How much is enough?

Blog post #465

“There is no reason to risk what you have and need for what you don’t have and don’t need.”**

This sentence from the excellent new book that I’m reading, The Psychology of Money, by Morgan Housel, really made me think.  And many other of his insights were just as thought provoking.

Housel’s book provides a different way to look at money than most financial or investment books.

To be able to think through the opening sentence of this post, which means that you shouldn’t take unnecessary risk for what you don’t have and don’t need, you must ask yourself how much money is enough? How much money do you need?

These can be difficult questions for some, and easy for others, depending on how much money you have, your age and your specific circumstances. It also has to do with the type of lifestyle you choose to live. And how important that lifestyle is to you.

If you really have enough money, do you need to take on additional risk? This is a worthwhile conversation to have with us, as your financial advisor.

“Enough” is not too little. Housel writes that “the idea of having “enough” might look like conservatism, leaving opportunity and potential on the table…”Enough” is realizing that the opposite -an insatiable appetite for more-will push you to the point of regret.” *** Housel is implying that it is not wise to allocate more to stocks, or other types of investments that could be risky (even if they don’t seem risky when you initially invest in them), when you don’t need to take on the additional risk.

In other words, you may not need to take on additional risk when the potential for loss is not worth the upside. We strive as your financial advisor to develop a reasonable investment plan for you, so that you do not take on too much risk. 

If you have enough money, what is the  reasonable way to invest, so that you can maintain, preserve and grow your assets, without incurring the risk of major losses which would impact your financial lifestyle? Answering that question is what our firm, and our investment strategy, is all about.

Housel stresses the importance and value of long-term investing and the benefits of compounding, which happens by being a patient investor for decades and decades. Housel writes that “…good investing isn’t necessarily about earning the highest returns, because the highest returns tend to be one-off hits that can’t be repeated. It’s about earning pretty good returns that you can stick with and which can be repeated for the longest period of time. That’s when compounding runs wild. The opposite of this-earning huge returns that can’t be held onto-leads to some tragic stories.”****

This is why our approach of building diversified portfolios is so important. We may not generate the returns you could get by buying the hottest individual stocks, but that is not our goal. We are striving to help you build long-term wealth in a manner that you can adhere to for the rest of your life.

In his 5th chapter, Housel explains that it is not just about creating wealth and becoming wealthy (which is an amount that each person/family must define for themselves), it’s about staying wealthy. “Good investing is not necessarily about making good decisions. It’s about consistently not screwing up.”

If you don’t yet have “enough” money or wealth, these concepts are just as applicable. Saving early, investing regardless of market conditions, not taking unnecessary risks and consistently making good financial decisions all contribute to your long-term financial growth. And then the benefit of compounding over decades can help you even further.

Housel feels that “survival” is the single word he would use to describe money success. I would have never thought about that term, but he makes sense. Getting money and keeping money are two different skills. He explains a survival mentality is key, as “few gains are so great that they’re worth wiping yourself out over.”

He writes that applying the survival mentality means understanding three things:
  • More than wanting big returns, it means to be “financially unbreakable.” If you are unbreakable, you will get the biggest returns (over the long-term), because you will be able to stick around long enough for compounding to work wonders.
  • Planning is important, but the most important part of every plan is to plan on the plan not going according to plan.
  • Being optimistic about the future, but also paranoid about what will prevent you from getting to the future, are vital.

These concepts all make great sense to our firm. In Housel’s book, which I highly recommend, he uses many stories and analogies to further explains his ideas.

Here are a few ways that our investment philosophy is congruent with Housel’s way of thinking. 

We work with you to develop an asset allocation plan, which is our way to control the amount of risk that you “need” to take. When a client can meet all their financial needs with a 40% stock allocation, we don’t recommend an 80% stock allocation, just so they can try to get even wealthier. The potential upside is usually not worth the risk and the added stress of huge, temporary market declines.

The way that our firm diversifies your assets at many different levels is consistent with Housel’s thoughts. We diversify by recommending different asset class investments which own thousands of companies in many industries, in the US and throughout the world. We could own just a handful of stocks or bonds and not be as diversified. That may lead to huge gains in some periods but lead to large losses in other times. The risk is not worth the benefit, in our opinion.

We say that we are “rationally optimistic,” but we also realize that the unexpected happens all the time. Events occur that we don’t expect. We are living through that right now. Markets drop when we don’t see it coming. That’s why we often remind you that it is normal for stock markets to incur huge losses at least once every 5 years on average and that 10% declines occur at some point in almost every year, even if the annual results are positive.

I have not finished reading The Psychology of Money, but what I have read has been helpful to me. It has confirmed our overall philosophy in many respects. But maybe even more important, it has provided many new ways to think about, and to talk with you about money, risk and strategies to be financially successful. And that should be helpful to you.




Are you improving your habits?

Blog post #430

For most of us, wealth or a successful career does not happen overnight.

Growing your wealth or accomplishing almost anything, such as improving your health or building a business, takes time. Success in these types of endeavors rarely happens quickly. Massive success does not always require massive action. In reality, most successes are usually the result of changes that seem small and incremental, which accumulate over months and years and then compound into remarkable results…..if you’re willing to stick with good habits for years.

In the book Atomic Habits by James Clear, he explains how very small changes in your habits and routines can have a significant long-term positive impact on your life. Although I have only started the book, I highly recommend it already.

Clear explains his title….” atomic” means an extremely small amount of a thing which is the source of immense energy or power. “Habit” is a routine or practice performed regularly.

