Where do we go from here?

Blog post #456

It’s early August, 2020. In the US, this marks the beginning of the 6th month of dealing with Covid-19, which really started to impact the US in March.

What are we thinking about in terms of investing and financial planning now, and going forward?

What are the lessons of the past 6 months and how should we apply them moving forward?

Markets react quickly and unexpectedly: Stock markets in the US and globally reacted quickly as countries shut down due to the pandemic. Then, unexpectedly, beginning in late March, markets recovered strongly.  Investors looked at the longer term view of recovery and how companies can adapt. However, companies and sectors that continue to be greatly affected by Covid-related challenges are still far off their pre-Covid price levels.

Stick to your asset allocation and financial plan: The rapid recovery of many stocks re-emphasizes why it is so difficult to time and predict the stock market. This is why we are strong believers in developing a long-term financial plan and adhering to that asset allocation.

We work with you to develop a financial plan, based on your goals, your need to take risk and your time frame. We don’t try to time the markets and we don’t base our advice on guesses and predictions.

There is still a long way to go: While there has been great progress in Covid treatments and initial vaccine development, a return to pre-Covid life is still likely to be many months, if not a year or two or even more into the future.

There is no way to know how long vaccine trials will take. We don’t know how many of the potential vaccines will be successful. Even when some are determined to be viable, distribution and receiving vaccines will take time, likely much longer than many now realize. And no one knows how effective any new vaccines will be.

Because of all these medical unknowns, we think it is important for each of us to be realistic and develop a long-term mentality related to this new Covid environment. We need to be resilient. How can you better adjust and adapt? As Covid issues will likely be with us for awhile, are there additional things that you can or should do, to help you and your family cope with this new world?

Is there anything you want to discuss with us, to help you cope?

How your investments will adapt: We focus on developing a very broadly diversified investment portfolio for you, as part of your investment plan. Even more today, we think being very diversified is vital and beneficial.

Your portfolio has growth and value companies, as well as large and small companies. We recommend investments both in the US and Internationally. Diversification, both in stocks and your fixed income holdings, has many benefits. The most important benefit is that you should not be materially impacted by any one industry or company.

As Covid continues in the future, we do not know which countries or companies may be more successful than others. Thus, broadly diversify. As my wife asked the other night during a walk, what will happen to stocks and companies that have hugely benefitted from Covid? Won’t they go down at some point? Will they be considered way overvalued in the future, as Covid is dealt with? We don’t know the answers, which is why a broadly diversified portfolio holds all types of companies, in varying amounts.

No company, industry or geographic region should cause a decline in your retirement lifestyle or your ability to reach your financial goals. Broad diversification provides this.

We want to stress the importance of thinking long-term, even though that means different things, depending on your age.

If you are in your 20s, 30s, 40s, or 50s, you have a very long life expectancy. You should not be focused on what is happening in the markets now. You should primarily focus on saving and investing. That is what I have done and will continue to do, regardless of what the markets are doing. I keep investing, every month, into the same funds and investments we recommend to our clients.

You need to have a positive mental attitude that our country and companies, both in the US and globally, will continue to evolve, grow, adapt and succeed. I believe that years and decades from now, the earnings of public companies will be greater than today, as the world and economies expand. I don’t know which stocks will be the best performers decades from now, which is why we believe in asset class investing as a core principle.

We are concerned about the impact of Covid on small businesses, industries and people that have been greatly affected by Covid, but that does not influence the long-term investment strategy of either our firm or me personally.

As you near or are in retirement, we stress the concept of a “fixed income foundation.” By this we mean that our goal for you is to have many years of your annual withdrawal needs in various fixed income investments, such as bonds, CDs, bond funds or cash.

For example, if you have $1 million of your $2 million portfolio in fixed income investments, and you withdraw $50,000 annually, you have a fixed income foundation of 20 years worth of withdrawals ($1 million divided by $50,000 = 20) and that assumes no interest on the fixed income.

If you have have many years of a fixed income foundation, then mentally we hope that you can focus on that, as your standard of living is not directly impacted by short term declines in the stock market.

Remember, regardless of how old you are, declines in a broadly diversified stock portfolio are temporary, and eventually give way to a more permanent uptrend in the growth of stock prices.

The harder concept for people to grasp, due to human nature, is that lower stock prices mean better value for stocks going forward. It is like a sale at a store (or online!). The store sales seem like a good bargain. Try to think of temporary stock declines like a sale at a store.

We see that periods of market turbulence or stock price declines cause great companies to react, adapt, adjust and add value for the long term. The companies that will succeed will figure out a way to do so, however they are able.

