Different choices, same end goal

Blog post #394

What do you do to be healthy? 

Have you tried different diets?

Do you take vitamins or supplements?

Have you tried different workouts?

Do you use a coach, trainer, fitness tracker or attend a regular class? 

Have any of those led to greater success?

To stay healthy, there are so many different options and choices we can and need to make. There is not a “one size fits all” fitness category. As with investment choices, which can be overwhelming, not all fitness levels and activities are appropriate for each person. Every WWM firm member has their own way that we choose to exercise to maintain our idea of a healthy lifestyle, such as walking, intense exercise classes, running, lifting weights, yoga, play a sport and biking, to name a few.

Just like our health, there are many choices or decisions for your financial road map to retirement and beyond. You know or you may have an idea or a vision of when and what you want your retirement lifestyle to look like. To get there it takes planning and making many decisions. This is where a financial advisor, just like a fitness trainer or nutritionist, can be helpful. 

If you have a fitness or eating routine in place, sometimes you go off course. You stop exercising. You add a few pounds. Even though it is easy to “not get back on the bike,” we all know it is in our best interest to resume with our fitness routine or eating best practices, to stay healthy. It is the same with investing, as even if there is volatility in the stock market, it is best to just continue with your long-term investment plan. 

Similarly, like investing, real life sometimes gets in the way. Even though you have a plan, there can be small or large bumps in that plan. Unplanned job changes. Illness. Unexpected expenses. Stock market declines.

It’s our job as financial advisors to help you navigate through real world circumstances and to help you reach your individual and family retirement goals, which are different for every person. We want to listen, learn and help you develop an investment strategy to help you reach your goals. 

When you become a client, we put together an Investment Policy Statement (IPS) that allocates your current assets, while considering your expected future savings and retirement goals. It is our goal to meet with you on a regular basis to make sure your goals are in line with the Investment Policy Statement put in place when you first became a client. 

If your plans change, or other outside factors change, we review and possibly revise your plan by amending your Investment Policy Statement, to make sure your asset allocation is in line with your goals. These adjustments could be due to changes in your goals, where you want to live or when you want to retire. Changes could also be for financial reasons, if you need to take more risk or less risk, based on how the financial markets have performed over time and your projected life expectancy.

Your Investment Strategy should be as important as your health. We all want to be the best versions of ourselves. 

If you have concerns about your health, you may visit your preferred health care professional to get help. If you have financial concerns or need guidance regarding your investments and financial planning topics, why not reach out to your advisor.

If this makes sense to you, please contact us to schedule a conversation.  We want to learn more about you and your goals, and how we can help you reach them.

Market Update

We always encourage you to focus on the long term.

We plan and allocate your investments so that you will have adequate liquidity to meet your short-term financial needs.

We don’t know how the future will evolve, but we do our best to plan, knowing that the reality is unknown.

While stressing our long-term focus, sometimes analysis and thoughts about short-term market actions and news can be helpful to you.

In general, worldwide stock market indices have declined since September 30th. US and worldwide stock market indices increased in early November (see blog dated November 8, 2018), then declined most of November, with a strong recovery this week, since Thanksgiving.

The decline of worldwide stock market indices since September 30th can be attributed to investor psychology regarding the following:

  • Slowing global growth
  • Trade tariff impact
  • The huge decline of oil prices since early October
  • Concern about rising interest rates in the US (see the above cited blog post)
  • Valuation concerns about some sectors or individual stocks may have been overvalued

Most of our clients have significant fixed income allocations. For illustrative purposes, let’s say someone had a 50% stock and 50% fixed income allocation. Though the financial markets have declined for the year, a balanced portfolio would not be down double digits on a percentage basis for the year to date. While not what we expect long term returns to look like, it is not anywhere near the losses incurred in a major down market.

We remain confident in our major investment principles, which include:

  • Being globally invested for the long term
  • Using very low-cost asset class mutual funds and not individual stocks
  • Not trying to pick which stocks, sectors or regions will do best
  • Owning high quality fixed income and not junk bonds
  • Avoiding hedge funds and alternative investments, which lack transparency and can be very expensive
  • Over-weighting to value and small company asset classes

On Wednesday November 28, US Federal Reserve Chair Jerome Powell gave a key economic speech. He first discussed his outlook for the economy and interest rates. He then explained in-depth the Fed’s approach to monitoring and addressing financial stability. I found both aspects of his speech to be very insightful and they gave me confidence about the future.

