What are you earning on your cash?

You should no longer be satisfied with earning next to nothing on your cash sitting at the bank.

After years of very low short term interest rates, you can now earn meaningful interest on cash and short term money.

Unfortunately, the interest rate at your bank may not have increased and may not increase much in the near future.

Thus, this is a simple but important item you should review and possibly take some action on. It could be worth a decent amount of money.

The 90 day US Treasury bill is currently yielding around 1.75%.

If you have excess cash that you do not immediately need and you are not earning at least 1% on your funds at the bank, you should be contacting us to discuss this.

For example, if you have $100,000 in your bank earning a .01-.05% (which is likely your bank’s current interest rate), you could earn $1,750 annually, based on current interest rates, less our investment management fees, rather than a few dollars.

If you have significant funds in the bank, the money could be invested in short term fixed income investments and the interest rate could be higher than stated above if you may not need the money in the next 90 days.

A few factors to consider:

  • The Federal Reserve is likely to increase short term interest rates by .25% at least twice more this year, with additional increases most likely in 2019.
    • Thus, it is reasonable that the 90 day Treasury bill and other very short term investments will be yielding 2-2.50% by late 2018 or during 2019.
  • If you do not need the money in the immediate future, your cash could be invested in various short term conservative investments, such as Treasury instruments, CDs or corporate bonds.
  • As always, we act in a fiduciary manner.  This means that we would only recommend you take these steps if it will be financially beneficial to you and make sense for your overall situation.
  • For the short term investments we recommend, they can generally be easily liquidated within a few days.  So there is no reason not to take advantage of these better interest rates if your bank is not offering interest rates on your excess cash funds of greater than 1%.

Monitoring your short term interest income is not something that most people have focused on in recent years.

Now is the time to review and take action.

Don’t be content with earning pennies on your cash.

Give us a call or send us an e-mail and let’s talk about this!


Traveling and Investing Successfully

To be successful at both investing and travel, you should….
  • Be open minded and adaptable
  • Be willing to try new things
  • Plan
  • Be patient
  • Seek out the advice of experts.

If you want to go on a two week trip to a foreign country, most people would develop a plan before they leave. You would likely consult an experienced travel agent, even in today’s internet age, if you are going somewhere you are not familiar with. Working with a travel agent, you would set an itinerary, pick the cities you want to visit and possibly things you may do during the trip.

In planning for your investment future, this longer journey requires goal setting, discipline and should include using a skilled navigator to advise you and your family, as advice will frequently be needed. If investing is not your area of expertise, a trusted advisor will help you handle volatility and constantly changing markets.

While traveling, you may incur challenges that require adjustments. You may be hit with bad weather. You may have flight problems. Have you planned for these kinds of contingencies? How well do you handle change?

In investing, we know that the unexpected should be expected, but most investors don’t plan for this. Our philosophy and investment strategy alleviates a lot of these types of issues, as we recommend broadly diversified portfolios and discuss your tolerance for risk in advance.

In the last week, two events occurred which significantly affected certain investors.  The unexpected did occur.

Some investors who desire high current income from their portfolio (they focus on yield) invest in energy master limited partnerships (MLPs). Last week, many of these MLPs lost 10% because of a federal regulatory decision which will significantly reduce their cash flow. This was not expected and the underlying investments not only incurred large losses in value, but their future income distributions may be cut. These investors have been hit with a double whammy, as they lost principal and their income may be reduced.

Facebook lost approximately 10% of its value in the past week due to the disclosure that certain data was released to other companies.  While Facebook has been an outstanding stock and is held within the large company mutual fund which we recommend, a decline like this shows the risk of owning just a few stocks, rather than many.

Some people purchase vacation homes or are attracted to buying a time share after only a few visits to an area. Years after buying the time share or 2nd residence, the initial luster may wear off. You may tire of visiting the same place every year. The beach that once seemed exciting becomes routine. The restaurants don’t change. You miss the variety of seeing new things and having new experiences. While the logic of acquiring the vacation home may have made sense initially, after many years, it may no longer be optimal for you. But now you are stuck with real estate that may not be so easy to sell. In this case, change may be hard.