This is why we invest in all types of companies, because you can’t predict who and how they will succeed, and which will have better future stock market returns. For example, while growth companies have excelled, many companies that are now considered value companies trade at a fraction of growth companies’ valuations. Many of today’s cheap companies will succeed, and they will likely have strong stock market returns when we look back, 5 or 10 years from now.

Plan for the future.

Be resilient.

Be positive.

Wear a mask.

Silver lining: Refi Opportunity

Blog post #455

One of the silver linings of the pandemic outbreak is the opportunity to refinance your mortgage or other loans.

You should investigate refinancing and act on this soon. The opportunity for this significant financial benefit should not be ignored.

Key takeaways:

  • If your current mortgage is at an interest rate of 3.5% or higher, and you expect to be in your current house for more than a few years, you should consider refinancing your mortgage.
  • This can be a very individualized decision and there are many options available. Please contact us to discuss refinancing and the impact on your overall situation.
  • In general, we have long been advocates for not pre-paying mortgages, as you should be able to earn more over the long-term with a diversified portfolio than the after-tax cost of a mortgage.
    • However, given the very low rate of interest that can be earned on fixed income investments and that these historically low mortgage interest rates make 15-year mortgages more realistic for more people, we think 15-year mortgages make more sense now than they were in the past.
  • With the ability to borrow at such low interest rates, regardless of whether it’s for a 15 or 30 year mortgage, we still do not think paying off your mortgage balance in full makes sense for most people, especially if you are younger than 60-70.
    • When you pay off your mortgage in full, you are using significant capital that will no longer have the potential to grow for you. While the stock market is always volatile in the short run, in the long run the stock market has outperformed these interest rate levels during almost all 10-20 year time periods. We feel that paying off a significant mortgage all at once, unless you have a vast portfolio, is not the right strategy for most people. 

Current rates: Interest rates vary based on your specific situation, but 30-year mortgage interest rates are just above 3% with no points and 15-20 year rates are now less than 3%. You can pay additional fees, called points (usually .25%-1% of the loan amount), to “buy down” the interest rate to be even lower. I was quoted a 15-year mortgage with 1 point for 2.5%.

  • Buying down the interest rate may make sense, but the payback period may take around 5 years if you pay a full point. Thus, paying additional points should only be considered if you are quite confident that you will be staying in that house for several years, depending on the cost of the points you pay.

Traditionally, most mortgages have been for 30 years. As rates are so low, or you may be many years into your current mortgage, a key question is how many years should your new mortgage be?

  • In other words, should you refinance from a 30-year to a 15-year mortgage?
  • Or should you consider a 20-year mortgage, which is less widely available? 

Let’s review some key concepts to consider in evaluating the refinancing decision process.

Should you refinance? If the savings of reduced monthly payments are greater than the cost of refinancing (and potentially any points you pay) within a few years, and you are sure you are staying in your home for at least a few years, than you should definitely pursue the refinance.

  • For most people, the answer will be yes, if your current mortgage interest rate is at 3.5% or greater.
  • If you have 30-year fixed mortgage of $400,000 at 4%, your monthly payment would be $1,910 (we are not considering property taxes or escrow payments, as these are not really affected by the refinancing).
    • If you refinance with another 30-year mortgage at 3.25%, your new payment would be $1,741 per month.
    • This is a savings of $169 per month, or $2,028 per year.
    • If the refinance costs around $3,000 for illustration purposes, the cost would be recouped in about 1 ½ years, which makes this a simple decision to do the refinancing.
    • Over the 30 years, you would save almost $61,000.

Should you consider a 15-year mortgage?

  • The interest rate may be even lower, say around 2.75% with no points.
  • However, because you are shortening the mortgage term from 30 years to 15 years, the monthly payment will go up significantly.
  • This becomes a major decision, as you must decide if you can afford to lock in a much higher monthly cost, as the payment will increase so much.
    • In our example with a $400,000 mortgage above, the payment would increase from the current $1,910 per month for the 30 year mortgage to $2,714 per month with the 15 year mortgage.
    • This would be an increase of $804 per month, or $9,650 per year.
  • The advantage of the 15-year mortgage is that you will have no mortgage payments later in life or much more equity in the house, faster. You would save more than $138,000 in interest payments in this example.
  • Going to a 15-year mortgage should be considered if you have significant excess monthly savings and you are confident that will continue, and you already have a substantial investment portfolio.
  • If you are not sure about your future income, and your income and expenses are relatively close, then you should probably pass on considering a 15-year mortgage and be pleased with the savings of refinancing to a new 30-year mortgage.

