Author: Dr. Daniel Levine

Are Financial Advisors Worth the Money?

Low-fee investing can be a two-edged sword because while no one likes to pay fees that compromise their portfolio’s continued growth, there is also wisdom with having an experienced and trained financial advisor. The money you spend in fees could very well result in returns that replace your good investments with great investments and change your retirement lifestyle from sufficient to comfortable. When it comes to deciding whether or not to hire a financial advisor, there are two main factors to consider. 1. First, you have to decide on the kind of financial advice you need. Research shows that advisors can add value in two different ways: they can be very helpful with managing your investments, and they can provide expertise with financial planning. Of course, the value of these benefits depends largely on each investor’s individual situation, experience, and knowledge.  The quality of the advisor you select is critical because there are a wide range of abilities, qualifications, and costs.     Working with an investment advisor makes sense if any of these fit your circumstances: ·         You have a large amount of money in your investment portfolio ·         Your finances are complicated in the areas of retirement, taxes, and estate issues ·         You lack a sophisticated knowledge of investing ·         Your time is limited or you prefer to spend your time on other tasks and pleasures 2....

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Aggressively Monitor Your Investments…

…Or Pay Someone Skilled To Do So When markets are rising and amateur investors are doing very well, it’s easy to forget that protecting your assets during declining markets requires skill, discipline and constant attention. Investors need to expect and be prepared to react to fast-moving markets. No market rally is permanent and no decline lasts forever, meaning there are no investments you can buy and forget about, which many amateur investors tend to do. The pace of change in today’s markets is too great for investors to be complacent. The list of 30 individual companies that compose the Dow Jones Industrials, which are some of the largest publicly traded companies in the U.S., has changed numerous times since the Dow’s inception in 1896. Companies were removed as they declined, were acquired, went private, or simply went bankrupt, and others took their place. This is an example of the constant state of change in the markets, even among giant companies. Investing with long-term assets is not child’s play since most investors can ill-afford to lose part of their nest egg. Today’s markets are no place for dabblers that lack the time, patience, training, discipline, and diligence to do the research and invest properly. If you aren’t completely sure you have the time, expertise and experience to manage your investments clearly and with a defined purpose, it may be wise...

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Learn From Your Mistakes

One of the key differences between successful long-term investors and those who aren’t is that successful investors learn from their mistakes and make a commitment to never making the same mistake again. Even when a mistake results in a large and painful loss, it’s necessary to take a step back and review the actions that led to your loss. Learning what went wrong in your thinking or your planning must be reviewed so you can educate yourself on what to do better next time. Also, never compound the errors you made by taking bigger risks in an effort to recover your money. This is addictive gambler’s behavior, not rational and emotionless investing, which is the best way to make decisions. Determine where you went astray and ensure you avoid the same mistake in the future. Many common investing mistakes can be attributed to emotional decision-making. Whenever you make financial or investment decisions, you will have the challenge of overcoming fear and greed. Fear can cause you to run for the exits when markets decline or your portfolio starts taking losses. Greed can encourage you to chase fads and take on too much risk in the pursuit of a big score. By recognizing your emotional triggers and engaging your rational mind, you can overcome your impulses and cultivate discipline. Taking unnecessary risks can quickly destroy your portfolio. In today’s markets,...

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Portfolio Performance and Measurement Reporting

Do you receive regular portfolio performance reports (not account statements) that clearly measure your performance against the appropriate benchmarks and disclose exactly what you pay for the performance of your investments? In order to make good financial decisions, it’s important to remove emotion from the picture. The only way this can be done is to: Set clear and realistic goals Create meaningful measurement Have defined consequences for failure Most investors do not set clear and realistic goals…so there is no meaningful measurement, and no defined failures or consequences.  This contributes to decisions being emotional in nature, which is often a potentially devastating flaw.     Set Clear and Realistic Goals; Have an Investment Policy Statement An Investment Policy Statement (IPS) should contain at least the following information: The time horizon for your investment strategy The income needs from your investment amount A decision-making policy for how investments will be made An asset allocation (diversification) model your investment will follow A provision for how frequently and how your investments will be monitored and reviewed A realistic rate of return goal which is relative to an appropriate benchmark Without an IPS, there is no clear communication about what is expected and how those expectations will be met. Investing without an IPS is like driving across a foreign country with no map, no directions, and no preferred destination. It could be an...

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How Good Are Your Investments…Really?

Most investments are not very good.  One of the more common investments today is mutual funds. As a whole, mutual funds are a great idea and can work very well…but the very rich generally don’t use them. There is good reason for this. Deferred annuities are also popular. They come in many varieties and most sound too good to be true. In this case, the most successful money managers do not use them. John Bogle, Founder of Vanguard Funds, Explains the Costs of Mutual Funds John Bogle was asked by an interviewer from the TV program Frontline, “What percentage of my net growth is going toward fees in a 401(k) plan?” Bogle replied, “Well, let me give you a little longer-term example. An individual who’s 20 years old today is starting to accumulate for retirement. That person has about 45 years to go before retirement — 20 to 65 — and then, if you believe the actuarial tables, another 20 years to go before death mercifully brings his or her life to a close. So that’s 65 years of investing. If you invest $1,000 at the beginning of that time and earn 8 percent, that $1,000 will grow…to around $140,000.” He continued: “Now the financial system — the mutual fund system in this case — will take about 2.5 percentage points out of that return, so you’ll have a...

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