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?””

The 3 Most Important Words in Financial Planning

September 05, 2013

According to this article, the three most important words when it comes to investing are the “margin of safety.” The article discusses how inaccurate people tend to be at making predictions about things like the economy, industry trends, and business growth. Since this unpredictability can wreak havoc on investment plans, many of the top investment experts recommend investing with a margin of safety, which is “simply the distance between your predictions coming true and needing those predictions to come true. You can still try to predict the future, but a margin of safety gives you room for error to be wrong.” In other words, rather than pick the investment that needs to grow at 10% per year to payoff, pick the one that could grow at 10% but would still be a good investment if it only grew at 5% with anything else being gravy on top. Continue reading “The 3 Most Important Words in Financial Planning”

Don’t Limit Yourself

August 23, 2013

From the time I was ~6 years old until very recently, I have been competing in one sport or another. If there is a winner and a loser involved in something, I’ll either try it or watch it. Over the last decade or so, I’ve become very fond of the sport of mixed martial arts (MMA). It’s a one-on-one sport combining boxing, wrestling, jiu-jitsu and other grappling styles. Because of the highly technical style of this sport, every single part of an athlete’s body needs to be operating at 100% capacity or defeat is nearly certain.  Continue reading “Don’t Limit Yourself”

Investment Options For the Soon-to-Be-Retired

August 21, 2013

As the early and late baby boomers get closer and closer to retirement (and in some cases are already there), we receive more and more inquiries about retirement planning, and in particular, distribution planning.  Just recently, I spoke with a gentleman who is within a few years of his retirement date, and he’s done a pretty good job of saving for retirement, but what he is most concerned with now is how to make sure he invests properly throughout retirement so that he generates the cash flow he is expecting to get from his nest egg. There are a number of investment options that may achieve the goal, and each one comes with its own pros and cons.  Here is a look at several different investment options that may be suitable for a retirement investment portfolio: Continue reading “Investment Options For the Soon-to-Be-Retired”

10 Common Financial Mistakes to Avoid

August 15, 2013

A friend of mine recently sent me this article about how in many competitive areas of life, it makes more sense to focus on preventing bad decisions rather than trying to make good ones. That’s because the advantages of making the good decisions can be largely cancelled out by other people making good decisions. In other words, it’s really hard to beat everyone else by making good decisions and relatively easy to avoid making the bad ones. This is what’s called a  “loser’s game.” Continue reading “10 Common Financial Mistakes to Avoid”

What is Risk?

August 08, 2013

For many people, reducing their risk is their top investment priority. Yet, in I’ve noticed that the word “risk” means very different things to different people. The standard definition in the financial world is the variance of returns. In other words, a risky investment is one in which the returns fluctuate a lot from year to year. But when most people use the word “risk,” I think they’re referring to the probability of their investment losing value. Continue reading “What is Risk?”

Small Changes Can Have Big Consequences

August 05, 2013

Many financial planners (this writer included) have resorted to the cup of coffee example at least once during their careers. It usually starts with a simple question such as “how much does a cup of coffee cost these days?” The answers depend on individual tastes and how many fancy iterations of a coffee or latte people can come up with (typically $3 to $5). Continue reading “Small Changes Can Have Big Consequences”

My Best and Worst Investments Ever

July 12, 2013

Some of the questions that come up a lot in conversations about personal finances deal with the subject of investing. What can I invest in now to make the most money over the next year? What should I invest in now?  What have been your best and worst investments ever?  While the questions about what to do today are not questions that I can answer, the best and worst investment decisions I’ve ever made are questions I could take in a lot of different directions. Continue reading “My Best and Worst Investments Ever”

Bubbles Come in All Shapes and Sizes

July 11, 2013

After reading my colleagues’ blog posts this week about their best and worst investment decisions ever, I’m glad that I was in college until 2000 and missed the dot com bubble of the late 90’s. As a college student, I didn’t have money to invest in the likes of pets.com even if I wanted to. Instead, I got to watch the rise and fall of the “New Economy” stocks from a distance. The only thing better than learning from your mistakes is learning from other people’s mistakes. Continue reading “Bubbles Come in All Shapes and Sizes”

The Good, the Bad, and the Ugly: The Best & Worst Investment Decisions I’ve Ever Made