Improving by 1% per day or per year does not seem like much, and may not even be noticeable at the time, but over the long run, can be very meaningful.

Likewise, small declines or mistakes here and there hinder progress and can eventually lead to a problem. Think of your daily food decisions, fast food visits or poor financial decisions, such as if you tried to time the stock market and failed at it. Did you ever get out of the market and then miss a huge recovery before you got back in?

If you are working and trying to build your retirement, are you increasing your retirement plan contribution % every year, when you get a raise?

  • If you did that, you would be saving more every year, and still taking home more money.
  • If you increased your retirement contribution every year, say from 5%, to 6%, to 7% and continuing each year…..that would have a huge impact on your savings and wealth accumulation over 5-10-15 years.

When my three children were young, we saved a few hundred dollars per month for each of them for college. Along with the habit of saving gift money they received from relatives, such as grandparents, and sacrificing some trips to ensure that we continued to save, we were able to save enough for each of their college costs. The growth of these accounts did not happen overnight….it was the result of starting at birth and continuing to save for more than 15 years for each of them. Also, we were disciplined and stuck with the investments, regardless of the ups and downs of the stock market.

In his bookClear stresses that “habits are the compound interest of self-improvement. The same way that money multiplies through compound interest, the effects of your habits multiply as you repeat them. They seem to make little difference on any given day and yet the impact they deliver over the months and years can be enormous. It is only when looking back two, five, or perhaps 10 years later that the value of good habits and the cost of bad ones becomes strikingly apparent.” **

If you save money each month or regularly, you don’t become a millionaire overnight. If you go to the gym or workout a few days in a row, you are not suddenly in great shape. For most of us, we make a few changes, try to change our habits….but don’t see quick results, so we don’t make the change a permanent habit for the long term.

Clear empathizes over and over that success is the product of daily habits that you stick with, not a once in a lifetime transformation, such as one great stock pick or starting the latest fad diet for a few days or weeks. You should be more focused on your trajectory. Are you moving in the right direction? We can help you with your financial planning, financial habits and trajectory. A personal trainer can help you with your health trajectory.

  • Are you spending less than you are earning?
  • Are you saving regularly?
  • Are you exercising regularly, doing both aerobics and strength training?

Your outcomes (results) are a lagging measure of your habits (what you have done in the past for many years). Your net worth is a lagging measure of your financial habits (which we can help you with). Your weight is a lagging measure of your eating habits. Your clutter (and mine) is a lagging measure of your cleaning habits and organizational skills (and mine). You get what you repeat.

Clear introduces two concepts that I found very instructive late in the first chapter. He said we all go through a “Valley of Disappointment” when we adopt new habits. We start exercising and don’t see quick results. It is frustrating. So, we get disappointed and don’t stick with it long enough to see the compounding benefits. Most of us quit the new habit when we are in the Valley of Disappointment. We want to see the results and impact, but the key of the compounding process is that the most powerful outcomes and changes are delayed into the future. And this is part of the reason that so many new habits are started and not adhered to for the long term, let alone for weeks or months.

To see a meaningful difference, we must adhere to new habits and practices long enough to reach the breakthrough, or what he calls the “Plateau of Latent Potential.” When you are saving monthly for college or retirement, the account may not grow much month to month, but then you realize at some point, which may be years into the future, that your monthly or quarterly habit of savings is becoming real money. The account has grown to a significant level. The habit is/was worth sticking to!

While I didn’t know about the “Valley of Disappointment” or the “Plateau of Latent Potential” until this week, I experienced exactly these feelings over the past few months. I hurt my back, which also caused pain down one leg and behind my knees in mid-November. After seeing my internist and a physical medicine doctor, I began physical therapy in mid-December. He prescribed a series of exercises I was to do three times daily, which took 20-25 minutes each time, as well as go in for physical therapy visits 2-3 times per week.

I started the exercises and was very frustrated around Christmas and New Years. I was spending about 60-75 minutes per day doing the exercises, plus office visits….and was not feeling much improvement. In Clear’s terms, I was in the “Valley of Disappointment.”

Fortunately, I am disciplined. I wanted to feel better. I didn’t give up. I made these exercises a new habit. Three times a day, almost every day, regardless of whatever other activities and early morning meetings I had, I did these exercises and went to see the physical therapist as directed, 2-3 times per week. (If anyone needs a great PT recommendation in the Southfield, MI area, I will gladly provide you his name).

Then it happened. All of a sudden, I started to see real improvement. I hit the “Plateau of Latent Potential.” The daily exercises showed signs of paying off. My legs felt better. My back pain was progressively diminishing. That was even more motivating. So, I have continued doing all these new habits, the regular PT exercises and office visits, and the progress has continued.

And unexpectedly, I realized that I was also getting stronger, which was a great side benefit. This is another benefit of adhering to good habits. Sticking to good habits leads to continual improvement, which leads to self-improvement in other parts of your life.

For me and our firm, we have always been dedicated to self-improvement and continual learning. I have been a member of a study group for over 15 years that meets with other financial advisors from across the country a few times a year and have monthly peer telephone calls.

This dedication and habit of self-improvement had another benefit last week. I decided to begin reading Atomic Habits after a Q & A session I participated in last week in Austin, Texas, with the co-CEO of Dimensional Fund Advisors. I had heard of the book previously, but had not read it. Dave Butler, the co-CEO was asked about his habits, as a successful leader. He said he is a huge believer in the power of habits and that successful people develop small habits on a regular basis. And they are successful because they stick to them as long-term habits.

