Everybody Needs Some

Get Investing Right and Save Your Future

Wed, 8 Apr 2009 17:08:39 -0400

Just a few days ago I opened a new web site, MoneyLifeBoat.com

MoneyLifeBoat™ is a project that has been rattling around in my head for years. I have always wanted to see a multi-media website devoted entirely to real investing (the kind of investing that works long-term and doesn't make salespeople richer and you broker). I keep looking for one, but it's just not there.

Sure, there are plenty of good investing and money management sites, but they don't focus on low-cost, diversified, long-term investing. They can't because there is too much financial incentive to keep pushing the bad. Stockbrokers, insurance companies, and managed mutual funds all have massive ad budgets. They don't like to spend that money on those who espouse a strategy that, should it be universally adopted, would lead to their demise.

Yet, I continue to tilt at the very large windmills, because I don't believe you are being served by them or need them. Indeed, some investors do need help managing their money. For those, there are many honorable investment advisors. Advisors who, for a predetermined and fully disclosed fee (only) will provide sound advice based on the client's true needs and situation. Sadly, the voices of these good advisors can barely be heard above the din of the commissioned sales-forces.

MoneyLifeBoat™ is for those of you who are sick of being taken for a wild financial ride for the sake of their commissions and fees. It is for those of you who don't want to keep making the same mistakes like, buying high and selling low. It is a place for people who are ready to take control of their own destiny and portfolio and steer a course toward a comfortable future. I hope you will stop by and see if it’s a place for you.

Oh, and if you are one of the first 250 members and enter the discount code SAVEMYFUTURE you will save 50%!

Back to Writing

Tue, 17 Feb 2009 16:25:45 -0500

I didn't realize how long it had been since I last wrote something in this blog. My only excuse is that I have been swamped with other ventures. Since I last added to this blog I have taken on a new radio show, that airs every Friday on KFNN in Phoenix. I am also in the process of creating a whole new website devoted to personal financial planning. I'll tell you more about that later.

Today, though, began a huge change in the way my advice and opinions are disseminated. Instead of just talking on the radio, I am now a financial planning columnist with a new online publication, examiner.com.

On a daily basis, you will be able to read my thoughts on saving money, spending it more effectively, investing it far better, and building a more secure future. I will also use some of the pieces that I write for examiner in this blog (and possibly elsewhere).

So if you have a little time, head over to examiner.com and either type in my name or look under the section's menu for business and finance. You will see me referred to as the national financial planning examiner (what they call a columnist).

Printing Money

Thu, 6 Dec 2007 18:46:49 -0500

Don’t let anyone ever tell you that all of the great money making ideas are taken. According to the folks at AllBusiness.com, a gentleman by the name of John Lisle purchased an ATM thermal printer on eBay. After playing around with it, he discovered that he could make some extra cash by selling fake ATM receipts to his friends as a tool to help them get dates with women (albeit, probably pretty shallow women) and as practical jokes.
He created a website, CustomReceipts.com, did some search optimization and is “raking” in a decent “four-figure” supplemental annual income. A warning for those who visit the site, be aware that the “Embarrassing Fake Receipts” portion of the site may offend those with “more delicate sensibilities” and if you kids take a peek, it might lead to some difficult explanations.
This site proves that, with a little creativity, the “American Dream” is alive and well and there are still plenty of ways to make a buck or two.

Long Life Insurance

Sat, 1 Dec 2007 11:33:59 -0500

If you have a family history of living past 85 and are worried you might outlive your assets, you have had few investment choices. You could either save more money than you ever possibly spend in a lifetime (tough to do), live extremely frugally and leave your kids more, give all of you money to an insurance company for a promise of a lifetime income (die early and they win big!) or invest better and create a withdrawal flexible withdrawal plan (my favorite and a topic I teach in my workshops).
Now, there is one more option and, despite my regular criticisms of the insurance industry, it’s not half bad. I read about this new product on Kiplingers.com recently called a “longevity annuity.” It is, in essence, a long-life life insurance policy.
According to Jason Scott, managing director of the Retiree Research Center at Financial Engines, by buying insurance against the costs of very-old age, a retiree can be liberated to spend more of his or her portfolio between ages 65 and 85. For instance, he says, a 65-year-old man with a $1 million bond portfolio would need to set aside $338,000 to provide adequate income between 85 and 100. The remaining $662,000 would be enough to provide annual income of $58,800 each year between ages 65 and 85, assuming a 2.5% real (after-inflation) return. But if the retiree buys a longevity policy for $79,000, he could boost his annual income starting at age 65 to $71,500.
This hypothetical retiree is able to boost his annual income because he is insuring himself against the costs of very-old age, he can now spend the $259,000 that he otherwise would have had to preserve to tap after age 85. Buying the annuity allows him to spend down the entire $921,000 -- and all its earnings -- during the two decades between 65 and 85.
Mr. Scott has published a study on the products at http://ssrn.com/abstract=992423. Bear in mind that this study is based on a 100% bond portfolio. Those who able to invest a portion of their portfolio in equities would have done much better.

