In 2012 variable annuity cases were the only class of security where arbitration cases increased. Recently, Diany Nygaard, a Kansas City, MO based lawyer said she has been “besieged” by investors claims, as reported in The WSJ. “[Brokers] will stand up in front of a room and sell what they tell people are tax free, high income, you-can’t-lose-your-money investments…That’s the shtick.” Investors in variable annuities are at the mercy of the issuing insurance company. Take a look at the chart below. It’s an ETF of insurance companies. It gives you a snapshot of how they performed when times … [Read more...]
Your Personal Financial Security Part II
Every Christmas we give our kids their age in cash—a tradition that began with Becky’s parents—making it fun to get older. Hard cold cash is often forgotten when credit cards, gift cards or your iphone complete transactions. But what happens when the lights go out? You still have basic needs, like caffeine. That’s why carrying some cash and storing some cash makes sense to me. It’s a lot easier letting the cashier keep the change for that cup-of-Joe or 5 lbs. of ice than explaining why he should trust you to pay him next Tuesday. "I'll gladly pay you on Tuesday..." … [Read more...]
A Guaranteed Investment
You know there aren't many guaranteed investments out there today. But If you are a participant in a defined contribution plan, such as a 401(k), you may have access to one of my favorites. It's called the company match. The company match is when your employer matches your contribution up to a certain percent. For example, if the company match is 5% and you contribute 5% of your salary, you have a total contribution or savings of 10%. If you save 2% the company matches 2% and your total contribution is only 4%. As you can see you want to meet that company match each and every year. It's hard … [Read more...]
Your Personal Financial Security Part I
Your personal financial security may not be as strong as it should be. You may be more vulnerable than you think. I called a client yesterday to review his portfolio and his wife quickly said he’d have to call me back because the police were at the house. He was filing a report because his debit card had been compromised. It turns out that over the weekend a waiter had held the card longer than normal (obvious after the fact) and had used the card numbers to make purchases online. Thankfully their bank was able to notify them and quickly canceled the card. I’m sure many of you have been in a … [Read more...]
Quantum Dawn 2
Over the Summer some Wall Street banks ran a crisis scenario in which "bank executives in charge of operations, technology and crisis planning were tasked with detecting how a massive cyber attack was unfolding in the markets - but each one only got to see a tiny red flag waving in a sea of information," Reuters reports. For years we've been recommending Fidelity Investments as a custodian for investor money. For my money no financial institution does technology better than Fidelity Investments. And that would include preparations against cyber attacks. If you don't already have an account … [Read more...]
“Don’t Fight the Fed.” All the Time?
Don't fight the Fed is the mantra of many investors today, but don't fight the Fed is a dangerous strategy late in an economic cycle. In January of 2001 the Fed started reducing rates to head off recession. If you had started buying then based on the Fed’s loose policy, you watched the value of your portfolio collapse by 40% over the course of 21 months before the market finally turned in your favor. The same thing happened in September of 2007 when the Fed decided to cut. If you happily took the signal of the Fed’s cut to indicate a time to buy, you would have been buying through 50% … [Read more...]
How Vanguard Wellesley Won the War
You want to keep this chart on your refrigerator because there's been a lot of talk in the press lately about 2008. Looking back five years later is always easier than living through it. What the press fails to explain is the emotional and financial toll 2008 leveled on so many retirees. There's a breaking point for every investor. For those (there's more than you think) that had too much in the stock market that point was clearly met five years ago this month. Too many sold at or near the bottom and have never fully recovered. I have a feeling those that got out are now back at it again, … [Read more...]
High Yield Risk
I was listing to WEEI sports radio last week when I heard an advertisement pushing structured settlement investments. The juicy 5%-7% yields are hard to ignore in this low interest rate environment as is the annoying sales pitch. But you want to stay away from this toxic waste. There's a reason they sound too good to be true. This article from 2010 helps sum it up for you. What are the potential dangers in buying your very own high-yielding hunk of a lawsuit? High yields, but unsuitable for most investors. First is the lack of liquidity. Imagine you expect to hold one of these annuities … [Read more...]
Make the Best Use of Tax Deferred Accounts
A recent article in Financial Planning noted that investors can generate 20 to 50 basis points each year in return by properly allocating assets among their taxable and tax deferred accounts. Many investors make the mistake of owning assets not subject to taxes in their tax deferred portfolios. Within tax-deferred accounts, the best fit are investments that generate income subject to the ordinary tax rate, which can be as high as 39.6%. Fran Kinniry, a principal with Vanguard's Investment Strategy Group, argues that tax-deferred accounts are "extremely valuable shelf space," and should be … [Read more...]
Bezos vs. Buffet: Billionaires’ Different Take on Media
With the sale of The Washington Post, Warren Buffet has unloaded a large stake in a drowning media company. Taking it off his hands is another billionaire, Jeff Bezos. Buffet’s Berkshire Hathaway has been the largest holder of Post Co. shares since the 1970s and will receive $53.5 million of the $250 million buyout price for its stake. One might assume losing Warren Buffet, who runs one of America’s most profitable companies, as a major shareholder would be a burden on The Washington Post, but that’s simply not the case. With Bezos coming onboard, WaPo is getting a manager who is an expert … [Read more...]
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