Author: Dr. Daniel Levine

Your 2018 Investor’s “NFL” Playbook

Successful investors know when to buy, how long to hold, and when to sell. They know when to pass, when to kick, and when to fake. They know whether they should use the shotgun, or if a nickel defense is their best bet. How is investing like NFL football? The coaches have a playbook, they know how to read signs, and they know the odds. The difference between a rookie and a veteran is that success is based on cold, hard planning. As exciting and terrifying as investing can be, veteran investors remove themselves from emotional play-making and follow the rules they’ve made to play their game. Just as you would never build a house without a set of blueprints, you should also not invest until you and your financial advisor have developed an Investment Policy Statement (IPS). With an IPS, you are completely clear about your investment goals, the constraints you are likely to face, and the impact these constraints may have on your portfolio so you can achieve your required rate of return (RRR). Your Investment Policy Statement contains your investment philosophy which guides you with crafting your investment goals. For example, you may decide to invest only in companies that help people, or because of your professional background in technology you may choose to only invest in companies developing new technologies because this is an area...

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The Dark Side of Compounding

Compounding is the continual growth of money based on an ever-expanding sum consisting of the initial principal and the ongoing accumulation of interest. Most of us are familiar with compounding interest, an experience that often begins in childhood as the funds we deposited in our savings account grew slowly over time by just sitting there. Albert Einstein referred to it as the eighth wonder of the world! However, just as money compounds in a positive way, it can also compound in a negative way, causing damage to your portfolio and teaching you a harsh lesson about protecting your assets from losses. The consequence of losses in your investment portfolio is harmful not only to your bottom line, but also sabotages your effective use of time which then even further diminishes your portfolio’s growth. A wise investor seeks gain on one hand and loss-prevention on the other. This may seem obvious, but human emotions can sabotage your best intentions. Understanding the effect of negative compounding may result in changing the way you think about investing, accepting risk, planning your investment strategy, your expectations of results, and ultimately the quality of life you can achieve with more diligent reflection and wiser decision-making. Negative compounding is not a familiar term to most people, yet it is an ever-present danger for investors. Whenever you suffer an investment loss, negative compounding is present. You...

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Behavior Builds Wealth

Wealth is built on behavior, not on the amount of income a person earns. Stories about NFL football players or Hollywood stars receiving huge paychecks are often accompanied by follow-up stories that tell the tragedy of wasted resources. While wealth is also often associated with advanced education or sizable inheritances, it is the behavior of the individual that determines whether or not wealth is retained. Wealth is more appropriately attributed to a commitment of basic financial planning and practices. “Take a minute to look at your goals, look at your performance, and see if your behavior matches your goals.” Kenneth H. Blanchard, American author and management expert. The first step is to determine how you’re spending your income. It may seem silly at first, but keeping a log of how you spend your monthly funds could be a tremendous eye-opener. Take an accounting of every penny and you might find you are regularly buying items you don’t need, and the aggregate amount you could save and invest might advance your financial strength significantly. For example, we’ve all seen articles about the excesses of buying a daily Starbucks coffee. $4 twice a day adds up to $160 a month and almost $2,000 a year. Did this get your attention? It’s the same with having lunch out every day. A $10 lunch costs $200 a month which adds up to $2,400...

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Will Your Retirement Nest Egg Last as Long as You Do?

Are you really prepared for retirement? Truly prepared to transition from your monthly paycheck to living only on your savings?     One of the biggest issues facing retirees in the U.S. today is that many of us are living longer. You wouldn’t think this was a problem, but living is expensive and getting more expensive every year.     Healthcare and medications are constantly increasing Basic living expenses are costing more as inflation pushes prices higher A bag of groceries used to cost $10 and now costs $30 The price of a cup of coffee and a newspaper is ridiculous Prices keep rising, and they are unlikely to stop. As time goes by, especially as a retiree living on a fixed income, you’ll need more money every year to stay ahead of the inexorable advance of inflation and remain financially secure, feel good about your life’s situation, meet your responsibilities, and be a blessing to your family and others. The life expectancy for men of 65 is presently 84.3 years, and for a woman at 65, the average life expectancy is 86.6. Frankly, these numbers are ephemeral because with the advances in medical technology and pharmaceuticals, many people will live into their 90s and we’re likely to witness a surprising increase in the number of centenarians, of which you could very well be one! This is great news...

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Start Your Estate Plan with These 4 Tips

One area many investors overlook is estate planning. Proper estate planning is an essential component of your financial plan because it can help your loved ones avoid a difficult and expensive process once you pass away. Here are four easy steps to help you plan for the distribution of your assets by creating and maintaining an estate plan that provides your heirs with financial confidence. 1. Make an Inventory Before you can make a plan, you have to know exactly what you have. Take some time to document your holdings. This will include your home, other real estate you may own, vehicles, jewelry, and any other personal property that has monetary value. Make a list of your bank, brokerage, and retirement accounts, noting the funds held by each. Also document all insurance policies, and note their cash values and death benefits. It’s also important to list all your liabilities, such as mortgages and any lines of credit or other debt that needs to be resolved. 2. Conceptualize Your Plan It’s always best to work with an experienced professional such as a financial planner or attorney. Be prepared for your first meeting by knowing the answers to these important questions: a. If you become incapacitated or pass away, who do you want to manage your estate or its distribution? b. Who do you select as your heir or heirs, and...

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