Marc Becker TV

Get Wiser: I’d Like to Retire Yesterday

2012-02-25T03:59:00.001-08:00

In this week's edition: When do you want to retire?

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I'd Like to Retire Yesterday

When I ask new clients when they want to retire, the most common answer is, “yesterday.” Then I ask, “When do you think you could retire and maintain your current standard of living?”

The most common answer is… silence.

Whether you are two or twenty years from retirement, considering expenses you will incur and how to meet them is critical. And the sooner you do so the better. Wherever you start, things will happen along the way that might throw you off track – all the more reason to plan for them.

1. Stock Market Drop
Several years ago the catch phrase, “My 401(k) is now a 201(k)” took hold. Retirement portfolios were crippled. Many pre-retires realized their risk exposure only after the fact, and the time necessary on the job lengthened by years – if they were able to avoid massive layoffs. Learn this: If you are within 10 years of retirement, your retirement accounts may need to be reallocated to take some risk off the table.

2. Boomerang Kids
As of 2009, over 50 million homes were “multi-generational.” Meaning the younger generation was living at home. But young adults, unlike kids, come with higher expenses such as transportation, insurance, college debt, etc. The burden of additional living expenses eat away at the finances of the parents and often extend how long it will take to retire.

3. Divorce
There is an adage among financial professionals: “The fastest way to go broke is to divorce.” The lifestyle change is obvious, whereas the devastating financial impact is not so. Enormous income allocation shifts are required. Assets are divided. A partner may be required to go back to work after decades of being out of the work force. Costs for the split can be in the tens or hundreds of thousands. In short, the financial picture is halved and procedural costs reduce that further.

4. Lifestyle Changes
Back in the day planners advised pre-retirees to expect needing 70% of the income required during your working life. New studies reveal that most often, people will need 95%-120% of income during retirement. Why? Because people want to pursue hobbies, travel, and often have medical costs substantially greater than when they were working. And then there is inflation.

5. Poor Planning
The majority of pre-retirees do little or no planning. So it’s no surprise this is the most common reason for delaying retirement. Churchill said it best: “A failure to plan, is a plan for failure.”

A Word to the Wiser:
Don't be intimidated by your finances. The earlier you start planning the easier and less disruptive saving for your retirement will be. If you haven’t started, do. Contact us and we will show you how easy this can be. Or take a look at this 2 minute video:

http://goals.wiserfinancial.tv/

I welcome your questions and comments. becker@wiserfinancial.com

Marc Becker, AIF
Managing Partner, Wiser Financial Coaching
Columnist, The Advisor Sherpa

Click here for more information on this subject.

To read past articles and view past videos, visit: www.marcbecker.tv

Golf Tip of the Week

Know Your Yardages

As a youngster, Deane Beman, now the former PGA Tour and Senior Tour commissioner, was one of the best amateur golfers in the world, not least because of his competitive smarts. I learned a lot from Deane over the years, but his best lesson came at the U.S. Amateur at Pebble Beach in 1961.

Although striking the ball beautifully, I was having trouble in practice judging distances of approach shots, particularly when the wind got up. Eventually, Deane said to me, "Why don't you do what I do--pace off the yardages and write them down?" I believe Gene Andrews, the fine California amateur, was the first to figure and record exact distances, but savvy little Deane was close behind him.

I paced off Pebble Beach and won that Amateur with some of the most accurate golf I've ever played. From that day on, I've rarely hit a shot in competition without knowing its exact distance. Once I began to have some success on the Tour, other pros began stepping off and charting yardages. Today, it is standard operating procedure in top golf worldwide.

Do you know exactly how far you need to hit your approach shots, even on your own course? If the answer is no, you might be surprised how much finding out improves both your club selection and your confidence over the ball.

Simply step off and note down yardages to the front and rear of each green from a permanent landmark like a tree or rock in the area where your drives usually finish. With that information, plus an estimate of how deeply the cup is cut into the green, it's easy to work out how far you need to hit the ball.

Source: http://www.nicklaus.com/nicklaus_golftips/

Trivia Time

This week's question: We had crazy weather this week in North Carolina, from snow on Monday to thunderstorms and near 80 by Friday. But North Carolina does not have the most extreme temperature changes in the US. What state holds the record for the most rapid temperature change, the greatest 12-hour temperature change, and the greatest 24 hour temperature drop in the US?

Do you know? E-mail your answer wendy@wiserfinancial.com and if you are correct, receive a free "Way to Go!", "You Rock!", or other congratulatory phrase. Then brag to all your friends about how smart you are.

The answers will be in next week's newsletter!

Last week's question: What is the total amount expected to be spent for Valentine's Day in the US this year?

Answer: The total spent on Valentine's Day in the US for 2011 was expected to be $17.6 billion.

Source: National Retail Federation

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The articles and opinions expressed in this newsletter were gathered from Marc Becker, The Advisor Lab, and a variety of other sources. Articles are written by Marc Becker. All sources are believed to be reliable but do not constitute specific investment advice. In all cases, please contact your investment professional before making any investment choices. Copyright © 2011 Wiser Financial Coaching LLC, All rights reserved. Marc Becker Wiser Financial Coaching, LLC 2741 Campus Walk Ave. Bldg 400 Ste 400 Durham, NC 27705 Tel: (919) 477-3355 Fax: (919) 477-3366 becker@wiserfinancial.com Securities offered through Triad Advisors Inc., Member FINRA/SIPC
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Get Wiser: Stupid is as Stupid Does

2012-02-11T03:59:00.001-08:00

In this week's edition: Like Mama always says. . .

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Stupid is as Stupid Does

Forest Gump often quoted his wise mother, “stupid is as stupid does.”

The meaning: stupid is defined by what people do, not what they say. In investing there is a harsher saying:

“If you follow the herd, eventually you get slaughtered.”

With that I submit the media, its herd mentality, and the resulting devastation incurred by investors following it.

I’ve reported improving economic conditions for over a year. Until recently, most media argued these facts were meaningless, including stocks more than doubling on average during this time. As improving data continues to emerge, the S&P 500 just had its best January since 1997, and other indices here and abroad followed suit.

Suddenly I’m not hearing many stalwart projections that have become a hallmark since 2008. When I do they now contain disclaimers such as, “I’m waiting for a pullback before buying more stocks, though this might be as much pullback as we get.” (Morning CNBC interview 2/8/12).

Now that’s a heck of a forecast: “I think the market will go down, but if it doesn’t I just predicted that too.”

“Stupid is…”

For several years experts have proclaimed with certainty: globally encompassing recession risks were growing and the market would falter in the aftermath – tank, to be more accurate. The last few months the tune has changed – now pundits are singing about when is the best day to get into stocks.

I avoid the words always, never, anytime, etc. They are absolute the universe tends not to be. So mildly diluted - Virtually anytime someone is trying to figure out the best day to buy stocks, he/she has already missed the best day.

Back at the ranch unemployment continues to decline, manufacturing is accelerating, and the service sector is ramping up.

"It's not hard to see how this recovery could become self-sustaining.” [Nobel Economist and notable policy pessimist Paul Krugman.] "The downside risks are evaporating." [Harm Bandholz,Chief U.S. Economist at Unicredit Research.] "Late last summer, I saw a 50-50 chance of recession. I have dialed that down quite a bit." [Robert Dye, Chief Economist at Comerica.]

Deutsche Bank, Morgan Stanley, Goldman Sachs and other institutions are re-adjusting growth forecasts for 2012 substantially higher than those just predicted.

“As Stupid Does…”

These are intelligent, experienced specialists and firms. They now, however, find themselves far behind the market…along with those acting on their previous predictions. Safety in numbers I suppose.

If you stopped investing when things were scarier, start. If you didn’t stop, keep going (and congratulations on capturing the 100% return when all the super geniuses are only now figuring out the best day to invest was in March of 2009).

In closing, another absolute word this time undiluted: I can’t tell you if the next 20% market move will be up or down. But I can tell you the next 100% move is always up.

Run Forest, run.

I welcome your questions and comments. becker@wiserfinancial.com

Marc Becker, AIF
Managing Partner, Wiser Financial Coaching
Columnist, The Advisor Sherpa

Click here for Returns since 2009
Click here for an article about the improving economy
Click here for the January Market returns
Click here for changing projections

To read past articles and view past videos, visit: www.marcbecker.tv

Golf Tip of the Week

Beware of Over-Practicing Putting

I've never believed that quantity of practice alone will make a golfer a good putter. Without feel, touch and timing, I would not have holed the ball when it mattered, regardless of how many hundreds of putts I'd hit on a practice putting green.

Consequently, I've never practiced putting beyond a point where I knew I was doing what I wanted to with my stroke. This goal has always been the product of constant rhythm or tempo, marked by the putterface making solid and square contact with the ball. The physical feel and the mind-picture this produces is one of great fluidity between my hands and the putterhead.

Once I attain these goals in a practice session, I quit, even if I have stroked only a handful of putts. By continuing beyond that point, I risk becoming too mechanical or losing my sense of touch. You, too, should beware of spoiling a good thing by overdoing it.

Source: http://www.nicklaus.com/nicklaus_golftips/

Trivia Time

This week's question: What is the total amount expected to be spent for Valentine's Day in the US this year?

Do you know? E-mail your answer wendy@wiserfinancial.com and if you are correct, receive a free "Way to Go!", "You Rock!", or other congratulatory phrase. Then brag to all your friends about how smart you are.

The answers will be in next week's newsletter!

Last week's question: What is the maximum capacity of the largest passenger ship currently in service?

Answer: Royal Caribbean International's Allure of the Seas is currently the world's largest passenger ship with a maximum capacity of 6,360 people.

Congratulations to David R. for getting the correct answer! Big applause!

Source: www.wikipedia.org

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The articles and opinions expressed in this newsletter were gathered from Marc Becker, The Advisor Lab, and a variety of other sources. Articles are written by Marc Becker. All sources are believed to be reliable but do not constitute specific investment advice. In all cases, please contact your investment professional before making any investment choices. Copyright © 2011 Wiser Financial Coaching LLC, All rights reserved. Marc Becker Wiser Financial Coaching, LLC 2741 Campus Walk Ave. Bldg 400 Ste 400 Durham, NC 27705 Tel: (919) 477-3355 Fax: (919) 477-3366 becker@wiserfinancial.com Securities offered through Triad Advisors Inc., Member FINRA/SIPC
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Get Wiser: Predictions Gone Bad: 2011

2012-01-24T06:29:00.001-08:00

In this week's edition: Oops.

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Wiser Readers,

Predictions Gone Bad: 2011

Hall of famer Tris Speaker once predicted: "Taking the best left-handed pitcher in baseball and converting him into a right fielder is one of the dumbest things I ever heard." He was speaking of Babe Ruth.

The media is full of predictions, no more so than with finance and investing. But this has more to do with captivating an audience than educating it.