While not everyone will be interested in the full speech, I highly recommend reading this speech, or at least the pages 1-2 about interest rates and pages 13-14 summarizing his thoughts about financial stability. The highlights of the first part of his speech are below. I will likely write about the latter part in a future blog post. The speech is very readable. It shows that the Fed is trying to effectively communicate, as well as look at the financial world and attempt to identify future problems before they become severe.

Powell explained that the Federal Reserve has two jobs, to promote maximum employment and price stability (keep inflation around 2%). He stated that “our economy is now close to both of these objectives.”

The real news which caused the stock market to increase significantly on Wednesday were his comments that the financial markets interpreted that interest rates will not need to be raised much further. He explained that while interest rates are still low historically, “they remain just below the broad range of estimates of the level that would be neutral for the economy-that is, neither (causing the) speeding up nor slowing growth.” (WWM inserted “causing the”)

Powell said he, along with his Federal Reserve colleagues, and many private sector economists, are forecasting “continued solid growth, low unemployment, and inflation near 2 percent. There is a great deal to like about this outlook. But we know that things often turn out to be quite different from even the most careful forecasts.” (Emphasis added)

Powell then went on to discuss the balancing act that the Federal Reserve has, that they are dealing with uncertainty and there is no pre-set path for future interest rate moves. Because no one can predict future events, which cumulatively will affect the Fed’s future interest rate decisions, Wall Street will play a guessing game and this leads to volatility in the financial markets. While all this occurs in the short-term, this is where we remain disciplined and focused on the long-term.

Our bottom line from this speech….

  • There will very likely be a short-term interest rate increase of .25% in December.
  • We stated in our November 8th blog post that there will likely be two or three .25% short term interest rate hikes in 2019. After this speech, it’s possible that there may less. The Fed will monitor and evaluate how the economy is performing and review its forecasts at each of their meetings.
  • Powell does “not see dangerous excesses in the stock market.” He made this comment in the latter part of his speech, when he was focusing on financial stability. He distinguished market volatility, which is normal and expected, from events that could threaten financial stability.

We hope this analysis is helpful to you.

If you have further questions, please contact us. That is what we are here for.

Discipline and Spain travelogue

My wife and I are in the midst of enjoying our first trip in Spain, as well as our first trip to Europe.  See pictures below.

On the plane here and between cities, I read a lengthy white paper** by a fund manager whose investing style is causing their firm’s “liquid alternative mutual funds” to be currently underperforming most US and International asset classes. Note….we have not recommended or are invested in these funds.

As part of his discussion (23 pages), a quote stood out to me.

“There are two pains in life: there’s the pain of discipline, and then there’s the pain of regret. You choose which one.”

The quote appears to originate from a power weight lifter, not an investment professional.

As a weight lifter, I assume the athlete is saying the regular pain of his or her disciplined exercise regimen must be endured in order to succeed. If the athlete is not disciplined or does not feel the pain, they will not be successful and thus face performance regret.

This is also true with investing.  To be successful, we must be disciplined.

In regards to our firm’s investment strategy, we intentionally design your portfolio to be quite different than the major US benchmark, the S & P 500, which is comprised of 500 US based companies, which change over time.

We design your portfolio to be different than this benchmark with the expectation that you will have greater expected future returns and also have a smoother, better long term investment experience.

However, in order to accomplish these goals, we as your advisor and you as our clients will have to endure periods of “pain” when our disciplined approach may not perform as well as other benchmarks.

We recommend a portfolio that tilts towards more small and value stocks than the S & P 500, as well as include global diversification to our clients’ portfolios.

We add these components based on strong academic evidence that these premiums exist, over the long term, to add small, value and International stocks to a US large stock portfolio. By doing so, you must be disciplined to reap the greater expected future returns.

While this may be true over the long term, just like the weight lifter, there are times when we feel the pain, as these strategies and components may not perform as well as a non-diversified or US large only portfolio. At times, your portfolio may grow, but not as much as the S&P 500. During other periods, your portfolio may decrease in value while the S & P 500 is increasing.

