Book Review: The Behavior Gap

The Behavior Gap, by Carl Richards


If a picture is worth a 1000 words, then the sketches drawn by Carl Richards are certainly valuable. Richards' newly published book, “The Behavior Gap,” is even more valuable and highly worthwhile reading.

Richards has created a very unique and elegantly simple way of conveying financial thoughts by drawing sketches, using a Sharpie pen. These sketches are featured in weekly blog posts in The New York Times. Richards is a financial planner based in Utah.

In The Behavior Gap, Richards has done an excellent job of combining numerous sketches with a very forthright narrative of financial topics and life lessons. The book is well written and full of excellent advice, a lot of which is much deeper and more meaningful than they initially appear.

Richards clearly writes about topics ranging from the importance of the process of financial planning, as opposed to getting a thick financial plan, to happiness, money, and great conversations, and how all of these are so interrelated.

Richards writes: “Simplicity is both beautiful and functional. And yet, people are often disappointed when I propose a simple solution to their investment or financial planning problems. Such solutions can often be reduced to a simple calculation on the back of a napkin… Our attraction to complexity distorts the way we approach our financial goals. The simple options that have the largest impact and your financial success require discipline, patience, and hard work.”

We have a number of Carl's framed prints in our office already. This book will be a valuable addition to accompany those sketches.

How a Financial Advisor Can Add Value

These are some of the ways that we provided value for our clients during 2011:

• Listened. We have listened and talked with them, to help them handle the volatility of the stock markets. As a result, they have been able to maintain their investment plans, which will benefit them in the long run.

• We have adhered to our cornerstone investment fundamentals: recommending globally diversified stock portfolios, holding very high quality fixed income investments, focusing on asset allocation, and the use of Investment Policy Statements.

• We have rebalanced our client portfolios throughout the year, focusing on the discipline of buying asset classes when they are low and selling them when they are higher. Similarly, we have done tax loss selling throughout the year, as applicable, not just at year end.

As we have strong CPA backgrounds, we have provided financial advice about many topics to our clients, such as:

• We have advised numerous clients on various aspects of their mortgage refinancing decisions, so they could take advantage of historical low interest rates.

• Made recommendations for our clients’ 401(k) plan investments, as we consider those retirement assets part of their overall investment portfolio.

• Assisted clients with college tuition planning, which ranged from evaluating section 529 plan decisions and investment options, to advising grandparents who wanted to make major prepaid contributions.

• Advised a number of clients on significant Roth conversions, which will have huge long-term benefits for these individuals, as well as future generations of their families.

• Helped a number of clients with charitable planning, including the planning, establishment and investing for charitable family foundations. These will benefit both the families now, as well as numerous charities in the future.

• Required minimum distribution planning, for clients who are older than 70 ½, who are required to take distributions from their various retirement accounts.

Other things we have done, which benefit our clients:

• We have attended numerous national conferences, as well as participate in biweekly peer group phone conversations with fellow advisors, to learn, share ideas and become better advisors.

• Read. We are voracious readers, of everything from the Wall Street Journal and the New York Times, both in paper and digital forms, as well as trade publications, books, blogs, Twitter and podcasts. We are continuously reading and learning.

• Blogging and Twitter: this will be the 28th blog post that I have written during 2011. Writing blog posts is a great way for us to communicate our thoughts and views on a timely basis, which we hope is valuable to our clients and prospects. Brad is also very active on Twitter, which is a terrific way for us to communicate with others, both in terms of sharing information that we find valuable, as well as connecting with numerous people throughout the country that we learn from every day.

Part of our core investment philosophy is recognizing that we do not have a “crystal ball” and cannot predict the future. We focus on what we can control, to the best of our ability, on behalf of our clients.

• As financial advisors, our guiding principle is to provide our clients with a greater sense of comfort and security, so they can enjoy and focus on the other aspects of their life.

We are truly appreciative for our clients and the many referrals that we have received in 2011, as our firm has continued to grow. We hope that you and your family have a very enjoyable holiday season and that 2012 brings you good health and happiness!

Investing: Can an Advisor Add Value?

Do you want this person/fund to manage your money?  Is this the right fund for you?

Resume:

• Beat the S & P 500 every calendar year from 1991-2005
• Named "Portfolio Manager of the Decade" in 1999 by Morningstar
• Barron's included him on its "All-Century Team" in 1999
• Fortune Magazine desribed him as "one of the greatest investors of our time" in 2006 profile
• And then there is this fact:  For the five year period ending December 31, 2010, this fund was LAST among 1,187 US large cap stock funds, as tracked by Morningstar.

The fund and fund manager described above is Bill Miller, manager of the Legg Mason Capital Management Value Trust for 30 years, who recently announced his retirement, effective in April 2012. The facts of this stock mutual fund performance clearly shows why it is nearly impossible to consistently predict the "best" fund managers over a long period of time.

After his great track record and much publicity, his fund was in the 98th or 99th percentile in 4 out of the last 5 calendar years, through 2010.  Through October, 2011, his fund is in the 82nd percentile. (per Morningstar data).

How can someone who is so "good," then become so unsuccessful?

This is a key question, which every investor must consider, in determining their advisor and investment philosophy. Was Miller lucky?  Did he lose his touch?  How do you know if your advisor or mutual fund manager will do the same?

Understanding what occurred with this fund, and how common this inconsistency in mutual fund performance is, is the basis for one of the fundamental investment philosophies that we adhere to. We recommend this strategy for your investment success, over a long period of time.



To describe the different philosphies, Bill Miller picked stocks for his fund that he thought were "value" stocks. He believes in active investing; that he could identify the best stocks to own that were undervalued. We believe that no one has the ability to consistently identify fund or money managers that can outperform a respective benchmark, over a very long period of time. Thus, we adhere to a "passive" strategy, which means that we recommend a very globally diversified set of stock mutual funds that hold a set of stocks in each "asset class," without making predictions or claiming to have a crystal ball.

It would have been very reasonable in 2000 or 2005 to put money into Bill Miller's fund, based on his past track record. Let's see how his fund did, and compare it to one of the funds that we use, in a similar asset class. Bill's fund is a large company value fund, so we will compare it to Dimensional Fund Advisor's (DFA)US Large Cap Value III fund (DFUVX).

For the 10 years ended 11/29/11, $10,000 invested would have grown as follows (per Morningstar.com):

• Legg Mason Fund:           $8,363 (a loss of $1,637)
• DFA US Large Value      $15,388 (a gain of $5,388)
• Vanguard S&P 500         $12,627  (a gain of $2,627)

By using the appropriate long term strategy, as your investment advisor, we can add significant value. We can provide you and your family with a solid investment strategy, that will result in greater comfort and sense of security.