Of forecasts Warren Buffet states, “a prediction about the market tells you nothing about where it is headed, but a whole lot about the person doing the predicting.” That is to say, an "expert's" prediction should be interpreted as a guess, while his level of optimism or pessimism can be precisely determined. Note the following examples:

The Worst Investing Predictions of 2011

Prediction 1: China would be the best place to invest. Result: China underperformed the S&P 500 by 19%. It even underperformed the EAFE index which includes slammed European stocks. Oops.

Prediction 2: Inflation would spike subsequent monetary and fiscal stimulus. Result: Just didn’t happen. Oops.

Prediction 3: Interest rates would rise dramatically. Result: Instead, The 10-year Treasury rate dropped almost in half. Bill Gross, widely touted as “The Buffet of Bonds” issued a formal apology to his investors for being so wrong. Oops.

Prediction 4: Municipal Bonds would default en-masse. Result: Muni bonds were one of the best performers over the period, one benchmark logging 9.6% for the year. This prediction was so dramatically incorrect it will go down with Business Week’s forecasting “The Death of Equities” in 1979 as one of the worst predictions of all time. Oops.

Prediction 5: The price of gold will continue to soar, many stating $2000 per ounce* was a “given.” Result: Gold did top $1800/ounce during the year, but fell back closing around $1550 at year end. Oops.

Prediction 6: Energy prices would soar. Result: Oil prices did increase from $99/ barrel to $107 at year end, but prices at the pump weren’t dramatically affected. Natural gas plummeted from $4.50 to under $3.00, its lowest price in 2 years. Oops.

Prediction 7: And the worst prediction of 2011…drum roll please…2011 would prove to be a stock-picker's year. Result: Approximately 11% of active managers beat the Russell 1000, a typically dismall 1 in 10 result in any one year period. More telling, the average active growth manager underperformed the Russell Growth Index by 4.5%! Ooooooooops.

But no worries, the media remains undaunted. Without consideration of financial affect on consumers that act on what is little more than a matter of opinion, media continue to proliferate the crystal ball gazing of countless investment swamis.

At Wiser we encourage you to remember a guess purports one outcome against many other possibilities – each having an equal chance of occurring. Go with the odds. The market will be right far more often than those guessing at it.

In the meantime, be sure to get in touch if you have questions or concerns about your investment strategy.

I welcome your questions and comments. becker@wiserfinancial.com

Marc Becker, AIF
Managing Partner, Wiser Financial Coaching
Columnist, The Advisor Sherpa

If you want to read more about predictions and sources for this data: Click Here
*If you want to read more about gold price predictions in 2011: Click Here

To read past articles and view past videos, visit: www.marcbecker.tv

Golf Tip of the Week

Putt Like a Piston

To me, the putting stroke is basically a right-handed action. I swing the putter back with my right hand, and I swing it through the ball with my right hand. All my left hand does is serve as a guide to steady and stabilize the stroke.

Visualizing my right forearm working like a piston is an image that helps me in using my right hand correctly throughout the stroke.

To "see," set up for, then sense the piston-like motion, I need to bend far enough over the ball to position my right forearm horizontal to the ground, or fairly close to that alignment. The set-up also requires positioning the palm of my right hand so that it looks squarely at the starting line of the putt. The feeling I then seek during the stroke is simply one of my right forearm pulling back and pushing through like a piston.

If you're not putting as well as you like, try this piston "picture" and motion.

Source: http://www.nicklaus.com/nicklaus_golftips/

Trivia Time

Hi Wiser Readers:
This week's question: What is the maximum capacity of the largest passenger ship currently in service?

Do you know? E-mail your answer wendy@wiserfinancial.com and if you are correct, receive a free "Way to Go!", "You Rock!", or other congratulatory phrase. Then brag to all your friends about how smart you are.

The answers will be in next week's newsletter!

Last week's question: January is named after what Roman god?

Answer: Janus.

Congratulations to David R. and Richard W. for getting the correct answer! Big applause!

Source: www.wikipedia.org

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The articles and opinions expressed in this newsletter were gathered from Marc Becker, The Advisor Lab, and a variety of other sources. Articles are written by Marc Becker. All sources are believed to be reliable but do not constitute specific investment advice. In all cases, please contact your investment professional before making any investment choices. Copyright © 2011 Wiser Financial Coaching LLC, All rights reserved. Marc Becker Wiser Financial Coaching, LLC 2741 Campus Walk Ave. Bldg 400 Ste 400 Durham, NC 27705 Tel: (919) 477-3355 Fax: (919) 477-3366 becker@wiserfinancial.com Securities offered through Triad Advisors Inc., Member FINRA/SIPC
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Get Wiser: Investing Resolutions for 2012

2012-01-14T03:59:00.001-08:00

In this week's edition: Happy 2012!

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Please note that our office will be closed Monday, January 16th in honor of Martin Luther King Jr. Day.

Investing Resolutions for 2012

Jeepers, the media is starting to take note of the positives in 2011.

Make no mistake, 2012 will be riddled with election and other volatility. But recently inserted into the “if it bleeds, it leads” media status quo are facts I’ve been reporting over the last year. Summarizing: business is up and un-employment is down. Four years after the apocalypse, trickles of hope are showing momentum that is becoming harder to ignore.

I could banter about ties between psychological financial behavior and macro-economics that elongate periods of distress, but this would likely bore all but me…and maybe even me a little. The short story is things are getting better faster, as they typically do 3-5 years after mega-collapse.

Notably, the aftermath shows stocks did not go to zero, the U.S. did not become a fascist state, and the world did not end. Crisis outcome, moreover, dictates the more time that goes by without the worst case scenario emerging, the less likely the worst case scenario is.

Of course, account values have not yet illustrated a blooming garden since 2007. But the way this year has been set up, my expectation is more flowers will come in 2012. In that vein, I propose 10 resolutions for this year:

Investing Resolutions for 2012*

1. I'll remember what is obvious now wasn’t obvious before it happened.
2. I won't make investment decisions based on what seems likely or unlikely.
3. I won't take more risk than I have the willingness and need to take.
4. I will avoid complex investments and eschew those promising big returns with little risk.
5. Forecasts are guesses about the future – the unknowable. Given the number of possible outcomes, few guesses will hit the mark. They have no measurable value and I will ignore them.
6. I won't confuse strategy with outcome. Disappointing returns doesn't mean my strategy was wrong. Nothing in life always works the way I want.
7. There are rough times in any investment plan, and changing course during uncertainty is more likely to make things worse than better. So I will adhere to my investment plan.
8. When tempted to react to trends, predictions or the results of others, I'll refer to the previous resolution.
9. Over time, higher risk and return come from stocks and lower risk and return from bonds. I will use both to take on risk appropriate for me, making sure any bonds I hold are of the highest quality.
10. I won't confuse current yield with long term returns. Periods exist when safe, low yield investments outperform a diversified stock portfolio. But there are no long term periods when this has been the case.

We wish you health, wealth and happiness in 2012. Please let us know what we can do to help you on your journey to investment success.

I welcome your questions and comments. becker@wiserfinancial.com

Marc Becker, AIF
Managing Partner, Wiser Financial Coaching
Columnist, The Advisor Sherpa

*While substantially altered, these resolutions were borrowed from Larry Swedroe. Thanks Larry!
http://www.cbsnews.com/8301-505123_162-57346641/top-10-new-years-investing-resolutions/?tag=cbsnewsMainColumnArea

To read past articles and view past videos, visit: www.marcbecker.tv

Golf Tip of the Week

Pretend Your Puttershaft Is Glass

I putt my best when I have a sense of gentleness in my hands, my stroke, and the way the ball comes off the putterface. Then the ball rolls consistently, which might just be the secret to fine putting.

To promote those feelings, I visualize the puttershaft as being extremely limber, almost as flexible as a length of rope, which means the only way I can get the clubhead to swing truly is to stroke very softly, smoothly, and slowly.

If the limber shaft image doesn't seem to be working, I'll replace it in my mind's eye with a delicate glass shaft that will shatter if I'm even a tiny bit harsh at the ball.

Vital to swinging the putter this gently, but with sufficient speed to roll the ball the required distance, is a very light grip. Equally important is retaining that softness in the fingers throughout the stroke--in other words, no involuntary grabbing once you've set the club in motion.

Source: http://www.nicklaus.com/nicklaus_golftips/

Trivia Time

This week's question: January is named after what Roman god?

Do you know? E-mail your answer wendy@wiserfinancial.com and if you are correct, receive a free "Way to Go!", "You Rock!", or other congratulatory phrase. Then brag to all your friends about how smart you are.

The answers will be in next week's newsletter!

Last week's question: Why is the day after Thanksgiving called Black Friday?

Answer: The day after Thanksgiving is traditionally the day when large companies become profitable for the year. In other words, their books go from red (a loss) to black (profitable), hence why the day got nicknamed "Black Friday."

Congratulations to David R. for getting the correct answer! Big applause!

Last week's search engine challenge: What kind of toys are are these?

Answer: The items in the picture were mechanical banks, popular in the late 1800s and early 1900s.

Congrats to David R. for getting the correct answer!

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The articles and opinions expressed in this newsletter were gathered from Marc Becker, The Advisor Lab, and a variety of other sources. Articles are written by Marc Becker. All sources are believed to be reliable but do not constitute specific investment advice. In all cases, please contact your investment professional before making any investment choices. Copyright © 2011 Wiser Financial Coaching LLC, All rights reserved. Marc Becker Wiser Financial Coaching, LLC 2741 Campus Walk Ave. Bldg 400 Ste 400 Durham, NC 27705 Tel: (919) 477-3355 Fax: (919) 477-3366 becker@wiserfinancial.com Securities offered through Triad Advisors Inc., Member FINRA/SIPC
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Wiser Wishes You a Happy Holiday and Closure Notice

2011-12-21T07:41:00.001-08:00

The Wiser family wishes you and your family a Happy Holiday season and a prosperous 2012!

We will also be enjoying the holiday season with our families and will be closed Friday, Dec. 23 through Monday, Jan. 2nd. We will return to normal business hours starting Tuesday, Jan. 3rd. Most of us will be checking messages and e-mail during our break.

End of Year Note from Marc Becker

To our wonderful clients,

With ongoing woes in Europe, 2011 has been as topsy-turvy as it gets. We've watched 20% swings in the markets every few months amid escalating sales and falling unemployment in the U.S. My hope was to see more progress in the market by this time.

However, good economic news has taken a back seat to provocative and widely un-interpretable political ramblings abroad. There is a stellar outcome in this, as we've continued to pick up shares at substantial discounts as high dividends have posted throughout.

Market values have not illustrated the impact of this on our portfolios, but for re-investors low priced market cycles are most desirable. 2012 is set up to be rocky in the beginning, but I feel strongly that prices will begin to reflect the benefits by year's end.

Everyone at Wiser thanks you for your business and attention to our frequent postings. Please let us know if there is anything we can do for you. I look forward to seeing you in the new year.

Thank you!