This is when the pain is felt. This is when we will talk to you about remaining disciplined for the long-term, as we feel strongly that the academic evidence still supports these concepts. We may each feel regret, for the opportunity cost of not following other strategies (going with the herd). However, we know that remaining disciplined may be painful in the short term, it has proven to be rewarding in the past and we expect this to continue in the future.

We cannot know in advance when these strategies or premiums will occur. Many times they are unexpected and quickly rewarding, such as with US small company value stocks in late 2016. Other times, investing globally has been very rewarding after trailing US stocks for many years.

So, remain disciplined. At times it may be challenging. 

In the long run, we expect it to be rewarding.

I’ve also included a few pictures from our trip to Spain.

The first is La Sagrada Familia, an unfinished Roman Catholic Cathedral in Barcelona, Spain, designed by famed architect Antonio Gaudi, who worked on this project from the late 1880s until his death in 1926. After decades of no work on this complex through the 1950s, it expected to be completed in approximately 10 years. It was well worth seeing and will be even more incredible when completed.


The second picture is my wife and I after an evening of pinxtos, which is small portions of food enjoyed at bars or small restaurants in the Basque, or northern part of Spain. We were in San Sebastián and had a guided tour of great pinxtos restaurants. We could not believe the crowds in the streets and bars on a Monday evening in this relatively small town!










**Liquid Alt Ragnarok? by Cliff Asness, 09/07/2018 www.AQR.com/insights/Perspectives



Transitions, Discipline and Milestones

Ten years ago, during a beautiful fall week, we moved into our current office space. We enjoyed the picturesque view outside our windows of the leaves changing colors. Keith and I were excited about our future. The S & P 500 was around 1,250.

The US stock market had declined almost 20% during the prior 11 months, but we had no idea what would occur in the coming weeks, months and years.

Five years into our financial advisory firm, in our new offices, we soon faced the bankruptcy of Lehman Brothers, the AIG bailout and the financial crisis of 2008-09. At the bottom of the economic collapse, in March of 2009, the S & P 500 had declined to 682, down 57% from it’s October, 2007 peak.

Today, the S & P 500 is around 2,880. Worldwide stock markets have strongly recovered from the depths of the financial crisis.

As a firm, we have grown significantly over the past 10 years. As we mark the milestone of 15 years as a financial advisory firm, we are very fortunate and truly appreciate the loyalty of our valued clients. We appreciate the trust you have placed in us and are grateful for the referrals that many of you have made to friends and relatives.

As we look forward and back, some key lessons apply as much today as they did 10 years ago.

We had many conversations with our clients during the financial crisis.  We listened to their concerns and we encouraged them to remain disciplined, to stick with the investment plan we had developed with them. We continue to have these type of conversations, as economic and political challenges and uncertainty are always with us.

Many people thought the world was coming to an end 10 years ago, at least financially. It didn’t….and it has recovered. The recovery may have been slow, but as an investor, the past 10 years have been good ones. Our clients have been able to grow their assets and live off of their investments, depending on their stage of life.

This time was not different. The crisis of 2007-09 was not different from other market crashes which preceded it. The key is that financial markets recover. We didn’t know how or when, but we had faith that there would be an economic and stock market recovery. If you are going to invest in stocks, you need to believe that most companies will adapt and their earnings will grow over time.

As it is very difficult to consistently identify which companies, sectors and countries will succeed or fail in the future, we believe in diversifying broadly across many companies and geographic regions. This strategy gives you the best change of success and minimizes your risk by not placing concentrated bets.

Today, with many US market indices at or near all time highs, many are asking the opposite question. Have US markets reached new peaks? Will they go higher?

We believe in rational optimism and being rational to deal with uncertainty. These principles enable us to provide you with financial and investment advice that is timeless and will work, if you are disciplined and patient.

We remain rationally optimistic about the long term financial markets, both in the US and overseas. We know that we cannot time the markets and predict a peak. History and academic data teaches us that corporate earnings will continue to grow, which will lead to higher stock markets in the future, both in the US and Internationally.

We know that certain asset classes that we recommend will trail other asset classes at times, but over the longer term, this diversified strategy will provide you with a smoother and more successful investment experience.

If you focus on your long term financial goals, such as how much money you will need annually for retirement, you will have a much greater chance of success. We strongly encourage you not to be distracted by day to day headlines, politics and the barrage of predictions and economic forecasts.