Other Conclusions:

The Lost Decade:  There has been much written about how the past 10 years ended in 2010 were considered the "lost decade," where investors made no money. This was true for many investors. While the  figures above are for the 10 years ended in November 2011, the DFA US Large Value fund was very profitable over this period. This shows the importance of diversification and owning more than just the S&P 500 as the basis of your portfolio.

Costs and expenses: 

We believe to be most successful, you should focus on the things that you can control. Thus, evaluating mutual fund expense fees should be an important part of your investment approach.

Bill Miller's fund charged various up-front fees, depending on which "class" of the fund that an investor used. None of the funds that we recommend charge such fees.

The annual expense ratio of Miller's fund is 1.75%. This means that each year, the fund subtracts 1.75% in fees, from whatever the actual performance is. The comparable DFA fund that we utilize, DFUVX charges .14%, one of the lowest expense ratios in the industry, for this fund category.

There are many other lessons to be gained from reviewing the experience of this fund and this fund manager, as well as carefully evaluating most mutual funds, or your own investment portfolio.  
  
Important notes:  The above examples are illustrative only. No one fund should constitute an investment portfolio. The above figures do not include an investment advisory fee, which our firm charges, separate from mutual fund fees. Legg Mason's fund would have charged a load, which is not included in this information.

Sources:  Morningstar website, 11/30/11; article by Weston Wellington, Dimensional Fund Advisors, dated 11/29/11

11 Wealth Management Tips for 11/11/11

1. Have a written investment plan, based on your need, willingness and comfort to take risk. It does not have to be fancy. But it is extremely important.

2. Regularly rebalance your portfolio. Be disciplined about this. It will help you to buy low and sell high.

3. Evaluate your portfolio performance against a set of benchmarks, at least annually.

4. A significant part of your stock portfolio should be invested in international and emerging markets.

5. Recognize that you do not have a crystal ball and cannot predict the future. Recognize that no one else can predict the future either. If you are using an advisor, and he or she regularly makes predictions or "bets," you may need to make a change. Do not focus on past performance, as it is not an indicator of future performance.

6. Diversification. Always. For everything. You should own large and small companies. Growth and value companies. In many countries and industries. Understand the reason to own smaller and value companies.

7. Know when it makes sense to own municipal bonds. Know which municipal bonds sectors to avoid, due to higher historical default statistics. If you own municipal bonds, they should be diversified across many states, not just the state you live in.

8. If you have significant fixed income investments, like bonds or CDs, you should not own bond funds. And definitely not long term or low credit quality bond funds.

9. Focus on what you can control. Focus on costs and your asset allocation. You cannot control or influence any company, industry or the stock market.

10. Review your estate plan documents and retirement plan beneficiary designations, to make sure they reflect your wishes and are accurate. If you have a revocable trust, make sure that it is actually funded.

11. Use a fee-only financial advisor. Their interests will be aligned with your interests. Find an advisor that can provide many benefits and value. They can help you plan for the future. They can listen to you, so you can handle volatile markets and prevent big mistakes. They can save you time, improve your investment experience and provide your family a greater sense of comfort and security.

I hope this list is helpful and provides you with real value. If there are items on this list that you are not familiar with, or would like to discuss further, please contact us.

Financial Markets Don't Come with Traffic Signals

It is unfortunate, but true. There are no financial traffic lights that signal “green.”  It’s all safe now…enter the stock market with no risk.

There are no reliable financial traffic lights that signal “red” and you should exit the stock market now.

So, how to handle the volatility that seems to face us? These are things we have been discussing with our clients. For years. Because in our view, “this time is not different.” Just the dates and issues have changed.

You must have a plan. It does not need to be fancy. Working with us, we will help you adhere to your plan. But you need to develop a written plan that provides for an asset allocation that makes sense for you and your family. We help to develop this plan, and how much to allocate to fixed income (cash, bonds, CDs) and how much to invest in stocks, and where, such as US, international, emerging markets and real estate. And we discuss with you the importance of “value” investing.

So what about now? What is going on?

Part of our philosophy is recognizing that we do not have a crystal ball and that we cannot predict the future. That being said, we are realistic and we are optimistic, for the long term. History teaches us that if we are patient, globally diversified investors, we will be rewarded. Most problems will get resolved. Companies, people and countries innovate and are resilient.

We recognize that there are many problems in the world, today. Right now, the financial markets are focused on Greece and European debt. Last year, the markets fluctuated with every drop of news from China. The US debt crisis and the “supercommittee” that is working on the US budget will be the focus in November.

We take a longer view. There are many positives. As Warren Buffett has stated, Mr. Market is usually too optimistic or too pessimistic. We feel that the markets’ decline this summer was overstated and caused more by emotional fear, than financial reality. We don’t think that future corporate earnings expectations have dropped by 15-20%. Many companies are reporting stronger earnings, have healthy balance sheets (corporate cash is at all time highs), have used record low interest rates to borrow cheaply and oil / gas prices have dropped or stabilized. These are all positives.

We also recognize that there are many problems. Governments of all types will need to reduce spending, to reduce their deficits. That reduction in spending will hurt economies and certain sectors. Uncertainty is a hot topic, especially in the press. Some type of uncertainty always exists. That will not change. We focus on what we can control.

Timing the market does not work. While worldwide stock markets declined in the third quarter, much of that decline has been recouped in the first few weeks of October. Just as no one could have predicted the steep decline on July 1 that subsequently ensued, no one could have predicted on October 1 the rally that has occurred.

We wish we had a crystal ball. We wish we had the perfect financial traffic light. Instead, we have a solid investment philosophy (which is not based on predictions and guess work) and financial planning skills that provide our clients with comfort and financial security. What do you have?

Dieting, Exercise and Investing. What's the Lesson?

How do you succeed at dieting, exercise and investing?

Are these unrelated? Not really.

Success at all three requires discipline, consistency and a program that you can stick to over the long term.

So how does this relate to investing? As advisors, we have adopted an investment philosophy that can be adhered to over the long run. It is rational, and provides our client’s with peace of mind, so they can stick with it.

In the past few weeks, the financial world has provided further evidence of why our approach makes sense, which gives us even greater confidence in our long term philosophy regarding stock investing. The markets have been very volatile since July, and our clients with stock investments have incurred losses, as have most others. But there is a distinct difference in approach.

We recognize that we cannot predict the future. We do not believe that we can identify which fund or money managers will do the best over the long run. Thus, we have adopted a philosophy which recognizes this.

A few weeks ago, Fidelity Magellan replaced the manager of this very large mutual fund, after years of underperformance. Over the last 10 years, this fund, once the largest in the world, ranked in the 95th percentile (1 being the best), trailing its benchmark and the S & P 500 by approximately 2.7% per year.