Marc Becker, AIF
Managing Partner, Wiser Financial Coaching
Columnist, The Advisor Sherpa

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Our mailing address is: Wiser Financial Coaching, LLC 2741 Campus Walk Ave. Bldg 400 Ste 400 Durham, NC 27705 Tel: (919) 477-3355 Fax: (919) 477-3366 wendy@wiserfinancial.com Securities offered through Triad Advisors Inc., Member FINRA/SIPC
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Get Wiser: Bad Parents and PIGS

2011-10-08T03:59:00.001-07:00

In this week's edition: Is Greece a spoiled child?

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Bad Parents and PIGS

I’ve two young children and give in from time to time. So far be it from me to give parenting advice. But I also have experience with parents who placate adult children financially during hard times. There is a difference.

Compassionate parents of distressed children often extend themselves beyond their means to keep a child afloat. The intent is to stabilize the child’s economy until he can pull himself up by his bootstraps. Sometimes this jeopardizes the parents’ financial future, concurrently short changing siblings now or in the future.

Harsh as it may sound, such effort enables the distressed child to change nothing. If she knows her obligations are covered, there is no reason to alter anything. My experience in these situations is that needs continue to grow, not the other way around.

Enter Greece and her mounting obligations, and her parents, the European Union (EU). Greece entered into a default situation almost two years ago. Since then the EU has injected billions without reform requirements attached. These monies have arguably done nothing other than pay monthly bills owed on increasing debt.

It doesn’t take a financial genius to understand that borrowing money to pay for money already borrowed is a bad financial position. Scratch that, it is the worst financial position - worse than bankurptcy - as the ditch deepens the longer it continues.

Several months ago the markets began to bark at this growing concern. It’s not just Greece that has caused the commotion. There are a variety of distressed countries making up the “PIGS” nations (now PIIGS): Portugal, Italy, Ireland, Greece, and Spain.

Greece by itself isn’t a threat to topple anything. The fear is if the EU continues to pour resources into this one problem child a domino effect could occur with the others. If this happens, indefinable familial ramifications would result. And now that we’re all financially related…lets just say that is a legitimate concern.

Continuing to serve Greece's debt sans accountability isn’t just gruesome financial management, it is the epitome of bad parenting.

This week the EU has finally begun speaking in terms of combined stabilization for the financial structure of Europe as a whole, akin to programs instituted in the U.S. several years ago. For now, the global market has reacted positively to something other than an exhausting slush fund to pay Greece’s bills.

If our experience in the U.S. is any indication, no matter how poorly thought out or implemented, a unitized process with increasing accountability may be enough to stabilize more drastic problems. While not perfection, it would be progressive.

And anything that can reduce the focus on one tiny teetering nation is progress our investments will be appreciative of, literally.

I welcome your questions and comments: becker@wiserfinancial.com

Marc Becker
Accredited Investment Fiduciary
Columnist, The Advisor Sherpa

To read past articles and view past videos, visit: www.marcbecker.tv

Golf Tip of the Week

Get Down Low

Hitting a ball that lies well below your feet is never easy, but it need not be as difficult as your instincts make it.

The tendency in the situation you see here, with the ball in a depression, is to lower the clubhead down to the ball by bending the knees. The problem is that excessive knee bend severely restricts the swinging motion. Over the years, I've found I can partially lower myself by widening my stance, and then bending my back. This way I can keep my legs fairly straight, permitting a little more freedom of movement.

The swing will still be restricted in size and force, so I normally use one more club--say a 6-iron instead of a 7-iron. Try not to be overly aggressive when you encounter this situation; it will help you to avoid wild shots and big numbers.

Source: http://www.nicklaus.com/nicklaus_golftips/

Trivia Time

This week's question: The next full moon is Oct. 11th. What is its official nickname?

New Feature! This week's search engine challenge: What lake is this?

Do you know? E-mail your answer wendy@wiserfinancial.com and if you are correct, receive a free "Way to Go!", "You Rock!", or other congratulatory phrase. Then brag to all your friends about how smart you are.

The answer will be in next week's newsletter!

Last week's question: What year was the European Union established?

Answer: 1993. The EU was established under its current name by the Maastricht Treaty.

Congratulations to David R. for getting the correct answer!

Source: www.wikipedia.com

follow on Twitter \| visit www.marcbecker.tv \| forward to a friend
The articles and opinions expressed in this newsletter were gathered from Marc Becker, The Advisor Lab, and a variety of other sources. Articles are written by Marc Becker. All sources are believed to be reliable but do not constitute specific investment advice. In all cases, please contact your investment professional before making any investment choices. Copyright © 2011 Wiser Financial Coaching LLC, All rights reserved. Marc Becker Wiser Financial Coaching, LLC 2741 Campus Walk Ave. Bldg 400 Ste 400 Durham, NC 27705 Tel: (919) 477-3355 Fax: (919) 477-3366 becker@wiserfinancial.com Securities offered through Triad Advisors Inc., Member FINRA/SIPC
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Google Groups Invitation: bloggerpost

2011-10-07T13:47:00.001-07:00

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Get Wiser: Value Across the Pond

2011-10-01T03:59:00.001-07:00

In this week's edition: More risk, more reward

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Value Across the Pond

Investors are often skittish about foreign stocks. Places, names and languages are unfamiliar.   Companies we know can be more comfortable, even during extreme price volatility. But adhering to the familiar may be costly.

Foreign stocks have offered wealth creation in accord with U.S. companies. And you don't need to travel or learn Italian to own them. Many international companies are traded on U.S. exchanges in U.S. dollars, so it's easy to compare their share price, history, and dividends with domestic stocks.

Successful investors know they can benefit from long term returns of a company without ever having heard of it. By comparing key financial data with one company against its competitors, important characteristics can be identified.  Two differing characteristics are Growth vs. Value.

When identifying Growth and Value stocks we utilize a mathematical formula taking account of the price of the stock in relation to earnings, debt and other factors. Of primary importance is the stock price relative to book value (saleable assets the company owns).

While many investors chase stocks that have already been increasing in price, value investors look for those depressed in price relative to their peers. As one might guess, a stock that lags in price is generally of a company that carries some signs of distress.

Therein lay the defining difference between growth and value stocks. A growth stock, like Apple, has a high price relative to its book value. Apple’s price/book ratio (P/B) is 5.1. For every dollar invested you are buying about 20 cents worth of stuff the company could sell if it liquidated. A value stock, like General Electric, has a P/B of 1.2. Every dollar invested buys about a dollar of saleable assets, a difference of almost 80%.

But Value stocks differ in other ways.   They are generally more volatile (risky), which explains a preferential price relative to growth companies. But, as the term “value” infers, they tend to have higher returns as a group – both domestically and abroad.

Recently we’ve heard a lot about Greece and the European Union. Many stock prices have been hammered in Europe over the debt issue, making them “Valuey.” When considering a broad base of companies to own, historically this is a good time to buy.

International Value stocks have produced excellent returns historically. Studies show that over a 35-year period these companies enjoyed 30% higher returns than their growth counterparts. “The Wiser Way” to own these stocks is through diversified Mutual and Exchange Traded Funds.

I welcome questions or comments about International Value Investing.

Warmly,

Marc Becker

To read past articles and view past videos, visit: www.marcbecker.tv

Golf Tip of the Week

Skip it Up There

Occasionally you will have a problem that appears to have no solution: ball sitting on hardpan with a bunker looming between it and the green, and very little putting surface between the ball and the hole on which to stop the shot.

The tightness of the lie prohibits wedging the ball high enough or with sufficient spin to stop it quickly. The bunker lip makes rolling the ball through the sand with a choked long-iron or putter very chancy.

What to do? Although it certainly isn't risk-free, a skip shot probably offers the best option. The goal is to one-bounce the ball from a level spot toward the front of the bunker so that it pops over the lip and up onto the green. Use a medium-iron, hooding the face slightly to give the ball a little hook spin. Stroke firmly using your normal chipping action and look at the ball hard until it vanishes.

You might be surprised at how well this technique often works out.

Source: http://www.nicklaus.com/nicklaus_golftips/

Trivia Time

This week's question: What year was the European Union established?

Do you know? E-mail your answer wendy@wiserfinancial.com and if you are correct, receive a free "Way to Go!", "You Rock!", or other congratulatory phrase. Then brag to all your friends about how smart you are.

The answer will be in next week's newsletter!

Last week's question: Where do you go to see the world's largest tulip (and other flowers) garden?

Answer: Keukenhof Park, also known as the Garden of Europe, in the Netherlands. Approximately 7 million bulbs are planted there each year!

Congratulations to Cindy S. and David R. for getting the correct answer!

Source: www.wikipedia.com

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The articles and opinions expressed in this newsletter were gathered from Marc Becker, The Advisor Lab, and a variety of other sources. Articles are written by Marc Becker. All sources are believed to be reliable but do not constitute specific investment advice. In all cases, please contact your investment professional before making any investment choices. Copyright © 2011 Wiser Financial Coaching LLC, All rights reserved. Marc Becker Wiser Financial Coaching, LLC 2741 Campus Walk Ave. Bldg 400 Ste 400 Durham, NC 27705 Tel: (919) 477-3355 Fax: (919) 477-3366 becker@wiserfinancial.com Securities offered through Triad Advisors Inc., Member FINRA/SIPC
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Get Wiser: Gold, Tulips, Guns & Salt

2011-09-24T03:59:00.001-07:00

In this week's edition: POP goes the bubble!

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Gold, Tulips, Guns, and Salt

In 2005 gold was about $430/oz (about the same as in 1986). Six years later, it ran over $1,800/oz: 350% more expensive. But enough about gold, let’s talk flora.

In 1593 Tulips were introduced in Holland. The rare flowers became the vogue and prices mounted. In one amusing exchange a single bulb was traded for a bed, complete suit of clothes, and a thousand pounds of cheese among a longer list of items.

At the height of the mania, bulbs sold for $1,250 in U.S. dollar terms. Deemed too valuable to risk planting, they were displayed ungrown at the risk of being mistaken for food and eaten by visitors.

One day a buyer failed to pay for bulbs ordered. Panic ensued and within a short period Tulip bulbs were worth practically nothing. So what does a tulip bulb and an ounce of gold have in common? More than you might think.

You can’t use either for anything other than display or selling at the going price (“Show or Sell”). Neither create more of itself on its own (pay dividends/interest). And both have experienced dramatic increases in price relative to their usefulness as assets. I’m not arguing either is without value. I’m introducing a misconception over the presumed value/safety of certain assets.

First, in recent years advertisers selling gold frequent the notion: "gold always increases in value". This is as far from reality. Just as it was when we heard this about real estate and technology stocks. As prices of any asset bubble, the presiding premise is that it won’t go down, it has always gone up. Our emotional bias toward recent events make this seem real, though intellectually we know "no tree grows to heaven." Most assets have ballooned and been busted before.

In 1980 the price of gold went from $200/oz to over $800. On a percentage basis this is similar to the recent run up. Then gold went down, way down, and stayed that there for 25 years. Interestingly, consumers purchasing gold recently are not focussed on the future market price as much as having it on hand after the end of the world.