Fall is a time of transition and change for many. School starts. Students move to college or begin middle or high school. These changes can be positive or negative. For those who are Jewish, next week begins the Jewish New Year, a time of reflection.

Over the past 15 years, Keith and I, along with our firm members, have dealt with all kinds of changes, both personally and professionally. Change, transition and unpredictability will always be with us. To deal with this, we remain very confident in our investment principles and guiding beliefs, which enable us to provide each of you with expert financial advice tailored to your specific situation. We want you to be disciplined and not make reactive decisions.

We hope this provides you with greater comfort and financial security, as we all deal with change and uncertainty.

Let’s Talk

Purpose and goals

We may underperform a major benchmark, the S&P 500*, this year, or in some other years.

We may outperform a major benchmark, the S&P 500, this year, or in some other years.

However, beating the S&P 500 every year is not our goal.

Our goal and purpose is to provide you advice and financial recommendations suited to your personal needs.

Our goal is to help ensure that you have adequate financial resources for you and your family’s lifetime.

For many clients, our purpose may be to help provide you with an annual income stream to live off of for the rest of your lives. This is a real and very important goal.

This goal, that you have adequate funds to live the life you desire, is accomplished over years and decades. It is not determined by whether we beat the S&P 500 this year or not.

If your primary financial goal is to conserve or maintain your investment portfolio for years and possibly decades, for yours and future generations, we can advise you so this goal can be accomplished.

The key is that focusing on beating a specific benchmark is not how you accomplish these goals.

You are most likely to succeed in accomplishing these goals by working with a financial advisory firm (like ours), doing comprehensive planning, being disciplined and utilizing a consistent and proven investment philosophy.

Succeeding financially and meeting your goals is complicated.  You have to know how to react to the markets ups and downs, the impact of constantly changing tax laws, handle uncertainty and the constant barrage of news, opinions and predictions.  We help you deal with all these complexities.

We intentionally structure your portfolio to be very different than the S&P 500, as academic evidence has shown that over long time periods, a globally diversified portfolio outperforms the S&P 500, with less volatility.

Investing and financial advice can have many goals and purposes.

We want to understand your goals. We want to help you succeed financially, so you can reach your goals. That is our purpose. 

Talk to us. We have a proven approach that works.

You worry and we respond

Everyone has some type of financially related worry, concern or question.

  • It may be when can you retire.
  • You may want to know how much you need to save to be able to retire.
  • You may be concerned whether you will have enough money to live on for the rest of your life.
  • You may be concerned about how you will handle your finances if your spouse dies.
  • You might want to know, once you retire, how you will get the money you need from your investments.
  • You may want to know how much money you can spend annually, given your current or future investment portfolio.

Regardless of what your specific concern, worry or question is, it’s our role as your trusted advisor to understand your concerns and to address them with you.

We will provide you answers in clear English, not technical jargon. When I go to see my doctor, I want to be able to understand them. I want to easily understand what he or she says to me. Clearly. The first time.

We strive to answer your questions and explain these issues, regardless of how complex they are, in this fashion.

Over the years, our clients have told us that we excel at this. We are proud of this feedback and really strive to meet this service goal.

We know that investment performance is always vital and relevant. But in many of our meetings with clients and prospects, we tend to spend the majority of our time discussing topics such as those above, to address your real concerns, issues and questions.

We know that financial matters can be complex and appear very complicated. We also know that the stock market and investing can be fraught with uncertainty, fear and risk. We help you handle this.

It is our role to make complicated matters understandable.

Based on our extensive experience, we can provide you with confidence and greater assurance, even with future uncertainties.

It is our role to listen to you, understand you and provide you with advice and recommendations that will help you to have less worries and financial concerns.

We continuously strive to meet these objectives.


In late June, I wrote a blog post titled “What we know and don’t know.”  I suggest you read or re-read it again now, as it is quite relevant to this blog post.

The One Stock to Own for the Next 25 Years

While I was barbecuing chicken for dinner last night, I was reading my Twitter feed. I came across a post where a few financial advisors were responding to a question….what one stock would you recommend to buy and hold for the next 25 years?