Some other things to consider:

  • Mortgage interest is deductible and if you refinance, the interest will still be deductible if your refi amount is $750,000 or less. Mortgage interest is one of the few tax deductions that remains without limitations. On an after-tax basis, mortgage interest actually costs even less than the stated interest rate.
  • If you cannot afford a 15-year mortgage as the monthly payments are too high for you, but you are part way through a 30-year mortgage, you can always pay more each month, to stay on the same time payment schedule as your current mortgage term. We can assist you in determining this. 
  • We would still advise younger people, particularly those below the age of 40, and maybe even below age 50, to use a 30-year mortgage. The longer your personal time frame, the greater opportunity you have to earn much more in a diversified portfolio than the cost of a mortgage. You can still lock in an incredibly low interest rate for 30 years and use the remaining funds to invest for the long-term.

We hope this information is helpful to you and your family.

This topic is one that you should discuss with your family members, to make sure that they are reviewing their personal situation and doing what is best for them. We would be pleased to discuss this topic with you, or others close to you.


Financial Quick Hits…..Quick Advice

Blog post #454

  • Consider refinancing your mortgage: Interest rates are at historic lows. If you have a mortgage with an interest rate above 3.25%-3.5%, you should be looking into refinancing. We do not always recommend shortening your mortgage, say from a 30-year to a 15-year mortgage, but that may be needed to get the lowest rates that are out there. If you are considering a 15-year mortgage, we should likely talk first. Mortgage firms are very busy, so you may need to be patient.
  • Don’t be afraid to ask. Talk to someone: Talking to someone else can be helpful, in almost all situations. We can be a resource for a wide variety of topics. If you are struggling with an issue or just can’t resolve something, reach out to us or someone else you trust and start the conversation. We help people deal with all kinds of issues, from complex matters like estate planning decisions to balancing a check book for clients. Talk to someone. It may help. It will allow you to get a new perspective, brainstorm and maybe gain some confidence.
  • Have an emergency fund and liquidity sources: The pandemic has taught us many lessons, including the importance of having funds on hand for the unexpected. Some have lost their wages or other income sources. Many have assisted others with financial challenges. It is important that you always have funds readily available, whether in your checking account, a home equity loan that you can borrow against, or as part of your fixed income allocation with our firm, that can be readily liquidated if needed.
    • One of the measures that we use for your liquidity protection is that if you are in a withdrawal mode, we strive to maintain at least 6 months of your future withdrawals in cash. This was very beneficial when the credit markets struggled in March, as we were not forced to sell positions when others were selling bonds at panic prices.
    • It is also important to remember that you should build an emergency fund before you begin to invest in the stock market. This is an important lesson for those in their 20s and 30s. Stock market money is longer term, that should not be needed for at least 5 years.
      • Hint to parents and grandparents: This is a good topic to discuss with your kids/grandchildren.  We can help, if you like.
  • Be aware of credit card bonus categories: Due to the pandemic, some credit cards have added or changed reward categories, particularly among premium credit cards. These have been changing often, so check with your specific credit cards.
  • Do some financial and physical housekeeping: 
    • Subscription services of all kinds are now part of our lives, but you should review them occasionally.
      • Are you really using all the TV or music streaming services you pay for?
      • I have an Audible subscription that I rarely use….so I should cancel it and save the extra money every month.
    • Could you donate clothes or other household goods that you no longer use? This could benefit a charity and get rid of clutter. If you itemize, keep the receipt for tax purposes and document what you donated. Even charitable organizations like Goodwill have made donating items “contactless.”
    • Are you using a password program like 1Password or LastPass yet? This will save you time and energy, and make your life more efficient. Ask any of our firm members, who all use 1Password in their business and personal lives.
  • Don’t take unnecessary risks: We recommend building a globally diversified portfolio that contains thousands of stocks. If you were to own huge positions in some stocks, this can lead to unnecessary risks.
    • As you build your portfolio, if you consider it like a bridge, we think it is better to drive in the middle (a broadly diversified portfolio) than riding the edges of the bridge with no guardrails (owning a lot of a few stocks).*
    • The less diversified you are, the closer you may get to the edge of the bridge. Sometimes, this can mean higher returns, but it also may mean greater losses. Owning huge positions in individual stocks can lead to huge losses which are unnecessary and hard to recover from. For example, if you owned $300,000 of Boeing, GE, Delta or any number of bank or energy stocks earlier this year or a few years ago, those positions are now only worth a fraction of what they used to be.
    • With a globally diversified portfolio, you will have fewer reasons to worry about poor returns from a single stock or asset class. And that will keep you in the center of your financial road.
    • For most of us, whether crossing a bridge or investing, we want to follow a safer and prudent path. Your future is too important to risk.


What we do know is that the financial world keeps changing. This is what makes our role in your life valuable, as we will continue to provide you advice that is relevant and appropriate. We take this responsibility very seriously.

Talk to us. We want to help you, and your family, deal with change, today and tomorrow.


