The Mutual Fund Show Misleading Investors

 Adam Bold & The Mutual Fund Store Misleading Investors

                                                                by: Brendan Magee
                                                                 Sept. 12th, 2012

Adam Bold, has a radio show, the Mutual Fund Show, that broadcasts in 60 cities across the country. More than likely you have heard the show or listened to one of his promos. Callers call in and ask his opinion about whether or not they are in the right mutual fund. 


I was listening the other day when a caller inquired about a fund that he said had perfromed decently over the past three or four years, but lately has been producing disappointing returns. He wanted to know if he should sell it and investin a new one. Mr. Bold looked up the fund and found out that the majority of  the fund's assets were invested in China which he liked because in his opinion there was no doubt that China was going to be a world wide economic giant in the coming years. He went on to suggest a couple other funds he liked and that had had better recent performance numbers.


As the phone call ended I wondered if Bold truly understod what business he was really in. In his show's bio, Bold states that his job is developing recommendations for people's investments. However, when a person is making statements about the future economic condition of a country on the other side of the globe, they are not in the investment business, they are in the predictions business. In other words they are in the gambling business. Investing and gambling are not the same thing, and when you confuse the two, you have a recipe for disaster, especially when you are dealing with people's life savings. 


When I first started in the business, the rising economic giant was Japan. From 1965 through 1987 their GDP went from $91 billion to $1 trillion. Japan was in the midst of buying prime real estate all over the United States. They bought Pebble Beach, Rockefeller Center as well as a lot of banks. The fear was that the United States was going to become an economic colony of Japan. Then out of no where in 1989, Japan endured a major financial and real estate melt down.


The Japanese Government attempted a stimulus package (sound familiar!) in an attempt to revive their failing economy which didn't have the effect they had hoped for.As of October 2010, their national debt reached $1.5 trillion and their debt stood at 192% of their GDP. None of which, as Japan was gaining in economic power, could be predicted with any reliability.


So here we are again. China has  certainly been getting a lot of notoriety for its economic transformation, and somebody stands up and says, abosolutely they will become an economic giant. If Bold really saw triple digit profits coming from the Chinese economy, the caller would have been wise to ask how much of Mr. Bold's money he had invested in China. The real truth is, neither Bold nor anyone else knows beyond a shadow of a doubt what is going to happen to China's economy over the next six months, years or 60 years for that matter.


If Bold really understood how capital markets really worked he would have told the caller that the possibility of China becoming a world economic power has already been factored into market prices.

 On the flip side, the market has also factored in the possibility  of China's economic collapse. Beyond that his opinion is only a guess, which Bold didn't care to share with the caller. Nor did he seem to let the caller know that if he sold his fund at its current level and invested in the funds he was suggesting that he'd being creating a loss for himself by selling low and buying high.


Here's the bottom line. It's fun to make predictions. Right now in Philadelphia we're having a lot of fun on two fronts: the Phillies making the playoffs and whether or not Mike Vick lasts the year as the Eagles quarterback. It's great to debate such trivial things. However, no sane person in Philadelphia would, for one second, wager their 401k plans on whether or not their prediction turns out to be right.


As far as investing is concerned, ignore the predictions. No matter how well informed they sound, there is nothing to them. Follow the rules of investing: Own a cross section of equities, diversify amongst a variety of investment categories (cash, bonds, stocks), then rebalance. If you do those things you will have a lot more time to enjoy debating sports, hanging with  family and friends, or listening to your friends complain about the the investment tip they took advantage of that went south. 


Brendan Magee is the founder of Inevitable Wealth Coaching. With questions, comments, or suggestions, call 610-446-4322 or e-mail brendan@coachgee.com

No Plan Makes No Sense

Actions Without Clearly Defined Goals Creates Chaos

               by: Brendan Magee

     Sept. 7, 2012

I read an article on MSN's Money section, How To Avoid A Retirement Crisis. It cited a Employee Benefit Research Institute study that revealed that 44% of Baby Boomers and Generation Xer's are not saving enough for retirement. To combat the troubling problem, Stephen Utkus, Vanguard Funds' Director For Retirement Research offered four tips on how those who aren't saving enough can make up for lost time.


Mr. Utkus suggestons included:
- increasing the amount of money you are investing for retirment by one or two percent each year.
-plan on working two more years longer than anticipated.
-buying an annuity wth a portion of your retirment savings
-working a part-time job after retiring for five years

Certainly, increasing savings is never a bad idea nor is working the worst thing that could happen to a person, especially if they like their jobs and are healthy enough to do it.


The one thing that I found to be glaringly omitted from Mr. Utkus's suggestions was not imploring people to put together a written plan that included specific goals for the amount of money a person would need to save for retirement.

How would a person know when they have reached their goals if they hadn't first determined what that amount was? How would a person know if they are saving enough and in the right portfolio until they knew the rate of return they needed to bridge their retirment shortfall?

What a bummer it would be to find out you could have retired two years earlier and avoided the rush hour traffic and boring staff meetings? What a bummer to have realized you missed grandchildren's kindergarten graduations or put off trips with friends all because you thought you had to keep working. 

People, unless your name is Trump or Gates, have a limited amount of income  and a lot of financial obligations to meet. They also want to go out and have some fun once in a while. A plan would enable a person to be more in control of how they use their cash flow and assets. Without a plan, life could be a mad scramble trying to put out what ever firing is raging hottest at the time.


In other words a written plan and the ability to know whether or not it's working is a source of peace of mind, and isn't peace of mind why you would go to the effort of building up enough money to retire in the first place? 


Saving money for retirment is a great thing to be doing for yourself and your family, but before you do that, take the time to have a written plan put together. It will save you a lot of unnecessary headaches.


Brendan Magee is the president of Inevitable Wealth Coaching. With questions or comments call 610-446-4322 or e-mail brendan@coachgee.com.