To clarify, we do not recommend owning only one stock and would not consider this to be an investment strategy. We are firm believers in holding a globally diversified portfolio of many stocks across all industries, sectors and geographic regions.

But for this hypothetical question, I thought it would be interesting to consider.

I first thought about what stocks I would NOT recommend and why. The key concept that kept surfacing was innovation and change and what industries or companies would be most affected by significant change over the next 25 year period. And what kept occurring to me was that nearly every company or industry I thought of, change could or would be a huge factor.

Looking at industry categories, I ruled out energy companies, as traditional oil companies obviously face threats from alternative energies. The retail and consumer sectors are under huge pressure from Amazon and online competition, so while there will be successes, I cannot predict which ones they will be.

Healthcare providers will make money, but insurance and reimbursement pressures will limit or impact their futures. Some drug companies have been hugely profitable and successful over the long term, but they must constantly innovate, spend millions or billions to come up with their “next” huge drug and again, there is no way to predict which company will be able to develop the drugs of the future.

Industrials, manufacturers and utilities will also have winners and losers, but none of these areas had a company that excited me for the next 25 years, with the possible exception of Boeing.

Technology and related areas was an obvious choice to consider. The key issue was whether the successes of today will be the leaders over the next two plus decades. AOL and Yahoo were stock market darlings in the late 1990s, then both flamed out. Just because a company has been successful recently does not mean it will do great over the next 25 years. This is called the recency effect.

I did not consider very small companies or companies like bio-techs for this pick. To do that would be more like buying a lottery ticket or a crapshoot selection….it may either do incredibly well or bust completely. I viewed this as finding a company today whose stock will be very successful over the next 25 years.

Amazon is dominant in two major areas, at least, Amazon Web Services (AWS) and their retail sales business. My concern with Amazon is that since AWS is so profitable, the natural tendency in business is that very profitable areas lead other companies to enter that sector, which eventually drives down profitability. That is occurring now, as AWS is increasingly being challenged by Microsoft, Google, IBM and many others, both in the US and globally.

Apple is a strong contender. Today, they seem unstoppable in selling iPhones and this product has changed how we live, communicate and shop. In reality though, they only have 12% of the worldwide smartphone market share. Their customers are highly loyal and Apple will continue to generate revenue from customers through app purchases and other sources in the future. However, as with all technology, will they be replaced in the future? Will they be able to continue to innovate and develop new products and revenue sources? The biggest threat is that the product life cycle can be short. Will they continue to succeed or become a future Nokia, Motorola or Blackberry?

My other choices are financially related. JPMorgan Chase is the dominant US bank and a leader in credit cards. As more and more spending is done with credit cards, they will capture more of these fees every day. However, banks run into problems when the economy has a downturn, which inevitably will occur over 25 years. They have broadly diversified sources of revenue, from everyday consumers, wealthy individuals and corporations throughout the world.

Likewise, Visa is the worldwide leader in credit cards, with a 56% market share. It will be difficult for another company to replace them, but technological change could lead to other ways we pay for goods and services, which could reduce Visa’s business, as well as potentially force their fees down over time.

My last consideration is Berkshire Hathaway, but not because of Warren Buffett. He is near the end of his work life, unfortunately. He will leave a legacy of a strongly diversified company with businesses in insurance, utilities, railroads, industrials and many other companies and products, along with billions of holdings in other stocks. Berkshire will likely do well, but as it is already large and getting even larger, it may have a harder time outpacing the broad market, due to the law of large numbers. Also, it generates most of its revenue in the US, so is not as globally diversified.

So what is my choice and what are the lessons from this exercise?

It’s not a glamorous choice, but I would hold JPMorgan Chase for the next 25 years. Chase is already quite large and successful, and does not face some of the other technological challenges that the others do. As we can’t predict the future, my thinking is that banking, lending, credit cards and related services will continue to be needed. If they are able to innovate and deal with change, Chase can continue to be quite profitable.

It is quite likely that one of the other companies mentioned here will outperform it, but each of the others seem to face greater potential risks, at least conceptually, than Chase does. I would not be surprised if Apple and Amazon stock’s outperform Chase, as they have much greater opportunities.

Thinking through this question has only made me more comfortable with our investment philosophy of not trying to pick individual stocks, but rather hold a globally diversified portfolio of stocks. 

