Articles of Interest

Throughout the week, I run across articles written by other people that may be of interest to you. This week, there are two articles I’d like to highlight.

The first article titled Wells Fargo Sustains More Adviser Losses Following Banking Scandal is written by Greg Iacurci of Investment News. The environment that was cultivated over the last few years at Wells Fargo that resulted in opening accounts without customer knowledge is beyond appalling. When Wells Fargo was busted, the CEO had the audacity to state that it was not the company culture for this to have happened. Give me a break! The CEO knew good and well that Wells Fargo had very, very aggressive sales goals. I am sharing this article as a way to say that Bigger Is Not Always Better. Many times people have this impression that bigger companies can provide better service and features. But this is often times not the case. Just think for a minute about the poor service you’ve likely received from your cable company, cell phone provider, hotel on vacation, etc… I invite you to come check us out if you have accounts with Wells Fargo or are simply looking for a better service experience that doesn’t come with any sales or product quotas. We are a completely independent firm and are a fiduciary, which means we legally must act in your best interest. And, by the way, we don’t receive any commissions on any products what-so-ever!

The second article titled 10 Big Settlements in 401(k) Excessive-Fee Lawsuits is also from Greg Iacurci of Investment News. Litigation is popping up more and more with 401k plans. This makes complete sense (at least to me) because the more client 401k plans that I look at, the more I can’t believe how poor the plans actually are. I continually see 401k plans that have excessive fees, poor investment choices, and limited investment choices. If you are not happy with your 401k options at your employer, I encourage you to make your voice known (in a respectful way of course). Sit down with your HR person or owner of the company and let them know that the 401k plan could be better (in many cases, a lot better). I suspect the powers that be don’t even know there’s a problem. But it’s a big problem because it could significantly affect employees’ success toward retirement possibly causing them to work longer. If you need any talking points feel free to check our Company Sponsored Retirement Plans page or email me

Hope you enjoy!

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3 Reasons To Pay Off Mortgage Early

Over the last two weeks I discussed four reasons why it’s usually bad advice to pay off your mortgage early. In Part I of the series, I went over Opportunity Cost and how this alone could cost you thousands, if not hundreds of thousands of dollars. And in Part II, I wrapped up the series by discussing Loss of Control, Lack of Diversification, and Shortfalls in Other Goals. However, in this week’s blog post, I will spend some time reviewing three situations when it just might make sense to pay off your mortgage early. 

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Articles of Interest

Throughout the week, I run across articles written by other people that may be of interest to you. This week, there are two articles I’d like to highlight.

If you watch HGTV, it seems like flipping properties and owning real estate is a sure way to make a profit. Charles Paikert of Financial Planning Magazine recently wrote an article titled How to Talk to Clients About Investing in Real Estate. Charles discusses the experience of real estate investor and financial advisor Michael Martin who says that “real estate is not for the faint of heart.” One of the important principles discussed in the article is that real estate shouldn’t be the only investment a person owns. It’s prudent to also own other asset classes. If you own real estate alone, many things could go wrong from location, illiquidity, and industries / companies in the city experiencing a downturn or exit. Be sure to read to the end of the article where it states that many advisors do not recommend investing in real estate through mutual funds or ETFs. I happen to disagree with this as owning real estate through this means has historically been very profitable over the long term without a lot of the headaches involved with owning physical real estate. This is not to say that owning physical real estate is bad. It’s just to show that there is more than one way to own real estate.

I wrap up this week with a very good article from Tom Allen and Mark Hebner titled How Accurate are JP Morgan’s Capital Market Assumptions. It seems as if people and companies (i.e. active managers) just can’t help themselves from making predictions. Every year, over the last 21 years, JP Morgan publishes their annual long term capital market assumptions giving investors so-called “guidance” on what they can expect the markets to do over the next 10 to 15 years. But just how successful has JP Morgan been at making predictions? The authors compared the predictions of JP Morgan to several major benchmarks going back to 2011. JP Morgan was only successful in 4 out of 42 predictions. In all fairness 2011 is not really enough time to ascertain success; however, surprisingly reports prior to 2011 could not be found. Hmmm, I wonder why??? This just goes to show that usually the ones making the predictions are the ones getting wealthy not the ones taking their advice. Additionally, this is yet another report that highlights the ineffectiveness of active management strategies.

