tag:blogger.com,1999:blog-87776659423791213002024-03-05T08:03:40.495-08:00The Investor CoachThe Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.comBlogger59125tag:blogger.com,1999:blog-8777665942379121300.post-9482375885158227422013-09-13T13:49:00.000-07:002013-09-13T13:54:02.131-07:00Investors Getting Right Answers To The Wrong Questions<div style="text-align: center;">
<strong><span style="font-size: large;">Are You Getting Right Answers To The Wrong </span></strong></div>
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<strong><span style="font-size: large;">Investment Questions?</span></strong></div>
<span style="font-size: x-small;">by: Brendan Magee</span><br />
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I think we have all had the frustrating experience of asking someone a question, and sometimes asking the same question multiple times, and getting a response that just doesn't answer the question you'd really like to have answered. A woman I am working with, when she went to discuss some problems she was experiencing with her 401k plan with her benefits manager got answers to questions she hadn't even asked. The answers she got were the right answers to the wrong questions her benefits manager, merely, perceived she was asking. <br />
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If Diane had asked the question, what's my fund's returns year to date? 10% would have answered the question correctly. If she had asked the question, where does the fund I am investing in rank amongst its peers? In the top 15%, would have been the right answer. Unfortunately, those weren't the questions Diane was asking at all and neither the benefits manager or Diane are getting answers to the questions that would reveal the real problems that are prevalent in their company's 401k plan. Frankly, both Diane and her benefits manager are in the same boat, they are both getting the right answers to the wrong questions, so please do not read into this that the villain here is the benefits manager. They are both victims.<br />
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In doing an analysis of Diane's 401k plan we saw that 62% of her money is invested in U.S. Large Company Stocks. This was a fund that when she enrolled in the plan, the rep told her, was designed to be allocated for someone in her age range and length of time to go before retirement. Rather than getting answers to the questions, What investments should my money go in, or are these funds any good, Diane and her benefits manager need to be asking other questions. They'd be much better off if they would ask questions like:<br />
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-How does the market work? Where do market returns come from?<br />
- How can I get a mathematical measurement of just how diversified I am? <br />
-What's the mathematical measurement of risk for the investments I am considering?<br />
-What's the long-term expected rate of return of the portfolio I am considering? <br />
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In asking those questions, Diane, her benefits manager, and every other investor would be asking the questions that would put them more in control of their investing. They wouldn't put so much stock in rates of return or rankings, things that mean absolutely nothing in terms of making good investment decisions. As it is Diane's benefits manager is giving her assurances in a fund that has way more volatility than she had previously been aware of. Over the course of the past 40 years her current portfolio has, on three occasions, taken a loss of 30%. She is, also, taking a lot more risk than she has to for the long-term expected rate of return of her portfolio. What good will a five star ranking do her when she experiences a 30% loss? Besides her, who else in the company's plan is walking around completely in the dark about their 401k plan? <br />
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This situation isn't exclusive to Diane and her benefits manager. Pick up a magazine, watch an investment commercial on television, or any literature from an investment company. The mutual funds are ranked from best to worst performing. The awards they've been given are proudly displayed and touted as the reasons you should invest your money with them. These are the answers to questions like, what did the fund do over the last one, five, or ten year periods of time or who should I hire to manage my money this year? These are answers that give a sense of credibility to the investment companies which makes it easier to sell their funds. They don't make it any easier to be a successful investor or gain confidence, clarity or peace of mind. These are the wrong questions to be asking and there is a terrible cost to be paid for making decisions after having asked the wrong questions.<br />
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<em><span style="font-size: x-small;">Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments call 610-446-4322 or e-mail </span></em><a href="mailto:Brendan@coachgee.com"><em><span style="font-size: x-small;">Brendan@coachgee.com</span></em></a><em><span style="font-size: x-small;">.</span></em> <br />
<br />The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-83234722886857009052013-09-09T11:14:00.002-07:002013-09-09T11:25:23.432-07:00Investors Can't Fix Inside Problems With Outside Solutions<br />
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<span style="font-size: large;"><strong>Solving Inside Investor Problems With</strong></span></div>
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<span style="font-size: large;"><strong> Outside </strong></span><span style="font-size: large;"><strong>Solutions Just Doesn't Work</strong></span></div>
By: Brendan Magee<br />
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People Magazine's July 2013 issue highlighted the struggle and triumph Matthew Perry (Chandler Bing on the hit sitcom, <em>Friends</em>) experienced in overcoming his 10 year addiction to drugs and alcohol. He spoke about the catharsis he had, that moment when he finally got on the road to recovery, and finally got what friends and professionals had been telling him for years. His story is one that investors can learn a lot from. <br />
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Like a lot of investors wanting to invest their way, Mathew Perry wanted to handle his recovery "his way." When life was getting out of control, Perry made changes, and with being paid $1 million per episode he could afford extravagant changes to his life. He bought houses and moved a lot. In his words, "If I just lived over there, I'd be fine." When investors aren't seeing the results they want, they often make changes to their portfolios. The Dalbar Study for 2012 showed that on average investors make a change to their portfolio within a three year period of time. As Perry puts it, "It was/is a classic case of trying to fix inside stuff (problems) with outside stuff."<br />
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Recovery for Perry didn't start until he had an inside revelation, and for most investors becoming a successful investor won't happen until they have a similar catharsis between their ears as well. His recovery coach, Earl Hightower a leading interventionist and addiction specialist, had been working with Perry for years preaching the same message with little results to show for it. Perry, one day saw it clear as day, the changes he wanted to achieve in his life weren't going to occur until he stopped trying to do things his way. From that point on, Perry said, " I was willing to do whatever Earl Asked me to do for the rest of my life." <br />
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By itself, here is an invaluable lesson to know if you have a coach you can have a life long relationship with or you are merely doing business with an advisor looking to sell you products. Does their message change or is it still basically the same. Over 500 times Hightower's message to Perry was the same. An investor coach's message will also stay consistent. <em><strong>"Own equities, diversify, buy low sell high and at no time engage in stock picking, market timing, or track record investing."</strong> </em>Any deviation from this and you do not have a coach. You have someone who is going tell you what you want to hear to keep you as a customer, not make sure you hear what you need to hear in order to be a successful investor.<br />
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For Perry, being a huge television star, there was no shortage of opportunities to drink and do drugs and his life quickly spun out of control. For investors, there is no shortage of investment products that can quickly turn an unsuspecting, trying to the right thing, investor into a gambler and speculator. There are 27,000 mutual funds to choose from, there are internet trading web sites to log onto, as well as over 600,000 stock brokers trying to lure you to their services. Like drugs and alcohol they are not readily labeled as things that can ruin our life. Stock picking, market timing, and track record investing perpetuate the illusion that these are things that will enhance your life. Drugs and alcohol abuse are two activities that will eventually, inevitably destroy a person. An investor who engages in or can't tell the difference between prudent investing and gambling and speculation will eventually see their financial security destroyed. <br />
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As it was for Perry, the days of going to work painfully hung over and seeing personal relationships destroyed are problems in and of themselves, but in reality they were merely the symptoms of a much bigger internal problem. As Perry found out if he didn't deal with the internal problem of addiction, the symptoms were going to get more severe and damaging. Investors need to take a similar actions. <br />
They need to be able to identify and deal with the bigger problems not just symptoms. <br />
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Along with gambling and speculation, if you haven't defined your investment philosophy, if you haven't identified your true purpose for money, and you don't know exactly what you are doing when it comes to building your portfolio, yours is more of an internal problem than an external problem. Trying to find solutions by, solely, making changes to your portfolio, any success you experience will be temporary and the problems that led you to make those changes, disappointing returns, massive losses, no accounting for costs, confusion, anxiety, and worry will come back stronger and be that much more severe.<br />
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In dealing with the internal problem of addiction, Perry says he is in a "good place" and really feeling "comfortable." When, as an investor, you focus your attention on yourself as an investor, and ask the questions you really need to start asking and getting the answers to, that's when you will begin to experience true peace of mind."<br />
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<em>Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions, comments, or suggestions, call 610-446-4322 or e-mail </em><a href="mailto:Brendan@coachgee.com"><em>Brendan@coachgee.com</em></a><em>.</em> The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-53207603044317358872013-09-05T09:21:00.003-07:002013-09-05T09:23:59.844-07:00The Rules Don't Apply To Stock Analysts<div style="text-align: center;">
<span style="font-size: large;"><strong>Does Your Broker's Recommendation Coming </strong></span></div>
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<span style="font-size: large;"><strong>With No Accountability?</strong></span></div>
by: Brendan Magee<br />
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I am in the midst of reading a very informative book, "Brokerage Fraud, What Wall Street Doesn't Want You To Know," written by Tracey Pride Stoneman and Douglas J. Schulz, and I like to share an interesting tidbit I picked up in my reading.<br />
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I think all investors realize to one extent or another that the investment industry's objectives and the investing public's agenda are in conflict with one another. The investor wants the truth on what is the best way to invest their money, keep costs down, take as little risk as possible, and get a decent rate of return. The brokerage industry wants to be profitable. They want you to buy the stocks, bonds, mutual funds, and investment products they sell. To accomplish this, they need to get your attention and make their products look irresistible. However, investors want to be advised, not sold. They want the inside scoop on what is going to do well and what is going to tank.<br />
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The brokerage industry's response is to offer investment analysis. They hire analysts to track stocks, different markets, and spot trends that will give their investors the edge. In <strong><em>Brokerage Fraud</em></strong>, Schulz recalls in his days working for Merrill Lynch that on every Monday morning there would be a conference call played throughout the office's p.a. system, where Merrill's analysts would list the stocks, companies, markets, and market sectors they were recommending the brokers to sell and investors to buy. That particular week, these were the recommendations the brokers were going to make to their investors. The analysis gave the broker's recommendation a layer of credibility that would make it easier to sell to their investors. <br />