If we tried to pick individual stocks for you for your future, essentially this is the exercise that we would have to do for every stock choice. And it’s impossible!!

This lesson was quite vividly reinforced as I finished this essay Thursday morning, as Facebook lost about 18% of their stock value today, due to concerns about their future profitability and user growth. This again is why we are broadly diversified and don’t just recommend holding 20-30 stocks.

From a pure performance standpoint, the only thing I’m pretty sure of is that the best performing stock of the next 25 years may not even be a public company today…..or may not even exist. However, we would eventually own some of it in your portfolio in the future, within our diversified holdings.

If you have thoughts on this post and your hypothetical pick, please email me at bwasserman@wassermanwealth.com. We will see what happens in the future.

Guidance for a Key Social Security Decision

Social Security benefits are more significant than many people realize. The amount you collect from Social Security could be $15-30,000+ per year, depending on your earnings history. As life expectancies increase significantly, Social Security benefits for a couple may be more than $1 million.

Social Security income is not subject to fluctuations and volatility like the stock market, which is a great source of stability in determining your financial future.

One key decision surrounding Social Security is when to start receiving benefits. This is the main topic of this post. For more information on other aspects of Social Security, please see our prior post, Social Security Basics: What you Should Know.

The earliest you can begin receiving Social Security retirement benefits is at least age 62. You must have earned at least 40 work credits during your lifetime, meaning you earned at least $4,800 per year for 10 years.

Your monthly Social Security benefits are based on “Full Retirement Age,” or FRA. This is the age when you can receive 100% of your Social Security retirement benefits.

  • Historically, this was age 65, but it is now gradually increasing to age 67.
  • For those born before 1943, FRA is before age 66.
  • For those born between 1943-1954, Full Retirement Age is age 66.
  • For those born between 1955-1959, FRA is 66 plus additional months.
  • If you were born in 1960 or later, your Full Retirement Age will be 67.

The age that you begin collecting Social Security determines the initial amount of benefits that you will receive for the rest of your life.  It is that important.

If you begin collecting before your Full Retirement Age (FRA), your benefits are permanently reduced. If you wait until after your FRA, your benefits will be greater.

  • If you file for early retirement payments at age 62, your monthly benefits will be permanently reduced to approximately 75% of the FRA benefit amount.
  • If you wait to receive benefits until after FRA, your benefits will increase by 8% per year, for each year after your FRA year, until age 70.
  • If you were born between 1943-54, delaying your benefits until age 70 will increase your monthly benefit to 132% of your FRA benefit amount.

Given the above information, why wouldn’t everyone just wait until age 70 and receive the maximum amount possible, based on their wage history? This is where financial planning and our advice can be so valuable.

We feel that this decision should be based on each person’s or family’s specific situation, and clearly not everyone should wait until age 70. We actually recommend that most people begin collecting Social Security well before age 70.

Though many articles encourage people to delay starting to receive Social Security for as long as possible, so many other variables should be considered that “one size fits all” advice should not be followed for this decision.

We recommend a comprehensive review of your full financial situation, as well as other non-financial factors. Key factors are when you want to retire, work part-time and your quality of life. If receiving your benefits earlier enables you to retire and that is a priority, then waiting years to receive Social Security does not make sense.

If you have any significant health issues or your family does not have a history of longevity, then you should not delay beginning to receive Social Security. As a rule of thumb, if you begin collecting around age 62 (or your earliest eligible age), you need to live longer than 82-83 for that decision to have been a “negative” one in terms of total lifetime benefits.

Even with longer life expectancy, no one can know if they will live until their early 80s. Thus, we feel that collecting early is a good and rational decision for many clients.As Social Security is a given, at least for decades, collecting your benefits could delay the need to withdraw/spend some of your other investable assets, if your Social Security benefits replace what you would have withdrawn from other sources.

We work with clients to evaluate both the financial and non-financial aspects of when to begin collecting Social Security. This is part of long term financial planning, which can be done many years before you reach your 60s. Along with the Social Security Administration’s projections, we have financial software to assist in planning for decisions like this. We would incorporate Social Security, along with your other assets and financial goals, to help you make this very personal and critical decision.

We remind you that there are many technical details regarding Social Security, including when you retire and your lifetime earnings. We recommend that you review our earlier blog post, as well as consult with a financial professional regarding your specific situation, in making this decision.