Fidelity, and this manager, have vast resources and a huge, global staff to assist in the research and stock picking for this fund. Despite all these resources, Fidelity’s staff was unable to outperform or come close to its target benchmark on a consistent basis, or even a majority of the time. The lesson: it is hard to pick a good money manager, in advance, that will outperform its respective benchmark, on a consistent basis over a long period of time.

The second example has been a number of reports of hedge funds reporting huge losses or funds that are simply shutting down, due to underperformance or dissatisfied investors. John Paulson, a hedge fund “titan” was an investment hero in 2008, as he placed huge bets against mortgage and financial stocks, and he was right.

Now fast forward to 2011. The WSJ reported today that two of his funds are down 32% and 47% for the year, far worse than market averages. He has placed huge bets on Bank of America, Hewlett-Packard and China’s Sino-Forest Corp. He has been very wrong in 2011. His funds have also lost billions on investments in gold and gold related stocks. Many of his clients are impatient and not willing to wait for his next great idea.

The lesson: There are many. Making huge, concentrated bets are risky. Sometimes they work, sometimes they don’t. When they don't, and your bets are very concentrated, the results can be horrendous.

Diversification, and not making concentrated bets and predictions, does work, which is why that is one of our core philosophies.

Our next post will further explain our investment philosophy.

Sources: Morningstar, for Fidelity Magellan; WSJ for Paulson information, 10/11/11 online

Financial Advisors Keep Learning

As the world is continuously changing, and the financial markets certainly are, it is important that we as financial advisors continue to learn, listen and interact with top industry experts.

Keith and I recently attended a series of programs in late September, as we do multiple times a year. I participated in a “Masters Forum” study group on Friday and Saturday, September 23-24th. This group of 20-25 members, which started in 2006, meets twice a year, once in the fall and once in the spring. We also talk in smaller groups every two weeks, to discuss topical issues. Keith participated in a similar study group on Sunday, and also talks to members of his peer group on a regular basis throughout the year.

These sessions were followed by the BAM Annual National Conference, which is a 3 day event featuring top speakers from across the country. This conference is attended by approximately 125 firms, representing $14 Billion in assets under management.

The following are some of the items from these meetings:

• Investor behavior is critical to investment success. That was the message of Carl Richards, of http://www.behaviorgap.com/. This NY Times weekly writer and sketch artist, has developed a series of sketches to explain and discuss complex financial issues in a simpler manner. We now have 4 of his sketches in our office, and will soon have a fifth. Visit us to see them!
• Carl emphasized the importance of investors' behaviors and emotions, which cause huge gaps (differences) between market returns and what most people actually earn on their own (usually much less!).
• We interacted with a number of portfolio managers and mutual fund executives, regarding updates on the financial markets and the strategies that we utilize. We are very confident in our long term investment philosophy, which for stocks is primarily implemented through Dimensional Fund Advisors (DFA) mutual funds.
• Hedge funds: we continue to not recommend them, as they are hard to evaluate, costs are huge (relative to mutual funds that we recommend), a substantial numbers of these funds fail, which makes historical analysis very difficult, as the poor performing funds drop out of the databases. 

•  We heard one of the top national speakers on retirement distribution strategies.

• Portfolio rebalancing is critical for long term investment success. Having the discipline to rebalance (to buy certain stocks when they are low, and sell certain stocks when they are high) remains a key part of our philosophy and value we provide to our clients.
•  We discussed the importance of communication skills and truly listening to our clients. One of the speakers, Mitch Anthony, has written a book titled “Defining Conversations.” He stressed the importance of real conversations, about deep issues and concerns, not just having superficial discussions. I started this book and highly recommend it.

Throughout the five days, we had the opportunity to share ideas and discuss various topics with both industry experts, as well as our peers throughout the country. This strong network of fellow advisors is an important component of our firm, as being able to discuss both specific client situations and general financial issues is critical to maintaining our discipline and add intellectual value on behalf of our clients.

How a Financial Advisor Adds Value

The financial markets have been turbulent again in recent days. But does this really affect you, today?


Asset Allocation
A financial advisor should determine what the appropriate amount of your money should be invested in stocks, while at the same time providing you with a solid cushion of cash, CDs and bonds. This way, you can sleep well at night, without worrying about the everyday movements of the stock market.

We all realize that it is easier to be an investor when stock markets are going up, but it is times like these, where major decisions (and major mistakes) can be made.

For example, we work with clients so that they have many years of cash and bonds available, so that if the stock portion of your investments goes down (temporarily), you will not be impacted (today) and need to sell the stocks right now.


Time Frame and Faith
A key component of the above planning, is that we understand what a client's time frame is. For someone with a long time frame, or does not need to withdraw money from their investments right now, a decline in the stock market should be viewed as temporary. As Warren Buffett often says, Mr. Market is always setting a new price, and it is usually either too high or too low.

We clearly recognize that there are many economic issues facing the US and the world currently. However, the same could be said about most time periods of the past, as well. The economies of the US and the world are resilient. The issues and challenges change, but there is always uncertainty.

We are realistic in our concerns, but longer term, realize that history teaches us that stocks do well in the long run, and particularly after down markets. The current volatility can be viewed as an opportunity.

If the economy looked terrific, and that was clear to everyone, then the markets would be at a high....and maybe you should be considering selling some stocks (we call this disciplined rebalancing).

At times like this, when there is uncertainty and fear, there can be a number of reactions. To freeze and not make any decisions is not in your best interest. If you feel you have not done good planning, or do not feel comfortable with your investments, then NOW is the time to act, to be decisive, or to get a "second opinion" of your investments.

The US Govt Debt Downgrade, Debt Ceiling and You

As I write this on Sunday evening, August 7th, the financial markets and economic news have been extremely volatile and mostly negative over the past 10 days. As always, it is important to take a step back and try to look at events with perspective.


First, the US Government spent weeks haggling over raising the Federal debt ceiling. What is normally a routine process became a very tumultuous one.

The impact: in the short run, the uncertainty of whether the issue would be resolved caused the stock market to decline, prior to the agreement between Congress and the President. In the longer run, the process and agreement has heightened the public awareness of the need for national fiscal responsibility, which is good. (Similarly, Ross Perot raised this awareness before Bill Clinton’s first election, which resulted in many economic positives, such as lower interest rates and good stock markets).

Downgrading of US Government debt by Standard &Poors: The possibility of this action had been rumored, but not widely realized by the general public. Thus, it is likely that financial markets will react negatively to the news.

The impact: This is interesting to consider. If "Wall Street" had an inkling this was to occur, interest rates would have risen or would be rising. Interest rates have done the opposite. Interest rates have been steadily falling, particularly in the past few months. The 10 year Treasury has declined from 3% at the beginning of the year to around 2.45% as of last Friday.

