Investors have a short-term memory—they forget what losing money feels like. Do you remember how everyone was reaching for yield leading up to the real estate crash? I do. A lot of wealthy investors lost big time money trying to lock in a few measly points more than what the risk free treasury was (not) paying. Then the crash hit, and they not only didn’t get those extra points, they lost all of their principal. I’m talking big money. Then, like clockwork, came the Monday morning lawsuits. Investors cried that they should have been made more aware of the risks they were taking. Some … [Read more...]
Why Vanguard is too Big: Part VII: What Do You Have to Lose? A LOT
You wouldn’t believe the conversation I had yesterday with a prospective client. It’s as if he’s done everything we’ve recommended over the years and we were set to talk yesterday—after all of those years later—to see how it all turned out. I’m here to tell you, quite well, indeed. This gentleman is wealthy beyond his imagination and I bet, having not met him face to face yet, I wouldn’t be able to pick him out of a lineup. That’s the beauty of quiet wealth: You control how you move about the world with no pressure to live up to some silly image. Long ago, my new friend and his wife … [Read more...]
You Invest They Win, AGAIN
Let’s file this one under You Invest They Win shall we? Unprecedented monetary policy intervention by the Fed has done what all unprecedented interventions by the government do, create winners and losers. In this case, the winner is BlackRock. The Fed picked the firm to handle its corporate bond buying program. Of course, BlackRock's share of the corporate bond market grew, and the big got bigger. As one investment professional told the Wall Street Journal “The unprecedented actions taken by the Fed during Covid-19 just accelerated the trend where the biggest products get … [Read more...]
Are You Working with Sound Investment Counsel You Can Trust?
When it comes to your money, one question you must be able to answer is: Are you working with investment counsel you can trust? Are you working with a counselor who adheres to the fiduciary rule—someone who, by law, makes investment decisions that are best for you, not them? Are you working with someone who’s seen it all? Yes, stocks do crash. That at least puts you at the starting line. Next, you and your counsel need to develop trust. This comes in many ways. The idea is to get to a level where you can ask your counsel anything, knowing you’ll have an answer with the truth you deserve. … [Read more...]
Who Wants to Live the Island Life? You Do
Imagine sitting under a palm tree, toes in the sand, gazing across a turquoise sea with not a care in the world. Wouldn’t it be nice to feel like this most days of the week rather than only on vacation, especially in times like these? Now, I know it’s not exactly practical, even if you have a tropical island as the backdrop of your Zoom calls. But you’d be surprised at how much island life is right in front of your eyes. For example, when it comes to investing, my favored Prudent Man certainly stands alone as an island far away from your everyday stock traders: For years my father-in-law … [Read more...]
You Don’t Get To
You don’t get to choose a lot of things in life. In times like these, we're always thinking of loved ones. We look at the world today and wonder what it will be like for them when we’re gone. How will our children survive, when being a productive citizen is frowned upon? Believe me, your instinctual focus on your family is always correct—because they need your guidance. You just need to give it. Your children will always be your children. In my conversations with you, you’re telling me how worried you are about their futures. In many cases, you’re telling me how successful they are in … [Read more...]
The “Dumbest Thing” He Ever Did Cost him $1.5 Million
At The Wall Street Journal, Michael Wursthorn and Geoffrey Rogow tell the story of Swedish investor, Kristjan Kullamägi, who found out the hard way that shorting stock can be a dangerous endeavor. They write: “Lately, shorting has been a little more stressful,” said Kristjan Kullamägi, a 32-year-old trader who lives in Stockholm. “Some of these tech stocks have doubled and tripled.” Mr. Kullamägi, who has been trading full time for himself for nearly a decade, was keeping an eye on smaller, more-volatile stocks for a potential opening to short. He found one in late July in shares … [Read more...]
5 Lessons That Should Have Been Learned from the COVID Crash
S&P 500 nears a new record! It’s a shocking statement considering the economic environment. Unemployment is at 10%, personal income after backing out government assistance is still in the tank, entire industries are at risk of failing, and S&P 500 earnings are down about 30% from year-end 2019 levels. How are stock prices on the verge of hitting a new high? Look no further than the extraordinary actions of the Federal Reserve. That’s not meant to be a compliment. The Fed printed trillions in a matter of weeks and their actions to bail out everything--from money markets … [Read more...]
It Happens Suddenly
In the short-run, sentiment matters as much if not more than fundamentals. In the long run, it is fundamentals that win out. The push and pull between sentiment and fundamentals drives many investors to make emotionally charged decisions that sabotage portfolio performance. Stocks can climb higher slowly over a period of years and then crash suddenly, wiping out years of gains. Take the NYSE Composite Index as an example, because--let’s face it--the S&P is no longer representative of a broad portfolio of stocks. From year-end 2012 through February 12, 2020 (7+ years), the NYSE … [Read more...]
My 10 Point Investment Plan: Pretty Much the Same as Back in 1990
Back then I offered subscribers to my investment strategy report a ten-point investment guide for the long term. The basic plan is today, thirty years later, pretty much unchanged. Make capital preservation your number one target Make dividends the cornerstone of your core equity portfolio Never forget the power of compound interest Make equities, not bonds, your core holdings. When general market conditions are horrible, and most folks are selling, aggressively buy your dividend stocks Use automatic withdrawal programs for retirement income Don’t trade in and out … [Read more...]
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