Source:  *27 Principles Every Investor Should Know, by Steven J. Atkinson (Illustrations by Dan Roam) July 2019


A Consistent Philosophy Matters

Blog post #453

“The important thing about a philosophy is that you have one you can stick with.”

–David Booth, Founder and Chairman of Dimensional Fund Advisors (DFA)

Having a core set of beliefs, or a philosophy, is vital to many aspects of your life.

Having a set of beliefs and a philosophy that is logical is especially important when it comes to investing. Having a philosophy that you believe in and can stick with can help you deal with the uncertainties and volatility that come with investing.

The purpose today is not to detail our investment philosophy and beliefs.

The purpose today is to remind you that we make decisions and provide you with advice within a sound and logical framework that we have used since we started our firm in 2003.

While we make changes and adapt to the ever-changing financial world, our overall core beliefs are still the same.

Doing the opposite, such as trying to predict the market’s moves every few months would be almost impossible. Trying to predict the next hot sector or geographic region would be an endless guessing game. Being market timers or trying to predict which money manager will be the best for the next few years seems like unproductive efforts to help meet your long-term financial goals.

Having a long-term philosophy enables us to be disciplined in our decision making. This enables us to have confidence. This enables us to provide you with the financial advice you need.

This enables us to help you stick with your long-term financial plan, even through difficult times and ones of great uncertainty.

We hope this provides you with confidence. We hope this provides you with a greater sense of comfort and security.

How to Deal with Lower Interest Rates

Blog post #452

The Covid pandemic has caused already low interest rates to move even lower. 

Throughout much of 2018, the 10-year US Treasury Note yielded around 3%. During 2019, it dropped from the 3% to 2% and since Covid hit, the US 10-year yield has hovered around 0.6% – 0.7%. It is worse overseas, as Germany’s 10-year notes pay 0.09% and Japan’s are at zero or negative.**

The implication of much lower interest rates are important to you as an investor. Going forward, at least for the next few years, it is likely your fixed income allocation will yield even less than it has been. As each fixed income security that you own matures, it will likely be reinvested at a much lower interest rate.

What are the choices that you have, and we face as your investment advisor, regarding very low interest rates? 

We could recommend some of the following, but that is not likely. We could….

  • Extend maturities
  • Invest in lower credit quality fixed income, to reach for higher yields
  • Invest more in stocks and reduce your fixed income allocation
  • Invest more in alternative investments

For most clients, we are not likely to recommend most of the above, at least not without extensive analysis and conversations with you.

Extending maturities means buying individual fixed income investments or bond mutual funds that are beyond what we are buying now, which is generally 5 years or less. The markets are not paying much more interest to hold longer maturities, so it does not make sense to us.

We view fixed income as your foundation, the safe part of your portfolio. When stocks drop, we don’t want your fixed income to crash as well. We don’t buy high yield (or junk bonds) for this reason. Risk and reward are tied together. If an investment grade 5-year corporate bond is yielding 2% today….and another one yields 6% or 10% for the same 5-year maturity, this means that there is much more default risk in the 6% or 10% bond. We want to try and ensure that you will get your principal back.

For some clients, we may review your stock to fixed income allocation, as fixed income is paying so little. For clients who are younger or can emotionally handle the volatility and greater risk in stocks, it may make sense to maintain a greater stock exposure than we would otherwise recommend. For older clients getting close to retirement or in a withdrawal mode, this may be a difficult decision. We will need to evaluate where you are in terms of your need to take risk, and your willingness to handle more risk. If you are comfortable and have adequate assets, the downside of greater stock exposure is probably not worth it.

We have not found any alternative investments that we are comfortable recommending. We have reviewed many, but they must provide benefits to you through performance track records that add value to your portfolio (and not just expected to add benefits), as well as provide liquidity, be understandable to us and have reasonable or low internal costs. As of now, we prefer to stick with our long-term investment philosophy that we are very comfortable with and not try other investment vehicles.

What does this mean for your future?

We focus on meeting your financial goals and the long-term total return of your portfolio.

