in his bit he said the word all wrong with the accent on the second syllable as if it referred to an ancient Chinese dynasty.  If you get timing wrong in comedy, the joke doesn’t work.  If you get timing wrong in your portfolio, you lose money.  The best timing with investing involves not timing the market at all and staying invested in a proper allocation for your needs.  Most investors will find that their total time in the market is what matters in the long run and not when to dart in and out of it.  Some investors believe they can jump out of the stock market before a crash and avoid losses.  The problem here is that expected crashes often don’t come and then you are sitting out the market as it marches higher.  Then it is hard to get back in when you intended to avoid losses but instead lost money by sitting it out.  And if you do dump stocks and the market subsequently falls, the next hurdle is to figure out when to get back in.  Investors often make the mistake of expecting further declines and then miss all the upside.  The long-term trend for stocks is always higher as prices will reflect all the profits generated by global companies every year even though there will be corrections now and then.  Many have been predicting a crash for years and they have been punished by missing a 3-year return in large-cap stocks of over 13% annually!  In comedy, you have to get your timing right and in investing the best timing strategy is not to time the market at all.

Larry Pike, CFA
Client Priority Financial Advisors LLC
www.clientpriority.com

Being Smart with $$ -- Vape or Have $1 Million. You Choose.

Vaping or $1 MILLION.  You choose.  Maybe your kids will ignore your health warnings and sneak off to vape behind the school when no one is looking.  But what if they knew the true long-term financial cost?  An average user may go through a pod per day at $4 each.  So let your kids know that if they throw that $4 per day into the stock market, instead of vaping, from their senior year of high school through all their working years, it will likely be worth almost $1 MILLION which they can spend in retirement.   Lighter users might be looking at less but still substantial money. Vaping or $1 million.  It seems like an easy choice. (Assumes 8.5% annual stock-market returns which are below long-term averages, over 50 years.  Past results may not be a predicter of future results.)

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com
Blog: clientpriority.blogspot.com

Being Smart With $$ - Don't Let Your Get Adviser Get Cute with Your Money

Does your financial adviser time the market? Many do believing they can avoid losses when the market is falling or grab profits right before the market will rise. The problem is that so much research shows that market timing fails more than it wins. A new client of mine showed me their portfolio before they moved from another adviser and I asked why their stock allocation was so low compared to an appropriate position for someone with their profile. The answer was that their soon-to-be former adviser was predicting a market decline. Well guess what? The market is now at all-time highs and substantially higher than when that adviser sold all their clients’ stocks and that decision has cost the clients a fortune. Can the market crash in the weeks or months ahead? It’s always possible. But what if it doesn’t? Over the long term, the market marches higher as companies keep generating new profits.  The adviser is hoping to pick up a few percentage points in the short term but instead may potentially be costing their clients a quadrupling of their stock values over the next couple of decades if they keep waiting for a crash that never comes. Don’t let your adviser get cute with your portfolio. A steady and consistent long-term plan is the path to success.

Larry Pike, CFA

Client Priority Financial Advisors LLC

www.clientpriority.com 

Being Smart with $$ -- Unnecessary Investment Fees Can Cost You a Fortune

Three quarters of a million dollars!  That’s about how much you might lose on a million-dollar starting portfolio over 15 years if your fees are around a mere 2%.  More correctly stated, that’s about how much less you’ll earn, all else equal, if you earn 5% investment returns annually (after 2.2% in fees) instead of 7.2% without unnecessary fees.  2.2% may not seem like much until you realize it may cost you three quarters of a million dollars.  Keep your investment fees low!  They matter more than you think.  Investors hate to lose money.  But what about losing the money you should have earned?  Don’t let an investment salesperson dazzle you with tales of big performance in exchange for a few percent in annual fees.  They are usually false promises that line the salesperson’s pocket at your expense.  Did I mention it may cost you three quarters of a million dollars? 

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com 

Being Smart with $$ -- Best Laid Plans

Best Laid Plans.  So often I hear from clients that a big part of their retirement plan is to work forever, or at least until 70.  Maybe they should have a Plan B.  A recent survey showed 8 out of 10 believe they’ll work in retirement but in reality, less than 3 in 10 do.  It’s usually due to a health or disability issue or an unexpected job loss.  Perhaps the advice of hoping for the best but planning for the worst is a good approach here.  If not working until 70 means cat food in retirement, best to make adjustments today to be safe.  (Source: Retirement Confidence Survey by Employee Benefit Research Institute 4/23/19.)

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com 

Being Smart with $$ -- Advisers Want Too Much of Your Money

“I WANT YOUR MONEY!” was what my new client heard from many financial advisers when he came into some new wealth.  Some wanted to sell him annuities which would likely generate commissions for the adviser of over $80,000.  Some had “great load funds” that would generate commissions for the adviser of over $50,000.  Some wanted to manage the assets for 1% per year which would likely generate fees for the adviser of over $50,000 in the next 5 years.  All of the above also usually have an additional $10,000 or more in annual fees inside the investments.  All these fees and commissions come right out of the client’s portfolio and severely restrain his long-term growth.  How is the poor guy going to make any money with all these commissions and fees?   Fortunately, a professional contact sent him to me where he gets advice on an hourly basis that is not affected by what product pays the highest commissions and where he doesn’t pay fees so large the adviser could buy a Tesla with it.  You may think doubling your money sounds good over 20 years until you learn that you could have tripled it without all the fees.  (Numbers above are based on a $1 million portfolio.)

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com