The impact of the downgrade may be long-term positive, if it causes Washington leaders of both parties to realize they need to compromise their hard line positions. Standard & Poors was correct, as they cited the negative political climate and ineffectiveness of Washington in their reasoning. We don't expect the US to default on any Treasury securities. However, the current deal does not make many specific decisions. The really tough decisions are handed to a committee. The huge reductions are delayed toward the end of the 10 year period. And most importantly, the actual deficit is not declining. The agreement is only slowing the rate of growth in the deficit. Thus, the downgrade may force US leaders to actually work on making those tough decisions, and making them stick. If that occurs, that would be real progress.

Oil prices have been declining, and sharply in the past week. The price of oil per barrel was recently in the $95-100 range and is now trading around $84/barrel. This is due to the anticipated decline in the economy, as well as trading factors (normal volatility). Thus, gas prices should remain well below $4, and may go below $3.50 per gallon soon. This is good for the consumer and will provide some needed stimulus to the economy.

Impact to investors:

In tough times, it is good to reflect on the basics, our core fundamental philosophies and consider the thoughts of those we respect the most. With that in mind....

We believe in focusing on the long-term and on matters that we can control. Thus, it is not a winning strategy to try to time the market in the short-term.

I don't think Warren Buffett is waking up Monday ready to sell stocks because of the US debt downgrade. He often says, and has profited from, buying when others are scared (during market declines). It is better to buy when there is fear and sell when others are being greedy. Thus, we would be more inclined to be buyers than sellers now.

It is vitally important to be properly allocated and have a globally diversified portfolio. Properly allocated means having ample cash or fixed income assets, to financially and psychologically handle markets downturns. We work with our clients to have such written strategy plans in place.

One of the greatest benefits that we can assist our clients with is just talking to them, to discuss these events, so they can better understand them and the impact they can have on their personal lives. It is our goal that our clients be able to have greater financial comfort and security, as well as peace of mind.

Investing and the Debt Ceiling: Our Thoughts

As this is written, mid-day on Monday July 25, 2011, Congress and the White House are at an impasse on resolving the impending debt ceiling limit, which must be resolved by August 3rd.

How should an investor react to this situation?

As clients and readers of this blog know, we advise clients to focus on the “long term” and on events that are within your own control, when developing your personal investment plan/strategy.

There are always going to be events and issues that cause investors stress and uncertainty. The financial markets do not like uncertainty. As uncertainty rises, markets tend to fall. However, the “financial markets” are really made up of individuals each making decisions, either on behalf of their individual portfolios or individuals who work for large institutions or brokers and financial advisors.

It is nearly impossible to act in a profitable manner, by anticipating future events. For example, the financial markets rallied last week, as progress (unexpected good news) was made on the debt limit issue. As that progress turned into a stalemate over the weekend (unexpected negative news), many expected the financial markets to drop significantly this morning. As I write this, the US markets are down less than ½%, which would be a surprise to many.

We would not recommend adjusting your portfolio in reaction to this specific event, assuming that you have a proper asset allocation and financial strategy for the long term. It is reasonable to expect some additional stock market volatility (meaning losses), if no progress is made in the next few days. It is not a winning strategy to make significant portfolio changes in response to specific events. It is almost impossible to time the markets, to be able to sell stocks at the right time and then buy back in at the right time.

We are concerned that our elected officials are not able to resolve these matters until the last minute, which is unsettling. However, we feel that the need to resolve the issue will prevail, though it may be a bumpy process. In the long run, the increased focus on Federal fiscal responsibility is important and it is being addressed, regardless of one’s political views.

10 Years from now Tweet

Diversify globally. Be disciplined. Focus on long term. Have a written plan. Control what you can control. Be positive.Use index-like funds.

Today's @dominoproject related prompt was to write a message to yourself, 10 years from now, in the form of a text or tweet. A tweet is limited to 140 characters, as is the above advice.

This advice is short and concise, but I am very confident that 10 years from now, this will prove to be good advice, which will benefit those that adhere to it.

Overcoming Uncertainty (Part I)

How do you overcome financial uncertainty?  You don't (for most people).

If you want to reap the rewards of the stock market, then you will always have to live with some element of financial uncertainty.

If you invest all your money in bank certificate of deposits or US Government Bonds, you will have minimal risk and be rewarded with minimal returns (and really, a negative real return, after taxes and inflation).  Otherwise, you cannot completely overcome financial uncertainty. This is a simple, but true concept.


The role of a good financial advisor is to assist you in dealing with this financial uncertainty, so you can become comfortable with the uncertanties of the world, and financial markets, specifically.

More in part II.

This post is prompted by the the @projectdomino writer's challenge.  Today's prompt:  Overcoming Uncertainty.  "Nothing can bring you peace but yourself.  Nothing can bring you peace but the triumph of principles."  Ralph Waldo Emerson.

This a part of a challenge for bloggers and writers to post, which began on May 31. I will receive a prompt, or idea, from them each day, which may be the basis for that day's post. For more information on this, see my first post on May 31, 2011.

Purely Personal: Very Happy after 1,921 Days

Some days you remember for the rest of your life. Yesterday was one of those days.


After 1,921 days, from March 2006 until yesterday, my daughter has worn a back brace for her pediatric scoliosis, nearly 24/7. Starting in 2nd grade. Every day. When it was 95 degrees at summer camp. Every night.

When her wonderful doctor, Dr. Michelle Caird, of the University of Michigan's Children's Hospital told us yesterday afternoon that she no longer had to continue wearing the brace, it was as if my daughter had more than won the lottery. The ear to ear smile never left her face the rest of the day. I think she was smiling while she slept last night.

What was so emotional was how she has handled this for all these years and the things she shared yesterday. These are the life lessons that make us so proud of her, which is why I am writing this.

She realizes that others have had to deal with far worse things. Yes, hers was a daily inconvenience. But she did not have cancer. She was not dying. She just had to wear this brace every day and every night. It was uncomfortable. It meant not being able to wear regular blue jeans or tighter fitting shirts. It meant wearing different clothing than other kids. But she handled this so well, most people never even knew, as she rarely ever complained. She never let it slow her down or contain her enthusiasm for life. Not at all.

She talked of how she could not have done this without so many people's support. Family, friends, other parents, camp counselors and more. Everyone would assist in putting it on for her. Wearing her brace meant that she could not sit on the floor. In grade school, when teachers read during “carpet time,” she would sit on a chair, in the back or side of the room. And quietly, her friends would join her. That is true friendship. That is what supporting someone really means.