  • We are not going to reach for additional yield if it means increasing the risk of defaults on fixed income. Although you will receive less interest income for the foreseeable future, we place greater priority on the return of your principal.
  • We will likely use more investment grade bond mutual funds in the near term, due to the very low interest rates, as they may hold higher yielding investments than we can purchase today. This also provides even greater diversification, which reduces your risk further.
  • We may need to work with you regarding Social Security planning, as we discussed in an earlier blog post, Social Security Projections and Impacts for all, dated May 14, 2020. If inflation remains low for many years, then future Social Security benefit increases will be lower or non-existent.
  • If you are in good health and feel you have a longer life expectancy, delaying Social Security benefits until age 70 may be a strategy that is recommended more in the future. There is a huge annual increase in benefits by waiting until age 70, rather than starting to receive Social Security benefits at your normal retirement age of 65-66.
  • We will continue to carefully monitor the credit quality of your current fixed income investments, as we do when we purchase new investments. We avoid low-quality fixed income investments, in both corporate and municipal bonds. We avoid some sectors entirely which have higher historical default risks.
  • Some clients may face difficult decisions, if interest rates remain low for an extended time period. The future is always uncertain, and things can change. Some may have to reduce their spending expectations or work longer, before they retire.
  • You should review your mortgage and see if refinancing makes sense. Rates are around 3% and even lower, depending on where you live and the length of your mortgage. I thought my refinance at 3.50% a few years ago would be my last, but I will likely refinance it again to lock in these lower mortgage rates.
    • For others, we may recommend paying off your mortgage sooner, which is something that we generally do not recommend. Please discuss these mortgage alternatives with us, as the recommendations are very specific to your individual circumstances.

We know the financial world keeps changing. This is what makes our role in your life valuable, as we will continue to provide you advice that is relevant and appropriate. We take this responsibility very seriously.

Talk to us. We want to help you, and your family, deal with change, today and tomorrow.

Source: **WSJ.com, July 9, 2020.

Is there a disconnect?

Blog post #451

The 3 months that just ended June 30th was terrific for nearly all asset classes, both in the US and Internationally.

The financial markets have been volatile, as one would expect, given the onset of the Covid-19 crisis. The 34% decline in the S&P 500 for the 33 days up to March 23rd was the fastest decline from an all-time high. But this rapid decline was then followed by one of the best 50 days in the history of US stock markets.

Markets are unpredictable. If the above market moves don’t teach you that, then nothing else will. This is why we emphasize the importance of staying in the market, because you don’t know what tomorrow will bring.

Early this week was another good example of the difficulty of predicting what the markets will do.

  • Over the weekend, Covid cases were rising and states were moving toward more closings, not openings. The news was bad both medically and for the economy.
  • With no new positive medical or vaccine developments on Monday and Tuesday, and Covid cases increasing, the markets went up on Monday and Tuesday.
  • You can’t predict that. Just stay in the market for the long-term. Be disciplined and take the long view.

How can large US company stock indices be down by only single digits for the first 6 months of the year, despite the Covid outbreak, widespread shutdowns and huge unemployment?

Many people have asked this question, wondering if there is a disconnect between the stock market and the actual economy. They are right and wrong.

The stock market looks into the future and values long term future expectations for publicly held companies. Thus, these large company indices that many view as “the market” are representing the future prospects and expected future cash flows for large companies like Apple, Delta, Amazon, Costco, Facebook, Marriott and many more. These large indices, such as the Dow Jones and S&P 500 are heavily impacted by a handful of the largest companies, as these indices are market weighted. This means the largest companies by stock market valuation have the greatest impact on the indices. And remember, the DJIA consists of just 30 stocks.

The stock market does not directly reflect the many small, private companies that are hurting or have already gone out of business. The market does not directly factor in the restaurants and stores near each of us that have already closed or are struggling. They are private, so they are not traded as stocks. But these privately held businesses are, or were, most likely customers or have relationships with many larger, public companies, and their owners and employees all shop at public companies. All this information should be factored into the current value of publicly traded stocks.

Thus, “Main Street” and “Wall Street,” if I can use those terms, are different.

The question that we cannot ever answer is about the future. As we often say, we don’t have a crystal ball.

What will the eventual impact of the stress on these smaller businesses be on the larger economy?

Will unemployment continue to go down? How fast or slow?

How will Covid impact consumer spending and will it affect the purchases of Apple products? When will people begin traveling again in large numbers and restore those related businesses and workers?

Will Target, Costco and Walmart feel the brunt of high unemployment? Will consumer spending drop or increase over the next 3 or 6 months, or longer, due to all these Covid effects?

Apple, Target, Costco and Walmart stocks are each near their 5 years highs. What the market is saying about these companies right now, based on their stock prices, is that they will succeed in the future. This helps to explain why these indices are at the levels they are at.

Other public companies, which are facing the negative brunt of the Covid impact, are still crushed, even if they have rebounded from their lows. Airlines, hotels, travel and leisure, and energy companies are far off their pre-Covid levels.

How do we handle and process these issues?

From an investment standpoint, we have a choice of how to approach all these issues. As a firm, we have taken the path that says that we will hold a diversified portfolio of many stocks, mostly in the US, as well as around the world.

But we have chosen not to play an expensive and most likely, unsuccessful guessing game to try and determine the answers to all the above questions, because no one really knows any of the answers.