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Stoneman Pride and Schulz write, <em><strong>"One little known fact that isn't made readily available to most investors is that, generally, research analysts that work for the brokerage houses do not have any accountability. Where a stockbroker must have a "reasonable basis" for recommending a stock or investment to a customer, no rules or regulations dictate what an analyst says or what must be in a research report. No securities rule or regulation applies to the analyst because they do not hold a securities license. They operate with relative impunity."</strong></em> <br />
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So if the brokerage house has been hired and paid hundreds of thousands of dollars to sell the stock of a publicly traded company, what do you think they are going to want their analysts to say about that particular company? Is the brokerage firm going to continue to have a profitable relationship with the company if the analysts use language like "buy, attractive, hold long-term or sell, dump, get out?"<br />
This puts the analyst and the brokerage house in the position where the truth might serve the investor's best interests, but not the brokerage house's profitability. <br />
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Perhaps, if investors understood their broker's recommendations were coming from someone who is perhaps more beholden to the firm then the investor and that no rules or regulations apply to analyst's recommendations, they might not put as much faith in their broker's advice. <br />
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So as Stoneman Pride and Schulz say, "Buyer Beware!"<br />
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Brendan Magee is the president of Inevitable Wealth Coaching. With questions or comments call 610-446-4322 or e-mail <a href="mailto:Brendan@coachgee.com">Brendan@coachgee.com</a>. The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-37748626916537162142013-08-22T08:58:00.000-07:002013-08-22T08:58:57.884-07:00Fun On The Train!<div class="separator" style="clear: both; text-align: center;">
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<br />The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-22041029217258240182013-08-20T14:08:00.000-07:002013-09-05T09:22:34.570-07:00401k/403b Plans Set Up To Fail<div style="text-align: center;">
<span style="font-size: large;"><strong>What 401k/403b Plan Participants Can't See & Why It's So Dangerous</strong></span></div>
by: Brendan Magee<br />
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I'll admit it. Once in a while for fun, I like to watch the Three Stooges. I especially like it when one of the Stooges covers up a hole in the floor and some unsuspecting character steps on the rug and falls through the floor. Since no one ever seems to get hurt, it's quite comical.<br />
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What isn't comical is 40lk/403b participants walking around with a very dangerous hole in their retirement accounts. Unlike the Stooges, what investors can't see is dangerous and can do permanent damage, and here's the thing, the 401k/403b participants I have recently met with are not Stooges by any stretch. They are lawyers, successful business owners, principals of education, and people with post graduate degrees.<br />
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What I have seen is there is no attention given, nor education into the cornerstone of all investing, <strong>DIVERSIFICATION!</strong> One gentleman has 75% of their portfolio invested into individually owned U.S. Small Company Stocks. Now this gentleman has already seen his portfolio take a 50% drop in value, he knows he is not appropriately diversified, but has no idea of what a properly diversified portfolio looks like. Worst of all, he had his portfolio put together by a "trusted" financial advisor. He hasn't been given any education or gained any understanding of diversification. What will he do if the minus 50% happens again just as he and his wife are getting ready to retire? What investments has ever generated a rebounded of 100%? Answer: None. <br />
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A lawyer who I met with and reviewed their 401k plan told me she asked the company representative to help her pick the investments for her 401k plan. They picked a Life Cycle Fund and she had no reason to doubt the sincerity or the credibility of the advice she had been given. As it turns out, 68% of her 401k plan is invested in U.S. Large Company Value Stocks. This is an asset class that has gone up by as much as 37%, but has also seen years that have been a negative 37%. This highly educated woman is walking around without any clue that the most serious money she owns is sitting in such a volatile position. When does the shoe drop? What portion of her portfolio is in a position to offset 68% of her portfolio absorbing a 37% loss? Answer: No portion is going to offset such a loss.<br />
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Lack of diversification also affects a person's ability to keep up with inflation. An early forties aged couple showed me their retirement statements. Since 2007 her husband's portfolio has lost one percent in purchasing power for every year he has owned the account. Not only has he unknowingly been paying a one percent insurance charge along with all the other investment fees, half of his money is in a fixed interest account. While since 2007 until today, U.S. Large Company Stocks have gone up 58.60% and U.S. Micro Cap Stocks have gone up 41.42% , 50% of his account has been stuck doing a measly two percent and has not benefited one bit from the stock market's run up. He can't go back and make up the returns he didn't capture and he can't go back and undue the damage the cost of living has done to the value of his retirement account.<br />
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To make matters worse, the wife's 401k plan has 62% of her retirement account in U.S. Large Company Stocks. Remember 2008? Remember U.S. Large Company Stocks going down by 37%? Do you think this won't happen again? How does a person recover from 62% of their retirement account going down by 37%? Answer: They don't. All the possibilities that were available when retiring on a certain amount of money are gone. Sure, this couple, like many others, will adjust, but what a tragedy to learn that all you had to give up was completely and easily avoidable with a better understanding of what it means to be diversified and how to achieve it. <br />
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Now as I pondered two weeks of seeing 401k/403b participants with little to no understanding of how poorly diversified they were and the jeopardy it put their retirement in, I wondered how much of the $14 trillion dollars Americans have invested in these plans is in the exact same position? How bad could it get? How will people ever get the coaching they need when apparently the participant can't see the hole in their retirement plans and the mutual fund companies are merely throwing a rug over the problem? <br />
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Plan participants and their employers have got to start paying more attention to the conversation that is being directed towards their participants. Less attention has to be given to the five star funds that populate their investment options and be more concerned as to whether or not they are being asked the right questions. Do they understand how to measure diversification in their portfolios? Do they fully understand the implications and applications of diversification in their portfolio? Getting the answers to these questions might not be as convenient as throwing a rug over the hole in the floor, but they are going to help investors see the holes and dangers they weren't able to see previously. They will be more fully engaged in creating their financial security and have the control where it belongs, in their hands, not in any one else's. Ultimately, investors will be experiencing a whole lot more peace of mind. <br />
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Brendan Magee is the founder and president of Inevitable Wealth Coaching. If you have questions or comments call 610-446-4322 or e-mail <a href="mailto:Brendan@coachgee.com">Brendan@coachgee.com</a>. The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-35583236958487292442013-07-09T09:28:00.000-07:002013-07-09T09:28:21.212-07:00Wimbledon Final All About Skill, Gambling All About Luck<div style="text-align: center;">
<span style="font-size: large;"><strong>Andy Murray's Win Was All About Skill, Not Luck</strong></span></div>
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<span style="font-size: x-small;">by: Brendan Magee</span></div>
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<span style="font-size: x-small;"> July, 2013</span></div>
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Last Sunday I was watching Great Britain's Andy Murray become the first British tennis player to win the Wimbledon Championship since 1936. It was an epic final pitting Murray against former champ Novak Djokovic. I was amazed as I watched these two guys pound shot after shot at each other in a match that lasted more than three hours. <br />
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As I watched the match, I was left with the thought that nothing about the match was a coincidence. That the match was so close, 6-4, 7-5, 6-4, that each game seemed to last 45 minutes, and that these two guys had made it to Center Court in the championship match of the most prestigious tennis tournament in the world was all about skill. <br />
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Andy Murray has been playing tennis since he was six years old. He has hit thousands of forehands, backhands, serves, volleys, and overheads. Plus, he goes through an extremely grueling training regimen that allows him to survive three to four hour matches under grueling conditions. The same can be said of Djokovic and all the top tennis players. They have developed a skill that is repeatable, reliable, and measurable. <br />
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Unfortunately, for investors with the maze of statistics the investment industry throws at people it is easy to believe the results the mutual fund managers are achieving are the result of skill as opposed to pure luck. If you look at the top 25 performing mutual funds we often see some pretty familiar names consistently. We see Vanguard, Fidelity, T. Rowe Price, but what investors often don't do is take notice of the name after the fund. We don't take time to see if for example Fidelity's Magellan Fund has stayed in the top 25 from the previous list. We don't take notice of whether or not it was Vanguard's Windsor Fund or their Wellesley fund that has maintained it's earlier ranking. If we did we might, rightly so, see that the skill we perceived the mutual fund companies to have, isn't a skill at all. <br />
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Here's the statistics, as measured by Morningstar Inc. In a given year only about a third of all mutual funds will outperform its benchmarks, and each and every year the third that outperformed its benchmark the previous year has been replaced by a new batch of top performing funds. It gets even worse the longer time frame. In any ten year period of time, none of the funds outperformed their benchmarks. Andy Murray can measure per match how many first serves he can get in, and he can measure how many points he can rely on winning as a result of a certain percentage of successful first serves and it is measurably reliable. So why can't the best educated financial minds of the investment world consistently achieve superior results?<br />
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The answer lies in what they are engaged in and what they are doing with investors money. <br />
A tennis player can learn the right way to hold a racket and the motion necessary to hit a topspin forehand and then go practice it until they get it right. They have control over how much facility they will develop. A mutual fund manger can look at the books of a publicly traded company, they can attend stockholders meetings, talk to executives of a company, read reports about a company, and solicit opinions of their colleagues, but none of that will give them more control over their stock picks. <br />
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That is because everything they are reading is based on something that has occurred in the past, and with that information they are trying to figure out what is going to happen tomorrow, next month, next year, the next 20 years, etc. There is no one who has control over tomorrow no matter how much research or analysis they put into it. It is why the Prudent Investor Law of 1990 states, <strong><u>"Bargain shopping in an attempt to separate the winner from the losers through forecasting and analysis is deemed wasteful." </u></strong>I wouldn't want my life savings any where near a prediction or forecast about who is going to win next year's Wimbledon title.<br />