So Rachel, we are lucky. You are lucky. The brace worked. You are healthy and have handled this challenge with such maturity, way beyond your age. You did it every day and with a phenomenal attitude. So celebrate! Go buy those jeans you want to!

I am very thankful that your mom was persistent in dealing with your medical issues, and recognized that we needed a new specialist in 2006. I’m thankful that your pediatrician, Dr. Vicky Solway, recommended that we go to UM Children’s Hospital. I’m thankful that Dr. Michelle Caird is so knowledgeable and kind to you. I’m thankful that Ron, of Wright and Fillipis, who made your many braces, treated you so well.

I will miss the closeness of you asking: “Dad, will you put on my brace?” But not too much! And I’ll adjust to this change very well. And I know that you will too.

#trust30 #gratitude

Stock Market Risks: Change Your Thinking

Stock price of ABC Company:     today:            $  80

Stock price of ABC Company:     1 month ago  $ 100

Is there more risk today, at the lower price, or a month ago, at the higher price?

In today's Sunday New York Times, a commentary began: "While market risk appear to be climbing - stocks have lost ground for six consecutive weeks as the economy seems to have hit another soft patch..."

Most investors get nervous and consider markets to be riskier when prices are falling.

However, from a risk standpoint, investors would be best to consider a reverse in their psychology or how they view stock prices.

When prices decline, there is actually less future risk, as the expected future return is greater.

When prices are rising, people feel more positive about stock prices and seem more willing to invest. This type of thinking leads to the opposite of what is in their best financial interest. It emotionally feels "best," but leads to the opposite of a succinct investment philosophy:  buy low and sell high.

Part of the value of working with our firm (or other good financial advisors) is to discuss this type of emotional psychology, as it relates to investing and making financial decisions.

If you take a long-term perspective, and can view stock prices more similar to buying retail goods (want to buy something when it is on sale, not at regular retail prices), you will have a better investment experience.

Like many things in life, this may be easier said than done. It can be hard to buy stocks in a declining or turbulent market, but that decision can be very profitable in the long run.

Cite:  The Worry Meter May Overlook Some Warning Signs, New York Times, 6/12/11, Paul J. Lim

Note: This is my 9th post of the @projectdomino writer's challenge.This a challenge for bloggers and writers to post for 30 consecutive days, beginning on May 31. I will receive a prompt, or idea, from them each day, which I may use as the basis for that day's post. The above post is not based on today's Domino prompt. For more information @projectdomino, see my post on May 31, 2011.

Five Years: Financial Thoughts

Note: This is my 8th post of the @projectdomino writer's challenge.This a challenge for bloggers and writers to post for 30 consecutive days, beginning on May 31. I will receive a prompt, or idea, from them each day, which I may use as the basis for that day's post. For more information on this, see my post on May 31, 2011.

Many of these suggested prompts could be personal, but I'm going to write this one based on being a financial advisor.

Prompt: What would you say to the person you were 5 years ago? What will you say to the person you'll be in five years?

Do you see the pattern that follows?

5 years ago, June 2006:  What advice would I give now, to myself, for 2006?

Provide financial advice to your clients that is always in their best interest.

Be sure that your clients have well diversified portfolios, based on their personal need, ability and willingness to take risk.

A portfolio of stocks should be globally diversified, which means that there should be a significant allocation to international stocks, emerging markets, small company stocks, as well as real estate. A diversified portfolio is not just the S&P 500 index fund.

Remember that over time, the vast majority of mutual funds and money managers do not beat their benchmarks.

Do not take risk with bonds. Only buy very high quality. Reaching for higher yielding, but less quality bonds, is not a good practice. Fixed income is the place to be very safe.

Expect the unexpected, and plan for it. Talk to your clients about bad markets as well as good markets.

Assist your clients in remaining disciplined, especially during down markets. If they do this, they will be well rewarded, after a market downturn, when the market rebounds.

It is impossible to accurately time the market. It is almost impossible to be right twice, as to when to sell (get out of the market) and then again (when to buy back into the market).

Rebalancing is crucial to long term success. When an asset class does well, sell some of it. Use the money to buy an asset class that has not done as well. This leads to buying low and selling high.

Plan with your clients (and have a simple written document), so your clients can achieve a sense of financial comfort and security.

Buy individual bonds or CDs of very high quality, only, which will work well if interest rates rise or fall. Bond mutual funds will not do well if interest rates rise.

5 years in the future, June 2016: What advice would I give now, to myself, for 2016?



Provide financial advice to your clients that is always in their best interest.

Be sure that your clients have well diversified portfolios, based on their personal need, ability and willingness to take risk.

A portfolio of stocks should be globally diversified, which means that there should be a significant allocation to international stocks, emerging markets, small company stocks, as well as real estate. A diversified portfolio is not just the S&P 500 index fund.

Remember that over time, the vast majority of mutual funds and money managers do not beat their benchmarks.

Do not take risk with bonds. Only buy very high quality. Reaching for higher yielding, but less quality bonds, is not a good practice. Fixed income is the place to be very safe.

Expect the unexpected, and plan for it. Talk to your clients about bad markets as well as good markets.

Assist your clients in remaining disciplined, especially during down markets. If they do this, they will be well rewarded, after a market downturn, when the market rebounds.

It is impossible to accurately time the market. It is almost impossible to be right twice, as to when to sell (get out of the market) and then again (when to buy back into the market).

Rebalancing is crucial to long term success. When an asset class does well, sell some of it. Use the money to buy an asset class that has not done as well. This leads to buying low and selling high.

Plan with your clients (and have a simple written document), so your clients can achieve a sense of financial comfort and security.

Buy individual bonds or CDs of very high quality, only, which will work well if interest rates rise or fall. Bond mutual funds will not do well if interest rates rise.

Conclusion:  Do you see the pattern? 

A Diamond Lost Hurts All of Us

This post is my 7th entry since I started the Blogger Challenge on May 31. I was planning to write on a  @projectdomino prompt tonight, but I read something more important in the New York Times online.

Unfortunately, due to poor decisions by a number of Republican Senators, a Nobel Prize winning economist is withdrawing his nomination to the Federal Reserve. Peter Diamond, nominated by President Obama, wrote an OpEd piece in the New York Times, announcing these intentions ("When a Nobel Prize Isn't Enough" http://www.nytimes.com/2011/06/06/opinion/06diamond.html?_r=1&src=ISMR_HP_LO_MST_FB .

This is a huge loss for our country. It represents politics over skill and experience, which is very sad, given the urgent issues which face our country. Mr. Diamond is an expert on structural unemployment and the Social Security system. Those are two of the most important issues that need to be addressed by the Federal Reserve, and our country in general.  Having an expert on these issues on the Fed would provide Diamond with a voice to be heard, to set the national agenda in working on these matters.