We are not going to try and guess which stocks will outperform others over the next 1, 5, 10 or 20 years. That would not be our primary focus to help you to reach your financial goals.

We want to focus on the key things that matter to you most. We want to make sure you have adequate funds for your needs, both in the short term and the long term.

This is why we work with you and talk to you about the importance of developing an appropriate investment allocation between stocks and bonds that you can live with, especially during market downturns.

We hope this makes sense to you. This approach should provide you with comfort and clarity.

We want to wish you and your family a happy 4th of July weekend. We hope that you stay safe, and socially distance.

As we said above, we don’t have a crystal ball. However, we do believe in science. We do believe in the benefit of wearing a mask when in public places. In our humble opinions, we believe that if more people would wear a mask, we (and the stock market) would be better off in the long run.

Our firm will be closed on Friday, July 3rd, in observance of the 4th of July holiday.

Blog post 450: A Milestone Interview

Starting in mid-June, 2014, I committed to writing these posts weekly, which we have done for the past 6 years. Since 2009, this is the 450th blog post we have written.

We hope these blog posts are helpful to you, as we strive to provide you with guidance, timely information and clarity, as you deal with a constantly changing financial world.

What have you learned from the last few months, from the pandemic and the financial markets?

The most important lesson confirmed what we already knew, that financial markets cannot be timed and predicted. One of our firm’s guiding principles and beliefs is that you can’t successfully time the markets….that you can’t successfully try to time when to get out of the stock market and then accurately figure out when to get back in. It is too hard to be right both times, getting out and getting back in.

No one could have predicted the strong stock market recovery since March 23, 2020. The stock and bond markets move on news that is unexpected. In other words, new information that is not already known. The Federal Reserve’s strong and sweeping actions could not have been predicted or timed in advance. They have done much more, and acted much faster, than they did during the Financial Crisis of 2008-09. That has had a major positive impact on the bond market, and thus, the stock market.

When unexpected progress is announced on vaccines or treatments, it is likely the markets may increase. However, there remains great uncertainty about future cases, the ability to control Covid, how the economy will react and future governmental and Federal Reserve responses.

Nearly all of our clients have adhered to their long-term plans. They have remained in the stock market. We plan and determine each client’s asset allocation to be appropriate for their risk tolerance, time frame and their need and ability to take risk…. your need for stock market exposure. We want each client to have an appropriate stock market exposure so you can emotionally handle the downturns.

What are some of your earliest investing memories and lessons?

I didn’t make any real investments until I was in my late 20s or early 30s. My first financially related memory was working at my local public library during high school, when an older gentleman advised me to read the Wall Street Journal every day. I have been a Wall Street Journal subscriber and reader since my first year of college, for almost 40 years now.

The summer after my first year in college I worked as a busboy at a resort in Wisconsin, putting myself through college. Chrysler was near bankruptcy at the time. I wanted to buy $500 or $1,000 of Chrysler stock and called my mom to discuss it. She had no investing experience, as my parents were divorced and we lived paycheck to paycheck. She said I needed to save the money to pay my college tuition and not to risk it on Chrysler stock. I would have made a lot of money if I had bought that stock, but she was clearly right. I had no business even thinking about buying Chrysler stock, as that was critical money that I needed for the coming year of college.

The lesson is that money needs to be considered in various buckets, based on your time frame. I needed the money for tuition and housing for the next year. Money invested in the stock market requires a long time frame, at least 3-5 years or much longer.

You need to think about your investments based on your time horizon. If you are saving for a retirement that may last decades, what happens today is not as critical. We are planning and focusing on providing you with enough capital for an income stream that will last you for decades.

What are some of the important decisions that you have made and why?

The decision to adopt the investment philosophies that we did in 2003, and still believe in and adhere to today. These guiding principles enable us to have a set of beliefs that give us confidence and a foundation for investment policy and the decisions that we make. We believe this gives our clients confidence and comfort, despite financial uncertainty.

My decision to ask Keith to be my partner in 2008 was critical. I will forever be thankful for his trust in me and leaving our prior firm, a week after his 4th child was born. While we have very different styles and personalities, we analyze things well together and complement each other. We feel that one plus one equals three, which is the basis for a strong business relationship.

The decision to be fee-only financial planners and not to accept any commissions is vital. We act as fiduciaries and put our clients’ interest first, always. If our clients do well, so do we. If they lose money, our income declines as well.

We have made several major investment policy decisions that we feel are proper in the long run. We believe in global asset allocation and broad diversification. While certain asset classes have performed below US Large stock indices for a number of years, we know these periods of underperformance often turn around. Over the long-term, meaning decades, a globally diversified portfolio has outperformed a US-only portfolio. We expect that to be true going forward.