A supposition exists that if the worst happens gold will still represent currency. I disagree. If the global economy collapses, our worries will extend far beyond worthless stocks. We won’t have ready access to electricity, transportation, safety or food. In that event, things of value will be usable items such as candles, horses, guns, and salt (the original currency). Frankly, I doubt bling will rank high on anyone's "I wish I had," list. A box of bullets, on the other hand...

Shortly after hitting $1,800/oz gold started acting differently. It has tottered back and forth displaying what is now considered uncharacteristic price dissimilarity with stocks. Over the last 5 days the dow dropped about 5%. Gold has dropped about 12%, an unusual event during a bad week for stocks.

I cannot say that $1,800 is the top for gold, but I can its value is fluctuating differently than in the last 6 years. I can say I’ve heard gold traders using terms like “a classic top” in relation to recent price movement. I can say, like it or not, anything quadrupling in price over a short period has always been a bubble. And I can say, even before the internet, bubbles take days, not decades, to pop.

I welcome comments and questions.

Warmly,

Marc Becker

If you would like to read more about the Dutch Tulip Bubble - http://www.damninteresting.com/the-dutch-tulip-bubble-of-1637/

Gold prices since 1970:

To read past articles and view past videos, visit: www.marcbecker.tv

Golf Tip of the Week

Skip it Up There

What to do? Although it certainly isnÍt risk-free, a skip shot probably offers the best option. The goal is to one-bounce the ball from a level spot toward the front of the bunker so that it pops over the lip and up onto the green. Use a medium-iron, hooding the face slightly to give the ball a little hook spin. Stroke firmly using your normal chipping action and look at the ball hard until it vanishes.

You might be surprised at how well this technique often works out.

Source: http://www.nicklaus.com/nicklaus_golftips/

Trivia Time

This week's question: Where do you go to see the world's largest tulip (and other flowers) garden?

Do you know? E-mail your answer wendy@wiserfinancial.com and if you are correct, receive a free "Way to Go!", "You Rock!", or other congratulatory phrase. Then brag to all your friends about how smart you are.

The answer will be in next week's newsletter!

Last week's question: In what area of the world did chocolate originate?

Answer: Mesoamerica, which includes southern Mexico, Guatemalla, Belize, El Salvador, and parts of Honduras, Nicaragua, and Costa Rica.

Congratulations to David R. once again for getting the correct answer!

Source: www.wikipedia.com

follow on Twitter \| visit www.marcbecker.tv \| forward to a friend
The articles and opinions expressed in this newsletter were gathered from Marc Becker, The Advisor Lab, and a variety of other sources. Articles are written by Marc Becker. All sources are believed to be reliable but do not constitute specific investment advice. In all cases, please contact your investment professional before making any investment choices. Copyright © 2011 Wiser Financial Coaching LLC, All rights reserved. Marc Becker Wiser Financial Coaching, LLC 2741 Campus Walk Ave. Bldg 400 Ste 400 Durham, NC 27705 Tel: (919) 477-3355 Fax: (919) 477-3366 becker@wiserfinancial.com Securities offered through Triad Advisors Inc., Member FINRA/SIPC
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Get Wiser: Retirement Date Funds and Chocolate

2011-09-09T23:59:00.001-07:00

In this week's edition: Life is like a box of chocolates. . .

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Retirement Date Funds and Chocolate

While professionals warn against them, Retirement Date (“Target Date” and “Lifestyle”) funds have grown in popularity - particularly in 401(k) and 403(b) plans. The idea behind these "set it and forget it" funds is simple: Choose a year you plan to retire - 2015, 2020, 2030 etc., – and then invest in a fund that names the closest year.

The idea behind Target Date Funds is good: a comprehensive portfolio that becomes more conservative as retirement nears. But the concept has been lost in the manufacturing process. So lost, one reporter calls them “a dangerous rip off.”

This is where chocolate arrives: Target Date funds are like a box of chocolates, you never know what you’re gonna get.

And this is where chocolate goes away: With chocolates you usually wind up with something good regardless of what’s inside.

Dozens of fund families offer Retirement Date funds. But differences in fees, allocation, and returns are staggering. Tim Middleton of MSN Money reports in 2008 the Oppenheimer Transition 2010 fund lost -41.5% compared to -3.6% of another Target 2010 fund.

Of the problems inherent in these funds, arbitrary risk modeling is the most dangerous. “Target Date investors got run over by a truck and didn’t know why,” said David Krasnow of Pension Advisors.

Investors generally conclude these funds take a protective stance – diversifying and decreasing potential losses over time. This dynamic asset allocation should create an appropriate “glidepath;” the same as a guidance system directing a landing plan would.

Oddly, there is no standardized method for determining the glidepath for investors. Some funds are aggressive at the proposed retirement date, extending their glidepath for another 30 years. Others are mostly cash on the same date. Investors find out which plane they are on when one crashes.

So how does a good idea go awry?

Target Date Funds utilize a “fund of funds” design. A Target Date (host) fund invests in other funds. The underlying funds have management fees and are usually actively traded, incurring additional costs. The host fund adds another layer of fees to manage underlying funds.

Manufacturers argue additional fees are deserved due to scrutiny when choosing and managing the underlying funds. I won’t argue they don’t have methods. But I will note how and what they will be managing in the future isn’t knowable, and usually the underlying funds are manufactured by the same family or by another company with a fee sharing arrangement in place.

Read in that what you will - but complaints against “excessive fees” in Target Date funds abound. And the train doesn’t stop there.
The majority of Target Date funds are hardly diversified according to academic standards. They weight toward large U.S. companies and intermediate bonds, scattering smaller percentages across other asset classes. Historically, this approach has not significantly reduced relative risk or increased return…reasons we diversify in the first place.

MIT PhD Zvi Bodie states, “The damage is done by the inherently misleading name of the fund. They have nothing whatsoever to do with target dates. Nothing happens on the target date. Nothing is promised on the target date.”

Recently I showed a client how he would have previously boosted his return by almost 3% per year by putting 50% in a broad stock market fund and 50% in a broad market bond fund – instead of a balanced Target Date Fund.

He said, “It looks like they are just charging more for the same thing I already have.” My response: “It’s a good gig if you can get it.”
I welcome questions and comments.

Warmly,

Marc Becker

For more insight on Target Date Funds:

Stop the 401(k) Rip-off!: Eliminate Costly Hidden Fees to Improve Your Life.

http://www.thestreet.com/story/10389236/1/beware-excessive-fees-on-target-date-funds.html

http://articles.moneycentral.msn.com/Investing/MutualFunds/target-date-funds-aim-elsewhere.aspx

http://www.kiplinger.com/magazine/archives/2008/02/target_funds_under_fire.html

http://www.iplanretirement.com/retirementblog/asset-allocation-a-dangerous-rip-off/

To read past articles and view past videos, visit: www.marcbecker.tv

Golf Tip of the Week

Try the Woodcutter Shot

My old friend Phil Rodgers, an ace short-game teacher, has helped me a lot with the little shots over the years. Back at the British Open at Muirfield in 1966, he taught me a way of escaping from what seemed like an impossible situation in sand, which has saved me a number of strokes since.

The technique is employed when the ball is near the rear bank or wall of a bunker that is too steep to permit a normal swing.

Assume your normal bunker shot set-up and stabilize yourself for a hard hit by wriggling your feet deep into the sand. Once you are secure, simply pick the club straight up by folding your arms exactly as you would to chop an axe into a log lying on the ground. Then hit down very hard with your right hand two inches behind the ball.

Your objective is to shock the ball out by burying the clubhead in the sand behind it, so forget about a follow-through.

Visualizing the action as strictly up and down, woodcutter-like, rather than back and forth, golfer-like, will help you execute it effectively.

Source: http://www.nicklaus.com/nicklaus_golftips/

Trivia Time

This week's question: In what area of the world did chocolate originate?

Do you know? E-mail your answer wendy@wiserfinancial.com and if you are correct, receive a free "Way to Go!", "You Rock!", or other congratulatory phrase. Then brag to all your friends about how smart you are.

The answer will be in next week's newsletter!

Last week's question: In what year was the first Labor Day Celebration?

Answer: The first Labor Day was celebrated in 1882 in New York City.

Congratulations to David R. once again for getting the correct answer!

Source: www.dol.gov

follow on Twitter \| visit www.marcbecker.tv \| forward to a friend
The articles and opinions expressed in this newsletter were gathered from Marc Becker, The Advisor Lab, and a variety of other sources. Articles are written by Marc Becker. All sources are believed to be reliable but do not constitute specific investment advice. In all cases, please contact your investment professional before making any investment choices. Copyright © 2011 Wiser Financial Coaching LLC, All rights reserved. Marc Becker Wiser Financial Coaching, LLC 2741 Campus Walk Ave. Bldg 400 Ste 400 Durham, NC 27705 Tel: (919) 477-3355 Fax: (919) 477-3366 becker@wiserfinancial.com Securities offered through Triad Advisors Inc., Member FINRA/SIPC
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Yeah, But. . .

2011-09-06T04:15:00.000-07:00

Yeah, But. . .

We’ve all been in arguments when our counterpart is incapable of seeing our side, let alone agreeing with it. There is an important psychological lesson from this.

Humans prefer to see things as black and white— limiting possible realities to two opposing conclusions. This simplifies everything to a basic moral imperative: right vs. wrong. As in: I am right, you are wrong.

We are well advised to keep in mind when we believe the answer is either A or B - the rest of the alphabet is still on the table. And chances are the truest answer is another letter.

That things may not be cut and dry opens the possibility we may be wrong and is often refuted by both sides. This imperative is so strong our mind highlights any evidence that supports our conclusion on any given matter…after our decision has been made.

This polarizing process is called tactical justification. When making a decision we go with what our gut (emotional reaction) feels is right in the moment. This usually takes less than 40 seconds. Then our brain (logic) illuminates proof supporting our gut reaction. This can last a lifetime.

In investing, psychologists point to the primary behaviors at play: “Recency” and “Loss Aversion”. Recency is the tendency to weigh recent events with greater meaning than earlier events. This hurts investors by instilling the feeling that this time it is different, so they need to do something different.

Loss Aversion explains emotional reactions to losses. According to Behavioral Finance Psychologists Daniel Kahneman and Amos Tversky, reactions to loss are twice as powerful as those to gains. Therefore, in tumultuous markets we are more inclined to change plans than in good markets.

Pick any 40 year period and I will show that war, catastrophes, energy crises, financial debacles, recessions, bubbles, political upheaval, debt, trade deficits, global unrest, etc., have happened before. Yet the general feeling was this was new, we were in uncharted waters.

So it’s not what is happening now is not different. It’s that the people experiencing it are. It seems new because, to us, it is. A professor of English once told me: “Reading about something is one thing, living it is quite another.”