Yet this highly esteemed MIT professor has been deemed "unqualified" by a number of Senators, particularly Senator Shelby of Alabama. Shelby cites his lack of experience in developing monetary policy. The Federal Reserve should be the "best and brightest" of our nation's economists, working together to address critical economic issues. His areas of expertise are vitally important to developing the foundations of monetary policy.

The Federal Reserve is missing a number of members. This is unfortunate and hopefully the vacant positions will be filled with other, very well qualified people.

Can You Predict the Future? Blogger Challenge #6

Today's post is short, yet powerful.


Prediction is very difficult, especially about the future.

                  Niels Bohr, Nobel Prize winner, Physics

If you cannot predict the future, then how can you accurately select which stocks or mutual funds or money managers will be the most successful, consistently, for the long term?

You can't....or you have been very lucky. Even Warren Buffett would agree with this.

If this makes sense to you, then we predict that our wealth management strategy for investing will make sense to you.

Give this some thought. Then act.

Financial Perspective Today: Blogger Challenge Day 5

Today, I've decided not to use the @projectdomino suggested prompt topic and to write about something I feel more passionate about.


To be successful in investing and build long-term wealth, one must have the proper perspective and frame of mind.

The financial markets have been choppy recently, particularly since the beginning of May. As we discuss financial matters with clients and prospects, many raise similar concerns.

People are concerned about many things: the economy in general, the price of oil, the US budget deficit and the national debt, overseas debt levels, unemployment levels, inflation, interest rates, etc. We share these concerns.

Some people look at all these problems and "decide" not to invest or make financial decisions now. This is not in their long-term best interest. As advisors, we recognize and try to emphasize the following perspectives:

We are realists, meaning that we understand these concerns, but are also long-term optimists. We realize that we cannot control these issues. We focus on the things we can control for our clients. However, we know that the US economy and the world in general can be very resilient, in the long run. Things tend to work out, over time. Consider the days and months after 9/11. We all shared huge concerns. Over the years, those fears lessened and travel and the economy rebounded. Resiliency.

We cannot predict the future. Thus, we cannot accurately predict the price of oil 3 months, 6 months, or 2 years from now. Thus, we cannot and do not make investment recommendations based on things that we cannot forecast.

We talk with our clients extensively, about any financial concerns they may have, both personal to them and/or these other outside factors. We then develop a financial plan and asset allocation policy that is appropriate for their personal circumstances. This helps them to move from "inaction" due to external factors to having a plan that they are comfortable with. This provides them with the ability to move forward, so they can be financially secure, and sleep well at night.

The facts prove that this is a good strategy, if you have the proper perspective and discipline. Staying on the stock market sidelines has not been a good strategy, if compared to a properly globally diversified portfolio.

The following figures may provide helpful perspective. These are for the S & P 500, which is an index of 500 large US companies. This is not a globally diversified portfolio, but useful to review.

2 years ago, June 2009        925

1 year ago, June, 2010     1,040

6 months ago                   1,220

June, 2011                      1,300


(Note: The above information for the S&P 500 is for illustrative purposes only and does not represent the financial performance of our firm or our clients.)

Biggest Challenge: Day 4 of Blogger Challenge

Note: This is my 4th post of the @projectdomino writer's challenge.This a challenge for bloggers and writers to post for 30 consecutive days, beginning on May 31. I will receive a prompt, or idea, from them each day, which may be the basis for that day's post. For more information on this, see my post on May 31, 2011.


Today's prompt: Identify one of your biggest challenges at the moment and turn it into a question... After 48 hours, journal what answers came up...and evaluate them.

As I want to post each day, I'm going to do an initial post for this question and then review it in 48 hours.

My challenge and question: How can I begin to exercise on a regular basis and stick to it?

This may not be my "biggest" challenge at the moment, but starting and continuing to exercise regularly has been a significant challenge for me for a very long time.

Like many things in life, the answer to this is quite simple: to just do it, and be disciplined about it.

How to stick to it? As people who know me know, I read a lot. Most advice I've read recommends that to get important things done, do them first thing in the morning. So, to be successful with an exercise routine, it would be best for me to exercise first thing in the morning, at least most of the time.

To set and accomplish goals, tracking and recording progress is important, so I should do this. I will use a monthly calendar.

One of my favorite books is The Compound Effect by Darren Hardy, publisher of Success Magazine. He writes about the effects of taking small, incremental steps toward any goal, which, over time, results in larger, long term benefits. This definitely applies to adopting an exercise routine.

Being disciplined applies to success in so many aspects of life, in order to accomplish goals. Being disciplined is also a critical factor in my business, as for our clients to be successful financially, they must be disciplined to stick with the financial plans that we develop for them. If they sell at the market bottom, they will not reap the reward of the inevitable market rebound. If I am not disciplined to make the time to exercise regularly, it won't happen.

I also want to exercise as a regular practice, as part of being a good role model for my children. This would benefit me, as well as them, and nothing could be better than that!

Other ways to accomplish a regular exercise routine:

Tell others about this goal. I've certainly done this with this post. I've shared it with my family members.

In making changes, in many situations, it is recommended to try not to take on too much change at once. I've just started doing this 30 day blogger project, and now I'm challenging myself to exercise more. However, writing these posts has created a sense of discipline and accomplishment, which is actually creating the motivation for me to start this exercise goal. Success in one area is leading to motivation in another area.

Another favorite book, which was part of the influence for participating in this blogger challenge, is Poke the Box, by Seth Godin. The key thesis of the book is "getting started" and taking the initiative to begin things. To challenge yourself and not be satisfied with the status quo. That is what this is all about.

Set goals. Do it. Stay disciplined. Repeat.

One Strong Belief: Day 3 of Blogger Challenge

Note: This is my 3rd post of the @projectdomino writer's challenge.This a challenge for bloggers and writers to post for 30 consecutive days, beginning on May 31. I will receive a prompt, or idea, from them each day, which may be the basis for that day's post. For more information on this, see my post on May 31, 2011.

Today's prompt:  the world is powered by passionate people, powerful ideas, and fearless action. What's one strong belief you possess that isn't shared by your closest friends or family? What inspires this belief, and what have you done to actively live it?

On a personal level, I'm not sure what my answer to this question is.

For my firm, this answer is quite clear.

Most people, in terms of their investing and wealth management, select mutual funds, money managers or brokers based on their past performance, or how they think these professionals will perform in the future. Or they pick the stocks they think will be winners. Most people believe that they can identify some firm or stock that has the ability to consistently outperform the stock market, or a specific asset class. This is called active money management.