We got out of commodities after 2010. We did this because we did not think commodities provided an effective hedge against inflation, which was the original purpose of buying commodity funds. This had been a good decision, as commodities have done very poorly since then.

We have avoided alternative investments and hedge funds. We believe in using very low costs investments, which we can understand and provide daily liquidity. Most alternative and hedge funds don’t meet these criteria. We invest only in high quality fixed income investments. We review different investments regularly, and have modified portfolios and investments over time, but new investments must meet our foundational criteria.

How does writing this blog fit into the firm? Why do you do this every week?

As founder of WWM and author of nearly all of these 450 blog posts, writing these weekly blog posts represents our commitment and discipline to effectively and timely communicate with you, our clients.

We want you to know that we care. We want you to know that we are always thinking about our constantly changing world and how it impacts you. We want to be unique as a firm. By writing each week, we can inform you and provide our thoughts to you in real time.

Writing a blog post every week means we are constantly looking for relevant topics to write and communicate about. Finding topics in the past months has NOT been a challenge. We feel this process makes us better Advisors for you. We listen to your questions and issues, as those frequently become future blog posts topics.

I want to thank the other members of our firm, and Michelle Graham in particular, who works with me each week to produce the blog and deals with my many editing changes. We must research and meet various compliance regulations, which takes time. We spend hours per week on each blog. It is a firm-wide effort.

There are very few independent financial advisors that make this type of commitment to their clients to produce their own, original content on a weekly basis. We hope you find this valuable and helps you to be a better and more successful investor.

What do you see for the future of the firm and its clients?

In the near-term, we will be working with clients on a virtual basis and we are well prepared for that.

WWM has grown at a steady, moderate rate over the past decade, and we hope that continues. We want to add clients, but only at a pace that will enable us to provide excellent service to all of our clients, new and continuing.

We are particularly pleased that we are working with multiple generations of client families. We have many clients where we work with grandparents, their children and even grandchildren. We work with parents and they are now introducing us to their children. We have helped many clients deal with life transitions, such as those who have had a spouse die or have gotten divorced. These can be difficult times for people and having a firm with this expertise that can assist you through those times can be critical to your well-being.

We are looking forward to engaging clients in a Wealth Analysis and planning processover the next year, and beyond. We are using a top of the line, comprehensive financial planning software that will enable us to interact and plan with you in a new way. Brad Newsome, an Associate Wealth Advisor who we hired last summer, is very experienced with this software program. He will be leading this implementation and the related client discussions. This process will address long-term financial planning and projections, goal setting, Social Security decisions and projections, college funding and many other areas. If you are interested in starting this process, please let us know.

We are committed in providing you with excellent financial advice, a dedication to client service and to be lifelong learners in many areas of financial and investment matters. We are committed to listening to your questions and concerns, and to invest in people and technology to provide the level of service, advice and long-term financial results that you deserve.

We plan to remain disciplined and stick with our commitment to communicate with our clients regularly via this blog, as well as through phone and Zoom calls. Hopefully in the not too distant future……meetings with you, wherever in the country you live.

Thank you for reading.

And thank you for being a loyal client!

Making financial decisions easier

Blog post #449

Your financial life can involve many decisions, choices and emotions. We can help to make it easier for you to deal with.

Staying in the market and sticking with your long-term asset allocation plan during a pandemic is not easy, but it can be done. We have helped you with this and will continue to do so.

Choosing among the many choices of a 401(k) plan and saving for college can be overwhelming. We can help, as we have for many others.

Dealing with finances and financial decisions after the loss of a spouse is not easy. We can help you or those you know, as we have helped many others.

Determining how much you need to save, and how you much money you will need in retirement is not simple, but we can assist you with this planning process.

We remind you to focus on the long-term. The stock market often looks forward into the distance, not at today or the next few weeks.

Markets move on unexpected news, good or bad. We remind you not to focus on day-to-day market moves, which should increase your ability to realize your long-term financial goals.

Dealing with a pandemic is not easy. Dealing with financial decisions during a pandemic can be even more challenging. We are ready and willing to help you, with whatever financial decisions or concerns you may have.

In recent weeks, all remotely and virtually, we have helped clients with many different issues. These have included decisions involving their asset allocations, investing issues, charitable planning, mortgage and moving decisions, selling a house, generational planning and gifting, job changes, as well as assisting clients going through life transitions.

Helping you and your family to make better quality financial decisions is one of our primary roles. We do this by listening and talking with you. You can benefit from our decades of financial experience and hundreds of client interactions.

We realize that uncertainty always exists, as financial markets, tax laws, the world and your life circumstances are always changing.

We strive to make complicated matters simpler for you.

