Objective information about retirement, financial planning and investments


Avoid these 9 Investing Mistakes


Investing is at best a risky proposition and sometimes even the best investment ideas don’t work out. However avoiding these 9 mistakes can help improve your investing outcomes.

Avoid these 9 Investing Mistakes

Inability to take a loss and move on 

It’s difficult for many investors to sell an investment at a loss. Often they prefer to wait until the investment at least gets back to a break-even level. I think its part of our competitive nature. Investing is not a competitive sport, leave that for our Olympians.  When reviewing your investments ask yourself “Would I buy this holding today?” If the answer is no, it’s time to sell and invest the proceeds elsewhere.

Not selling winners

I’ve seen many investors over the years refuse to sell highly appreciated holdings, all or in part. There is always the risk that you’ll sell and the price will keep going up. But sometimes it’s best to protect your gains and sell while you’re ahead or at least consider selling a portion of the holding and reinvesting the proceeds elsewhere. The latter can be part of your portfolio rebalancing process.

Investing without a plan

When you take a road trip in your car you generally have a map to help you to get to your destination. Investing is a means to an end, a road map to achieve your goals such as providing a college education for your children or funding your retirement.

Without a financial plan how will you know how much you need to accumulate to achieve your goals?  How much risk should you take?  What types of returns do you need to shoot for? Are on track toward your goals?  Essentially investing without a plan is much like hopping in the car without any idea where you are headed. 

Trying to time the market

It’s difficult to predict when the market will rise and fall. Even if the stock market is following a general trend, there will be up and down trading days. Trying to buy and sell based on those daily fluctuations is difficult. While there are professional traders who do this for a living, for most of us this is a losing proposition.

Worrying too much about taxes

Taxes can consume a significant portion of your investment gains for holdings in a taxable account. While nobody wants to pay more tax than needed, in my opinion paying taxes on a gain is almost always better than dealing with an investment loss.

Not paying attention to your investments

Your portfolio needs to be evaluated and monitored on a periodic basis.  You should reevaluate a stock when the company changes management, when the company is acquired by or merges with another company, when a strong competitor enters the market, or when several top executives sell large blocks of stock.

This applies to mutual funds as well. Manager changes, a dramatic increase or decrease in assets under management or a deviation from its stated style should all be red flags that cause you to evaluate whether it may be time to sell the fund.

Failure to rebalance your holdings  

This goes hand in hand with having a financial plan. Ideally you have an investment policy for your portfolio that defines the percentage allocations of your investments by type and style (stocks, bonds, cash, large stocks, international stocks, etc.).  A typical investment policy will set a target percentage with upper and lower percentage ranges for each style. It is important that you look at your overall portfolio in terms of these percentages at least annually.

Different investment styles will perform differently at various times.  This can cause your portfolio to be out of balance. The idea behind rebalancing is to control risk. If stocks rally and your equity allocation has grown to 75% vs. your target of 60% your portfolio is now taking more risk than you had planned. Should stocks reverse course, you could be exposed to over-sized losses.

Assuming recent events will continue into the future 

The first 15 plus years of this century have been tough on investors. The market tumbled during the 2000-2002 time frame and then again in 2008-2009. More recently the stock market dropped steeply and suddenly in the wake of the Bexit vote in the U.K. These events have instilled fear into many investors. It’s hard to blame them.

However this fear and the assumption that recent events will continue into the future might also be keeping you from investing in the fashion needed to achieve your financial goals. Taking the events of recent years into account is healthy, however letting these events paralyze you can be destructive to your financial future. This holds true for stock market drops as well as protracted bull markets.

Building a collection of investments instead of a well-crafted portfolio

Are you investing with a plan or do you simply own a collection of investments?  Great football teams like my beloved Green Bay Packers have a better chance of winning when everyone embraces and executes their role in the game plan for that week.  In my experience you will increase your chances for investment success when all of the holdings in your portfolio fulfill their role as well.

Nothing guarantees investment success.  Avoiding these 9 investing mistakes as well as others can help you increase your odds of being a successful investor.

Concerned about stock market volatility? Approaching retirement and want another opinion on where you stand? Not sure if your investments are right for your situation? Need help getting on track? Check out my Financial Review/Second Opinion for Individuals service for detailed guidance and advice about your situation.

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Are You Ready For Retirement?


To my readers:

The infographic that was originally included in this post was taken down as was the link to the firm that supplied it due to a malware warning on their site.  Please check out the many other posts on this site in the retirement category and other categories that may interest you.  I apologize for any inconvenience but your online safety in viewing my site is of the utmost importance to me.

Original post without reference to the infographic

Happy Thanksgiving to all of you and to your families.  We are thankful for having all five of us home together and the time we get to spend as family. For anyone with adult kids you know that doesn’t happen as often as we might like sometimes.

As I write this we are sitting out Black Friday as we always do and looking forward to a weekend filled with family, great leftovers, and football. Especially on Sunday when I am hoping for a Packer victory over the Partriots at Lambeau Field.

Retirement is a journey.  I can’t think of a better time to get started or to gauge your progress than now no matter what your age.  Why not take some time over the last month of year to ensure that you hit the ground running in 2015?

Cutting Investment Losses and Lovie Smith

English: LOVIE SMITH, of the Chicago Bears, in...

Lovie Smith is the Head Coach of the Chicago Bears.  A column in the Chicago Tribune this past weekend suggested that Smith might be on his way out at season’s end.  Smith makes a bit north of $5 million per year and his contract runs through the 2013 season.