Be Grateful

Sat, 24 Nov 2007 11:56:06 -0500

Gratitude. The perfect topic for a Thanksgiving weekend. I just finished reading a piece at Townhall.com by Jerry Bowyer that really hit home. He looks at gratitude from a financial, entrepreneurial, and business perspective and finds a connection between not appreciating the wonderful things we have and losing them.
He discussed an entrepreneur who “founded a highly successful state-level news analysis television program, but that wasn't enough for him. He wanted to start more of them. He imagined sticking pins in a map, until the map was filled with pins. The bone-head got overextended, ran out of money and had to ask his wife and kids to help him turn the company around. In the end, he became grateful for what he had, and cared for it, and it grew.” He was talking about himself.
He also shared a story about his son at 10 years-old when he “bought a little plastic toy frog for him. While we were driving home from the store together, he started complaining about it. Let me see it, I said. I took it, looked it over, and said, “You're right, not good enough for you,” and I threw it out the car window. In our house, I told him, when you complain about something, you lose it.”
Bowyer even managed to tie ingratitude to the fall of the Roman Republic in a bit of wisdom shared in a letter by rabbi who lived more than 1900 years ago. Bowyer explains, “Rome had, by that time, torn down even the vestigial organs associated with the Republic and had become a full-blooded dictatorial empire. Many philosophers and statesmen offered whispered explanations for the fall of the Republic, but I think the rabbi's letter got to the essence of it: "They did not acknowledge God, neither were they grateful." The Romans didn't really know what they had inherited, and therefore, when Julius Caesar offered them peace and plenty without toil in exchange for republican legal institutions, they heartily accepted.” I have never read a better explanation as to while Rome collapsed.
Being grateful can pay dividends in every aspect of life and his final paragraph says it all. “If you're grateful for something, then you'll appreciate it; if you appreciate something then you'll care for it; if you care for something then you will (more than likely) get more of it. In other words, if you show appreciation for the assets under your care, they'll probably return the favor and show appreciation for you.” What is really powerful is that “it” isn’t just a business. “It” can be anything or anyone that is important to you. Great advice!

Going Up? Going Down?

Sat, 24 Nov 2007 10:24:04 -0500

During a recent discussion with my wife about the state of the economy, she wondered aloud if we should sell everything and “go to money market for awhile.” You see, she, too, is a former stockbroker. While I have fully recovered from my days in the industry, she still has some work to do.
I raised that thorny issue of knowing versus feeling and we reminisced about the many times that we had both been wrong about our “feelings” about the future direction of the market. We both realized that we had been more wrong than right when trying to anticipate a downturn in the market. The few times she had sold on bad news, the market fell for only a brief period and then starting rising again before she felt the time was right to reinvest in stocks.
I am reminded of our inability to predict the stock market’s direction every time I read Marketwatch. This generally gloomy financial and investing web site is a fascinating example of the ongoing contradictions in the world of short-term investing advice. On any given day you can find an argument to support almost any belief you have about the future of the investing markets and the economy.
One day, I read about bullish signs from newsletter writers, only to discover they have turned bearish 24 hours later. One piece will suggest you invest in boring long-term equity portfolios (thanks, Paul Farrell) while another sings the praises of gold.
It’s not just Marketwatch sending confusing signals. They exist from almost every source of financial information. Some are excited about the future while others are convinced that we are about enter a global depression. It seems easy to determine who is right and who is wrong if we have strong personal feelings one way or another. We humans tend to gravitate toward those who validate our opinions. The sad fact is, though, believing something strongly, even in good company, doesn’t make it right.
That is one of the big reasons for my attitude toward investing. Nobody seems to have a clue about the short-term direction of anything. Some get it right, others get it wrong. Then, at some point in the future the roles reverse. That leads me to the conclusion that everyone is merely guessing. If you guess often enough, eventually you are bound to be right sometimes. During those times, you look brilliant. When you are wrong, you are merely ignored.
All I know about the financial future is that economies tend to consistently grow. That consistent global growth can lead to steady long-term wealth only when you are invested broadly and steadily in the assets that represent the economy, stocks. Stock prices have risen more than they have fallen (which only makes sense, because if they fell more than rose, the market would eventually drop to zero), so missing just a few of those periods of rapidly rising prices is worse than missing a few of the declines.
The key is massive diversification and discipline. If the equity portion of your portfolio resembles the entire world stock market the only way to lose money, long-term, would be for the entire world economy to collapse. Should that unlikely event occur, I am guessing that most of will be more concerned with survival than our portfolios.