We strive to give you guidance that is in your best interest.

We strive to provide you with clarity and guidance, for whatever issues you may be facing.

In this time of extra uncertainty, we are confident that we can provide you, and those you care about, with solid financial advice. Talk to us. We are here for you.

Our firm has relationships with approximately 125 clients in 18 states, including Michigan, Florida, and many others. We work virtually with clients across the country, so we are well prepared to assist you, other generations of your family, as well as your friends.

Purely Personal – Graduation Edition

Blog post #448

On Sunday, Rachel, my youngest child, will graduate from Kalamazoo College, a small liberal arts college.

Like so many other high school and college graduates around the world this year, she will not be able to have a formal ceremony. I am proud of her accomplishments as a student and as a passionate individual. I am grateful that I will be with her to celebrate, at a social distance on Sunday, as I have not seen her in person in many months.

As investors all know, investing can be difficult and challenging. You must be disciplined. There can be ups and downs.

Rachel has overcome challenges and shown determination throughout her life. She is very caring about others, passionate about her beliefs and is not afraid to stand up for what she believes in. This has been part of her for as long as I can remember.

Rachel advocated and worked for many causes throughout her college experience, from her first year on campus through her final weeks sheltering in place with her housemates. She has been a campus leader as well as a leader for two years in Kalamazoo College’s camping orientation program, LandSea.

Rachel canoeing as a LandSea leader in the Adirondack’s

She has wanted to do things her way. And she has. She told me in high school that she wanted to attend a small, most likely private, college. She didn’t want to attend the University of Michigan or Michigan State University, as most of her friends did. I told her that would be far too expensive for a general undergraduate education.

She showed me that I was wrong, as many small private colleges provide significant grants or scholarships that make the cost comparable to UM or MSU. Note to fellow parents or grandparents….it may be worth exploring small private colleges for your children if they are interested.

She has taught me other things during her four years at K College.

  • When I moved her into college, she quickly taught me that she was a “first year” student and not a “freshman,” as the gender-neutral term was very important to her. I tried my best to use the term she wanted and eventually, it came naturally to me. This taught me that we can change our habits if we concentrate on it. But change takes effort and persistence.
  • Rachel taught me that what she was learning at college, such as how to think and process ideas was most important, not the grades that she got. I don’t know what her GPA is, and I am OK with that. This may not apply to many students and parents. I trusted her. She has learned to be a better reader, writer and thinker. She has learned responsibility. She completed a massive senior thesis project that took 8 months and is 78 pages long, and with future efforts, hopefully will reduce sexual harassment at summer overnight camps in the future.
  • Rachel taught me that a semester abroad can be valuable (and lots of fun as well)
  • Thankfully, she pursued what she wanted and spent 4 months in Greece, followed by a month of traveling alone throughout Europe. This provided me with an opportunity to travel to Greece and Italy with my three children, which was a memorable family experience and one of the best trips I’ve had. Thanks Rachel!!
  • She has taught me to be a better listener, though I sometimes struggle with interrupting her, as we exchange passionate ideas and viewpoints. Rachel, please know that I try, and I do listen to you!

Rachel on her study-abroad term in Greece, overlooking Athens

People ask me what Rachel will be doing after she graduates. For several years, I have told others that “she will likely work in an organization of some type where she can change the world, as she wants to.” She is very passionate about what she believes in. She is not motivated by money. She is not materialistic. She is a leader and she is effective. She plans to spend the next year in Detroit with a non-profit organization dedicated to social change through service. I have no doubt that Rachel will succeed at causing positive change, in whatever areas of focus she decides to pursue.

In this time when health and social justice issues require change, I’m proud that my daughter will be graduating with leadership abilities, strong thinking skills and a passion to bring positive change to our world.

Just like investing, it will not be easy. But I am confident in the future.

Dealing Thoughtfully with Uncertainty

Blog post #447

For this week’s blog post, we encourage you to watch this short video.

David Booth, Founder and Executive Chairman of DFA (Dimensional Fund Advisors) shares his thoughts on the importance of having an investment plan that you can stick with, uncertainty and how to think about the future.

I didn’t know what the word “clairvoyant” means. It means to have the ability to predict the future.

As Booth states at the beginning of the video, we don’t have the ability to predict the future; humans are not clairvoyant.

We hope you find this few minute video worthwhile.

David Booth on Dealing Thoughtfully on Uncertainty

We help you plan. We help you with a strategy to reach your goals. We consider your goals and risk tolerance.  We help you make good decisions.

Just as we strive for your relationship with our firm to be beneficial for you, we hope this video is helpful.

Uncertainty can create opportunity. Please feel free to forward this blog post and video to others you know who could benefit from our firm’s approach to financial planning and investing.