When living it, feelings strengthen into what I call the “Yeah, but” phenomena. This occurs in debates over any topic between polite, open-minded adversaries. It goes something like this:

One side makes a point justifying his/her conclusion and the other responds, ‘I agree on that point but,’ or ‘I understand how that could be interpreted that way but…’

As in, “Yeah, but…I’m still right and you’re still wrong.”

In investing, two options in the market are argued: Buy or Sell. Hundreds of studies show that choosing one over the other is detrimental in a portfolio. It’s called market timing. That’s why we systematically do both at the same time. It’s called rebalancing. Just as “the truth often lies in between,” selling of a portion of winners to buy underperformers has always proven the most successful strategy, including during recent events.

Even after strong positive returns over the last year, I’m hearing this from some investors:

“I want to go to cash and wait for the next recession, then I’ll get back in,” and “I need to perform immediate buys and sells as any investor requires during such times.” I listen to reasoning focused on current events— and remember such requests don’t happen when the market is going up. Perhaps Dan and Amos are on to something.

So how do we protect ourselves against psychological inclinations of which we’re unaware, given justification abounds that they are rationale and logical?

First, whenever we are inclined to change something we have a problem. We don’t change banks, CPAs, jobs, or portfolios unless we feel a better opportunity lies elsewhere. But firing your CPA because he’s a jerk is different than altering your portfolio because the market is jerking. There are tons of banks and CPAs, but there is only one market, and eventually she has always come around…every time.

Second, if you are considering portfolio changes, contact us. We want to know what you are thinking and feeling and a conversation can’t hurt.

In closing, Warren Buffett’s 2004 Berkshire Hathaway Annual Shareholder letter offers relevant advice in times like these (paraphrased):

Business has delivered terrific results the last 35 years. Therefore it should have been easy for investors to earn juicy returns: All they had to do was piggyback in a diversified, low-expense way. A rebalanced indexed portfolio never touched would have done the job. Instead many investors have met with disaster.

There are three reasons for this. High costs incurred by excessive trading and portfolio fees; portfolio changes based on tips and fads; and a start-and-stop approach marked by untimely entries and exits. Investors should remember that expenses, excitement and fear are their enemies.

I welcome questions and comments.

Warmly,

Marc Becker

If you would like to read more about behavioral finance click here.

The Backwards Rebel Yell

2011-08-29T05:29:00.001-07:00

The Backwards Rebel Yell

Recently investors have been on a nauseating roller coaster of volatility. Pundits offer explanations as to why and what to do about it. Behind the scenes, investors acting on this advice are abandoning their investment strategy, and partly responsible for these extreme market shifts.

While I wish people didn’t have to experience unpredictable ups and downs, ultimately this is why I have a job: I know how to stomach the ride on a roller coaster going backwards.

Enter “The Backwards Rebel Yell (BRY).” Most coasters are scary but we face forward, able to prepare for the next jolt and approximate when the ride will be over. The old style wooden BRY, however, runs its entire course with the train turned backward.

As the chain tugs the train up the first hill, the riders observe the station they departed. As the train drops over the first crest, accelerating on a seemingly vertical slant, the vista changed to sky. And the riders had no idea what is about to happen next.

As a coaster aficionado, this was one of my favorites. It might explain not only why our company doesn’t bury its head during such turbulence, but prospers through it. Even without knowing the next descent or bone jarring curve, we can explain the most likely outcome: we will wind up at the station— our destination all along. There are only two things that will alter this: a cataclysmic disruption of life as we know it, or we jump off the train.

When I listen to the media gurus it reminds me of the Shakespeare quote from Macbeth, “It is a tale told by an idiot, full of sound and fury, signifying nothing.”

Investors do themselves a favor by ignoring speculation and remaining focused on their investment plan; keeping in mind market volatility is ordinary. Like a backwards roller coaster, we can’t see what’s coming. But if we’ve invested, this is precisely what we bought a ticket for to begin with.

Terrence Odean, an expert on investor behavior said this in regard to the recent market volatility:

"It has been like watching coins get flipped, except each flip as been 5% up or down on the market. The average investor should think about how much damage he could have done to his portfolio going in and out and getting the calls wrong. Sure, there’s a chance you would have gotten them right, but in a market like this one— with everything that is going on out there— do you really want to risk that?"

In other words, acting on a feeling you should be doing something today and perhaps again tomorrow can have the same outcome as fleeing a coaster going 70 miles an hour and then trying to jump on the next train from the same spot you jumped off. Generally speaking, this effort decreases our chance of making back to the station.

So what are some simple rules that an investor can follow in times like this? Wall Street Strategist Bob Farrell summarizes good strategies to follow in roller coaster markets:

1. Markets return to the mean over time.
When stocks go too far in one direction, they tend to come back to their long-term trend— often slingshotting too far in the other direction in the process.

2. The public buys the most at the top and the least at the bottom.
Buying when prices are low and selling when prices are high requires discipline and doing the opposite of what the herd is doing. A time to buy is when others are fearful. A time to sell is when others are complacent. The discipline of rebalancing ensures that you are selling assets high and buying assets low. (Something Wiser investors implement at least 4 times per year).

3. Fear and greed are stronger than long-term resolve.
Investors are their own enemy when allowing emotions to take them off course. A prudent investment plan will withstand market volatility and better ensure our goals are met. If you are feeling unsure, talk with an advisor who adheres to a long term philosophy. He/she will be able to explain how your portfolio is designed to handle times like this.

4. When all the experts and forecast agree— something else is about to happen.
Ignore the talking heads – their guess is as good as yours as to what will happen next. The reasoning (fear/greed) they spew to justify the advice (gambles) they advise sells advertising and creates captivating headlines. If you follow the financial media for any time you may notice: when things are bad it generally predicts worse - and when things are good it generally predicts better. Going against the herd mentality is often more profitable.

5. Bull markets are more fun than bear markets.
No ____ (insert your own word here). Focused investors, however, understand bulls and bears are part of investing. They can no more reliably unwind them than they can separate green Play-Doh into yellow and blue Play-Doh. When the focus is on the future, they understand this strategy is far more likely to yield green Play-Doh down the road. And it is easier and less expensive.

I welcome questions and comments.

Warmly,

Marc Becker

Reference: The article referencing Bob Farrell’s comments can be found at this link.

2011-08-09T08:01:00.000-07:00

“The First Cut Is The Deepest”

This song of a heart break is prolific beyond lost love. When a previously uncompromised sense of trust is shaken our emotions run wild.

The U.S. Credit rating has fallen below perfect for the first time. Never mind the rating agency is one that lent itself to the financial crisis. Never mind this change of heart doesn’t reflect our ability to pay the interest on our debt. And, never mind the fact we dropped from “perfect” to “as close to perfect as possible without being perfect.”

It is merely the fact it has changed, the first cut, that has investors in an uproar. And just like reactions after a first heart break, what is happening now makes little sense.

Logically, since a credit rating identifies the level of risk associated with a debt, one should expect a demand that higher interest be offered for this additional risk. In short, people and institutions would sell bonds with low interest rates when the risk to the issuer increased.

But that’s not what happened. Money flooded into U.S. Treasuries decreasing the realized interest rate. Apparently dropping from AAA to AA+ isn’t enough to dissuade global investors.

Logically, the rating drop combined with good corporate economic news might lead one to expect a jump in stocks, since the government is in trouble but business is progressing. But that’s not what happened either.

Instead, money flooded into treasuries and the stock market has suffered substantially.

So what do we do?

“I still want you by my side
Just to help me dry the tears that I’ve cried
If you want I’ll try to love again, but you know,
The first cut is the deepest.”

Don’t sell low, BUY LOW. After all, we’ve learned to love again before.
I welcome questions and comments.

Warmly,

Marc Becker

Am I Taking Too Much Risk?

2011-08-04T05:59:00.000-07:00

Am I Taking Too Much Risk?

Now that we find ourselves on the low end of the trading range for the year, some investors are asking if they should remain invested in the market. Interestingly, when the market is up, I’ve only been asked this question once.

The investing ideal is high returns with no risk. I want to take a moment to break down what this means on a gut level:

We want to invest $5,000 today and achieve the wealth necessary to buy a mansion, a yacht, a plane, and three gourmet meals a day in short order. And why not? It can’t hurt to dream…can it?

Actually, it can. This concept is so attractive that investors are frequently harmed or destroyed by this promise. The investor who chooses to believe in big returns with little or no risk is more likely to fall prey to Ponzi schemes and other scams.

Intellectually, most realize there is no such thing as a free lunch. Most investors understand that, if done prudently, taking more risk raises the opportunity to achieve higher returns. Taking less risk minimizes potential losses but nearly insures losing out on the highest returns. The words, “risk” and “return” go together…always. It has been said, “Risk is really fortune’s accomplice.”

In everyday life, "risk" carries a different connotation. It refers to the chance that something bad will happen. This includes actions that present little gain to accompany the risk, such as climbing Mt. Everest (many people die attempting this feat) or raising a 2 iron (yes, some of us still have one in the bag) above your head in a thunderstorm.

In business and investing, you can't have greater returns without taking greater risks. This is precisely the reason we are seeing stories about stifled job growth and manufacturing. In times of uncertainty companies are more concerned about maintaining a foothold than reaching the summit. The summit is still the goal, but industry looks for more than a scary story with bragging rights. It wants a summit covered with money.

As an example: In 2009 Apple stock was trading at $80 a share. Tablet computers, small devices with no keyboard and little memory, were failing left and right - including Apple’s own Newton. There appeared to be no market for the tablet.

Apple, convinced that smaller computing and “under the arm” internet linkage would ultimately be successful, took a risk. A huge risk in that the development and production cost of the iPad could have crippled the company if the product failed. After its release in 2010 the stock price tripled and Apple redefined personal computing.

When investing, risk refers to price volatility within a fluctuating portfolio. It's not the chance something bad will happen as a result of reckless action - but the potential magnitude of temporary failure that accompanies bold action. Downside volatility is an inevitable part of upside return.

The market, economy, and our political environments are not ideal at the moment. The situation begs our inner analyst to begin speculating on everyday risk, the next bad thing that could happen. If we broaden our view just a little, we see stock investors are up nearly 100% from two years ago. A larger step back reveals Apple trading at $7 a share ten years ago.

As investors, our second smartest decision is to not run from risk but to buy and hold these bold investments appropriate to our investing time horizon. The smartest decision we can make is to actually buy more of these investments when prices are dropping if we are able.

“Be fearful when others are greedy, and greedy when others are fearful.”

-Warren Buffet

Properly managed, these investments have always been the greatest wealth creators and most likely will continue to be-- as long as our way of life doesn’t end. In the event that actually does happen, it won’t matter where you have your money.

I welcome questions and comments.

Warmly,

Marc Becker

U.S Defaults on Debt – Time to head for the hills?

2011-07-26T07:29:00.000-07:00

U.S Defaults on Debt – Time to head for the hills?

I’ve been receiving a lot of questions like the one below:

Marc, hi, as with most, I am concerned that the equity market will take a large hit if the dopes in Washington don't handle this debt ceiling crisis quickly. What are your plans if the 8/2 arrives and there is no deal in place?