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It's not the easiest thing for investors to do, to rise above what is worthless rhetoric as opposed to valuable investment advice. The recipe for investors is to be able ask and answer the right questions. In the case we are using today, investors want to ask, can you identify the warning signs that you are gambling and speculating with your money vs. prudently investing it? If you can you will go along way towards avoiding investment advice that is dependent on a prediction and save yourself a lot of wasted time and money. <br />
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Brendan Magee is the founder of Inevitable Wealth Coaching. With questions, call 610-446-4322 or e-mail <a href="mailto:Brendan@coachgee.com">Brendan@coachgee.com</a><br />
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<strong><u></u></strong>The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-82577881117613405162013-06-19T13:02:00.001-07:002013-06-19T13:02:58.232-07:00U.S. Open: Great Golf Drama, Misguided Investing Messages<br />
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<span style="font-size: large;"><strong>U.S. Open: Great Golf Drama, Misguided Investment Messages</strong></span> </div>
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<em> by: Brendan Magee, June 2013</em></div>
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It would be hard not to get caught up in the drama of this past week's U.S. Open Golf Tournament. Could Phil Mickelson finally breakthrough and win his first U.S. Open after so many heartbreaking runner up finishes? Would one of the other golfers finally win the first major tournament of their careers? Golfers and nongolfers around the country watched with baited breath as every shot could determine who would wind up victorious. From the standpoint of riveting drama, the U.S. Open delivered in spades to its viewing audience. </div>
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What the tournament also delivered was some poorly framed investment commercials, and as I watched the commercials I wondered how many investors got caught up in their misguided messages. One in particular stood out to me. There was a couple sitting across the table from a financial advisor and they were trying to get their nerve up to as they said to, "Start investing again." Their fate was portrayed that as the markets went through some rocky times, they took their money out of the market and now was the time they had to get back into the market. </div>
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As I watched the commercial I was wondering how many people could identify with this couple's plight and were in the same boat trying to figure out when they should get back into the market. I also wondered how many people realized this couple in trying to solve their dilemma were working on the wrong end of the problem. Here's what I mean by that.</div>
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Go back to 2008, the stock market was in a free fall. U.S. Large Company Stocks went down by 36 percent. U.S. Large Value Stocks went down by 40.74 percent. U.S. Small Company Stocks went down by 36 percent. Globally, markets were in complete free fall. You couldn't find a news outlet that didn't say the end of the world was about to occur. </div>
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The couple in the commercial and real life investors saw their life savings take a beating, got scared and took their money out of the market. In October 2008, investors took $58 billion out of the market (As noted by the Dalbar Corporation) and investors waited until the market settled down. In other words, they waited until the market went back up. So investors sold low and now are committing the sin of buying high by getting back into the market after the rebound. In and of itself this is investment suicide, but to make matters even worse look at the returns investors waiting on the sidelines have missed out on going back to January 2009 through June 19th, 2013. </div>
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U.S. Large Company Stocks are up 58.60 percent. U.S. Large Value Stocks are up 125 percent. U.S. Small Company Stocks are up 130 percent, and Emerging Market Stocks which were down 49 percent in 2008 are up 88.33 percent since January 2009. Investors who got out of the market in 2008 or early 2009 made the impact of their losses permanent. Even if they got back in today it will be impossible to make up for missing out on the spectacular returns of the past three to four years. </div>
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The lesson to be learned is not panic and get out when markets go down, not try and figure when is the right time to get back in</div>
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<em>Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments call 610-446-4322 or e-mail </em><a href="mailto:brendan@coachgee.com"><em>brendan@coachgee.com</em></a><em>.</em> </div>
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The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-24699375489547881342013-03-08T12:13:00.000-08:002013-03-08T12:13:49.655-08:00 <br />
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<b><span style="font-size: large;">Date: Tuesday, March 19, 2013 </span></b></div>
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The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-4110574472257119302013-02-07T14:07:00.000-08:002013-02-07T14:07:05.542-08:00<br />
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<span style="font-size: x-large;">Why Pa. Taxpayers Will Have To Cough Up $4 Billion</span></div>
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<span style="font-size: x-small;">by: Brendan Magee</span></div>
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<span style="font-size: x-small;">2/7/13</span></div>
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<span style="font-size: large;">In Sunday January 27th's edition of the Philadelphia Inquirer, Joseph N. Di Stefano, reported that Pennsylvania's taxpayer's contribution to the state's pension fund is going to increase from $1.6 billion to $4 billion within four years. So what's one of the major reasons for the increase? Answer, the Pennsylvania State Employees Retirement System (SERS) board of directors not knowing the difference between gambling and speculating with money vs. prudently investing it.</span><br />
<span style="font-size: large;"></span><br />
<span style="font-size: large;"></span><br />
<span style="font-size: large;">In 2006 SERS gave $3 billion in taxpayer money to six private investment firms in an effort to outperfrom sagging bond and stock markets. They also needed to find a way to pay for increases to the pension benefit which was enacted by Gov. Tom Ridge, but who failed to provide the funding for such an increase. </span><br />
<span style="font-size: large;"></span><br />
<span style="font-size: large;"></span><br />
<span style="font-size: large;">So first things first, What is a hedge fund? It's an aggressively managed portfolio of investments and unlike your typical mutual fund they are not subject to the same level of regulations from the Securities and Exchange Commission. Their pitch is they are designed to generate above market rates of return. They claim to have a special or sophisticated ability to know in advance where your money should or shouldn't be to outperfrorm the market. In other words you could substitute the word speculate for aggressively managed because in order to outperform the market you would have to be able to predict the future. </span><br />
<span style="font-size: large;"></span><br />
<span style="font-size: large;">Pa. believed or wanted to believe that there were special frims out there that could do just that. They were so impressed that they paid one firm Arden Asset Management $20 million of taxpayer money to identify which hedge funds they should use for their pension portfolio from 2006 through 2012.</span><br />
<span style="font-size: large;"> </span><br />
<span style="font-size: large;"></span><br />
<span style="font-size: large;">So the first step SERS took down the slippery slope of gambling and speculation was the failure to realize that in order to outperfrom the market, their portfolio (the taxpayer's money) would exposed to strategies that were in essence gambling and speculation. They paid for the privilege of getting a seat at the blackjack table with taxpayer money. </span><br />
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<span style="font-size: large;"></span><br />
<span style="font-size: large;">The second step was allowing someone to continually roll the dice with the pension's money. A hedge fund's performance is based on that fund manager knowing in advance which way the market is going and having their money properly allocated before the market reacts. The state had no idea that all the available infromation has already been factored into market prices. They failed to grasp that only unknowable and unpredictable information and events that will take place in the future and how the world's population reacts to those events will determine market prices going forward. How in the world could anyone claim to have this ability? How in the world would anyone believe anyone who claimed to have this unique insight?</span><br />
<span style="font-size: large;"></span><br />
<span style="font-size: large;"></span><br />
<span style="font-size: large;">As is the case with most gambling, the results of the hedge fund managers was not very profitable. Between mid 2007 to mid 2012 the average hedge fund according to the Bloomberg Hedge Fund Index lost 10 cents on every dollar invested. Arden Asset Management fared better than the average hedge fund in that they gained 2 cents for every dollar invested, but that was far below the 7.5% projected and needed by the pension to meet its obligations.</span><br />
<span style="font-size: large;"></span><br />
<span style="font-size: large;"></span><br />
<span style="font-size: large;"> To compound, the problem the state anounced it was liquidating its hedge fund position. Another way and what would be the honorable thing for the state to tell the taxpayer is, <strong>The STATE BOUGHT HIGH AND NOW IS</strong> <strong>NOW SELLING LOW</strong>. As far as the state is concerned that's no problem,the taxpayer is more than willing to make up for the shortfall($4 billion). The irony here is that the state anounced it will give Arden another $150 million in taxpayer money to invest.</span><br />
<span style="font-size: large;"></span><br />
<span style="font-size: large;"></span><br />
<span style="font-size: large;">I say the taxpayer has every right to be upset about how the state is mismanging their pension fund. After all it's the taxpayer who ultimately pays the price. However, the solution for the state and taxpayer is an Investor Coach. A coach would be an advocate not only for the state but the taxpayer as well. For example, the coach could create an agreement with SERS that they are not allowed to engage in any strategy that is consistent with gambling and speculation. Every transaction has to be anounced to the public in advance. There would also be strict fines placed on any governemnt official who engaged in or allowed for any gambling or speculation activities with Pa.'s pension money. After all, where is the incentive to disengage in a dysfunctional behavior if there is no penalty?</span><br />
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<strong><em>Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments call 610-446-4322 or e-mail to </em></strong><a href="mailto:brendan@coachgee.com"><strong><em>brendan@coachgee.com</em></strong></a><br />
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The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-41169915606273530512013-01-24T10:13:00.003-08:002013-01-24T10:29:59.712-08:00<br />
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<span style="font-size: x-large;">Why Investors Need To Be Able Measure Portfolio Turnover</span></div>
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<span style="font-size: x-small;"> by: Brendan Magee</span></div>
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<span style="font-size: x-small;"> 1/24/2013</span></div>
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<span style="font-size: large;">Diane told me how happy she was with her current investment advisor. She told me she was happy to have found someone whom she could trust, and I asked what was it about her advisor that she liked so much.</span><br />
<span style="font-size: large;"></span><br />
<span style="font-size: large;">She told me how she had come to know him. Her father had passed away and the manager for the firm that had been handling her father's investments called her. He let her know that that the broker, whom Diane had never met before, who had been handling her father's account was no longer with the company. The manager told her they had discovered that the broker had been engaging in an excessive amount of trading on behalf of her father's account which was generating a lot of commissions for the broker at the expense of her father's account. </span><br />