I have a habit of listening to others I respect, and Dave Butler is one of those people. When someone like that recommends a book, I usually go directly into my Amazon app and put the book into my cart. Habit. It then becomes an immediate reminder to consider reading that book. Another habit. Then I read a lot. Habit.

We want to help you develop and continue to have good financial habits.

If you spend less than you earn, you can save.

If you save and invest wisely over the long term, you can have financial success.

You can retire in a comfortable manner. You can travel if you choose. You can provide financial assistance to your children and grandchildren, as well as charitable causes.

A lifetime of good things can come from having good financial habits.

Talk to us about your family. We want to help you, your children, (and even your grandchildren), with any financial matter that is important to you and your family.

If you know of family or friends who could benefit from this type of advice and guidance, please share this post with them, and let them know we are available to help them as well.

** Source, Atomic Habits, James Clear, page 16 (italics added for emphasis)

Reflections on the Week

Risk and return.


Climbing Mt. Everest.

How to be better investment advisors.

These were some of the topics of the 2018 BAM National Conference which I attended, along with Michelle Graham of our firm, over the past few days.

We heard from Alison Levine, who in 2002 was the captain of the first American Women’s Mt. Everest Expedition.  Her presentation was filled with many leadership and life lessons, which can also be applied to investing.

In building her team, Levine said the members’ techniques and ability were important, but willpower was the most important factor. To be a successful long-term investor, you will need to have willpower to endure down markets (such as we are experiencing right now), willpower to ignore the constant noise and financial predictions and willpower to stick with your financial plan (investments), even when they temporarily underperform some other stocks or asset classes.

Levine stressed the importance of confidence. She had to know that each of her individual climbers were confident of their ability to have a truly confident team. As your advisors, we are confident about our consistent investment philosophy. As a client, we want you to be confident in our investment strategy and philosophy, so you can adhere to it for years and decades.

To make this attempt to climb Everest, the American Women’s Mt. Everest Expedition required extensive planning, training and financial support. This was not a one person effort. The Women’s trip was sponsored by the Ford Expedition and not the Chevrolet Avalanche (get it?) …as both wanted to sponsor the venture.

We learned that before an Everest climber can attempt to reach the ultimate peak, they spend two months having to go up and down the mountain. (See the picture) They go from the base camp up to base camp 1, then back down to the base camp. Then up to base camp 2 and back down to the base camp. Then up and down to base camps 3 and then 4….before they are finally able to climb all the way and try to get to the peak. They are forced to endure this up and down process so their bodies can get safely acclimated to the thin mountainous air.

The climbers had to go backwards many times, so they could eventually go forward. Even when going backwards, they were making progress towards their goal. As in investing, sometimes the markets force you to go backwards (when the markets decline), before you can go forward (when the markets go higher, and then eventually reach new highs).

Various speakers discussed how risk and return are related, which of course we know.

Levine’s 2002 attempt did not make it all the way to the final summit. She was 28,704 feet above sea level, but due to storms that quickly developed, they were unable to trek the final 331 feet up to the peak. Did they fail? No! They had to make smart decisions. It was better not to take extra risk, in order to return …and live. That is the ultimate risk and return!

She returned to Mt. Everest in 2010 and finally made it all the way to the summit. She said she could not have done it without an extensive support team and the crucial experience she gained from her 2002 venture. We are part of your support and advice team. We have extensive experience, rely on market and academic data, and behind us, we have extensive resources that we can rely on, as needed.

We agree that risk and return are related. We discuss this with you, as we develop and evaluate your portfolio over time. One speaker expressed that due to US S&P 500 valuations as of September, 2018, the future expected returns for this asset class are quite low going forward, well below the historic average of 8-10% per year. He may be right, but there is no way to know. None of us has a clear crystal ball about the future. However, we disagree with his recommendation to invest in alternative investments which we find hard to understand, use leverage and make bets by shorting certain stocks (betting they are over priced and will go down). Some speakers advocated adding alternative investments to try to reduce the overall risk of a portfolio or to increase the expected returns. As of now, we are not in agreement that the risk of these alternative investments are worth the potential return. We are open to new concepts and ideas, but we must be confident in them before we invest our money and recommend them to you.

We also heard from another speaker, who spoke from the view of an investor.** He shared how years ago, it was difficult for him to deal with uncertainty, noise and the constant barrage of media predictions and warnings. This was before he began using his current advisory firm (not WWM) and investment philosophy, which is likely similar to ours.

He talked about how important it is for us as advisors to be good listeners. He stressed values that are similar to ours, such as “doing the right thing” and “doing it the right way.”  He discussed the importance of treating each client as an individual and understanding your personal emotions and feelings about money, as well as sharing our personal money stories. I plan to write about these topics in future blog posts and we will discuss them in client meetings.

He said that by working with his advisor, he became more comfortable with the uncertainty of the financial world. He began to tune out the noises. He worked with his advisor to make better financial choices. He realized that he can only control what he can control. He now knows that as a long-term investor, the investments and decisions he makes today will compound over time for great future benefits. He doesn’t know exactly how this will work out, but is confident that over the long term, he feels this is the correct philosophy to have.

We strive to provide the type of guidance and advice that the speaker described, so that our clients can also feel this way.

The speaker feels transformed by the relationship he has with his financial advisor. He refers to himself as a transformed investor. As a result of his new mindset, he is much more willing to refer his friends to his advisory firm, so his friends can be helped by his advisor and feel the way he does.