Timeless Advice

In June 2011, I wrote a blog post that was advice to myself as a financial advisor, based on the prompt: What would you say to the person you were 5 years ago? What will you say to the person you’ll be in five years?

This post is a variation of those questions, written to you, as our clients and other investors.

What investment advice should you know that will be applicable and helpful to you today, in 5 years, 10 years and many years into the future….

  • You should rely on a financial advisor and firm that only have your best interest in mind when providing any advice or recommendations. This means they must meet a fiduciary standard. Large brokerage firms and banks generally do not meet this standard. You should ask and understand the real difference.
  • Have a well diversified portfolio, based on your personal need, ability and willingness to take risk.
  • Your portfolio of stocks should be globally diversified, which means there should be allocations to international stocks, emerging markets, small company stocks, as well as real estate. A diversified portfolio is not just the S&P 500 index fund.
  • Remember that over time, the vast majority of active mutual funds and money managers do not beat their respective benchmarks. Thus, using low cost mutual funds with a buy and hold strategy is the best way to be rewarded by the stock market over the long term.
  • Your investment goal should not be to beat the S&P 500 every year. You should be focused on making progress towards your long term financial goals. While a globally diversified portfolio should outperform the S&P 500 over the long term, it should make your portfolio less volatile….a smoother and better investment experience.
  • Do not take risk with bonds or fixed income investments. Only buy very high quality. Reaching for higher yielding, but less quality bonds, is not a good practice. Fixed income is the place to be very safe.
  • Expect the unexpected. Be prepared for down markets, which are the norm and not unexpected. Be prepared emotionally for down markets, as they occur regularly. Since 1945, the S&P 500 has declined 27 times between 10-20%. That is a significant decline about once in every 3 years. Sometimes the declines are far worse. However, the market has always come back and made new highs. Talk to your advisor about bad markets as well as good markets.
  • Do your best to remain disciplined, during down and up markets. If you do this during a down market, you will be well rewarded when the market rebounds. If you are disciplined during up markets, you may avoid fads and some excesses.
  • Be fearful when you are greedy, and be greedy when you are fearful.*
  • If you bought stocks during the last financial crisis (2007-09) or allowed us to do so on your behalf, you added rocket fuel to your financial future.*
  • Know that it is impossible to accurately time the market. It is almost impossible to be right twice, as to when to sell (get out of the market) and when to buy back into the market.
  • Rebalancing is crucial to your long term success. When an asset class does well, allow your advisor to sell some of it. Your advisor will use that money to buy another stock asset class that has not done as well, which leads to buying low and selling high. Or the advisor may use the money to add to your fixed income allocation, which is your long term safety net.
  • Plan with your financial advisor and have a simple written document which includes the firm’s investment philosophy and your personal allocation plan. It may be called an “Investment Policy Statement.” This will help you achieve a greater sense of financial comfort and security. Do not work with a firm that does not use this kind of written plan.
  • Be patient. Save early. Focus on the long term.  Avoid fads and what is “hot” today. Accept that the future is uncertain. Do not trust others that “predict” the future.
  • Do not get caught up in products and alternative investments that are hard to understand. Sometimes simple may be better, almost always far cheaper and often more successful.
  • Use a financial advisor that encourages your questions on a variety of financially related topics, listens to you and explains things to you with clarity, so you can understand them.



Let’s Talk

*These concepts are similar to those written by Jason Zweig, an excellent financial journalist, in a blog post he wrote on May 20, 2018.

Estate Planning: What you should be considering now

Estate planning means much more than trying to avoid a possible federal estate tax.

True estate planning means you have properly put in place a set of documents (a plan) that says how and to whom your assets will go when you die, as well as how they will be managed if you become incapacitated.

The current Republican legislative proposal calls for the elimination of the Federal Estate Tax. It is critical to note that if the Federal estate tax is repealed, it will most likely only be temporary, for up to 10 years. Due to the rules of the Senate, it is unlikely that the tax reform legislation will be permanent and many of the provisions, if passed, would expire in 10 years.

Thus, even if the estate tax is repealed, estate tax laws have changed frequently over past decades and an estate tax could be enacted again in the future. Your estate plan documents should be flexible and represent your desires, whether you are subject to an estate tax or not.