We see a similar pattern with many others we meet with (non-clients) who have held what we refer to as “legacy stocks” for decades. These are stocks which may have performed well for many years, but have significantly underperformed broad stock market averages for numerous years. Some of these stocks have not grown or even declined over the past 5-10 years, while the broad US and global stock markets have increased dramatically. They may no longer be optimal investments. Examples of these would be companies like GE, Proctor & Gamble, General Mills, IBM, many retailers and others in industries which have faced stiff new competition or have not adapted to change in the economy. Companies like Ford, Coca-Cola, Pfizer and Merck have either hardly increased in value over the past 5 years or have increased, but far less than broad market averages.

This is where adaptability and being open minded is vital. Are you willing to consider new or different investment approaches? To our valued clients, we appreciate that you were willing to consider our investment strategy, which at one time was new to you.

For those who hold these types of legacy stocks, or focus mainly on the dividend or yield of their investments, we encourage you to be open minded to other investment strategies. You may have unrealized capital gains and don’t want to incur capital gains taxes. You may like the dividends you receive, but they may decline in the future, as has occurred with GE. As we will discuss in a future blog post, focusing on your capital and the total return of your investments is much more important than your annual dividend income.

As your travel plans may have to change mid-trip and you may need to adapt for the duration of the trip, it is important to be open to reviewing your investment strategy. You should be willing to review if the companies you own have adapted and will be optimal as the economy is always evolving and changing. What may have been a solid strategy 10 or 20 years ago may not be the optimal strategy for the future. Our globally diversified investment strategy is structured so that you can benefit from changes in the economy, without subjecting your portfolio to unnecessary risk.






Uncertainty and Financial Planning

The future is always uncertain.

A simple concept. But it can be difficult to live with and can make financial planning challenging.

However, a close relationship with a skilled and trusted financial advisory firm can reduce your concerns and anxiety about future uncertainty.

Our role as a financial advisor is to assist you, through conversations, information and analysis you can clearly understand, so you can effectively deal with the realities of investing and your future. We want you to be able to live (and sleep) comfortably with the uncertainties of the financial world.

If you want to benefit from the rewards of the stock market, you will always have to deal with uncertainty. You will have to become comfortable with volatility. Our diversified, rationale and understandable investment strategy can help you deal with investment uncertainty.

We are pleased that we have clients who tell us they have been able to experience market ups and downs without worry. This tells us we have succeeded in helping them.

Uncertainty can take various forms, depending on what occurs in your life as well as in the world.

Let’s look at retirement. For many people, this is a potential source of uncertainty and anxiety.

Consider all the unknowns. You don’t know how long you or your spouse will live. You don’t know what future investment returns will be. You don’t know what your cost of living will be and how much it will increase every year. You don’t know what health care or senior living costs you will incur. You may want, or need to, assist your children or grandchildren in the future.

How can you resolve all of these issues and uncertainties?

We provide information, starting points. Understanding. Have discussions. Run projections. Evaluate different options, such as when you will retire and when to begin taking Social Security.

We work through these issues and factors with you. Over time, we analyze your sources of income, your assets and other variables and prepare financial projections. Through discussions and meetings, you will develop greater comfort and confidence….and have less stress about your retirement planning. You will get more comfortable dealing with the uncertainty of the future.

No matter what stage of life you are at, you will face financial decisions which we can assist you with. We can help you make better and more informed decisions, even in a world filled with uncertainty.

We can help you with your 401(k) investment selections. We can advise you on house decisions and mortgage options. As you save for college for a future generation, as a parent or grandparent, we can guide you on the best saving methods and investment choices (and there are many).

We integrate tax planning with investment management. This is a unique strength of our firm, as we are CPAs as well as experienced financial advisors.

As you get older, we help you deal with estate planning laws, which are frequently changing. What happens to your money and other assets in the future is vital and we have worked closely with many clients in this area. We provide significant value to clients in helping them with their estate planning and charitable giving.