<span style="font-size: large;"></span><br />
<span style="font-size: large;">The branch manager told Diane that their firm does not condone their brokers putting their personal gain ahead of their client's and as such that broker's employment with the firm had been terminated. Never mind the fact that the firm's manager didn't let Diane know that the manager had the responsibility of monitoring the behavior of their brokers, she felt good that the manager reached out to her and let her know that he would personally take over the day to day management of the money she was receiving from her father's portfolio. Diane felt that her interests were being looked after. Hence she felt she was in the hands of someone she could trust. </span><br />
<span style="font-size: large;"></span><br />
<span style="font-size: large;">This is where the story takes an ironic and deceitful twist. The advisor said he would transfer the money to one of the frim's mutual funds and that would protect her money from excessive trading. So as we were talking I asked if she could measure the amount of turnover that was taking place in the fund her money was in. She answered no. The follow up question was, could she account for all the costs she was paying for the managemet of her money in the fund and again she answered no. </span><br />
<span style="font-size: large;"></span><br />
<span style="font-size: large;">Now let's first understand what turnover in a fund is. Turnover is a measurment of the amount of trading that goes on inside a fund. For example if the turnover rate is 100%, that means that within the year every stock within the fund has been sold and replaced with new stocks, and just like the more trading the broker was doing on her father's account, a higher percentage of turnover means the more commissions and other expenses a mutual fund investor is going to pay. </span><br />
<span style="font-size: large;"></span><br />
<span style="font-size: large;">The fund Diane was investing in had 79 different stocks and a turnover rate of 79%. So more than two thirds of the stocks owned by the fund were being sold and replaced with new stocks. This equates to an added expense of about one percent for the trading the fund was doing. Bear in mind, their is no where in her statements that these trading expenses are accounted for so she has no idea that this is going on. </span><br />
<span style="font-size: large;"></span><br />
<span style="font-size: large;">The hypocrisy on the part of the manager is that he said the firm didn't condone the excess trading being done to her father's account, but then he endorses Diane investing her money in a very actively trading mutual fund that hides the expenses she is absorbing. You also have to understand that Diane has no control over the amount of trading her fund could be doing. It could go up to 200% and she'd have no idea as to what is going on. </span><br />
<span style="font-size: large;"></span><br />
<span style="font-size: large;">The only way she would know about the amount of trading going on in her mutual fund is to ask and be able to answer the question, Can you measure the amount of turnover that is taking place inside your fund? </span><span style="font-size: large;">If she realizes that a higher percentage of turnover means a higher rate of trading, which means higher expenses, which also means a higher degree of gambling and speculation taking place within her investments, she will know to stay away from not only the fund, but also the manager of the brokerage firm.</span><br />
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<strong><em>Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments call 610-446-4322 or e-mail </em></strong><a href="mailto:brendan@coachgee.com"><strong><em>brendan@coachgee.com</em></strong></a><strong><em>.</em></strong> The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-11777357114040412202012-11-06T11:46:00.002-08:002012-11-06T12:02:54.944-08:00Schwab Misleading Investors About ETF Costs<br />
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<span style="font-size: x-large;"><strong>Schwab Misleading Investors About ETF Costs</strong></span></div>
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<span style="font-size: x-small;">Nov. 6, 2012</span></div>
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<span style="font-size: large;">I was watching a football game last Sunday and on comes a commercial from Charles Scwhab about how they offer the lowest cost Exchange Traded Funds (ETF's). They showed a comparison between their ETF's and the industry average and their cost of .004% cost was the lowest in the investment industry. If that was all there was to costs that might be impressive, but the fact that they excluded a bunch of other costs associated with ETF's makes it misleading.</span><br />
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<span style="font-size: large;"><br /></span><span style="font-size: large;">First, what is an ETF? An ETF is fund that mirrors a particular segment of the market. For example, an investor could own a fund that is identical to the S&P 500, but unlike a true index fund an ETF allows an investor to actually trade one segment of the market for another segment of the market. For example, today you could hold an ETF that mirrors the S&P 500 and if tomorrow you think the more attractive market is U.S. Small Company Stocks you sell your ETF in its entirety and buy the U.S. Small in its entirety. It's a quicker way of moving from one market to the other. </span><br />
<br />
<span style="font-size: large;"><br /></span><span style="font-size: large;">Getting back to Schwab misleading investors, ETF's include all the costs associated with an actively trading invetment strategy. The .004% Schwab is referring to is just the tip of the iceberg. </span><br />
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<span style="font-size: large;">The key word here and why brokerage houses promote ETF's is, <strong><em>Traded</em></strong>. Remember how brokerage houses make money. They make it off of trading securities. How in the world could Schwab afford to put a commercial on prime sporting events on just .004%?</span><br />
<span style="font-size: large;">On a $100,000 investment, that .004% equates to $40. You could barely afford to put an ad in a local newspaper if that was all the revenue the brokerage house was bringing in.</span><br />
<br />
<span style="font-size: large;"><br /></span><span style="font-size: large;">So what are some of the costs in actively trading ETF's?</span><br />
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<span style="font-size: large;">There's commissions. Just like when a stock is traded individually or through a mutual fund there is an expense that is imposed on that transaction and that same commission expense applies to ETF's. There are also Bid/Ask Spreads. When an investor places a trade in addition to the commissions that are paid, the trade also has to go through one of the brokerage houses's market makers. </span><br />
<br />
<br />
<span style="font-size: large;">Think of the market maker as any other business owner with an inventory to buy and sell from. When a customer comes along, the market maker tacks on an expense to the sale in order to make a profit. When the market maker buys back an ETF to add to their inventory they mark down the price so that when they put the ETF back on the market they can sell it at a price that they can profit from. </span><span style="font-size: large;">None of the costs were mentioned in Schwab's commercial and if the an investor took the ad at face value they'd have no idea about all the other costs they'd be paying and how they will impact on their returns. </span><br />
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<span style="font-size: large;">None of these costs metioned even begins to shed light on the costs investors will absorb by participating in the trading of their ETF's. There is no mention of the fact that trading securities on an active basis is gambling and the expected rate of return on gambling is 0%. After absorbing all the costs the return is negative. Hence, promoting solely the costs of holding the fund is completely misleading to the investing public.</span><br />
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<strong><em>Brendan Magee is the founder and president of Inevitable Wealth Coaching in Drexel Hill, Pa. With questions or comments call 610-446-4322 or e-mail </em></strong><a href="mailto:brendan@coachgee.com"><strong><em>brendan@coachgee.com</em></strong></a><strong><em>. </em></strong>The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-34475469743505780422012-11-02T11:19:00.000-07:002012-11-02T11:31:04.423-07:00Certainty And Disppointing Returns Go Together<br />
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<span style="font-size: x-large;"><strong>Certainty And Disappointing Returns Go Together</strong></span></div>
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by: Brendan Magee</div>
<div style="text-align: center;">
Nov. 2, 2012</div>
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<span style="font-size: large;"><strong>A very nice man shared with me that he had been disappointed with the results of his investments. He told me that over the past five years his account had only gone up by about one hundred dollars. He showed me his statement and asked if there was anything I could do to help.</strong></span><br />
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<span style="font-size: large;"><strong>As he handed me his account statement he told me this was all the money in the world he had and since he was retired he couldn't afford his account to suffer any losses. Thus, when we looked at his account holdings, all the money was in a certificate of deposit.</strong></span><br />
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<span style="font-size: large;"><strong>Like a lot of people who have their money in certificates of deposit their was not a lot to celebrate in terms of return.His annual yield to maturity was a mere 0.95%. When you factor in the rising cost of living over the last 20 years at 2.80%, the value of his money wasn't going up by 0.95% on annual basis, it was decreasing by 1.85% every year he kept his money in that certificate. </strong></span><br />
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<span style="font-size: large;"><strong>However, his biggest investment problem was not losing value on his life savings every year. That was symptomatic of a bigger problem he has no clue about.</strong></span><br />
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<span style="font-size: large;"><strong>Our friend was looking at his investments looking for an investment solution when all the while his investments actually have an investor problem. The bigger more damaging problem he alluded to as he handed me his account statement. "This is all the money I have and I can't afford to take any losses," is masking his problem. Our friend cannot live with (is scared to death of) any negative returns. He cannot live with any uncertainty, uncertainty that comes from depositing any of his money into equities (stocks). In this man's case he cannot see that <em>FEAR</em> is making his investment decisons for him and he's paying a huge price for it. </strong></span><br />
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<span style="font-size: large;"><strong>Let me make this clear he will pay a price no matter what he does, a much higher price than money can offset. If he says to himself, I am tired of seeing my money lose value, his alternative is to commit some portion of his portfolio to investments that do not guarantee his prinicpal. From year to year he will be living with the thought that he could see statements that reflect a decrease in his account balance. </strong></span><br />
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<span style="font-size: large;"><strong>The question is how much uncertainty can he live with. Can he go to bed at night and sleep comfrotably knowing that 10, 20,30, or 50% of his money is exposed to the volatility of the stock market? </strong></span><span style="font-size: large;"><strong>We already know the price he is paying for complete certainty. The value of his money can do nothing but go down with all of it being deposited into his ceritificate of deposit.</strong></span><br />
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<span style="font-size: large;"><strong>The thing that really limits his options and leads to poor decisions is not asking the appropriate questions. For example, he needs to ask about his life expectancy. Rather than thinking from year to year, what if he realized he needs to be concerned with his money lasting over the next 25 years? What if he looked at how poorly investments that have a 100% certainty of principal have done when compared to the rising cost of living as opposed to the stock market?</strong></span><br />
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<strong><span style="font-size: large;">Would it make it any easier if he had a better understanding of how to apply diversification to his portflio? Would he draw courage from seeing that when he makes use of investments that offset one another under different economic conditions that risk can be controlled?</span></strong><br />