One of our core beliefs is just the opposite.  We are believers in passive investment management. Passive management means that we purchase a mutual fund that owns all the stocks in a given asset class. For example, instead of trying to choose the 30-50 largest US stocks that may do the best, and then sell them and buy others in a short while, we would own the S & P 500 for the US large growth asset class. As most money managers underperform this "index" or benchmark, we are providing better advice for our clients. We believe this will provide the best long-term investment experience for our clients, as well as ourselves, because of the experiences we have witnessed, as well as the extensive academic research which supports this strategy of investing.

Before I started this firm, I spent time with my CPA clients and saw firsthand how they moved from broker to broker, and mutual fund to mutual fund, as they became disappointed again and again with their advisor's "strategy" and would go looking for the next strategy that would work. This cycle repeated itself over and over, with many clients.  I became determined to find a better way to assist my clients.

The prompt above asked "what have I done to actively live this?"

I started a wealth management firm based on this core philosophy.  I affiliated with a national organization, BAM Advisor Services, based in St. Louis, which now manages $14 billion as a network of firms. We generally utilize Dimensional Fund Advisors (DFA) mutual funds,which strictly adheres to the same philosophy, and because of firms like ours, DFA has grown to become the ninth largest mutual fund company in the United States.
 
We have our core beliefs. It is not the view of Wall Street or of most of the financial media, but we feel more strongly every day that this is the proper way to invest and manage money for the long-term. This philosophy has been successful in all types of financial markets, both in the US and globally.

So in this regard, we have taken some powerful ideas, we are passionate about this strategy and we have been fearless in building a business based on these concepts.

Financial Planning in One Sentence (Day 2)

Note:  This is my 2nd post of the @projectdomino writer's challenge.This a challenge for bloggers and writers to post for 30 consecutive days, beginning on May 31. I will receive a prompt, or idea, from them each day, which may be the basis for that day's post. For more information on this, see my post on May 31, 2011.


Today's blog post prompt: describe today in only one sentence.

Do the right thing.

This is written on my firm's business card. It represents our values as a firm, our values with our clients and the decisions we make on their behalf.  It is part of the professionals we choose to affiliate and collaborate with, and my personal values.

While I try to do the right thing, I also recognize that I have made mistakes, both personally and professionally. We all have. I have apologized when appropriate. I have taken ownership and moved forward, as that is the only way we can all exist and progress.

In term's of my client relationships, "doing the right thing" is a core principle. I was recently given a wonderful book, which I highly recommend, about the life lessons of Nelson Mandela (Mandela's Way, Fifteen Lessons on Life, Love, and Courage by Richard Stengel). One of these lessons is to have one or a few core principles, which should always be adhered to. There may be other strategies or aspects that may be modified, but we must each choose some core beliefs which are unwavering.

For my firm, this concept translates to how we make decisions and provide our advice. The client's interest always comes first. Legally, we have a fiduciary responsibility to our clients. Traditional stock brokers do not adhere to this standard.

We believe (and academic research strongly supports) that active money managers do not add value and they cannot be identified, in advance, consistently, over a long period of time. We believe in global diversification. We believe in diversification for both stocks as well as bonds and CDs. We recognize that we cannot predict the future and we do not have a crystal ball.

I also want to emphasize the word "do." We are doing. We are growing, personally and professionally. We are active in our community. We are learning. We are reading. We are attending seminars and conferences. We are interacting with others through social media. We are planning. We are meeting with current and new client prospects.

And we are thankful that "doing the right thing" results in good things.

#Trust30

Financial planning: 15 Minutes to Live (Day 1)

This is my first post of the @projectdomino writer's challenge.This a challenge for bloggers and writers to post for 30 consecutive days, beginning on May 31. I will receive a prompt, or idea, from them each day, which may be the basis for that day's post.  For more information on this, see my first post on May 31, 2011.

The prompt: I just discovered I have 15 minutes to live. (and 15 minutes to write)

Fortunately, this is purely hypothetical.

Obviously, my first thought is of my family, relatives and friends. I am secure knowing that my children will be well taken care of. I am comforted that I have planned properly, I have adequate life insurance and estate planning documents which are in place, so they will be OK financially. I'm glad that I have practiced what I have preached to my clients.

I have left my children with a legacy of good values and have been privileged to have shared with them many wonderful life experiences. I have been very actively involved in many charitable organizations, and those institutions will benefit in the future from both the time that I have spent being a leader, as well as the legacy gifts that are part of my estate plan.

In terms of my business, I am again comforted to know that my clients will be well taken care of by my wonderful partner, Keith Rybak, as well as our collaborative partners, BAM Advisor Services and DFA mutual funds. As Keith and I meet with clients together, he knows them well. My clients will benefit from that consistent practice that we have adhered to.

As importantly, all of our clients have written Investment Policy Statements, so their goals and investment allocations are clearly documented, and not just in my head. There should be no need for any sudden changes due to this hypothetical event.

I am further comforted by knowing that I have provided good, long term investment planning for my clients, and they will be financially secure if they continue to adhere to the philosophies we have in place.

If this was real, and fortunately it is not, I would feel that I have been very fortunate to have had a wonderful family, I have left my children with a better life than I started with, that I was able to travel and grow a business. I have regrets. We all would at a time like this. I have made mistakes. I am very human. And I didn't get to see Michigan in the Rose Bowl.  I will now get to discuss with Bo the concept of "Those Who Stay Will Be Champions." 

As this is not real, I will continue to pursue my goals, and continue to champion my values and pursuits.

#trust30

Financial Blog Writing Challenge: The Beginning

My goal with this blog has been to write, with the purpose of educating and sharing information which would be relevant to clients and prospective clients. Up to now, I have written occasionally, but not with any specific quantitative goals.

Today, I'm committing to a new challenge, or opportunity, based on one of the people I read and respect the most, Seth Godin.  His organization, @ProjectDomino, is starting a 30 day challenge for bloggers and other writers to create content for each of the next 30 days. I'm going to give it a shot!

Each day, I'll be receiving a prompt from @ProjectDomino, which will provide a guide on this "writing journey."  It is to create "an opportunity to reflect on your now, and to create direction for your future."

So, these posts may be business or financial related, or they may be more personal. I am probably going to try to tie in their prompts with wealth management and financial planning, but I'm not really sure.

When you start a journey, or try a new experiment, you don't know where it leads. But new opportunities are the key to so many things.....I am willing to try this.

#trust30  For those of you not on Twitter, that is the hashtag, or way that others on Twitter can follow the posts of people who are participating in this project. My twitter name is @wassermanwealth

What You Can Control

You can only control what you can control.

We incorporate this concept as a core part of our wealth management and investment philosophy.

You can control the costs and investment expenses that you incur. This is why we utilize some of the least cost mutual funds, yet they still have excellent performance over the long term.