If we advise the future generations of your family with their investments, you will have the additional sense of comfort of knowing that their investments are being well managed, now and in the future.

The financial world is continually changing. Tax laws change. Investments are inherently uncertain and volatile. We strive to provide you with advice and guidance so that you can effectively deal with all these forms of uncertainty.

What happened in February?

The cause of the quick and significant decline of worldwide stock markets in early February, 2018 of approximately 10% remains subject to analysis and discussion for some.

The decline may have been caused by many reasons. There may not be a specific reason.

Understanding the exact cause or reasons for the decline is not what is critical, though.

Understanding the cause of the decline may not even really benefit you.

Even if you knew the cause, what could you do with that information? Not much.

Would it change how we manage your portfolio? No.

Would it change how you invest? We doubt it and we hope not.

Why? Because for you to be successful investors, we plan and structure your portfolio in line with your long-term financial goals.

We do not react to current events and sudden market moves by making quick, reactive investment changes, except to rebalance your portfolio according to your written investment policy.

So while we could have a short or long conversation with you about what caused the February decline, we would much prefer to talk with you about the many benefits of our long term, disciplined and diversified investment strategy, which has withstood the test of time.

While we don’t know the specific cause of the February decline, we do know that our solid investment guidance and advice on many other financial matters are worthwhile and can be quite beneficial.

That is a conversation well worth having.

Learning from Warren Buffett

Warren Buffett’s Berkshire Hathaway Inc.’s 2017 Annual Shareholders Letter was released last Saturday morning. This letter has been required reading for me for as long as I can remember. There are always lessons to be gleaned from his letter which can help all of us to be better investors and smarter financially.

Berkshire Hathaway grew in value based on Buffett’s stock investments in many large US companies during the 1970s through the early part of this century, as well as the success of its vast insurance companies. During this century, he has focused more on buying large companies outright, as well as making many opportunistic investments during times of crisis, such as during the financial meltdown of 2008-09.

Buffett has not discussed his recent stock purchases or sales in the past few years’ Letters. However, his actions are quite instructive:

  • His purchases and sales shows that he is adaptable to changes in the economy and that he has not held onto stocks of certain companies, even though he likely intended to never sell them when he first bought them.
  • In 2015, he sold all of his massive position in Proctor & Gamble, which he obtained when P&G acquired Gillette many years before. In 2016, he sold more than 63 million shares of Wal-Mart. In 2017, he sold over 81 million shares of IBM, which when he bought IBM in 2011 he said he “was too late to the IBM party.” He sold his IBM shares at a loss, during a period when the general stock market increased by a huge amount.
    • He realized that the prospects for each of these companies had changed significantly from when he originally acquired them. This is an important lesson for all of us, to realize that times change and we must re-evaluate our investments, particularly if you own individual stocks which you purchased years ago.
    • Sometimes we all must change as society and the economy changes.
  • He has also shown willingness in the past few years to purchase two groups of stocks that he said he never would.
    • He has established an enormous position of over 166 million shares in Apple stock during 2016 and 2017, after years earlier stating that he would never purchase technology companies. He views Apple as a consumer products company.
    • He also started purchasing 4 airline stocks in 2016 after stating in 2007 that airlines are the “worst sort of business.”
    • Time will tell if these are good long term investments. He gets credit for being adaptable and flexible.

The following are highlights from Buffett’s letter and my commentary:

Buffett feels it is important to be comfortable with your investments and be able to sleep well every night. He said… “Charlie (Munger, his business partner) and I sleep well. Both of us believe it is insane to risk what you have and need in order to obtain what you don’t need.”

Buffett is OK with not buying just for the sake of buying stocks or companies: “Despite our recent drought of acquisitions, Charlie and I believe that from time to time Berkshire will have opportunities to make very large purchases. In the meantime, we will stick with our simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.”