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<span style="font-size: large;"><strong>More critical than all of these questions, is asking what purpose is he out to fulfill on with his money? In other words what is it that he is out to create with his money? Answering those questions will give him energy and passion, not answering them has him holding on to his money for dear life and his money is actually running his life. </strong></span><br />
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<strong><em>Brendan Magee is the founder and president of Inevitable Wealth Coaching. with questions, comments or suggestions call 610-446-4322 or e-mail </em></strong><a href="mailto:brendan@coachgee.com"><strong><em>brendan@coachgee.com</em></strong></a><strong><em>. </em></strong><br />
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<br />The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-698877117343387012012-10-22T13:40:00.001-07:002012-10-22T13:57:11.711-07:00Don't Expect Others To Do What You Don't<strong><span style="font-size: large;"></span></strong><br />
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<strong><span style="font-size: x-large;">Don't Expect Others To Do </span></strong><br />
<strong><span style="font-size: x-large;">What You Don't Do Either</span></strong></div>
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by: Brendan Magee</div>
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Oct. 2012</div>
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<strong><span style="font-size: large;">I was listening to a popular investment radio show on Saturday morning. The show was making what I thought were some a good points. They were talking about how many financial planners and stock brokers do not have a fiduciary responsibility to their clients. </span></strong><span style="font-size: large;"><br /></span><span style="font-size: large;"><br /></span><strong><span style="font-size: large;">To be a fiduciary means that you are someone who is responsible for money that is intended for someone else's benefit. For example you may be the trustee to money that is intended for someone's grandchildren which will be handed over to them at some point in the future</span></strong><strong><span style="font-size: large;">. </span></strong><br />
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<strong><span style="font-size: large;">You could even be a person who is serving on a board of trustees that holds accounts that are to be handed over upon retirement. When someone is acting in a fiduciary capacity, they have a legal obligation to the people who are going to benefit from that money. If bad investment decisions are made, the beneficiaries can hold all fiduciaries responsible and can sue for damages. </span></strong><br />
<span style="font-size: large;"><br /></span><span style="font-size: large;"><br /></span><strong><span style="font-size: large;">"<em>The Crash Proof Retirement S</em>how" was making the case that that liability is not something that brokers and planners are subject to. Therefore they can, without too much fear of reprisal, make investment recommendations to their clients and not worry if the investments crash. </span></strong><br />
<strong><span style="font-size: large;">In essence brokers and planners can profiting from making investment recomendations that are not safe or suitable in particular for retirees, and no doubt there is evidence that conflicts of interests have occurred in the past. The show aslo made a good point that most investors are not aware of the lack of safeguards when dealing with brokers and planners. Again, all good points.</span></strong><br />
<span style="font-size: large;"><br /></span><span style="font-size: large;"><br /></span><strong><span style="font-size: large;">What I thought was even more telling than what the show's hosts were saying about the lack of fiduciary standards that brokers and planners were subject to was the fact that I didn't hear the show's hosts say that they were acting as a fiduciary when making investment recommendations to their clients. </span></strong><br />
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<strong><span style="font-size: large;">The hosts were making the case that the lack of fiduciary standards was reason enough to not trust the advice of brokers or financial planners. However, merely pointing this out to you was the reason in which you could trust the recomendations and education you will receive from them. I can't see the ethics in trying to hold your competitors up to a standard that you yourself aren't willing to live up to.</span></strong><br />
<span style="font-size: large;"><br /></span><span style="font-size: large;"><br /></span><strong><span style="font-size: large;">I thought I would share with you one way to identify whether or not you are dealing with someone who is acting on and is well versed in the fiduciary standards of care. Ask the advisor if they are an Accredited Investment Fiduciary, AIF. Just like accountants have professional designations for which they need to pass courses and follow through with continuing education requirements, so do financial advisors who wish to specialize in a fiduciary standards for investing. </span></strong><br />
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<strong><span style="font-size: large;">To become an AIF requires enrolling in, passing the course, fulfilling on continuing education requirements that are laid out by the University of Pittsburgh's Center for Fiduciary Studies. </span></strong><br />
<span style="font-size: large;"><br /></span><span style="font-size: large;"><br /></span><strong><span style="font-size: large;">When dealing with investments, be it your own or for those that are for the benefit of some body else, an AIF is specifically trained in the standards of care that must be applied in order to maintain and demontstrate prudence. Perhaps most importantly, AIF's know that should they stray from those standards of care they as well as all other fiduciaries of that account, are subject to a legal liabilty and can be sued for damages.</span></strong><br />
<span style="font-size: large;"><br /></span><strong><span style="font-size: large;">So no doubt, I think it's not in the investor's best interests to be dealing with a broker or financial planner who is not acting in a fiduciary manner in regards to their investments. I also do not believe it is very ethical or honest to create the illusion that you are acting in a fiduciary capacity when you are not. I also think it is good to be able to very quickly identify whether or not you are dealing with an advisor who is acting in a fiduciary capacity or not. All you need to do is ask if they are an AIF. </span></strong><br />
<span style="font-size: large;"><br /></span><span style="font-size: large;"><br /></span><em><strong><span style="font-size: large;">Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments call 610-446-4322 or e-mail </span></strong></em><a href="mailto:brendan@coachgee.com"><em><strong><span style="font-size: large;">brendan@coachgee.com</span></strong></em></a><em><strong><span style="font-size: large;">. </span></strong></em>The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-4718859492605280182012-09-12T12:36:00.002-07:002012-09-12T12:38:03.352-07:00The Mutual Fund Show Misleading Investors<br />
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<strong><span style="font-size: x-large;">Adam Bold & The Mutual Fund Store Misleading Investors</span></strong></div>
by: Brendan Magee<br />
Sept. 12th, 2012<br />
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<span style="font-size: large;"><strong>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. </strong></span><br />
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<span style="font-size: large;"><strong>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 <em>no doubt</em> 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.</strong></span><br />
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<span style="font-size: large;"><strong>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 </strong></span><span style="font-size: large;"><strong>savings. </strong></span><br />
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<span style="font-size: large;"><strong>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.</strong></span><br />
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<span style="font-size: large;"><strong>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. </strong></span><br />
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<span style="font-size: large;"><strong>So here we are again. China has certainly been getting a lot of notoriety for its economic transformation, and somebody stands up and says, <em>abosolutely</em> 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. </strong></span><br />
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<span style="font-size: large;"><strong>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.</strong></span><br />
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<span style="font-size: large;"><strong> 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. </strong></span><br />
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<span style="font-size: large;"><strong>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. </strong></span><br />
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<span style="font-size: large;"><strong>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. </strong></span><br />
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Brendan Magee is the founder of Inevitable Wealth Coaching. With questions, comments, or suggestions, call 610-446-4322 or e-mail <a href="mailto:brendan@coachgee.com">brendan@coachgee.com</a><br />
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<br />The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com1tag:blogger.com,1999:blog-8777665942379121300.post-13750982823176630552012-09-07T13:11:00.000-07:002012-09-07T13:13:12.136-07:00No Plan Makes No Sense<br />
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<strong><span style="font-size: x-large;">Actions Without Clearly Defined Goals Creates Chaos</span></strong></div>
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by: Brendan Magee</div>
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Sept. 7, 2012</div>
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<strong><span style="font-size: large;">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.</span></strong><br />
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<strong><span style="font-size: large;">Mr. Utkus suggestons included:</span></strong><br />
<strong><span style="font-size: large;">- increasing the amount of money you are investing for retirment by one or two percent each year. </span></strong><br />
<strong><span style="font-size: large;">-plan on working two more years longer than anticipated. </span></strong><br />
<strong><span style="font-size: large;">-buying an annuity wth a portion of your retirment savings</span></strong><br />
<strong><span style="font-size: large;">-working a part-time job after retiring for five years</span></strong><br />
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<strong><span style="font-size: large;">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.</span></strong><br />
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<strong><span style="font-size: large;">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. </span></strong><br />
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<strong><span style="font-size: large;">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? </span></strong><br />
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<strong><span style="font-size: large;">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. </span></strong><br />
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<strong><span style="font-size: large;">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.</span></strong><br />
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<strong><span style="font-size: large;">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? </span></strong><br />
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<strong><span style="font-size: large;">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.</span></strong><br />
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<em><strong>Brendan Magee is the president of Inevitable Wealth Coaching. With questions or comments call 610-446-4322 or e-mail </strong></em><a href="mailto:brendan@coachgee.com"><em><strong>brendan@coachgee.com</strong></em></a><em><strong>. </strong></em>The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-83608065821583301892012-08-10T09:01:00.002-07:002012-08-10T09:13:14.157-07:00<br />
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<strong>Financial Planning Keeps The Power In Planners Hands,</strong><strong> Not The Investor's </strong></div>
by: Brendan Magee<br />
Aug. 2012<br />
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In the April/May 2012 issue of AARP Magazine, Allan Roth a financial planner, wrote an article entitled the,<br />