My response:

Don't get me wrong here - I'm not saying the government is incapable of making really bad decisions. But your question interjects a market reaction that would seem a logical result of such. I could write for hours on previous events when the market did exactly the opposite of what logic would dictate, but in this case the present works well enough.

This conundrum didn't start today, or last week, or even last month. Does suspense build as the clock ticks closer? Sure. Just like in the movies where the hero is trying to disable a bomb before it goes off with 1 minute left on the timer. Regardless, the DOW is within 200 points of its high since 2008.

Could the market plummet without timely resolution? Yep. Could it do something else? Yep. Could “the dopes” work this out making this concern futile? Yep.

Keep in mind the media LOVES a story like this. Just like the writer of the bomb movie, the bloodier the potential ultimate disaster, the more captivated the viewer becomes. So first let me point out this isn't a terrorist/bomb movie, yet it's painted to gain the same attraction from viewers. And this is done for one reason and one reason only. The more consumer attraction, the higher the advertising revenue the outlet can demand.

I’m not vilifying anyone by saying this; it is merely a result of the evolution of journalism economics. Over the last year investors have capitulated over Libya, Egypt, Greece, Japan, our own economy, etc., all with believable doomsday scenarios attached.

Remember the bird flu pandemic? Reports speculated on deaths in the 100s of millions. Yet the market went up. If you Google this now you’ll find numerous articles noting people were more affected by the H1N1 vaccine than by being exposed to the flu.

Back to current events: unlike the bomb timer, the date for passing a debt ceiling is an arbitrary deadline, as most deadlines are for any politician or government agency. That said, this should come as no surprise: There have been many times the government hasn't met a deadline. Yet no bomb has actually exploded and the world hasn't ended.

Second, let me relay what we are doing not only to defend our positions, but to maximize our opportunity should the market collapse for this or any other reason. We are properly allocated to commodities such as precious metals, energy, foreign currencies, and foodstuffs that historically increase in value when equities falter.

We are also heavily diversified in global markets. Less than 8% of our most aggressive portfolio is allocated to S&P 500 companies. If big U.S. companies’ stock prices take a hit, that doesn’t mean the other 41 markets we are invested in will suffer the same fate.

And for our fixed (bond) allocation we focus on short-term instruments, also globally diversified on the corporate and government issued levels. This buffers us from rising rates and other economic or corporate risk that WILL occur.

In short, we positioned for this years ago, without having to know what “this” would be. This strategy has worked time and again – through numerous crises over the last 30 years including the dot.com bubble and recent financial crisis.

If anything happens in the next few weeks other than eruption of the bomb that ends the world as we know it, we will survive through and prosper from it, just as we have through previous disasters.

Below is a link to a telling article concerning our recent situation and what to expect, or not, should things slide worse. Take from this letter and article 2 things: we don’t know how prices of anything will be affected – and we are positioned in the best possible way for that fact.

http://finance.yahoo.com/news/Preparing-for-worst-as-apf-745849065.html?x=0&sec=topStories&pos=1&asset=&ccode=

I welcome questions and comments.

Warmly,

Becker
www.marcbecker.tv

The Greek Tragedy and Investing

2011-06-22T07:28:00.000-07:00

Ongoing financial woes in Greece remind us we live in a world of uncertainty. Currently Greece is the lowest credit rated country in the world. “Global Economic Collapse” has been the byline of choice when the media has reported on this story since 2009. Newsvendors have pulled all stops when it comes to connecting the dots between the possibility of Greece defaulting on its debt and worldwide economic disaster.

If raising angst in investors is the intent of the media, it has done a fine job. I’m asked at least 3 times a week about what might happen if Greece does this or that. The root of these questions is the fear that whatever the ifs ands or buts, the result will be a negative impact on our investments.

Here are some things of which I am certain: We cannot know in advance how any crisis will affect anything or for how long, including the value expressed on our investment statements. Moreover, from a larger view, this news item is the epitome of risk– which is the very nature of investing. If stocks, bonds, countries, economies, etc., did not experience risk and volatility, there would be no premium over time for investing in them. If that were the case, no one would do it. See if this sounds familiar:

Economic Risk: “In financing a project, the risk that the project's output will not generate sufficient revenues to cover operating costs and to repay debt obligations.”

12 years ago this perfectly defined Brazil. It teetered on economic ruin that, given its global energy contribution, could have create a far greater problem than Greece threatens. Now we see that Brazil has turned into a major economic player and its stock market has had the highest returns of any other since that time.

But back to Greece. As for the things I’m not certain about… but still seem reasonable: As a global economic player, Greece is quite small. The total debt outstanding is 432 Billion in U.S. dollar terms. Compared to the near failure of a single company in 2008, AIG, this isn’t particularly scary. When compared to the size of the entire problem at the time, this amount would hardly be worthy of a conversation.

If I am to buy into the potential catastrophe as described, the possibility of default has the world teetering on bankruptcy. The European Nations, U.S., China, Japan, Canada, Brazil…and so on are going to be blown out of the water by this. I’m not saying it is desirable and won’t create problems, but topple the global economy? Really?

Since 1973 there have been 15 major financial crises that affected the markets. What follows leaves out a number of political, currency, commodity, wartime, and other crises:

1973: OPEC strangles energy supply. Oil prices surged out of sight leading to the worst bear markets since the depression.

1980’s: The Latin America Debt Crisis. This crisis threatened to bankrupt many major US banks.

1984: Continental Illinois and National Bank became insolvent. This threatened to create a run on U.S. banks.

1987: The DOW dropped almost 25% in a single day. The largest one-day drop in the history of the market.

1989-1991: The Savings & Loan Crisis. 747 S&L institutions (banks) failed.

1990: The Japan Bubble and Collapse. Japan has still not fully recovered.

1990: The Scandinavian Banking Crisis. Created a dismal impact on Sweden, Norway and Finland.

1992: Black Wednesday. The Bank of England had to withdraw from the European Exchange Rate Mechanism due to speculative attacks on the British pound.

1994: The Mexico Peso Crisis. The US had to lend money to Mexico to prevent the country from going insolvent.

1997: The Asian Contagion. Banking devaluations ran rampant across Asia.

1998: The Russian Stock, Bond and Currency Collapse.

1998: The Long Term Capital Collapse. The Federal Reserve had to step in and provide a bailout to prevent another collapse and contagion.

2000: The DOT COM Bubble Burst.

2001: 9-11. Leading to a wartime market, this began with the literal collapse of the center of the Global Financial Mechanism.

2007: The US Financial Crisis.

The lesson is that crises, volatility, and yes, risk are NORMAL. Stated most simply, the volatility endured from this normalcy is where returns higher than CDs and T-bills come from. Those that realize this “risk adjusted” premium are those that have a clear investment strategy that does not deviate when media speculation paints a dismal picture.

The number of people able to alter their strategies around such events to further profit is so small, there isn’t a single book written about them as a whole. But there are hundreds of books discussing the success of those who look at risk, prudently diversify into it, hold fast, and succeed.

In closing, it is interesting to note that from 1970 to April 2010, the S&P 500 returned 10.0% per year and the EAFE returned 10.1% per year.

I welcome your comments.

Warmly,

Marc Becker

Implicit Costs Maim Investors

2011-06-15T07:26:00.000-07:00

When evaluating investment cost, most focus on the obvious rather than the obscure. However, educated investors understand evaluating costs requires more than simply looking at stated (explicit) fees. Today I’m focusing on unstated (implicit) costs that do not show up on a fund screening site or in a prospectus.

Long term investors attempt to structure a diversified portfolio of stocks and bonds. This is most commonly achieved by owning mutual funds. The “expense ratio” (annual fee) of these funds can be found within a prospectus or on most fund screening sites. But the expense ratio itself doesn’t tell the entire story when it comes to total expenses created within these investments.

Funds incur other costs passed to investors when the manager buys and sells underlying securities on behalf of the fund owners. The average fund manager turns over the entire portfolio each year , despite that this flies in the face of a known successful strategy— buy and hold. Every one of these trades incurs additional charges to the fund holder. In cases like this, the implicit costs may be even higher than known fees. When added together, it is not uncommon for fund costs to exceed 3% per year.

Expenses in investing are similar to walking in a swimming pool. The higher the cost incurred, the deeper the pool, and the slower the headway. One of the biggest favors any investor can do him/herself is to stay in the shallow end of the pool.

At Wiser, we actually try to stay in the baby pool. Sure, there is no diving, but how much did you enjoy the last time your portfolio went for a dive?

Prudence dictates minimizing the things that we know are likely to detract from future value. Academically it is long proven that the number one detracting element in investing is cost. That said, looking for ways to avoid all costs isn’t a realistic expectation either.

The point is to be aware of the trade off between cost and value. Funds that trade a lot do so in an effort to add value by achieving higher returns than the market. But these managers, primarily due to the excess costs involved, rarely attain this end. In a way it is like the manager is trying to lift the bucket he is standing in.

The compound affect of this drag is substantial. A recent Government Accountability Office study estimated that 1% in unnecessary cost on a portfolio averaging 8% return can be devastating.

According to this study if you incurred implicit costs of 1% and started with $100,000 you would end with $387,000 twenty years later. Without the added cost the value would be $466,000. Over 30 years— $761,000 vs. $1,000,000. Ouch.

The good news is, once understood, implicit costs can be managed. Minimizing the internal costs of your portfolio by holding low-turnover investments is an important part of being a prudent life-long investor.

We would like to congratulate David R. for correctly answering last week’s trivia question. He even showed the math, impressive.

I appreciate and welcome feedback or comments…warmly,

Marc Becker

Will Japan Melt Down the Market?

2011-03-17T07:49:00.000-07:00

Will Japan Melt Down the Market?

By Marc Becker

Investors are worried about the effect Japan’s crises and market will have on their portfolios…and I can hardly blame them. Earthquake, tsunami, nuclear reactors teetering, over 10,000 dead. Scary stuff.

But before I get into that: I have been speaking to where the market is right for over a month as the last significant downturn began in April of 2010 due to Greece’s near insolvency. The market recovered quickly from the fear Europe would collapse and has done nothing but skyrocket. At the time the Dow was at its lowest resistance level since the market recovery began - 9,600 - and is up @22% since.

What is a resistance level? Anyone who has watched the market for two weeks or longer realizes it neither goes straight up nor down. The market tends to move back and forth between two points for some time before going higher or lower. Usually, after a period of weeks or months the market will break out of this range (spread); either above the higher point (the upper level of resistance) or below the lower (the low level of resistance).

Investors should consider our last low resistance level in the Dow was set at 11,400 after the Dow broke through this barrier last December. Until that point, the Dow had been moving back and forth between 11,400 and the previous low resistance level of 10,800 set in September of 2010. The spread at the current point is substantially larger than usual with the low at 11,400 and the high at about 12,350.

Most spreads we’ve seen over the last several years have been 600 points, + or – 100 points. The spread between 11,400 and 12,350 is almost 1000 points, nearly twice the norm in this market recovery phase.