If you are a client, we hope that you feel this way about our firm, so when the situation arises, you can help your friends and relatives by referring them to us.

If you are not a current client, but want to have this type of investor experience and relationship, let’s talk.


**The speaker is not a client of our firm or BAM Advisor Services (our back office firm), so this is not intended as any form of client testimonial.


Positive Things Happening in “Our Towns”

The 4th of July holiday arrives next week.

It’s a time to be with family, attend a parade, have a barbecue and enjoy some fireworks. Maybe take a vacation. I will be doing all that next week.

I have been reading Our Towns, by James and Deborah Fallows. James Fallows, a well-respected journalist, and his wife, document their travels to 29 cities over the past 4 years in their own private airplane, exploring how small communities and individuals have used ingenuity, resilience and self-sacrifice to re-develop these communities across the US.

Our Towns illustrates how these cities and towns have worked to reinvent theirdowntowns, overcome industrial decay and reinvigorated their communities.  It is also a great travelogue of communities in the US, many which would be great to visit.

This is a positive book. It does not include visits to towns which do not have success stories. So journalistically, it may not be wholly accurate or balanced. But balance was not their intention. The book provides examples of how civic and business leaders, educators, developers, and others can work together to make a difference and improve their regions.

In an Atlantic Magazine article, James Fallows wrote about Our Towns, he explained the process he and his wife used in their travels and encourages others to visit new places with their spirit of curiosity. “I suggest the following test…: Through the next year, go to half a dozen places that are new to you, and that are not usually covered by the press. When you get there, don’t ask people about national politics…if it’s on cable news, don’t ask about it. Instead, ask about what is happening right now in these places. The schools, the businesses, the downtowns, the kind of people moving out and the kind moving in, and how all of this compares with the situation 10 years ago. See where that leads you…..”

There are great examples and vivid stories in this book. It made me want to visit many of the towns and geographic areas they colorfully describe. Our Towns makes me want to re-visit Holland, Michigan, which I have been to several times. I was not aware that the city has 5 linear miles of sidewalks that are heated to melt snow in the winter. This was partially paid for by one industrialist and matched by the city.

While I may never visit Caddo Lake, Texas, which borders Texas and Louisiana, their description of the efforts made to save and rejuvenate the lake and surrounding area certainly makes a trip sound worthwhile.

This is not an investment book. But the narrative of Our Towns represents similarities to our philosophy of investing, as the towns featured are patient and focused on the long term. The community leaders and others profiled did not always listen to conventional wisdom, as they were focused on their goals and were resilient in their efforts.

One of the most interesting sections was how the Fallows’ noticed that each community has a way of asking “the Question.” This is the Question that gets asked when you meet new people, after you ask, “How are you?” or some version of this. The interesting part is the second question, the conversation opener, which they realized is very different for each region. In Greenville, SC, the question is “Where do you go to church?” In Chicago or Boston the question would be “What’s your parish?” In St. Louis, it’s “Where did you go to high school?” In the Detroit area, though not in the book, this would be the same question, especially in my parent’s generation. In some major cities, the Question would be “Where do you live?” or “What do you do?” as a status identifier.

This is not a political book.  Our Towns is about the “big plans” local leaders have strived to achieve and have accomplished, by working together as a community.

Our Towns describes the stories, challenges, manufacturing efforts and what makes each community go. They profile who helped to re-invigorate a city, how and why. Our Townsis a story of hope, of what can happen when communities work together, when leaders, business people, educators and others focus on renewal, resilience, take risks and make sacrifices for the communal good.

Before the 4th of July last year, I featured a very moving and wonderful book by historian and author David McCullough, The American Spirit, Who We Are and What We Stand For. McCullough selected 15 speeches from the hundreds he has given in all 50 states over the past 25 years for this collection. I would still highly recommend this book, if you have not read it.

We hope that you and your family have a safe and happy 4th of July holiday. We hope that you maintain a positive attitude about your community and our country!

The Power of Investing In……

I am writing this on my way back from a meaningful and extremely worthwhile BAM Alliance learning group session.

It was thought provoking. It was memorable.

It has the potential to be transformative.

I made new connections and relationships. I strengthened and renewed others.

It is the power of investing in moments.

U.S.S Yorktown, Charleston, South Carolina

My three days in Charleston were successful because of the talented staff at BAM, our back office firm, who invested significant time and energy to create moments and experiences.  Additionally, I was intentional to take the time to plan for the session in advance.

One of the valuable additions to this meeting were two, 30 minute book review sessions. One of the books was The Power of Moments, by Chip and Dan Heath, which I highly recommend.

As financial advisors, we focus on investing, viewed financially. This book advocates investing time to plan and create more memorable and elevated experiences in all aspects of your life. 

The authors of this very readable book feel that “life and work are full of moments that are ripe for investment.” They cover many aspects of life and settings, such as schools and education, families, businesses and organizations.

The Heath brothers feel “we must learn to think in moments, to spot the occasions that are worthy of investment….The “occasionally remarkable” moments shouldn’t be left to chance! They should be planned for, invested in. They are peaks that should be built. And if we fail to do that, look at what we’re left with: mostly forgettable.” (Emphasis added)

Invest time in advance to plan peak moments and be intentional and creative about it. Make an effort to elevate the experience. For certain life moments and experiences like a trip, invest time to end the experiences with peak moments.

The authors write “when people assess an experience, they tend to forget or ignore its length-a phenomenon called “duration neglect.” Instead, they seem to rate the experience based on two key moments: (1) the best or worst moment, known as the “peak”; and (2) the ending.” This is called the “peak-end rule.” It is not the length of the vacation or experience which counts, it is about the peak moment during the experience and what happens at the end of the experience that creates the memory impact.