Leaving a Legacy

Sat, 17 Nov 2007 11:58:21 -0500

This does not relate directly to money, but it is a story that touched my heart and should move you. The young man in the photo is Simon Sharp. He and his family lived in my community of Celebration, Florida for many years. When Simon was 14 he decided that he wanted to spearhead the creation of a veteran’s memorial in a centrally located park in town. A leader in Boy Scouts, Simon wanted to use this ambitious project to obtain his Eagle Scout designation.
Not long after beginning his fundraising, Simon fell ill and was soon diagnosed with a nasty form of leukemia. Yet, between Simon and his fellow Boy Scouts, $12,000 has raised toward the $40,000 cost of the memorial.
Over the past few months, 15 year-old Simon grew increasingly ill and it looked like he wouldn’t get any better. Simon knew he was dying and wanted to become an Eagle Scout. His Scout leader worked with him from his bed and on November 13th (two days after Veteran’s Day), Simon became an Eagle Scout. The next day, Simon died.
You can read the Orlando Sentinel’s Darryl Owens commentary on this amazing young man here.
If you would like to contribute to the realization of Simon’s dream you can send checks to:
Celebration Memorial Fund, P.O. Box 470125, Celebration, FL 34747
I will be personally watching the progress of this project.

A Waste of Time for No Extra Money

Fri, 16 Nov 2007 14:49:19 -0500

Most investors spend way too much time trying to find a way to beat the market. In a recent question posed to Money Magazine’s “The Mole,” and investor asked about the wisdom of spending the past 20 years trying to research the best actively managed mutual funds. This person wondered if investing in a diversified portfolio of index mutual funds would be “smarter, save time, reduce stress” and end up providing comparable return.
“The Mole” responded by stating something like 5,000 hours to create a portfolio that likely underperforms the market. He (or she?) correctly stated that while we believe that working harder and smarter should lead to better returns it, in fact. “rarely works out that way.” Because the only research we can do into funds is purely “backward looking.”
Trying to find the best mutual is like trying to drive to the store by only looking through the rear view mirror. You might get lucky and make it, but most of the time you won’t. The facts are clear; actively managed mutual funds rarely make investors more money than dull, boring no-load index funds. This is mostly because of the higher annual fees charged to pay for the analysts and managers.
Most investors would be better off getting a massively diversified portfolio of no-load mutual funds (Take a look at these great no-load index portfolio ideas) and spend those hours at some other money-making pursuit. Even with a minimum wage job that active fund investor could have made about $25,000 for all those hour spent doing essentially worthless research. Even better, had that minimum wage income been invested in a diversified no-load index fund portfolio over those 20 years it would have likely grown to more than $100,000.

Nobody Reads Them

Fri, 16 Nov 2007 13:07:56 -0500

I have not met anyone who actually reads those reams of processed tree bits that financial institutions create. As important as it might be, no one reads mutual funds annual reports or prospectuses. It’s those prospectuses that are supposed to protect you from unsuitable investments, high fees and commissions. The mutual fund industry knows we don’t read prospectuses, which allows many brokers and insurance agents to rip you off.
The Securities & Exchange Commission (SEC) id finally trying to help make it easier for you to know what you are getting when you invest. USAToday published a Reuters story about the SEC voting to “require mutual funds to provide a summary prospectus containing key information in plain English, in a clear and concise format.”
This new summary prospectus is planned to provide the fees and costs, risk levels, investment objectives and strategies in a more user friendly format. More detailed information will be available should an investor actually want it. Fund investors should find it easier to understand what they might be getting and a what real cost.
In addition, this will save he funds some money (and spare the lives of a few more trees), as a full printed prospectus will no be required for every prospective client. This proposal is actually supported by the fund industry.
The SEC will be taking public comments on these new rules soon. The full proposed rule has not yet been published, but the SEC has published a press release.