What A Lost Cell Phone Can Teach Us About Investing

February 25, 2015

Earlier this year, my boss shared with us her story of how she dropped her phone behind her bed. Her first thought since the bed was basically against the wall was to move the bed…in her words “bad idea.” After some time (and a little pain medicine), she took a second approach: use a hanger from the side to pull it out….again, “No dice.” (She thinks she actually made it worse by pushing it further out of reach.) Continue reading “What A Lost Cell Phone Can Teach Us About Investing”

The Gym Rat’s Guide to Investment Terms

February 12, 2015

Investing and the financial world in general can be pretty confusing. There are a lot of terms you may not know and concepts you may not be familiar with. It can even start sounding like another language! Continue reading “The Gym Rat’s Guide to Investment Terms”

Should You Buy Life Insurance as an Investment?

January 08, 2015

Should you purchase a whole or universal life insurance policy as an investment? We recently received several questions on our Facebook page on this topic so there seems to be a lot of confusion about it. On the one hand, many agents over-sell these policies as a way to earn big commissions. On the other, they can make sense for certain people. Let’s take a look at some guidelines to use to see if it makes sense for you: Continue reading “Should You Buy Life Insurance as an Investment?”

What’s Your Real Risk Tolerance?

October 23, 2014

With panic sweeping the stock market, it’s time to check your risk tolerance score. (You did take a risk tolerance quiz like this before investing your money, right?) The whole purpose of determining your risk tolerance is to use it as a guideline to create a mix of investments that you can “tolerate”…in other words, that you won’t bail out of during times like these. After all, if you do bail out and fail to get back in the market in time (and if you figure out a way to time the bottom, please let me know), you’ll miss the eventual recovery and turn a temporary loss into a permanent one. Continue reading “What’s Your Real Risk Tolerance?”

How to Invest: A Tale of Two Investment Theories

August 06, 2014

My first exposure to investment theories was during an economics class I took in college. I was always sort of a geek when it came to graphs and numbers—which I guess explains my degree in statistics—so I was captivated when the professor drew an example of the efficient frontier on the chalk board. It made perfect sense to me. Continue reading “How to Invest: A Tale of Two Investment Theories”

What Baseball Can Teach Us About Investing

July 09, 2014

This weekend, I watched my nephew play in a baseball tournament.  They played very well in their first game, outscoring their opponent by more than ten runs.  They played well in their second game too but an unfortunate mix up in fielding assignments when there were two outs cost them two runs late in the game that proved to be the difference. It was a hard loss and for the next few days, all I could think about was that one play. If only they had made that play they would have gotten out of the inning with the lead and quite possibly won the game. Continue reading “What Baseball Can Teach Us About Investing”

Can You Beat the Market…With Index Funds?

June 19, 2014

Last week, I wrote about different types of index funds and how some “index funds” aren’t as diversified or as low cost as they may seem. However, there’s also a case for certain types of diversified index funds that are designed to outperform traditional index funds. They come in two flavors: equal weight and fundamental index funds. Continue reading “Can You Beat the Market…With Index Funds?”

Stock Investing Made Easy

May 08, 2014

Last week, I wrote about some of the benefits of investing directly in individual stocks. However, it can be challenging to decide which stocks to invest in. Here are some tools that can help simplify that process.      Continue reading “Stock Investing Made Easy”

Time to Dump Your Mutual Funds?

May 01, 2014

No, I’m not talking about “sell in May and go away.” If you invest in stocks, you probably do so through mutual funds. After all, they’re available in your employer’s retirement plan and you get a degree of instant diversification even if you don’t have much to invest. But here are some reasons you might want to consider investing directly in individual stocks: Continue reading “Time to Dump Your Mutual Funds?”

Should You Go For The Gold?

February 27, 2014

With the 2014 Winter Olympics in Sochi now over, the United States ended up winning 9 gold medals, 6 silver and 11 bronze medals. It’s truly amazing to watch the athletes ski, slide, glide and flip their way to Olympic history. There was a previous post about how athletes are taxed on the prize money awarded with their medals and as I watched the games, I thought about how gold and other precious metals can help an investor reach their financial goals.

Two extremes

There are two extremes on the precious metals spectrum. There are some who believe that investing in gold is a money losing proposition because it doesn’t pay dividends and it costs money to store. In fact, Warren Buffet said, “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

On the other end are those who believe that the US dollar is quickly losing purchasing power and gold is the true currency. There’s a growing concern that rampant inflation and debt will make the dollar worthless. While I know people who believe that inflation will soon jump to double digits and we’ll burn dollars for fuel, I question their reason for gathering gold or silver. If we suffer such devastating economic collapse, I don’t believe the main currency will be gold or silver but gasoline, food, clean water, and antibiotics.