This is particularly true with vacations, as we remember the peak moments of a trip and the ending. I can attest to this from my vacation to Florida in March. It was good, but not the best. My memory of this Florida vacation was negatively impacted because during the last two days it rained and my wife was sick. We had a bad ending, in the authors’ terms.

These were things beyond our control. However, I assume that if the rain and Felicia getting sick had occurred at the beginning of the trip, rather than at the end of our vacation, I’m pretty sure the authors would be correct and I would have a more favorable memory of this trip.

I accomplished a number of objectives during these few days at the BAM Masters Forum event because I was intentional. I wrote out goals before arriving, people I wanted to connect with and talk to about certain matters. Other discussions occurred spontaneously and without any prior planning.

For this 12th annual gathering of fellow advisors from across the country and a number of BAM staff members and executives, BAM requested that we bring “wedding attire” for one dinner, so I brought a sport coat and nice slacks, rather than the normal resort attire. They asked us to participate in a southern bow tie competition, so I borrowed a bow tie and wore one for the first time. It made the evening quite fun and special. It elevated the evening. We took group pictures and admired the diverse collection of bow ties. The early planning resulted in a more memorable evening for all.

My learning group session ended with another memorable dinner on Tuesday night. My flight home was Wednesday at 2 pm.

Wednesday morning, I could have slept in, packed and gone to the airport. I did things differently, with great results.

Wednesday at 9 am I toured the World War II aircraft carrier U.S.S. Yorktown, originally commissioned in 1942 that was docked near my hotel. This was incredible experience. As I walked up and down the ship’s steep stairs, it’s 6 levels and the enormous flight deck filled with planes of different decades, I was filled with gratitude and appreciation for those who served on these ships, flew the planes that took off and landed, those who lost their lives on missions and the hard work and ability of those who designed and built these behemoths.

After visiting the ship, instead of eating hotel food for lunch, I took an Uber into downtown Charleston for some great southern fried chicken at Leon’s Fine Poultry and Oyster Shop (well worth it!!). Even though I was rushed to arrive at the airport, the last minute stress will not be my memory a year from now. My positive memory of the end of this trip will be of the incredible aircraft carrier and the delicious fried chicken. 

I read most of The Power of Moments. There are many more valuable insights to be gained from this book than just the few I highlighted. I plan to apply some of these concepts within our firm and in my life. This will take effort, as the authors note, but it would be well worth the investment and time to implement some of these concepts and ideas.

Who should read this book: Almost everyone. Those who want to have a more impactful and enriching life, or help others to have one. Certainly parents, business and non-profit leaders, teachers, coaches and medical professionals.

A 4th of July Book Recommendation

The long 4th of July holiday weekend is upon us.

A time to be with family, attend a parade, have a barbecue and see fireworks. Maybe take a vacation.

It is a time to reflect on our great country, which started over 240 years ago.

It is also a great weekend to read a very moving and wonderful new book by historian and author David McCullough, The American Spirit, Who We Are and What We Stand For.  McCullough selected 15 speeches from the hundreds he has given in all 50 states over the past 25 years for this collection. 

From the sample of speeches I have read, I very highly recommend this optimistic book.

The 171 page book is a treasure of history. It is positive. It is inspiring. It is educational. I have learned something interesting on almost every page.

McCullough, one of the most honored American historians in the US, winner of two Pulitzer Prizes, two National Book awards and the Presidential Medal of Honor, reminds us of fundamental American principles and brings to vivid life people and places in American history.

His speeches are clear and succinct. He paints vivid pictures with words as few others I have read.

In these days of seemingly endless negativity, the first speech in his book addresses the incredible accomplishments of Congress over the decades….ending slavery, building railroads, ending child labor, creation of Social Security, the Voting Rights Act. McCullough adds perspective.

“We need to know more about Congress. We need to know about Congress because we need to know more about leadership. About human nature. We may also pick up some ideas.”

McCullough also challenges us as a country in his speeches to face some of the many problems which exist. Inner cities, poverty, violent crime and others. He advocates the core of many of the solutions to these issues “should be history, for the specific and realistic reason that all problems have histories and the wisest route to a successful solution to nearly any problem begins with understanding its history. Indeed, almost any attempt to solve a problem without an understanding of its history is to court failure…”

He stresses learning, history and education. Not just when you are young. Throughout your entire life.

In a 2008 speech at Boston College titled “The Love of Learning,” he says: “information is useful. Information is often highly interesting. Information has value, sometimes great value. The right bits of information at the opportune moment can be worth a fortune. Information can save time and effort. Information can save your life. The value of information, facts, figures, and the like, depends on what we make of it – on judgement.

He later goes on to explain that information and learning are acquired from great books, understanding the proper perspective, ardor and “attended with diligence.” He tells a great example of learning by surprise, on pages 143-45, of how one person’s trip to Europe planted a seed which would change the US’ spread of slavery.

The book provides a context to some of our values as a financial advisory firm. We rely on learning, reading and good judgement. We are continual learners. We base many of our decisions and advice by understanding the history of financial markets, as history can be more valuable than predictions and guesses about the future.

I hope you take the time this 4th of July weekend to learn more about our country’s history. Be positive and read this outstanding book. Buy a copy for a friend, child or grandchild.  Read.  Value our history.