You can control how globally diversified your investments are, which reduces your investment risk. We actively do this for our clients.

There are some things that you cannot control. You cannot control whether gas prices go up or down. You cannot control interest rates. You cannot control the success or stock price of any one company.

As we provide advice to you, we recognize what we can and what we cannot control, and discuss this with you.

A few weeks ago, Oprah Winfrey taped an interview with President and Mrs. Obama, which was to air on a Monday. Even Oprah could not control that the US would capture Osama bin Laden on the day before this interview was to air. She was very upset that the show aired, which was now seemingly irrelevant. Even for Oprah, there are things she could not control.

As you consider your important financial decisions, you will be most successful if you recognize what you can control, and focus on those items. This will provide you and your family with greater financial security and peace of mind.

Top Ten Financial Tips for Tax Day

1. Your investments should be globally diversified. And that means the entire world, not just the US, Europe and Asia. Small and large companies. Value and growth companies.

2. Track your investment performance against worldwide benchmarks. Annually.

3. Consider the impact of an eventual increase in interest rates, especially if you own bond funds.

4. Have a written, long term investment strategy. It doesn’t need to be complicated.

5. Be disciplined and stick to your written investment strategy, regardless of how the stock markets are doing in the short term.

6. Understand the fees you are paying for all of your investments, whether you see them or not. Stock and bond mutual funds. Alternative investments. Individual bonds. Your advisor. You may be surprised by what you find.

7. Understand how your advisor is really compensated. The financial interests of you and your advisor should be aligned (on the same side of the table). Like a fee-only advisor.

8. You can only control things that you can affect, like most of the above. You cannot control the direction of financial markets or any company.

9. Be prepared and plan for the unexpected. And talk to your advisor about what that means.

10. Reduce your taxes by putting certain investments in retirement accounts and others in taxable accounts. Make sure that you and your advisor understand these concepts.

Would you have expected this?

Today, March 31st, represents the end of the 1st quarter of 2011.

Three months ago, on January 1, 2011, did you expect:

The leader of Egypt to be peacefully overthrown?

The price of oil and gas to increase significantly?

Revolutions to be underway in many Middle East countries?

A major earthquake and tsunami in Japan?

We didn’t either.

However, even with all of the above events, do you realize that the S & P 500, a broad index of 500 large US companies, increased over 6% during these same 3 months.

• This is the largest 1st quarter increase of the S & P 500 during any year from 2001-2011.

Readers of this blog and clients of our firm know that we believe in investing in a globally diversified stock portfolio. This would include large and small US companies, as well as large and small companies in countries throughout the world. Most other “asset classes” also had similarly positive performances during the first 3 months of 2011.

One quick lesson from this information:  Even during times of crisis and unexpected news (and almost all periods have some of both), the stock markets throughout the world may still be positive.

That is why we firmly believe in the importance of focusing on the long term and planning for the long term, and not to be focused on the day-to-day volatilities of the stock market or world events.

Value of a Financial Advisor: Perspective

As I sit at my desk, with spring beginning to arrive in Farmington Hills, MI, it is hard not to think about world events and their impact on the financial markets.

The horrific events in Japan, both nature and nuclear, are profoundly sad and scary. The events in the Middle East over the past months may be very positive, resulting in increased democracy and freedom for many, but could result in oil disruptions.

Neither of these series of major events could have been predicted on January 1, as 2011 began. As no one could have predicted these events, no one could have made investment decisions based on these events occurring.

Which leads to one of our  basic investment tenets:  we focus and plan for our clients, for the long term. While we recognize that there are many issues and problems in our country, and throughout the world, we try to assist our clients by keeping a long term perspective. While the events of today are important, they should not control or even impact your financial goals, which may be decades into the future.

As we plan, we are realistic, but optimistic about the future. Our country, and the world for that matter, has proven to be very resilient, if viewed by years or decades, and not day to day. For any time period you select, challenges were faced. Thus, we structure your portfolio with safe, fixed investments for the short term or to provide a foundation of current cash flow, and with stocks to provide growth for the longer term.

We plan for our clients when we begin to work with them. We develop an Investment Policy with them. Then, at times like this, or during 2008-09, we are here to talk to them, if they desire. That is key. By talking about the financial markets and what is going on in the world, we help our clients to keep a long-term perspective, which really means they are able to keep their long term strategy in place (and not panic). That is key to helping their investment experience to be positive, so they will have the comfort and security to know that we are helping them move toward reaching their financial goals.

A Tribute to a Colleague

I received an email at 11:11 am on Monday. In the back of my mind, I knew that it may be coming at some point, and unfortunately, it arrived.

A colleague of mine who lived in Gulfport, Mississippi, who I first met over the phone in 2002, passed away over the weekend. He was 58.

Rodney Van Loon was a CPA with a big heart, who was willing to share his time, energy and thoughts with others. For that reason, Rodney’s legacy also includes the value that my firm has brought to its clients.

When I was considering entering the financial advisory business, around 2001-2002, Rodney and I talked a number of times, very extensively. He was already part of the BAM network of financial advisors, which I am now affiliated with. Through these many discussions, I too joined the BAM network, which has been a vital part of the philosophical foundation of my firm. Our investment strategy and business model is based on these early phone conversations.

Rodney was willing to share and talk to me, even though I was a complete stranger. This was a gift to me, which I don’t think he recognized or even thought twice about. I thanked him for it many times through the years. We met in person over the years, at annual conferences and then more frequently, through an intensive multi-year peer program that we both participated in, with other BAM advisors.

Rodney’s deep, strong Southern accent and graciousness were always apparent. He, his family and his firm survived Hurricane Katrina, which devastated his community. He could not survive the disease which took his life on Sunday.

My deepest condolences extend to his family, his friends and clients in Mississippi.

Rodney’s legacy will live on in many ways. The impact of his willingness to share his time with me, so graciously many years ago, will continue to benefit my clients in the future. That is the true value of giving to others.

Our 2011 Investment Predictions

None.

We have no crystal ball. We cannot predict the future.

These statements are a critical part of our investment philosophy.  We recognize and accept that we cannot predict the future direction of the financial markets. If Warren Buffet is not smart enough to predict the future, we certainly cannot.

We do have a very clear investment strategy.  We adhere to a disciplined investment approach, for both stocks and fixed income investing. Our philosophy is not based on guessing which country (will Japan or Europe be hot in 2011?), stock sector or company to invest in (should we buy Citigroup and sell Microsoft?). That is not a winning game.

We do know that interest rates are at or near historical lows and that eventually interest rates will rise. We know that when interest rates rise, owners of bond funds will face financial losses, which for some will be significant.

If you own bond funds, or know someone that does, they should talk to us. We do predict that discussion will be a very valuable one.