This is important because the nature of the trader mentality (those frequently buying and selling on the floor) would look at the Dow over 12,000 as a prime selling opportunity to take profit.

Why does this matter? Because regardless of global or economic events, seeing the market retrace as profits are taken is somewhat predictable regardless of world events.

As an example, the Dow bounced between 10,800 (the previous low resistance level) and 11,400 for almost 2 months, finally breaking out over 11,400 at the end of the 2010. During that time the market was being tested and profits were being taken from the previous resistance level of 10,050 set during the third quarter of 2010.

Now enter Japan and fear of nuclear meltdown and the noticeable fact that the Nikkei (the Japanese equivalent to our Dow) has dropped by over 20% since the earthquake. When combining a natural profit driven pull back with a major global event it is easy to create rationale for another market plummet.

Just as it was when Ireland/Greece/Spain were in trouble, or AIG, or the BP spill, or the earthquake/tsunami that killed 300,000 in 2004, or the housing crisis, or…you get the point.

Primary emotional unrest right now is due to the fact that the stability of several reactors in Japan has been jeopardized. And if we were trying to profit by daily trading I would be informing you of speculative gutsy moves and guesses right now.

I am no different than any investor I work with. I don’t like watching downturns regardless of the coinciding event and much of what is going on in the world is worrisome. But I focus on 5 important things during such times:

1) Going up and down is the nature of the market in bad times AND good.
2) There are ALWAYS worrisome things going on in the world.
3) Regardless of #2, given time the market has ALWAYS gone up more than down.
4) The only thing that will stop this is the end of capitalism as we know it.
5) While I care, I don’t concern myself with today’s portfolio value – I concern myself with its value 3, 5, and 10 years from now.

In our current situation the reality is, barring a reactor event that destroys an entire country, changing direction right now is the worst mistake I could make as an investor.

We’ve been here before…exactly here. Remember Chernobyl, 3 Mile Island, and more?

My guess is that each day that goes by without a major deterioration in Japan decreases the likelihood of a major deterioration.

After surpassing the resistance level at 11,400, my expectation was that level would be retested, meaning that the Dow would dip back down close to that level after surpassing 12,000. Why? Because it hasn’t happened yet and that is what the market does.

The Dow stalled at 12,350 almost a month ago and began pulling back over a week ago. Then the earthquake/tsunami hit and elicited a reason for worry. So what would be a natural occurrence in a sublime world now appears to be another beginning of another end, still fresh in our minds from 2008.

I would not be surprised in the least, whether things stabilize or deteriorate in Japan, for the market to react for a period of weeks or months. As I said before, I would be more surprised for the market to increase by 20% and just keep going up.

Therefore, this is no reason to panic. Keep in mind most of you are reinvesting in a market that is taking a dip, meaning you are picking up more shares than you would otherwise.

For those working with us, we have set your allocations for the long term. Part of the long term (as any investor MUST be aware) is remaining disciplined through minor and major geopolitical/economic/market events. Ultimately, our greatest chance for success is to live fulfilled lives one day at a time in the present, while letting our portfolios live for the future.

Yours,

Marc Becker – Managing Partner Wiser Financial Coaching, LLC
Email: info@wiserfinancial.com

P.S. Remember last week when Libya (and two weeks before Egypt) were going to disrupt the Middle East, skyrocket oil and crash our economy? What happened to that?

Gold and Equities

2011-02-23T08:02:00.000-08:00

Question: Why are both equities and gold and the like headed up? What happened to dissimilar price movements?”

As for equities and commodities rising in price at the same time - first keep in mind - nothing in nature has a correlation coefficient of -1. That is to say, there will always be times where dissimilar price movement is not evident over short periods between asset classes that move dissimilarly over long periods.

If we expand our scope and look at equity prices against commodities over the last 4 years instead of the last 2 – it is easy to see that half of this period commodities saw significant increases in price whereas stocks are struggling to get back to even.

But also keep in mind a “short period” could wind up being 10 years or even longer. The short and only real answer to why both are going up at the same time is that money is currently going into both asset classes on a broad scale.

Understanding why prices go up and down is extremely easy. Much easier than the media would have us believe. It is a volume equation. Picture a glass half filled with water. If water is added the level (price) goes up and vice versa. As people put money into various assets their prices appreciate, and when they pull money out the prices do the opposite.

It is estimated between 7 and 11 trillion dollars is sitting on the sidelines and since prices are going up in these markets the most, well, they become more and more attractive relative to cash which is paying .2% and bonds between 3% and 4%.

As for gold and other precious metals there is a compelling possibility that could explain a continued rise in these assets for some time, being China and other large emerging markets. While a gold standard no longer exists many economies including the U.S. Germany, UK, France, etc., still sit on between 50% and 70% of their GNP in gold (as in holding that much of the asset).

India and China are only closing in at @ 5% currently and it wouldn't be surprising for these nations to extend demand of these commodities as they catch up. Needless to say, that is a butt load of gold.

And while this is logical, it in no way means that is what is going to happen. No emerging market has made a run on gold in the last 10 years where this looks, retrospectively, like it would have been a hell of a good idea.

But if you can imagine yourself as an emerging market - you have to balance which is more valuable: buying more and more ownership of foreign based companies (stocks) and government issued debt (leverage) with other nations, or a bunch of metal at a high price requiring even more money to protect it.

To this all I can say is no run is infinite, so owning the hay stack instead of trying to find the needle therein is still the smarter option. That is why I am personally pursuing and advising Wiser clients to dip their toes into the array of asset classes we are, instead of trying to guess whether gold or stocks will do better over the next 5 years.

This strategy will meant that whatever stock or commodity does the best, we will own it – while investors guessing at what will perform best very well may not.

Questions about anything financial? Write me…I’ll write back.

Your favorite Money Coach,

Marc Becker
Email: info@wiserfinancial.com

A Quick Question?

2011-01-13T06:23:00.000-08:00

I received a question from a client recently about the economic outlook found at this link: http://www.hulu.com/watch/201179/charlie-rose-david-einhorn (this segment is about 20 minutes of David Einhorn, hedge fund manager, being interviewed by Charlie Rose and is worth watching)

This client writes:

“Please view this link, very interesting take on economy. I did not blink for the entire 20 minutes. Your plan may be just the ticket for what is being predicted. Would like to discuss when we get the chance.

My response:

Mr. Einhorn and I don't agree in regard to the value of market inefficiency. This isn't surprising as his training has been as an analyst, primarily for hedge funds, which epitomize the notion that there is a way to determine whether a security is over or under priced.

While the market is not completely efficient, consistently turning a profit from this is nearly impossible. He is correct that government interference makes the market even less efficient – but this type of sway makes profiting from inefficiencies even more unreliable. He states this himself when describing our government’s ‘intervene/don’t intervene’ approach as one financial firm after another began to crash in 2008.

If one doesn’t know what the government will do next, one can’t profit from whatever the market reaction may be to whatever the government might do.

As far as profiting from general market inefficiency: a grotesque demonstration of this was experienced in April of 2010. Some stocks valued at $50 or more could be purchased for pennies after a fat finger trade and ensuing “stop loss” orders ran prices down to virtually 0.

This is about as inefficient as the market gets. There was nothing wrong with the companies though their stock prices dropped by almost 100%. It took weeks to figure out what happened. But if we closely examine this extreme example one thing stands out above all else; as out of whack as this truly inefficient deviation was…it lasted for a whopping 90 SECONDS.

The fallout was longer lasting and substantially more conspicuous. Stock prices and confidence were depressed for 3 months after this debacle. But I’ve neither heard Mr. Einhorn nor any other active manager brag about how he/she took advantage of what seems a glaring market inefficiency.

In fact, many hedge fund managers increased their short positions (placed bets that the market would go lower) for several months following this incident – only to be caught with their pants down when the market began to forget and readjust to what the financial media called a “correction.”

Furthermore, the inefficiencies in the market Mr. Einhorn refers to in this interview are miniscule in comparison. As an example, he makes a compelling argument for buying Apple stock. His argument summarizes why one might expect growing market share by its products.

But there are many competitors in the space offering the same things that almost completely destroyed Apple in the 80s. Lower cost, a variety of providers, and open architecture (tens of thousands of FREE apps). I doubt I need to point out the traction Verizon’s Droid and Google technologies have achieved in so short a time. Smart phones aside, I believe the Ipad now has a dozen or more serious competitors.

So what is the future of Apple? I have no idea and neither does any analyst. It is worth noting the future prediction of growth is based on speculation that what has been happening will continue unfettered. In my opinion, growing market share with cool gadgets is meaningless in a society where so much new technology is surfacing so quickly…"the guy in the garage" affect never goes away.

No one knows this better than Apple CEO Steve Jobs as this nearly killed his company 20 years ago. A movie worth watching in this respect is “The Pirates of Silicon Valley,” where Mr. Jobs argues his company’s product will prevail as it was more stable, faster, and better in every way.

The response to Mr. Jobs’ argument was, “it doesn’t matter.” This response came from none other than Bill Gates. And in this age, there are many more guys and many more garages than ever before.

As for his economic outlook I agree with Mr. Einhorn. A lot of problems haven't been dealt with in a way that bolsters long term confidence and another crisis of some kind could result from this. This is why I am not resting on my historically significant laurels of strong post-recession markets and advising clients to go as stock heavy as they can possibly tolerate.

There is a need to better protect ourselves from a market reaction to whatever this crisis might be – thus the inclusion of the commodity component in our portfolios.

But Einhorn's vagueness about what future crisis lurks is exactly the reason I don't adhere to any doomsday predictions that have perfectly good reasoning behind him. Something may or may not happen. It might be big or small. And it could involve virtually any aspect of any economy. I look at it like this:

Are we out of the woods yet? No.
Do we know how long it will take to get out? No.
Will we encounter quicksand and rodents of unusual size on this journey? Probably.
So, should we stop? No.

So, when listening to predictions of doom or exuberance my advice is…blink. Our way of life has not ended nor will it. This means there will be good times and bad going forward, but capitalism will prevail in the long run. There’s no sense in drying your eyes out now.

Have a question? Write me and I’ll write back.

Your favorite Money Coach –

Marc Becker

Did You Ever Have The Feeling...

2010-09-08T11:03:00.000-07:00

Did you ever have the feeling you wanted to go? Understanding of the psychological factors which can change how we perceive the market is important. The on again off again feeling many have about the equity markets in particular can sometimes be unwarranted.

What Can You Learn From an Experiement ?