Brad’s 2016 Book Recommendations

One of the passions that I bring to my role as a financial advisor is being a continuous learner. I read extensively, particularly non-fiction. I’ve read most of the books below during the past year.

I strongly encourage reading Good for the Money: My Fight to Pay Back America,by Bob Benmosche. This book surprised me. I thought I knew the AIG story. I knew why they failed, but this powerful book tells how the CEO of AIG (after the government bailout) battled many forces to enable AIG to pay back the US government all its money and billions more. Memorable and more than a business book. There is way more to the AIG comeback than you probably good-for-the-moneyknow. 

The Moral Case for Fossil Fuels, by Alex Epstein, should be read to understand the impact which fossil fuels play in our lives. A must read to understand our world, whether you agree or disagree with the author.

Michael Lewis’ latest book, The Undoing Project, tells the story of two psychologists who have greatly impacted psychology and behavioral economics. I’m not finished with this book yet, but it’s fascinating and very readable. It is much more than economics and decision making and filled with treasures of information.

As Lewis is also the author of Moneyball and other books, it is clear why his book is much more readable than Misbehaving, by Nobel economist Richard Thaler, which I started and have not finished. The latter is good, but a much more challenging book.

Essentialism, by Greg McKeown, shows you how to live by “less but better.” One of my favorite books of the past few years. Great concepts. essentialism

Deep Work, by Cal Newport, explores being more productive by really focusing. While relevant to many, I encourage you to recommend this to college age students or others who are addicted to our culture of short attention spans and multi-tasking.

An ongoing theme of our firm is that we are rationally optimistic, especially in the long term. Part of this philosophy comes from The Rational Optimist, by Matt Ridley, a dense and not always easy read, but an excellent analysis of progress throughout civilization. I have recently started Progress by Johan Norberg, which appears to be a more readable account of progress in 9 categories, such as poverty and the environment.

If you are interested in personal change in any aspect of your life, Triggers, by Marshall Goldsmith, or Get Momentum, by Jason and Jodi Womack** are both excellent. If you want to live better with a positive attitude about your success, I really enjoyed Million Dollar Maverick, by Alan Weiss. Despite the title, this is not about money.

One of the biggest influences of all the books and my learning over recent years has been the 4 book series by Ari Weinzweig, co-Founder of Zingerman’s Community of Businesses. I have started his just released fourth book, The Powers of Beliefs in Business. His books are long, dense and very worthwhile. I highly recommend all four of the books. They do not have to be read in order. (Available only from or their locations).

I began the year by reading Reagan, by H.W. Brands. It is a very readable and seemingly balanced history of his life and Presidency. I did not finish it, but only because wonderI kept buying other books. This is an example of learning from history, which is important, and the perspective which time, research and an excellent author can provide.

For children and young adults, I recommend Wonder and 365 Days of Wonder, by R. J. Palacio. The former is a wonderful novel and the latter is a daily book of sayings based on the original book. Both are outstanding.

To learn more about social media, technology trends, business and life perspectives, I really enjoyed #AskGaryVee, by Gary Vaynerchuk.

My biggest book purchase of the year weighed in at 17 pounds. What Does it Sound Like When You Change Your Mind is 800 pages of compiled blog posts by Seth Godin, whose daily blog posts are required reading for me every day of the year. This book will likely be in the office, so take a look when you are here next!


With our best wishes for a happy holiday season, filled with good times with your friends and family (and maybe a good book or two!).



**Jason Womack is my executive coach and we have a long-time personal relationship.





Year End Review Q and A (and much more)

What were some of the biggest surprises or events of 2015?

  • The huge decline in oil and commodity prices.
    • The greater than 40% decline in oil and gasoline prices since January 1, 2015 shows how difficult it is to make financial predictions. I doubt anyone would have accurately predicted these price levels a year ago, let alone a few years ago.
  • The sharp decline of the stock market worldwide in late August, and then the subsequent recovery which recouped those losses by early November.
    • This re-iterates our strong belief in not trying to time the market and to remain fully invested in the stock allocation that is appropriate for you.
 Are there other implications or lessons to be learned from the huge drop in oil and gas prices?

Technological innovation is a major cause for the drop in oil prices, and thus gas prices. These innovations, which were not envisioned 10 years ago, have enabled oil to be found and produced at far lower costs and in more places. The drop in oil prices and the continued technological improvements throughout the energy sector is globally transformative and will generally have huge long term positive implications.

What do you think of the Federal Reserve action this week to increase short term interest rates?

As we discussed in our blog post 2 weeks ago, Interest rate liftoff and the impact on you, we view the Federal Reserve action to begin increasing short term interest rates as positive, as it reflects strength in the US economy.

We expect short term interest rates to increase very gradually over the next few years. As traders try to guess the timing of these Fed moves, this will likely cause short term volatility in the stock and bond markets. Remember, volatility is temporary and comes with investing in the stock market. It is not always enjoyable to live through, but just as this summer’s volatility came and went…so will future volatile periods.

What should investors be focusing on now?

Investors should remain focused on their long term goals, not on short term stock market returns or performance. You should view your portfolio performance over many years, not months. You should review if your strategy is working well, when actually tracked over 3-5 years, or longer, against appropriate benchmarks.

So how are the funds that you recommend performing?

The mutual funds we recommend are performing very well, as compared to their respective category benchmarks (for example, how does a US large value fund compare against other US large value funds?). In nearly every asset class, they are in the top quartile over the past 3, 5 and 10 years. Most of the funds are outperforming their category averages by a distinct amount annually, over the past 3-10 years.