Smith has had some success with the Bears, leading them to the Super Bowl after the 2006 season and to the NFC championship game after the 2010 season (where they lost to my Green Bay Packers).  Last year the Bears started 7-3 but faded and missed the playoffs.  This year they started 7-1 but currently stand at 8-5 with a key game against the Packers this weekend.  Looks like another potential meltdown for the underachievers.  In fact Smith has missed the post season 4 of the past 5 seasons.

The investment decision process

Investors are faced with the decision about where to best deploy their investment dollars on a regular basis.  Sometimes this decision involves taking a loss on an investment and moving on.  Maybe this involves a once high-flying mutual fund or perhaps a stock that looked promising.   When trying to guide a client through this decision process, the first and main question that I ask is “… would you buy this investment today?”  Often it’s tough for investors to admit that they made a choice that didn’t pan out.  However I would offer that the ability to take a loss when warranted and move on is a trait of successful investors.

The same process is also undertaken (or should be) by companies.  Has our investment in a new business line or in the acquisition of that competitor paid off for us?  More so what are the future prospects?  Is this still a good use of our capital and in the best interests of our shareholders?

In the case of the Bears, if they fire Smith they are assured of having to pay his salary for 2013 plus that of any assistant coaches who might be under contract if they are let go by a new coach.  The decision should be about whether Smith is the right person to lead the team into the future.  Pro Football is a business; the Bears are the 8th most valuable NFL franchise according to Forbes.  In spite of a lack of success on the field (their last two championships were in 1985 and 1963) they have a loyal fan base and play in the NFL’s second largest market.  Will a continued decline in the team’s performance hurt the value of business?  Some teams have seen immediate success from a new coach; take the San Francisco 49ers last year.  On the other hand there are no guarantees.

Love your family not your investments

I have encountered a number of folks who have a sentimental attachment to a particular investment. This might be due to having held it for a long-time or perhaps due to having inherited it from their parents.  This has no place in investing.  I’m not advocating trading for its own sake, or selling an investment on temporary weakness.  Rather you need to consistently review your holdings and your overall portfolio.  If changes are needed then make them.  In some cases this might involve taking a loss, admitting you made a poor investment decision, and deploying your money elsewhere.  This needs to be done within some sort of plan or framework such as an Investment Policy Statement.

In the case of the Bears, this transplanted Packer fan hopes the Bears not only keep him around for 2013, but that he is around for years to come.  I suspect many Bear fans are hoping the team eats his 2013 salary and makes a better coaching investment.

Please feel free to contact me for a review of your investment portfolio.

Photo credit:  Wikipedia


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4 Tips for Setting and Achieving Financial Goals

IRVING, TX - JANUARY 31:  Quarterback Aaron Ro...

With the start of the college and pro football seasons upon us, coaches and players are in the process of setting goals for themselves and for their teams.  On defense this may mean improving the number of yards allowed (I hope this is at the top of the list for my beloved Green Bay Packers).  For the offense a goal might be to lower the number of quarterback sacks allowed by 20%.

Most of us dream of things we’d like to do in the future or perhaps what we would like our lives to become. When it comes to the world of financial planning, these aspirations need to be translated to goals in order to determine how best to achieve them.

One of the initial discussions most financial advisers have with a new client centers on the client’s goals for their money. Typical aspirations for clients might include funding their children’s education or saving for their own retirement. Goals might also center around a certain lifestyle, both now and perhaps later on during retirement.  In order to translate these aspirations into goals, the following must be attached to these aspirations:

Set a time frame. A goal must have a time frame by which it needs to be achieved. For college, it is generally near the child’s 18th birthday. Retirement is typically at a certain age. If the time frame is open-ended, how will you know when the money is needed? How will you track your progress? How will you know how much you will need to save over time?

Over the course of time, the time frame for some goals might change.  Retirement is a prime example.  Perhaps you had planned on retirement at age 63, but your investments took a major hit during the 2008-09 market decline.  You are now back on track, but new calculations tell you that age 66 is more realistic in terms of being able to generate the type of annual cash flow to support the lifestyle you’d like to enjoy during retirement.  

Goals need to be quantified. It’s not enough for a football player to say they want to improve; they need to quantify what improvement means.  For the college student-athlete this might mean improving their average yards per catch by 10% and improving their classroom GPA by half a grade point.  Saving for retirement is the same. What is a comfortable retirement? How much will it take annually to fund a comfortable retirement? Start out by looking at your current level of savings, and try to quantify how much you will need annually to live comfortably in today’s dollars.

Take this annual amount and subtract things like a pension or social security that will provide you with monthly income. The balance is what you need to fund. Translate this “gap” into an amount that you need to accumulate by some date, and now you have a retirement accumulation goal that is quantified and has a time frame. Keep in mind you will also need to factor in the impact of inflation.

For example, you might determine that $1 million is needed in 20 years to fund your desired retirement lifestyle. Armed with this information, you can start looking at where you are and what you need to do to achieve your goals.

Monitor your progress. Establishing quantifiable, measurable financial goals with a set time frame is just the first step. Now for the real work. You need to monitor your progress on a regular basis, because things change. For instance, the stock market may rise or fall rapidly, you might lose your job, an illness could occur, or you might find yourself ahead of schedule in terms of the amount accumulated.

Adjust and adapt.  It is important to monitor your progress and adjust your goals when needed. It is also not uncommon for goals to change over time. This is often because life changes.  Are you expecting another child years after you thought you were done?  Did you suffer a job loss?  Get married?  Get divorced?  These and innumerable other situations arise in our lives.  Curveballs like these can throw a wrench into the best laid financial plans.

While there are no guarantees that doing all of this will lead to achieving your financial goals, in my experience those who fail to plan their financial futures are simply planning for failure.

Remember: Financial planning is an ongoing process, not a one-time event.

Please feel free to contact me with your financial planning questions.

Photo credit:  Daylife

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