<strong><em><u>The Two Faces of Your Financial Planner</u></em></strong>. His intent was to spell out how, often times, well intentioned financial planners recommend the wrong things to be doing with peoples' money. In the artice he writes, "My point is this: Bad advice is epidemic in my industry and it doesn't come from villainous fraudsters such as Bernie Madoff. "We financial planners are masters at persuading ourselves that what's in our best interests is also the moral thing to do."<br />
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He goes on to talk about what planners want from the investing public and how money is the motivating factor behind the actions that planners take in approching potential new customers. He also lists in the article <strong><em>"10 Ways To Get The Best Money Advice" </em></strong>one of which is make sure you completely understand any investment recommendations and how they fit into your strategy. He also says that you should try to explain it to a friend to see if it makes sense to them as well. <br />
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This recommendation is one of the differences between investor coaching and traditional financial planning. It brings to mind how financail planning leaves the investor dependant on the financial planner. Here is what I mean by this. <br />
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With financial planning there is eventually a recommendation to put your money in a particular investment. There might even be a solid reason as to why the planner thinks the investment will help the investor. In this situation the investor is totally dependant on the planner in coming to conclusions about where their money should go. There's not a lot of peace of mind in that arrangement.Investor Coaching is a process where the investor is no longer dependant on any one to determine how their money should be invested. Investor independance comes from asking the right questions. How does the market work and where do returns come from are a couple of those questions. Other questions include, How do you come up with mathematical measurements of how much risk in one portfolio vs. another or how can you measure the diversification of one portfolio vs. another. <br />
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When the investor gets the answers to questions like these, they can see for themselves how their money should be invested. They don't need anyone's recommendations. Also, rather than go and explain the financial planner's recommendations to a friend to see if it makes sense to them, they are going to be able to articulate clearly and concisely what it is that they are doing with their money and be able to answer any and all questions as to why they are taking that approach as to the thousands of other strategies that are ou their.<br />
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How many people can clearly explain to soemone what is being done with their money and why? The investor is in a place of power, control and peace of mind when they are not living and dying on the recommendations of planners or friends.<br />
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The difference between the Mr. Roth's position as a financial planner and mine as a coach is this. Planning is a product driven approach. Coaching is an investor driven approach. Financial planning's product driven approach keeps the power in the hands of the planner who can make the recommendations to be in the right products, not in the investor's hands. Coaching's investor driven approach works to empower the investor. By asking the right questions, the investor begins to see what they couldn't see before. Therefore the investor is now able to experience new levels of power, control, independance, and peace of mind.<br />
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With questions or comments, call Brendan Magee at 610-446-4322 or e-mail <a href="mailto:brendan@coachgee.com">brendan@coachgee.com</a>.The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com1tag:blogger.com,1999:blog-8777665942379121300.post-5947181421641275882012-08-06T08:20:00.000-07:002012-08-06T08:20:55.430-07:00A good fight & then release<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgq7svoYJdJMHeXeWmIBR90DM2F7ng_lFCIue6NONhhRSuS3P202uCBzeXWQ7enFLDQn_89udSmYBcBfx9Asv6fu0ibeRcin4yN4JB_GAFech2pF3LsIBpVb3eRgiA3v6e3LBgASbNX23K0/s1600/P7310001.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="640" kda="true" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgq7svoYJdJMHeXeWmIBR90DM2F7ng_lFCIue6NONhhRSuS3P202uCBzeXWQ7enFLDQn_89udSmYBcBfx9Asv6fu0ibeRcin4yN4JB_GAFech2pF3LsIBpVb3eRgiA3v6e3LBgASbNX23K0/s640/P7310001.JPG" width="480" /></a></div>The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-18188843096095606952012-07-09T12:38:00.000-07:002012-07-09T12:51:20.774-07:00Bar B Que Time!!<div style="text-align: center;">
<u>Investor Coaching Session</u></div>
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<span style="font-size: large;"><strong>Bar B Que Time!!</strong></span></div>
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<span style="font-size: large;"><strong>&</strong></span></div>
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<span style="font-size: large;"><strong>The New Cost Of Capital</strong></span></div>
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<strong>When</strong>: Wed. July 25th</div>
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<strong>Where</strong>: Inevitable Wealth Coaching</div>
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3350 Township Line Rd.</div>
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Drexel Hill, Pa. 19026</div>
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<strong>Time</strong>: 6:30pm-8:00pm</div>
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<u><strong>The evening entails:</strong></u></div>
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-An inside look at just how much investing is really costing you</div>
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-See what brokerage houses are doing to keep you in the dark</div>
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-Burgers, Dogs, Chicken right off the grill!!</div>
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-A cold beer or a nice glass of wine</div>
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-Mr. Softee's serving your favorite frozen treats</div>
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<strong>Our presentation:</strong></div>
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<span style="font-size: large;"><strong><u>The New Cost Of Capital</u></strong></span></div>
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Please RSVP regrets or attendance by Mon. July 23rd. You can reserve your seat by calling 610-446-4322 or e-mail <a href="mailto:brendan@coachgee.com">brendan@coachgee.com</a>. </div>
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Seating must be reserved in advance and will be on a first to reserve basis!!</div>
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<br /></div>The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-62961578672098776802012-07-09T11:28:00.002-07:002012-07-09T11:29:52.019-07:00An Event You Won't Want To Miss!!<div class="separator" style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhibUHxYEwOAfw_8psLaW5uhAdDBcwWLRJvjKiUN8Vwl4lQjFdiLtUu2nncARyM8wdpaneXyJjlu24b6vA7C_PhG_RICKxjbDSJn7bQD5nBLcoeqb2rN-BZOpXkxkiCSWFZe00BDEsQ3UwF/s1600/cnew+cost+of+capital+flyer-001.jpg" imageanchor="1" style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="640" sca="true" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhibUHxYEwOAfw_8psLaW5uhAdDBcwWLRJvjKiUN8Vwl4lQjFdiLtUu2nncARyM8wdpaneXyJjlu24b6vA7C_PhG_RICKxjbDSJn7bQD5nBLcoeqb2rN-BZOpXkxkiCSWFZe00BDEsQ3UwF/s640/cnew+cost+of+capital+flyer-001.jpg" width="494" /></a></div>The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-33932281066696642582012-06-27T12:02:00.004-07:002012-06-27T12:13:24.167-07:00Market Timing & Rebalancing Are Not The Same Thng<div align="center">
<strong><span style="font-size: x-large;">Market Timing & Rebalancing Are Not The Same Thing</span></strong></div>
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by: Brendan Magee</div>
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<span style="font-size: large;">No doubt investing can be a very confusing topic. The lines between prudent strategies and imprudent strategies are not black and white. They are murky at best. Case in point, marekt timing as opposed to rebalancing which is a fancy way of saying buy low/sell high.</span></div>
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<span style="font-size: large;">Earlier in the week I had a client who had attended a movie event tell me that he believed rebalancing and market timing are the same thing. As he said it, my inner burglar alarm system went off and I couldn't help but tell him that under no circumstances are they the same activity. Since I believe that my client is not the only one with this misperception and it's vitally important for an invetor's success to have a clear distinction between the two, I thought I'd try to explain the difference between the two. </span></div>
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<span style="font-size: large;">Let's start with market timing. This is what has proven to be among the most damaging strategies an investor can engage in and it is perhaps the most difficult to avoid. Why is it so difficult to avoid? Look around at all the advertisements and opinions on what to do with your investments. <strong>"It's time to buy gold! It's time to get out of</strong> <strong>the stock market. It's time to get back in the market!"</strong> All of these messages are predictions and forecasts about the world's markets, and they all come with tons of statistics to validate the wisdom of the advice.</span></div>
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<span style="font-size: large;">As enticing as the suggestions may be, we know in life nobody can consistently reliably predict the future. The gutters are filled with the victims of brokerage houses suggestions proving to be not worth the paper they were printed on. Just ask John Corzine. Market timing is bad for your portfiolio and your financial secuirty.</span></div>
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<span style="font-size: large;">Rebalancing on the other hand is fundamental to successful investing (buy low/sell high). Rebalancing is a by product of asset allocation. Asset allocation is where an investor decides of their total investable dollars what percetage will go to which particular investment categories. For example, you might decide to commit 10% to U.S. Large Company Stocks and the remainder of your portfolio to go to other investment categories in certain percentages. </span></div>
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<span style="font-size: large;">Rebalancing means that at a given period of time you come back and look at your portfolio and see how the various parts of your portfolio have performed in relationship to one another. In our example let's U.S. Large Company stocks had a very profitable return. Let's say it's up by 25%, while the other parts of your portfolio may have gone down a little or not as much as your U.S. Large Company Stocks. Rebalancing means you are going to always work towards keeping your portfolio in its original percantages. </span><br />
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<span style="font-size: large;">So anything above 10% in U.S. Large Comapny Stocks gets sold off and that 15% profit gets distributed among the investments that have gone down or haven't gone up as much as your U.S. Large Company Stocks. Systmatically, your portfolio sold what was high and bought what was low. </span></div>
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<span style="font-size: large;">The difference between this and market timing is that this transaction was not based upon a prediction about the future. It was based on keeping the portfolio in its original percentages. The reason this is so important is that over 90% of a portfolio's performance is derived from its assel allocation policy. </span></div>
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<span style="font-size: large;">When investors apply discipline to their asset allocation policy they have a much easier time following the golden rules of investing, buy low/sell high, and history has shown they are ultimately more successful than investors who fall victim to market timing strategies. </span></div>
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<strong><em>Brendan Magee is the founder and president of Inevitable Wealth Coaching. Call 610-446-4322 or e-mail </em></strong><a href="mailto:brendan@coachgee.com"><strong><em>brendan@coachgee.com</em></strong></a><span style="font-size: large;"><strong><em><span style="font-size: small;"> with questions, comments or suggestions.</span></em></strong> </span></div>
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<span style="font-size: large;"></span></div>The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-55605596875627515922012-06-21T12:39:00.004-07:002012-06-21T12:39:50.193-07:00Check Out Main Street Money Showing<div style="text-align: center;">