What are some key trends or observations that you feel are important for the future?

  •  Investors should continue to focus on what they control. By this we mean their portfolio should be broadly diversified, they should utilize low cost investments and be mindful of tax minimization of their portfolio holdings.
  • Too many people focus on trying to pick the right stocks or “best” active mutual fund managers. This has been proven not to be a winning strategy, especially if you actually quantify your results and costs.
  • Others hold onto stocks which may have been good blue chip stocks many years ago, but have vastly underperformed the markets in the past 5-10 year ago. This is especially a key issue with people who have gone through life transitions and inherited stocks from parents or spouses, and are reluctant to make changes to these holdings.
  • With the rapid changes in technology and innovation, we feel our globally diversified strategy is even more important than in the past. For example, while we cannot identify which technology stock will be very successful over the long term (and don’t think others can consistently predict this in advance either), we will benefit from holding these stocks within our diversified portfolios.
  • As people are living longer, planning should emphasize your future cash flow needs, not just your portfolio balance.

What about bonds?

Investors should avoid “high yield” or “junk” bonds. We do not recommend these to our clients, as the increased risk is not worth the additional interest that you may receive. See the end of our blog post last week which discussed this topic, How do you define financial success?. If you own any of these types of bond mutual funds, please contact us to review your holdings.

Are you positive about the future?

Yes. Absolutely. One of the books that I have purchased, but not read yet is titled “The Rational Optomist.” That is how we would describe our feelings about the future. Our economy, government and the global society certainly have problems to address and overcome, but in the long run, society will continue to advance. Companies will continue to innovate and prosper. To invest successfully, you must remain positive about the long term and the ability for companies to progress and succeed.

What book has had the most impact on you in the past year?

The Moral Case for Fossil Fuels, by Matt Epstein. While I am only about halfway through this book, it is extremely thought provoking. I’m not sure that I agree with all of the author’s opinions, but he is challenging “conventional wisdom” with hard facts and concepts that I have not seen elsewhere.

Our objective is to provide you with the most successful investment and financial experience we can. We rely on academic data and continual learning, not crystal balls and unproven forecasts. We are not like a traditional “Merrill Lynch” stock broker.

Epstein’s provocative book has caused me to look at the energy issue with new perspective. In general, most people think we should have more alternative energy sources, beyond oil and coal. He vividly describes a scene in Gambia in 2006, where infants died because the hospital did not have reliable 24/7 electricity. He states that until alternative energy sources can be produced in tremendous mass, then stored or provided 24/7, people need to understand how integral fossil fuels are to the advancement of our society over the past 100 years.

Epstein defines his standard as the quality of human life. He states that fossil fuels have “enabled billions of people to live longer and more fulfilling lives” with very clear, distinct facts and examples.

For me, one of the key takeaways from this book is to challenge conventional wisdom and future forecasts when providing advice to our clients. We have to be prepared for the unexpected, and to help our clients cope in a world with many unknowns.

By relying on facts and data, continually learning and challenging ourselves with many opinions and sources, we will be better financial advisors. Our clients will be better because of that.

How and why do you write these blog posts?

Brad writes these blog posts each week. They are not outsourced or written by a non-member of our firm. Keith and Michelle review and edit them.

I write them to educate you, our clients, potential new clients or friends. I write them to help you better understand the financial world, our investment philosophy or to encourage or motivate you to take some action, to improve your life or your financial well-being.

Writing these essays helps me to be a better advisor. By writing almost every week throughout the past 18 months, I am forced to be much more aware of what is going on in the world and what may be relevant and important to communicate to you.

As we conclude 2015 and begin a new year, I hope that these weekly essays are as valuable to you as they are to me in writing them. I look forward to keeping you informed and help you cope with our constantly changing world, so you and your family can be more financially secure.

Note: This will be my last essay for 2015. I will not be writing an essay next Friday. I expect to send out the first blog post for 2016 on January 1. Have a happy holiday season and best wishes for a healthy and successful 2016.

How One Book Has Impacted So Many

What book has impacted you the most?

I read this question last week and I immediately knew my answer.

I have read hundreds of books, but only one influenced my career change and led to such a positive impact for my clients.

This book was the “tipping point” which enabled us to start this investment firm and provided the foundation of our investment principles.

This book was the beginning of business relationships which are the backbone for our firm, for research, technology and the use of Dimensional Fund Advisors (DFA) mutual funds.

This book changed my life and the lives of my clients and their families.

“The Only Guide to a Winning Investment Strategy You’ll Ever Need” was this instrumental book. Larry Swedroe, Director of Research for BAM Advisor Services, wrote this book in 1998. I read the book a year or two later, as I was exploring how to transition from a traditional CPA into the investment advisory business to better help my clients. Reading this book started me on the path of developing our core investment principles. It enabled us to provide an investment solution that would benefit our clients for the long term.

This book showed us how we could have an investment philosophy that would be effective, understandable, disciplined and hold up over time. This book provided a way to talk with our clients and prospects. Many of our clients come to us after experiences with other brokers or advisors. They appreciate the clarity of our investment approach and see that we invest with a consistent and rational philosophy. They recognize that we focus on what we can control and work to minimize their costs and taxes.

Swedroe’s book stresses that stock market corrections are normal and expected, during most years. Knowing this, you can benefit from the long term expected returns of a globally diversified stock portfolio. This knowledge provides you with the courage to remain committed to your stock investments and be confident about your future.

The book explains that you can’t effectively time the market or confidently pick stock winners to “beat the market” over a long term period. That research is just as valid today.