July 10, 2013

With some of the recent stock market volatility, a common question seems to be emerging from the employees I speak to in workshops, webcasts, and consultations: where is the best place to invest these days? Believe it or not, even as a financial professional who has been in the industry for nearly 19 years, I still don’t know the answer to that question. The truth is, like many of you, I’ve had my share of good investment decisions and bad ones.  What I can tell you is that we learn from experience so allow me to share my experiences with you in the hope that you don’t repeat my bad decisions and perhaps follow in my good ones instead. Continue reading “The Good, the Bad, and the Ugly: The Best & Worst Investment Decisions I’ve Ever Made”

Following the Herd to My Worst Investment Ever

July 09, 2013

Back in early 1999, as Internet stocks were all the rage, I invested that year’s Roth IRA into the Putnam New Opportunities Fund, which had double digit returns for their 1 and 3 year historical performance. Now, I know past returns don’t indicate future performance,  and I also had that little voice in the back of my mind that was saying it was too good to be true, BUT the Putnam wholesaler had recently visited my office and was saying how hot the fund was, and as a broker myself, I was able to buy in at NAV, meaning I didn’t have to pay the front end sales charge. I couldn’t resist.  Continue reading “Following the Herd to My Worst Investment Ever”

My Best and Worst Investment Decisions Ever

July 08, 2013

If you are considering working with a financial advisor, you need to ask some important questions when deciding if a professional is qualified to help you reach your financial life goals. Last year, I was asked a simple but powerful question that appeared in an interview for a Forbes.com article.  It was actually a two part question that was framed as things that everyone should ask their financial advisor.   Continue reading “My Best and Worst Investment Decisions Ever”

Reasons to Stay Away From a Roth IRA

July 01, 2013

Roth IRAs are not a secret anymore since they first became available in 1998 as a way to use after-tax money to save for retirement. The biggest benefit is that as long as the Roth IRA account has been open for 5 years and withdrawals take place after age 59 ½, you never have to pay taxes on the earnings (contributions are always accessible without taxes). Tax-free earnings growth has a lot of appeal for younger generations and people not in their peak earning years who expect to be in a higher tax bracket during retirement. Continue reading “Reasons to Stay Away From a Roth IRA”

Is It Time For Your Mid-Year Financial Check Up?

June 24, 2013

Summertime is officially here and things around my house are just as hectic as ever.  With all of the upcoming events my kids have on the schedule like summer camps, swim lessons, dance lessons, soccer camps, reading lists, vacations, and staycations, we have to do a serious balancing act as parents.  (When I say “we,” I actually mean my wife, Heather, because I admit that she is the master organizer in our household.)  Continue reading “Is It Time For Your Mid-Year Financial Check Up?”

Financial Lessons From My Father

June 20, 2013

With my colleague Greg Ward’s post yesterday about teaching his children the value of a dollar and Father’s Day still in my recent memory, I reflected on what financial lessons my own father passed on to me. After all, he was a former stockbroker and is now a successful investor. Here are some that have stuck with me: Continue reading “Financial Lessons From My Father”

5 Ways to Save for Retirement With Some Surprising Benefits

June 13, 2013

When it comes to saving for retirement, most people know to contribute to their employer’s retirement plan (at least enough to max out their employer’s match) but there are also other ways of saving for retirement with some unique benefits that are not quite as well known. Here are 5 that you want to take advantage of if possible: Continue reading “5 Ways to Save for Retirement With Some Surprising Benefits”

Will Your Stock Be Gone in 18 Months?

May 31, 2013

I have always enjoyed reading about predictions. It happens a lot at the end of one year and the beginning of another. I usually print a few of them out, put them in a folder, forget about them for a long time and then look at them a year or so later as I’m printing out a new set. One of the articles from last year turned out to be relatively accurate. When I read this article, it took me back to last year’s article and the writers have a methodology that I’m sure will keep me reading their predictions each year. Continue reading “Will Your Stock Be Gone in 18 Months?”

Is the Stock Market Too High to Invest?

May 23, 2013

Usually when I talk about investment mistakes, I refer to what is known as the “greed, hope, and fear” cycle. This is the well-known tendency of investors to invest more aggressively when the stock market is doing well, hope it will come back when the market begins its inevitable downturn, and then eventually sell near the bottom out of sell fear. Investors are then typically reluctant to get back in until things “settle down,” which means when the market has gone up for an extended period of time and is possibly nearing another high point. This causes investors to buy high and sell low, the opposite of what you want to do.   Continue reading “Is the Stock Market Too High to Invest?”