<span style="font-size: x-large;">Matson Moneys CEO Mark Matson's Presentation</span></div>
<div style="text-align: center;">
<br /></div>
<div style="text-align: center;">
<span style="font-size: large;">Main Street Money,</span></div>
<div style="text-align: center;">
<span style="font-size: large;">How to Outwit,</span></div>
<div style="text-align: center;">
<span style="font-size: large;">Outsmart, & Out Invest</span></div>
<div style="text-align: center;">
<span style="font-size: large;">The Wall Street Bullies</span></div>
<div style="text-align: center;">
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<div style="text-align: center;">
<span style="font-size: large;">Will Air This Saturday, June 23rd At 1pm</span></div>
<div style="text-align: center;">
<span style="font-size: large;">On Mind Tv</span></div>
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<br />The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-13339745543278596792012-06-20T11:15:00.002-07:002012-06-20T11:15:28.880-07:00Still Working On The Wrong End Of 401k Problme<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEheWKuW43a9FemfWnX7k74r_psHOISCMrT_ta5MERGq6d5PPYlSErIrGJ5eAXATnJOHLjFI1Ma7fOtq4H8PzDxAb09ULrUumhGX5GmDDWBilsKr8iSFWz3mDz45x1CVsDoZvXgbwr01RBw_/s1600/solin+401k-001.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="640" rca="true" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEheWKuW43a9FemfWnX7k74r_psHOISCMrT_ta5MERGq6d5PPYlSErIrGJ5eAXATnJOHLjFI1Ma7fOtq4H8PzDxAb09ULrUumhGX5GmDDWBilsKr8iSFWz3mDz45x1CVsDoZvXgbwr01RBw_/s640/solin+401k-001.jpg" width="494" /></a></div>The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-40919158156786043572012-04-17T14:19:00.002-07:002012-04-17T14:29:11.801-07:00Mc Donald's Great Place For Fries & Shakes, Not Investment Advice<div align="center" class="MsoNormal" style="margin: 0in 0in 10pt; text-align: center;"><span style="font-size: 18pt; line-height: 115%;"><span style="font-family: Calibri;">Mc Donald’s, A Great Place For Fries And Shake, Not Investment Advice</span></span></div><div align="center" class="MsoNormal" style="margin: 0in 0in 10pt; text-align: center;"><span style="font-family: Calibri;"><span style="mso-tab-count: 3;"> </span><span style="mso-tab-count: 3;"> </span>April 17<sup>th</sup>, 2012</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-family: Calibri;"><span style="mso-tab-count: 8;"> </span>By: Brendan Magee</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: 12pt; line-height: 115%;"><span style="font-family: Calibri;">A week or so ago, my wife and I decided to stop on our way home and get a chocolate shake and fries at Mc Donald’s.<span style="mso-spacerun: yes;"> </span>As I am waiting in line , I can’t help but over hear a conversation a fellow customer is having with a friend she has just run into. </span></span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: 12pt; line-height: 115%;"><span style="font-family: Calibri;">She is warning him to take all his money out of the stock market. Something she has read has told her that another economic collapse is going to occur within the next few months. Her friend left and I just couldn’t help myself from asking this woman a few questions. </span></span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: 12pt; line-height: 115%;"><span style="font-family: Calibri;">First, I asked where she had come upon these predictions of economic collapse? She was nice enough to let me know that credibility could be given to the forecasts because amongst those making these predictions were Donald Trump’s economic advisors. She told me the analysts were predicting that a gallon of gas was going to go to six dollars a gallon and that was going to fuel the economic calamity. She said their advice was to get out of the stock market and put everything into cash until the storm blows over. </span></span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: 12pt; line-height: 115%;"><span style="font-family: Calibri;">My next question to her was, “So Donald Trump’s advisors can predict the future? They know what’s going to happen in the next few months?”<span style="mso-spacerun: yes;"> </span>The women responded that she didn’t think they were engaged in predicting the future. </span></span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: 12pt; line-height: 115%;"><span style="font-family: Calibri;">I then asked her, Do you believe that any one can predict how six billion people around the world are going to react to events that haven’t even happened yet? Before she could answer, I said because in order for Trump’s or anyone else’s advisors to be able to know where the stock market is going that is exactly what they’re going to have be accurate on.<span style="mso-spacerun: yes;"> </span>As she was walking to the door, probably more than a little annoyed at the jerk giving her such a hard time about well intentioned advice she had made to a friend, she justified her position with a couple of comments.</span></span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: 12pt; line-height: 115%;"></span><span style="font-size: 12pt; line-height: 115%;"><span style="font-family: Calibri;">She said:</span></span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: 12pt; line-height: 115%;"><span style="font-family: Calibri;">The advisors weren’t engaged in predicting the future, rather, they were advocating being <b style="mso-bidi-font-weight: normal;">“prepared.”</b></span></span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: 12pt; line-height: 115%;"><span style="font-family: Calibri;">She said she didn’t take any risks with money. </span></span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: 12pt; line-height: 115%;"><span style="font-family: Calibri;"><strong>So here are a couple of truths about investing she was either in the dark or in denial about. </strong></span></span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: 12pt; line-height: 115%;"><span style="font-family: Calibri;">One, when you make decisions with your investments that are based on predictions or forecasts about the market or the economy, you are engaged in gambling and speculation. The only way to consistently win at that game is by being able to predict the future. </span></span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: 12pt; line-height: 115%;"><span style="font-family: Calibri;">Two, there is no such thing as a risk free investment. As she is going about her investment decisions, she has several risks, two of which I will elaborate. She is engaged in market timing. She will have to be right at least twice. She will have to be correct at which time to get out and when to get back in to the market. Being wrong about having her money out of the market and missing the best days of the market is going to be devastating on her returns. </span></span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: 12pt; line-height: 115%;"><span style="font-family: Calibri;">Three, if someone really knew what the stock market was going to do, they would not be telling you, they’d keep the information to themselves and make an absolute killing. </span></span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: 12pt; line-height: 115%;"><span style="font-family: Calibri;">Four, all the knowable and predictable information about the economy is already factored into the price of stocks and current market levels. It is only unknowable and unpredictable information that will move the market. It’s possible that gas prices could go to six dollars a gallon and if it does it will have an impact on the global economy. <span style="mso-spacerun: yes;"> </span>It’s also possible that that won’t happen at all. Your guess is as good as mine or Donald Trump’s for that matter. It might be fun to debate such things, but it has been academically proven that it is detrimental to your portfolio to base investment decisions on such kinds of predictions.</span></span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: 12pt; line-height: 115%;"><span style="font-family: Calibri;">So every once in a while treat yourself to a treat at Mc Donald’s, but do not employ any investment advice you may over hear. </span></span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: 12pt; line-height: 115%;"><span style="font-family: Calibri;">By the way, the young lady who was kind enough to speak with me, thanks for being nice enough to engage in a conversation with a perfect stranger, and I owe you a milkshake for your hospitality. Just call or e-mail me and let me know where to send the gift card.</span></span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span style="font-size: 12pt; line-height: 115%;"><span style="font-family: Calibri;">Brendan Magee is the president of Inevitable Wealth Coaching. With questions, comments, or suggestions, call 610-446-4322 or e-mail </span><a href="mailto:Brendan@coachgee.com"><span style="color: blue; font-family: Calibri;">Brendan@coachgee.com</span></a><span style="font-family: Calibri;">. </span></span></i></b></div>The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-51516603882397516972012-01-23T12:59:00.000-08:002012-01-23T13:04:31.235-08:00What's Really Behind Romney's Wealth<div align="center" class="MsoNormal" style="margin: 0in 0in 10pt; text-align: center;"><br />
</div><div align="center" class="MsoNormal" style="margin: 0in 0in 10pt; text-align: center;"><span style="font-family: Calibri; font-size: x-large;">What We Can Learn From Romney’s Success</span></div><div align="center" class="MsoNormal" style="margin: 0in 0in 10pt 1.5in; text-align: center; text-indent: 0.5in;"><span style="font-size: 9pt; line-height: 115%;"><span style="font-family: Calibri;">By: Brendan Magee</span></span></div><div align="center" class="MsoNormal" style="margin: 0in 0in 10pt 1.5in; text-align: center; text-indent: 0.5in;"><span style="font-size: 9pt; line-height: 115%;"><span style="font-family: Calibri;">Jan. 2012 </span></span></div><div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;"><span style="font-family: Calibri; font-size: large;">Saturday morning I was listening to am1210’s The Big Money Show hosted by Steve Cordasco. Cordasco made the case that the 401k system in this country is broken. As evidence to that he cited a study that showed that only two percent of the workers who have been participating in a 401k plan had reached the $1 million dollar mark. To him, this meant the remaining 98% were failing to make the grade. By comparison, Cordasco spoke of the investment success that Republican Presidential Candidate Mitt Romney has achieved. He said the advantage that Romney had over the average 401k plan participant was that he had autonomy in that he could decide the investments he would invest in.<span style="mso-spacerun: yes;"> </span>Whereas, Romney had an endless list of investment options, the 401k plan participant could only invest in the options their employers made available. </span></div><div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;"><span style="font-size: large;"><br />
</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;"><span style="font-family: Calibri; font-size: large;">For the time I could listen, Coradsco got a few callers to agree with his position. These were 401k participants who felt f they could do a better job of selecting investments for their 401k plan than their bosses. </span></div><div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;"><span style="font-size: large;"><br />
</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;"><span style="font-family: Calibri;"><span style="font-size: large;">In either case, I think Cordasco and the shows listeners are missing the main reason for Romney’s wealth. Bear in mind, I have never seen Romney’s portfolio. I have no idea what he invests in, nor a clue about his investment strategies. However, I don’t think I am going too far out on a limb when I say it’s not so much about the investments he’s chosen as it is his behavior that is responsible for his success. I know that over his lifetime if he engaged in a constant buy high/sell low approach, he wouldn’t come anywhere near the amount of wealth he’s been able to attain.<span style="mso-spacerun: yes;"> </span></span></span></div><div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;"><span style="font-size: large;"><br />
</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;"><span style="font-family: Calibri; font-size: large;">Hopefully this is a good illustration of what I mean. Let’s suppose you had the money and you built a magnificent 10 bedroom house. This house had the most modern appliances, an in home movie theatre, swimming pools, marble floors, luxurious bathrooms with Jacuzzi bathtubs , tennis courts, a huge kitchen, big flat screen t.v.’s etc. The market value of your house upon completion was around $5 million. Now just after you moved in, you proceeded to take a jack hammer and sledge hammer to every room in the house. Your $5 million house isn’t going to retain its value for long. The homeowner’s and investor’s behavior has to be consistent with their asset growing in value or it will lose value.</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;"><span style="font-size: large;"><br />