Swedroe refers to the “stomach acid test” as a way to see if you have the fortitude and discipline to stick with your stock allocation when the going gets rough. We talk to our clients about this, so they are able to remain in the market during volatile times. We make sure that you have an adequate foundation of cash or fixed income for many years of cash flow needs. This provides you with confidence and security.

Swedroe’s book gave me the courage, capability and confidence to commit to starting our investment advisory firm. Over a decade later, this foundation has contributed to the positive impact we have had on the lives of our clients and their families.

Don’t underestimate the power of a single book.

This is Big – and Full of Energy

We often refer to this motto: “Focus on things that matter and things you can control.”

Today, we want to focus on something different, something which matters a lot, but which we have no direct control over: the long term trend towards much cheaper oil and gas.

Sometimes you may not realize when a broad and important trend has begun or is occurring. Increased knowledge provides you with greater clarity, which results in more confidence about the future.

We want to emphasize the importance of the energy revolution which is occurring through the technological breakthroughs of fracking and horizontal drilling. This is likely one of the great societal changes of our time, similar to the changes which have come from the microprocessor.

Horizontal drilling and hydraulic fracturing (fracking) have increased U.S. crude oil production by 3.6 million barrels a DAY in less than four years. This has resulted in a crash in oil prices, even though oil demand has remained very strong, both in the U.S. and worldwide.**

Three years ago, the price of oil was around $88 per barrel. Last July, oil was $96 per barrel. Today, and through much of 2015, oil has traded at $60 or below, and is now around $52-53 per barrel.10 Year price of oil chart through 010615

We think the long term trend for oil prices is to remain near the $50-60 per barrel range, or go even lower.

There may be volatility and swings in either direction, as demand and supply adjust. As compared to oil prices of the past, the long term trend should be lower, not higher.

What has caused the huge oil price decline?

The technological advances in fracking and hydraulic drilling has resulted in the huge decline in oil prices. The operators have reported “they can produce more profitably today at a price of $65 a barrel than they could at $95 a barrel three years ago… Where can they be profitable three years hence – $40 a barrel? $30? The oil patch today is afire with the same technological imperative and competitive mission that has powered the U.S. electronics revolution – think Moore’s Law – to dash headlong down the learning curve, crushing costs and prices and making up for it in volume.” **

The U.S. and the world are no longer subject to the OPEC cartel controlling oil prices. The frackers are using “just-in-time” production. OPEC cannot simply withhold supply, as that would cause prices to increase. Frackers would quickly react by investing and increasing drilling and production of new and existing wells. Oil production is no longer dependent on multi-billion investments with many years of lead time. And as productivity and innovation increase, which they are quickly throughout the world, the cost of oil production will go lower.

Why is this important to you and your financial future?

This long term trend toward much lower oil prices has many significant benefits for each of us, as well as corporations and governments throughout the world. Some of the benefits are:

  • Costs will be greatly reduced. The cost of gasoline will be less. Transportation costs of materials and parts will be less, increasing corporate profits and reducing the rate of inflation.
  • Government spending will be less than if oil prices were higher. Just imagine how much gas and oil products the U.S. Government and military utilizes. The more they save, the less they spend (or borrow).
  • The lower the cost of oil, the lower the rate of inflation. If inflation is lower, than interest rates will remain low. The Federal Reserve has stated that one factor in keeping interest rates low is that inflation is below their 2% target rate.
  • Interest rates’ remaining low by historical standards helps to improve corporate profits, lowers the cost of borrowing, and encourages economic investments, all which are positive for world-wide stock markets.


Daniel Yergin is one of the world’s foremost energy experts. He is a Pulitzer Prize winning author of many books, including his 2011 book on energy, The Quest. In this book, written only four-five years ago, Yergin significantly underestimated how quickly fracking and horizontal drilling would have on the supply of energy. While I highly recommend this lengthy book, it is clear that technological change can occur faster than even a top expert can anticipate.The Quest book cover

Yergin concludes The Quest with these thoughts on energy and technological innovation:

“It…is the search for knowledge, which advances technology and promotes innovation… What has been accomplished since could not possibly have been imagined. The challenges of meeting rising energy needs in the decades ahead, of assuring that the resources are available on a sustainable basis to support a growing world, may seem daunting; and, indeed, when one considers the scale, they truly are… But what provides for reasoned confidence is the increasing availability of what may be the most important resource of all—human creativity.

A famous geologist once said, “Oil is found in the minds of men.” We can amend that to say that the energy solutions for the twenty-first century will be found in the minds of people around the world. And that resource base is growing. The globalization of demand may be shaping tomorrows needs. But it is accompanied by a globalization of innovation. The generation of knowledge and the application of science have increasingly become a worldwide endeavor; and the links and interactions, amplified by ever-widening information and communications systems, multiply the speed and impact of what can be accomplished. This means that the resource base of knowledge and creativity is expanding. This will fuel the insight and ingenuity that will find the new solutions…That is at the heart of the quest, it is as much about the human spirit as it is about technology, and that is why this is a quest that will never end.”***

So instead of worrying about the Greek debt problems, let’s focus on the positives of the technological advances our society has made. Then keep focused on your goals and personal financial plan.

P.S. If you want to see a great sketch by Carl Richards on the Greece issue and you, click here.


**The Shale Boom Shifts into Higher Gear, by Donald Luskin and Michael Warren, WSJ, May 31, 2015

***The Quest, by Daniel Yergin, 2011, The Penguin Press.