Hope you enjoy!

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2nd Quarter Market Review 2017

During Q2 2017 International Stocks and Emerging Markets Stocks outpaced U.S. Stocks. The best performing asset class was international small company stocks with a return of 7.28%. While we know that small company stocks have historically outperformed large company stocks, most 401k plans that I see don’t have an International Small Company Stock Fund. Please do yourself a favor and talk to your HR Department to see if they can’t get this added to your investment options. This is so important because over the last 47 years, international small company stocks outperformed international large company stocks by a whopping 4.93% per year!! 

Despite some negative headlines over the past quarter, stocks were still positive. This goes to show that you shouldn’t base your investment strategy on negative headlines. You also shouldn’t base your investment strategy on who is President. I continue to hear people say, year in and year out, that they are hesitant to invest because of who is President. And it’s these people who have missed out on significant gains. Research continues to show that the stock market historically provides substantial gains regardless of who is President. 

Click here to read the full Q2 2017 Market Review.

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Articles of Interest

Throughout the week, I run across articles written by other people that may be of interest to you. This week, there are two articles I’d like to highlight.

The first article is from Larry Swedroe titled Top Firms Fail to Beat Passive. The evidence continues to pile up showing that firms who engage in market timing strategies in an effort to beat the market usually underperform. And it’s interesting because when you listen to active managers discuss their methods and strategies it all sounds very appealing. After all, who wouldn’t want to be in the market just before it goes up and then get out just before it goes down. The only problem: NO ONE CAN DO THIS CONSISTENTLY!! Larry’s article compares DFA funds, which are essentially passively managed funds which don’t attempt to market time, to two very large active funds. The two active funds have not beaten DFA funds in any asset class over the last 17 years, which goes to show why active management is often called a loser’s game. Full disclosure: my firm utilizes DFA funds for most client portfolios. 

The second article has a very similar theme to the first. The title of the article Go Short on American Stocks Says This $500 Billion Fund Firm says it all. Here we have yet another company, in this case Alliance Bernstein, making a prediction. In fact, they go so far to say investors should bet against U.S. Stocks and that emerging markets and Europe stocks will fare better. We’ve seen these sorts of predictions time after time, and they usually do not turn out well. As I’ve written before, even if people have accurate predictions, they don’t know when they will actually come true. And many investors miss out on gains or suffer losses by acting on this type of crystal ball advice.

Hope you enjoy!

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Articles of Interest

Throughout the week, I run across articles written by other people that may be of interest to you. This week, there are two articles I’d like to highlight.

Some of you know that I played tennis in college, so this first article from Dan Solin really caught my attention. The title of the article is If Only I Could Take a Set From Roger Federer. In most things in life, amateurs don’t stand a chance against pros. But Dan correctly points out that this is not the case when it comes to investing. The so-called pros are paid lots of money to predict the direction of the market, avoid down markets, perfectly time up markets, find the next Google or Apple, etc. Many of you know that we utilize Dimensional Fund Advisors’ (DFA) mutual funds for the very reason that they DON’T attempt to make these predictive claims. And in this article Dan references a study that shows two very large “predictive type companies” who have underperformed DFA every year over the last 17 years. 

The second article is from Fox 2 News titled Illinois Lottery Suspends Powerball, Mega Millions Amid Budget Crisis. You may be wondering how the lottery ties in to financial planning and investing. But before your mind wanders too much, let me point out that the lottery is not an effective investment strategy. However, this article does highlight two very important investing principles – “don’t put all your eggs in one basket” and “don’t let tax savings take priority over proper investment strategy”. Many people, especially wealthy people, have the idea that investing in municipal bonds is a great strategy because it avoids federal tax and in some cases, state tax, if it’s a municipal bond issued in your resident state. You don’t have to look too far for states that are experiencing financial trouble. It’s just not worth it to put a large chunk of your money into one state. If you are going to invest in muni-bonds please minimize your risk by spreading your money across the nation. But also recognize that it’s probably not wise to own “just” muni-bonds either as you should spread out your risk by owning other types of bonds as well.

Hope you enjoy!

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