I live in the White Mountains of New Hampshire. We live for ski season here. This week the ski season ended almost a month earlier than it usually does because of unseasonably warm weather over the last couple weeks. This is on top of the season starting a couple of weeks late. People are pretty bummed here for that reason. But the reality was, other than the shortness of the season, it was good. We got in a lot of skiing this year. My son made major strides in his ability. My wife and I skied many, many days. It’s just that our expectations were not met so it seems bad because last season was a very long season. The big picture is that some seasons are like this, short and sweet. Some are even worse. We are basing our expectations on last season, which was above average in length.
Same about expectations on investing for retirement. Continue reading
The financial planning community thinks you should have a significant piece of your retirement savings in bonds. How much? Well, the industry has come up with a handy “rule of thumb.” Subtract your age from 100 and put the resulting percentage in stocks; the rest in bonds. In other words, if you’re 40 years old, put 60% of your assets in stocks; 40% in bonds. And to make sure you can do this most 401Ks have a bond mutual fund offering. And most “experts” suggest rebalancing every year.
Now compare that advice to this out of Warren Buffett’s letter to shareholders that came out last week.
Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as “safe.” In truth they are among the most dangerous of assets. Their beta may be zero, but their risk is huge. Over the past century these instruments have destroyed the purchasing power of investors in many countries, even as the holders continued to receive timely payments of interest and principal. This ugly result, moreover, will forever recur. Continue reading
Ever been treated like this?
I am working with a client who sent me an e-mail from another agent who he was working with originally. Before he received this e-mail he was still undecided as to who to work with. The funny thing is he simply asked some questions, good questions, and stated he had talked to another agent.
Here is the first paragraph [with all identifying sections taken out].
“With all due respect, I don’t have the time nor the inclination to attempt to justify our strategies with you if you are going to turn this into a “beauty contest” with other agents or products. I’ve been there, done that and it is a complete waste of time. Our strategies are not up for debate at this point. We could use any insurance company we wanted to but with our experience, we know what is best for the client and that is our one true aim.” Continue reading
There are many unnoted costs in our lives. One of the biggest is procrastination. In personal finance you see it often. You most often see it in making a decision about change. Change can be very hard for people because often it means that you made a bad decision earlier. Once momentum has been built doing one thing, it is very difficult to stop and go in a different direction. Often I lay out the future for folks with their 401K investments and demonstrate the issues they will have. They get that the mutual funds returns and the taxes paid are not going to be to their advantage as they go forward, but can’t seem to stop doing it! Maybe it is too convenient for them, maybe it is easier to not think about the future, or maybe it is too scary to go off the beaten path? The bottom line is hesitation and procrastination.
Then there are some people who are doing nothing currently and want to start to save for retirement. But, how do they get over their fear of making a mistake? The fear paralyzes them to the point of just not doing anything year after year. Continue reading
I admit it. I look at the stock market most days its open.
And even though I really don’t have to worry about its short-term movements, I get this little tinge, an emotional feeling, when it is moving one way or another. Now today I took a look and the S & P 500 is up 3.4%. 3.4%?????? I mean, really, what is so different about today that the outlook for profits for the 500 largest companies is worth 3.4% more? I was talking to a client in September and he thought, back then, when the market was lower than it is now by about 50 points, that it was going to go down 20-40%. He was very sure of it. Now it might in the future….I have no clue in the short term…..but this just points out how non-rational the market is. Continue reading