The place for gold in our portfolios

The place for gold in our financial portfolios is somewhere in the middle of the spectrum. Gold is part of a larger asset class called commodities. Its price tends to be uncorrelated to the stock market, so having some gold can lower the overall risk of a portfolio. A recent study by economists reported that from 1836 to 2011, gold earned an average annual inflation-adjusted return of 1.1 percent. By contrast, they estimated long-term returns to be 1.0 percent for Treasury bills, 2.9 percent for long-term bonds and 7.4 percent for stocks.

So how much gold should you have in your portfolio? It depends on your risk tolerance and overall goals but many economists suggest that gold or silver comprise no more than 2% of your overall investment portfolio. Of course, the recent Olympic medalists aren’t thinking about what the economists are saying. Their medals ARE the dividends of all their hard work and dedication. Congratulations to all the athletes!

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Could Asset Location Make Your Investments More Tax Efficient?

September 20, 2013

What happens when you get a group together that consists of financial planners, CPAs, estate planning attorneys and investment managers? Usually when that happens for me, it means that a bunch of my friends are getting together to go watch one of our friend’s bands play or we’re playing poker. And, it also means that the topic is eventually going to become a financial one and inevitably there will be people on opposite sides of an issue so debate is a certainty.  The great thing about the debate is no matter what side you’re on, you learn something you didn’t know before the debate. One of our recent debates was about asset location.  Continue reading “Could Asset Location Make Your Investments More Tax Efficient?”

How to Invest for Income When Rates Are Rising

September 19, 2013

One of the biggest challenges facing current and future retirees is shifting from investing for growth to investing for income. This is especially difficult in today’s environment of low and possibly rising interest rates. Let’s start by taking a look at some options for getting investment income in retirement: Continue reading “How to Invest for Income When Rates Are Rising”

Should You Invest in a “Motif?”

September 12, 2013

A friend of mine recently asked me what I thought of a site called Motif Investing. The idea of the site is that it allows you to buy a basket of up to 30 stocks or ETFs based on an idea or “motif.” Some popular examples are stocks benefiting from things like the rise of 3D printing or biotechnology, stocks  that have recently suffered a sharp decline, or stocks with good dividend payouts. The weighting of each motif can be customized and individual stocks or ETFs can even be removed. It costs $9.95 to purchase, sell, or re-balance each motif. So is this a good way to invest in stocks? Let’s take a look at the pros and cons: Continue reading “Should You Invest in a “Motif?””

Have You Outgrown Your Mutual Funds?

September 27, 2012

When it comes to investing, many of us stick to mutual funds. After all, they’re generally the only option in employer retirement plans (except perhaps for company stock) and financial advisers like to sell funds because they’re relatively easy for them to manage. They also make a lot of sense when you’re just starting out with investing and don’t have enough to purchase in individual securities. However, as your portfolio grows, you may want to consider purchasing individual securities, especially if your portfolio is taxable. Here are some reasons why: Continue reading “Have You Outgrown Your Mutual Funds?”

All in the Family: Intra-Family Loans

September 26, 2012

The current low level of interest rates can be either a bane or a boon, depending on your perspective. If you are in the market to borrow for a major financial purchase or investment and have decent credit, the situation is looking mighty good. New car loans are running between 3 and 4 percent, mortgages are now as low as less than 3%, and some federal student loans have again been pegged by Congress at 3.4 percent. Continue reading “All in the Family: Intra-Family Loans”

A “Must Do” If You Hold Company Stock in Your 401(k)

April 30, 2012

The bottom line is employees must love the companies they work for.  It’s not that they wear the company t-shirt and logo hats and drink out of their insulated mugs. That isn’t how I can tell.  It’s in their portfolios.  When they ask me to review their portfolios, the employees who hold company stock tend to go overboard.  I’ve seen 401(k)s with 90% in company stock and many have well over 20%.  When we talk about the risks of having more than 10% of assets in one stock, they smile politely and say, “I know.”  But many don’t do anything about it.  Continue reading “A “Must Do” If You Hold Company Stock in Your 401(k)”

When Enough is Enough

March 07, 2012

After my stepfather passed away, my mom started working with a local bank to manage her investments.  At the time, I was living in California and it was difficult for me to help her with investment decisions.  Plus, I had always warned my clients that allowing family members to get involved in your investments was a bad idea because you could always fire a stranger but you can never fire a member of the family.  It was with this in mind that I allowed her to continue this relationship despite my occupation as a financial planner. Continue reading “When Enough is Enough”