</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;"><span style="font-family: Calibri; font-size: large;">401k plans give their participants a variety of options to invest in. There are stock funds, bond funds, money market funds, and fixed options to choose from. If we take a look at the market rates of return for just a few of the equity and bond markets from 1973-2010, the returns are more than enough for investors to outpace the rising cost of living, 4.42%. U.S. Large Co. Stocks, 9.81%, U.S. Small Co. Stocks 12.59%, Long-term U.S. Government Bonds 8.57%, International Large Co. Stocks 9.58%, International Small Co. Stocks 13.38%(As noted by CRSP).<span style="mso-spacerun: yes;"> </span></span><br />
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<span style="font-family: Calibri; font-size: large;">So the question becomes, if investors are not seeing these kinds of returns from their 401k plans or other investments, why aren’t they? It’s not as if these investments are not readily available to every investor. The answer could be that their behavior is inconsistent with realizing these returns. Could an investor be sabotaging their own financial security?</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;"><span style="font-size: large;"><br />
</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;"><span style="font-family: Calibri; font-size: large;">So if investors are having difficulties with their investments and are solely looking at their portfolios, they may be working on the wrong end of the problem. They might have to step back and take an honest look at themselves as investors. As painful as that may be, it’s nothing compared to running out of money in retirement, having to take a job at a fast food store in your 60’s or 70’s, or showing up on your children’s front door with no place left to go. The great thing about looking at yourself as an investor is the responsibility is in the hands of the investor not in the hands of a portfolio or a mutual fund. When responsibility comes back to the investor, so does power and control. </span></div><div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;"><span style="font-size: large;"><br />
</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;"><span style="font-family: Calibri; font-size: large;">When Romney says in the debates he’s not going to apologize to anyone for the success he’s had, I think that comes from a history of his taking control of his finances and not being dependant on anyone else. That is something to be proud of and most people in his shoes would be just as proud. <span style="mso-spacerun: yes;"> </span>I think most people want control of their destiny in their hands, not anyone else’s. We just won’t get it though if we fail to realize our behavior more than the investments we choose is going to determine our success or failure.</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;"><span style="font-size: large;"><br />
</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;"><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span style="font-family: Calibri; font-size: large;">Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions, comments, or suggestions call 610-446-4322 or e-mail </span><a href="mailto:Brendan@coachgee.com"><span style="color: blue; font-family: Calibri; font-size: large;">Brendan@coachgee.com</span></a><span style="font-family: Calibri; font-size: large;">. </span></i></b></div><div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: justify;"><span style="font-size: large;"><br />
</span></div>The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0tag:blogger.com,1999:blog-8777665942379121300.post-30681606119336776712012-01-06T12:30:00.000-08:002012-01-06T12:43:32.474-08:00Instincts & Emotions Can Play Havoc With Couples Finances<div align="center" class="MsoNormal" style="margin: 0in 0in 10pt; text-align: center;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14pt; line-height: 115%;"><span style="font-family: Calibri;">Instincts And Emotions Can Play Havoc On </span></span></b></div><div align="center" class="MsoNormal" style="margin: 0in 0in 10pt; text-align: center;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14pt; line-height: 115%;"><span style="font-family: Calibri;">A Couple’s Ability To Deal With Finances</span></span></b></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-family: Calibri;"><span style="mso-tab-count: 7;"> </span>By: Brendan Magee</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-family: Calibri; font-size: large;">A couple of weeks ago I met with a very nice married woman and she shared with me some serious financial problems she was experiencing. In her early fifties with retirement appearing closer on the horizon, <span style="mso-spacerun: yes;"> </span>Jodie told me her retirement savings took a big loss. As serious as this problem was, this wasn’t the biggest problem she was dealing with. <span style="mso-spacerun: yes;"> </span>Jodie counted her husband, Tom’s, <span style="mso-spacerun: yes;"> </span>lack of interest in dealing with the family’s finances as the most vexing problem. For all the years they’d been married the job of investing and banking fell on her shoulders. <span style="mso-spacerun: yes;"> </span>No matter how many conversations she had with him about their finances, Tom just didn’t seem to show the proper amount of interest or concern.</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: large;"><br />
</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: large;"><span style="font-family: Calibri;">Bear in mind, Tom and Jodie have a fi</span><span style="font-family: Calibri;">ne marriage. He does take good care of her. He drops her off and picks her up from work every day. They have raised good children and now have grandchildren to dote on. They are definitely sweethearts to one another. </span></span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: large;"><br />
</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-family: Calibri; font-size: large;">Now during our conversation, which Tom didn’t attend, Jodie became reenergized. Prior to our conversation she mentioned that if she remained on the same path she could see herself experiencing a deep depression. We were both feeling good about our conversation because she was beginning to see that when she started to ask the right questions, the investing breakthroughs she was seeking were within reach. <span style="mso-spacerun: yes;"> </span>We decided to schedule another appointment and start to get the answers to the questions that would help her have the peace of mind she was after. </span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: large;"><br />
</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-family: Calibri; font-size: large;">This is where things went surprisingly off track. Jodie went home and tried to describe the conversation she and I just had and how it was something she wanted to proceed with. Tom was an unmitigated "no". He did not want to proceed under any circumstances. He didn’t even want to entertain the idea of talking with me just to have a better understanding of how coaching was different and could help them. Given that Jodie mentioned how Tom avoided conversations about money his reaction wasn’t all that surprising. What was surprising were Jodie’s conclusions. </span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: large;"><br />
</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-family: Calibri; font-size: large;">She knew that her investments would continue to suffer if she continued down the wrong path. She had known for years about Tom’s reluctance to deal with the family’s finances. She told me she had been raised by her parents to be very responsible about money and took the time to do so over the years. She felt <span style="mso-spacerun: yes;"> </span>the disconsolation that was coming her way if things weren’t made right, but she decided to cancel our next appointment any way and not go any further with coaching.</span><br />
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<span style="font-family: Calibri; font-size: large;"> When we spoke she said she couldn’t proceed if it meant doing damage to her marriage. The pain of crumbling finances was more bearable than the perceived pain of disrespecting her husband.</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: large;"><br />
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<span style="font-family: Calibri; font-size: large;">As a coach the dilemma that Jodie is dealing with is nothing new. We are dealing with a couple who think they have money and investing problems, which is the wrong end of the problem. The biggest problem they have is they can’t see that their instinctual <span style="mso-spacerun: yes;"> </span>and emotional wiring is malfunctioning.</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: large;"><br />
</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-family: Calibri; font-size: large;">All human beings are motivated to avoid pain. Jodie is feeling pain from two sources. The first is of poorly performing investments and where that is likely to lead her should that problem not be fixed. She is also feeling the pain of Tom not showing enough interest in the family’s finances. She knows she isn’t capable of fixing the problems on her own so she appropriately seeks professional help. </span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: large;"><br />
</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-family: Calibri; font-size: large;">Unfortunately, she is getting a double dose of pain from the fear that if she goes ahead without the agreement of Tom, he’ll become upset with her. She is forced to choose the lesser of two evils, a damaged marriage or a failing retirement portfolio and all that goes along with that. Tom is no less susceptible to his humanity than Jodie. It’s painful and stressful to be asked to deal with something you’ve been avoiding for so long. </span><br />
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<span style="font-family: Calibri; font-size: large;">The real problem is, the conversation about how their instincts and emotions are shutting down their ability to deal with some very serious financial problems and keeping them from experiencing the abundance they both deserve and could experience isn’t happening. They are convinced that theirs is purely a financial problem. <span style="mso-spacerun: yes;"> </span>Not having this conversation, they are to a degree enslaved by their instincts and emotions rather than masters of them.</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: large;"><br />
</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-family: Calibri; font-size: large;">What Jodie knows to be the right course of action gets overridden by hers and Tom’s instincts and emotions. The problems she knows needs to be fixed remain and continue to do damage, damage that time could make impossible to undo.</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: large;"><br />
</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-family: Calibri; font-size: large;">Until people recognize and accept how powerful their instincts and emotions are, especially when it comes to money and investing, it will remain a hidden source of frustration and confusion. The only way to effectively deal with our instincts and emotions in investing is by getting coached. A coach will provide several valuable tools. First they will help you to focus on the questions that will help you stay on the path you know is the right one. Second, with your permission, they’ll call you on it, <span style="mso-spacerun: yes;"> </span>when your instincts and emotions are getting the better of you. </span><br />
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<span style="font-family: Calibri; font-size: large;">Coaching is what is lacking in Jodie and Tom’s world and they are both paying a terrible price for it. There’s no need for you to pay the same price. Find yourself a qualified coach!</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: large;"><br />
</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-family: Calibri; font-size: large;">Here’s the big thing as far as instincts and emotions are concerned. You were born with them. They aren’t going anywhere. In his infinite wisdom the Creator blessed us with these wonderful gifts. They make life interesting and exciting. There are just a few areas where they work against our best interests, and money and investing are among them. Given how important money and investing are to our lives, you know God must have a sense of humor. </span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: large;"><br />
</span></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span style="font-family: Calibri; font-size: large;">Brendan Magee is the founder of Inevitable Wealth Coaching in Drexel Hill, Pa. With questions, comments or suggestions, call 610-446-4322 or e-mail </span><a href="mailto:Brendan@coachgee.com"><span style="color: blue; font-family: Calibri; font-size: large;">Brendan@coachgee.com</span></a><span style="font-family: Calibri; font-size: large;">. </span></i></b></div><div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-family: Calibri;"><span style="font-size: large;"><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span></span></span></div>The Investor Coachhttp://www.blogger.com/profile/17271615681897507066noreply@blogger.com0