2010-03-31T09:02:00.000-07:00

It is no secret the U.S. has one of the lowest savings rates of any industrialized nation. Moreover, the financial meltdown of 2007 and 2008 exposed many consumers as being even more careless with debt. Yet, the simple lower income households in the U.S. have even lower savings rates as the asset gap between the wealthy and poor continues to widen (Loibl, Grinstein-Weiss, Min, & Bird, 2010). When the results of low income households who completed an Individual Development Account (IDA) program as compared to the general low income population were examined, there were statistically significant difference between the two populations. Those who completed an IDA program had higher levels of saving, higher rates of home ownership, higher rates of saving in investment accounts, and reported experiencing less financial strain (Loibl, Grinstein-Weiss, Min, & Bird, 2010). Since their creation in 1998 the federal, state, and community funding amounts have amounted to a little over $200 million into IDA programs, or roughly an average of $4,000 per household (Loibl et. al, 2010). What is more, the funds being saved are for secondary education, business development, career skill development, and new home purchase. It would seem a logical idea to run a similar program on a large scale to provide an incentive to save for specific goals. Even if 30 million households were put on the program it would cost roughly 17% of what was spent on the bank bailout, which in large part was exacerbated by a lack of consumer understanding. Somehow, rewarding excess and greed and ignoring basic financial education, seems a little backwards.
Nonetheless, the purpose of this post is not to debate domestic policy, but to highlight the importance of maintaining a savings discipline for specific goals. Not only can saving change your bottom line, progress toward a goal can change the psychological factors which are often a part of the financial decision making process. Even when teaching children to save, providing a match may provide more incentive to continue saving. Whatever the case may be, understanding your own habits is a key point in defining your financial future. Today there are a number of tools which can help you do so in a quick a streamlined manner. One site, www.mint.com, pulls in your transactions and helps you monitor your family’s spending in minutes. If you have question about assessing your financial behavior feel free to shot me an email at markeith@wiserfinancial.com, and if you are not sure if you have a problem- if you have more than $1500 in credit card debt, the average among low income household IDA program graduates, then chances are it's time to evaluate the first step in any twelve step program.
Information on the NC IDA program(Each State or local program may be different):
http://www.nclabor.com/ida/ida.htm
Reference
LOIBL, C., GRINSTEIN-WEISS, M., MIN, Z., & Bird, B. R. (2010). More Than a Penny Saved: Long-Term Changes in Behavior Among Savings Program Participants. Journal of Consumer Affairs , 98-126.

Separate Your Business From Your Portfolio

2010-03-24T09:59:00.000-07:00

Each year more than 500,000 small businesses close their doors, including 20,000 to 40,000 that are shuttered by bankruptcy.1

Whether you are building a small business or are at the helm of an established, successful enterprise, you know that it can take everything you have in terms of time and money to survive the competition while also turning a profit...continued here

A Simple Way To Help Your Family

2010-03-16T13:18:00.000-07:00

If you have a current will, count yourself among the minority of Americans who have done their heirs an important service.1

A will’s primary purpose is to help convey titled property. It’s not a good place to communicate your wishes regarding personal matters or to provide specific instructions for your survivors in the event that something were to happen to you.

A letter of instructions, while not a legal document, can help your family cope during a difficult period by providing information that has no place in a will — such as the location of the will itself. For the remainder of this article visit here

Roth Conversions 2010

2010-03-16T06:35:00.000-07:00

Socially Responsible Investing

2009-10-19T10:58:00.000-07:00

How do you construct a socially responsible portfolio? What is the most efficient way to invest and do good things for your community?

Choosing Your Investment Philosophy

2009-09-28T12:00:00.000-07:00

What You Don't Know Can Kill You

2009-08-21T12:08:00.000-07:00

Most people understand that there are expenses involved in investing. However, not every expense is created equal and what you fail to pay attention to can be the death of your portfolio.

Not Just An Ally

2009-07-24T14:07:00.000-07:00

The Last Wave

2009-07-20T11:31:00.000-07:00

What does a Chile recipe have to do with investing?

2009-07-17T13:08:00.000-07:00

What does a Chile recipe have to do with investing? See Marc Becker's most recent installment to find out!

Why Invest in Mexico

2009-07-10T13:42:00.000-07:00

Diversification is important in managing a portfolio. Just as important is understanding how certain holdings in your portfolio make a difference.

Protect Yourself In A Flat Market

2009-06-26T12:59:00.000-07:00

A classic economic debate

2009-06-12T06:39:00.000-07:00

Recent market volatility has caused us to re-examine methods of diversification. Click here to view a recent expose' on the matter I would like to share. On a more serious note: Join me next week for the first installment of an all new "Get Wiser" investing series. Until then, here's wishing you a happy, and hopefully hilarious, weekend.

Coach Becker

The Daily Show With Jon Stewart

Mon - Thurs 11p / 10c

Money Shot

www.thedailyshow.com

Daily Show
Full Episodes

Political Humor

Newt Gingrich Unedited Interview

Be Accountable

2009-04-29T12:21:00.000-07:00

A Different Kind of Example

2009-04-24T12:58:00.000-07:00

A Broker Experience

2009-04-21T10:46:00.000-07:00

Coach vs. Broker

2009-04-15T15:26:00.000-07:00

The Biggest Problem With Your 401K

2009-04-10T08:11:00.000-07:00

You may have seen law firms advertising to people that have lost money in “any investment” recently. These firms love complaints against 401(k), SEP, SIMPLE, and other retirement plans – one client can quickly become a lot of clients. Many employers think they are safe from this liability because a big brokerage company or name brand bank put the plan in place. This is not the case.

In the last year hundreds of law suits have been filed against the likes of Walmart, Dell, International Paper, Lockheed Martin, etc. And while the provider brokerage firms vary in these cases, the plans all have one thing in common:

Employees receive a list of funds with performance history and virtually no other information or assistance in making investment elections. Sound familiar? If so, this may mean your plan is not fulfilling its ERISA requirement to educate your employees about the plan. And this could be the biggest problem with your 401(k) or other retirement plan, especially if participants are asking other employees for advice, if there aren’t even larger issues looming.

What was intended to be a competitive benefit can turn into a liability nightmare, especially in a down market. The truth is very few plans pass Department of Labor scrutiny when audit time comes, and in most cases the employer is personally responsible for losses incurred in a plan where stringent requirements are not met and maintained. And while employer liability is a big issue, the greater problem lies in the confusion employees face when trying to fund retirement on their own.

The majority of plans are laden with fees, some apparent, some not. More often than not they lack what is necessary to build a diversified portfolio. In some cases, it is difficult for participants to get specific advice. The good news is that you can better protect yourself as a plan sponsor simply by understanding what is required of you as a fiduciary to the plan.

If this sounds overly complex and unfair, that’s because it is. But, while the investment world is vast in its complexity, if you know the right things, you don’t need to know everything. The truth is if you know what you need to pay attention to in a plan, it’s not that hard to provide a solid, low cost, user-friendly plan to your employees, and cover your own assets at the same time.

The first thing you need to know is under ERISA you are expected to act as an investment expert, so if you don’t know what is in your plan or how it works, now is a great time to find out! Join us on April 23th at noon for a free lunch at KeySource Bank to find out if you know what you need to as a plan sponsor.

For question or comments you can always email us at becker@wiserfinancial.com

What Will End This Recession?

2009-04-07T11:16:00.000-07:00

This is an excellent commentary on the current condition of the markets and the economy. Stein and Westbury are know for their well-grounded assessments and are often interviewed on CNBC. Notice their reference to the market fall in 1973-74 and the subsequent rise. If you attend our quarterly education series, you know Wiser references this period often! It's worth the two minutes it takes to read.

Click here to read the article

Education Saving

2009-04-01T10:06:00.000-07:00

Below is the answer to a question we received from Jessica K. I thought it would be good to share the answer with everyone. In short the question was, would it be better to use the Maryland Education plan for saving for education for he children or take advantage of an opportunity else.

Answer:
In general terms, given the brevity of your time frame before using the funds - it would be most prudent to be very conservative. In most cases, protecting the money so that it will be there is the highest priority.
If this sounds about right, here are two available options worth considering – and a third if you’re an optimistic risk taker:
1) Money market or CD accounts - They don't pay enough to even keep up with inflation, but the money will be there when you need it, and you can know in advance pretty much exactly where you’ll stand in two years. If you took this route, I'd go for 3 - 6 months CDs. They pay almost as much as 1 or 2 year counterparts, but if interest rates rise, you can latch on to the higher rate every few months. (in a falling interest rate environment, the opposite would also true, but they really can't go much lower)

2) Use the state 529 plan. While you should still be super conservative, I can help you pick a low cost, low risk investment option and explain to you how you can easily differentiate when presented with a short list of investment options in the future. Any gains will be tax exempt (don't expect much the safest options [maybe even less than CDs], but if there are any gains at all it will save a little sumthin sumthin).

There are other potential benefits using this plan as well:
Any earnings are tax-free when used toward eligible college expenses.
Each account holder can deduct up to $2,500 of contributions each year from Maryland (some other states also allow deductions) income per beneficiary—$5,000 for two, $7,500 for three, etc. Contributions in excess of $2,500 can be deducted for up to the next 10 years. Contributions in following years could be eligible for deduction; however, you cannot deduct more than $2,500 per beneficiary in any year or extend the 10-year limit on each year’s contribution (meaning if you put in 50K the max you can deduct is $25K and it would be deducted over the next 10 years).
While the ability to enjoy tax deferred growth and tax free distributions (as long as the funds are used for eligible college expenses) are inclusive to all 529 plans, the ability to qualify for a Maryland State income deduction on contributions is available only with the College Savings Plans of Maryland. Additionally, the availability of the Maryland income deduction is conditioned on the contributor being the account holder and a Maryland taxpayer.
I am not an expert in Maryland tax law, so there may be income limitations that effect the deduction you would want to make sure of before contributing. But from my cursory overview, it appears that you and your husband could both open accounts for the same child, and possibly double the deduction from 2500 to 5000. Grandparents with extra cashflow can also benefit from this deduction, if they’ve any interest in contributing toward the education of the grandchild.
3) I’d still use the state plan to do this, if the deductions apply to any significant extent. But, if you feel strongly that the stock market will begin to recover in the next 2 years, you might consider putting a portion (20% - 40%) in low cost asset class funds. Given the short time frame this would be a speculative move to say the least, and is most appropriate if: the amount isn’t significant in relation to the bill – meaning losing it wouldn’t really affect the overall burden; or, you have substantially more than you’ll need, giving you the ability to pull the plug before the required amount was breached if things keep heading south.
If you and/or contributing family have substantially more than you’ll need, there are other options you may wish to consider that can yield benefits beyond the educational cost requirement. But that’s a different entry.

If you or someone you know has questions like these please feel free to send them to info@wiserfinancial.com, we love hearing from you.

Maryland Educational Expense Plan site (prepaid trust vs. investment account site):
http://www.collegesavingsmd.org/plan-comparison-chart.aspx?page=plan-comparison

Maryland State Tax URL regarding educational expense deductions:
http://individuals.marylandtaxes.com/incometax/collegesavings.asp

Tax form for claiming deduction:
http://forms.marylandtaxes.com/current_forms/502.pdf

Is This The End?

2009-03-20T12:54:00.000-07:00

Do you know who has your money?

2009-01-22T10:50:00.000-08:00