As good estate planning encompasses many more issues than estate tax reduction or avoidance, you should review or work on your estate plan even if the estate tax is repealed.

We view our roles as financial advisors very broadly. We are much more than just investment advisors. We have extensive experience in helping clients clarify their goals, simplifying the estate planning process and providing creative solutions. If dealing with these issues is difficult or you would like our assistance, please talk to us.

There are some of the topics you should consider in reviewing or drafting your estate plan:

  • Do you have the proper supporting documents in place and are they current?
    • These should include Powers of Attorney, Health Care Powers of Attorney and Advanced Medical Directives. If you are married, each spouse needs their own documents.
    • You should have a Revocable Trust in place, to avoid probate. Then it is important that you have funded the Revocable Trust, which means that your various assets are titled in the Trust name, not in your personal name.
  • Who are your Trustees or Executors when you die or if you become incapacitated?
    • Are they age appropriate and younger than you, to be able to effectively manage your affairs for many years in the future?
    • Have you named successor Trustees, beyond the initial Trustee(s) or Executor(s)? We do not recommend naming banks in these roles, except for special situations.
    • We have seen a number of times when the people named for these positions made sense when the documents were originally drafted, but later need to be changed. Check these.
  • Are you comfortable with when and how assets may be available to the next generations, depending on their ages and level of maturity?
    • Particularly if you have significant assets, think through the numbers. We can walk through this exercise with you.
    • For example, if you have $6 million and after you (and your spouse) die, and you have 3 children, are they able to handle receiving $2 million each?
      • Should the children get all of the money in one lump sum, even if they are adults? We recommend spreading the distributions out over a period of time, for almost all situations, unless the beneficiaries already have shown good responsibility handling significant sums of money.
        • Your documents could specify distributions in multiple stages over a number of years. If they are older than the last age specified when they would actually begin to receive the funds, a second provision could state: at the time of your death and then 2 and 5 years later, as an override.
    • We strongly recommend that assets going to the next generation should be given in the form of trusts, not to the beneficiaries outright, especially if the beneficiaries could be receiving $500,000 or more. This is vital in case of a future divorce by your children or beneficiaries.
  • If you desire to leave assets to a charity, and you have significant assets, we generally recommend making these charitable bequests from an IRA or retirement plan. This will be a huge tax savings to your heirs. These need to be done through the beneficiary designation form for that account, not through an estate plan document an attorney drafts.
  • As Alzheimer’s and dementia are becoming more common issues, we recommend that you review the provisions for how your financial matters would be handled if you were unable to manage your own affairs.
    • Traditionally, most estate plan discussions and documents focus on what happens after you or your spouse die. With Alzheimer’s, you may be alive for many years, but require the assistance of others to manage your finances. Thus, durable power of attorney designations and similar documents are vital.
    • Review your designations for this responsibility. Unlike estate Trustees who may have a only short period of responsibility, a successor during your lifetime may provide services and deal with issues for years or decades. 
    • If you are diagnosed with Alzheimer’s, Dementia or Parkinson’s, it is wise to meet with an Attorney who specializes or is knowledgeable about these issues in the early stages to make sure all your documents are in order as your significant other or guardian will be responsible for your care, finances and legal documents.
  • Do you want to add specific provisions for grandchildren in your estate documents? This has been a very meaningful topic we have discussed and seen implemented with a number of clients. They are providing these gifts, in addition to leaving funds to their children.
  • Is your life insurance adequate? Do you have older policies which should be reviewed? Do you have significant cash value or do your policies mature before age 100?
  • If your children are minors, have you designated guardians for them? If this was done a number of years ago, do you still agree on the guardians?
  • If a relative died recently, you should check to see if any of your estate plan documents need to be changed as a result. Your beneficiary designations? Your trustees or successors? Guardians?
  • If something happened to you, do your immediate family members know the passwords to your financial accounts, such as your credit cards, banks and other institutions? See my blog post on this matter, Emergency Planning.


This week’s takeaway: Estate planning has traditionally focused on avoiding estate taxes. With recent tax changes and others proposed, you should review and focus your estate planning and related documents on practical matters. Time spent on these issues could be very beneficial to your and your family members. We are here to help you.