Buffett is positive on stocks for the long term but is clear that stocks can be volatile and unpredictable in the short run. Stocks should not be bought and sold based on short term predictions or analysis. “Charlie and I view the marketable common stocks that Berkshire owns as interests in businesses, not as ticker symbols to be bought or sold based on their “chart” patterns, the “target” prices of analysts or the opinions of media pundits. Instead, we simply believe that if the businesses of the investees are successful (as we believe most will be) our investments will be successful as well. Sometimes the payoffs to us will be modest; occasionally the cash register will ring loudly. And sometimes I will make expensive mistakes. Overall – and over time – we should get decent results. In America, equity investors have the wind at their back.

The connection of value-building to retained earnings that I’ve just described will be impossible to detect in the short term. Stocks surge and swoon, seemingly untethered to any year-to-year buildup in their underlying value. Over time, however, Ben Graham’s oft-quoted maxim proves true: “In the short run, the market is a voting machine; in the long run, however, it becomes a weighing machine.”

Buffett pointed out the huge temporary losses in Berkshire’s stock prices which have occurred since the 1970s. He included the following in this year’s Letter:

“Berkshire, itself, provides some vivid examples of how price randomness in the short term can obscure long-term growth in value. For the last 53 years, the company has built value by reinvesting its earnings and letting compound interest work its magic. Year by year, we have moved forward. Yet Berkshire shares have suffered four truly major dips. Here are the gory details:

Period High Low Percentage Decrease
March 1973-January 1975
93 38 (59.1%)
10/2/87-10/27/87 4,250 2,675 (37.1%)
6/19/98-3/10/00 80,900 41,300 (48.9%)
9/19/08-3/5/09 147,000 72,400 (50.7%)


“In the next 53 years our shares (and others) will experience declines resembling those in the table.  No one can tell you when these will happen.  The light can at any time go from green to read without pausing at yellow.”

Buffett emphasized the importance of taking advantage of market declines as buying opportunities, not as a time to panic and sell:  “When major declines occur, however, they offer extraordinary opportunities to those who are not handicapped by debt.  That’s the time to heed these lines form Kipling’s If:

“If you can keep your head when all about you are losing theirs . . .
If you can wait and not be tired by waiting . . .
If you can think – and not make thoughts your aim . . .
If you can trust yourself when all men doubt you . . .
Yours is the Earth and everything that’s in it.”

Buffett’s comments often mirror the philosophy and investment behaviors we recommend.  He states… “Though markets are generally rational, they occasionally do crazy things.  Seizing the opportunities then offered does not require great intelligence, a degree in economics or a familiarity with Wall Street jargon such as alpha and beta.  What investors then need instead as in ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals.  A willingness to look unimaginative for a sustained period – or even to look foolish – is also essential.”

His comments about risk:

  • “Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. “Risk” is the possibility that this objective won’t be attained.”
  • “I want to quickly acknowledge that in any upcoming day, week or even year, stocks will be riskier – far riskier – than short-term U.S. bonds. As an investor’s investment horizon lengthens, however, a diversified portfolio of U.S. equities becomes progressively less risky than bonds, assuming that the stocks are purchased at a sensible multiple of earnings relative to then-prevailing interest rates.”
  • “It is a terrible mistake for investors with long-term horizons – among them, pension funds, college endowments and savings-minded individuals – to measure their investment “risk” by their portfolio’s ratio of bonds to stocks. Often, high-grade bonds in an investment portfolio increase its risk.”

As Buffett often advocates, he believes that individuals should invest utilizing broadly diversified indexes, which track various benchmarks with extremely low costs.  We are confident that our investment strategy is the best way to capture the long-term expected returns of the stock market with the greatest chance for success.

Just like Warren, we sleep well at night.  We want you to be financially successful and able to sleep well at night.



Disclosure: Brad Wasserman, author of this blog post, owns a small number of Berkshire Hathaway shares, which was purchased to enable me to attend Berkshire’s annual meeting. All my other stock investments are in DFA mutual funds, which is one of the primary mutual funds companies that we recommend to our clients.