In my last article, Compound Interest- the most powerful force in the universe… Maybe, I discussed the powerful secret of compound interest. This secret works well if you take advantage of the aspect of time. This secret is not for those who want “action” with their investments. People who “gamble” with their investments will find this concept difficult to successfully master. To learn more about investing vs. gambling, read my prior article, Investing is not gambling…if it is done correctly.
Using the element of time to your advantage allows your money to grow and also requires a bit of patience. We are bombarded on a daily basis with ideas, news and emotional triggers which urge us to react to them. The question you have to ask yourself is,
“Does this piece of news change anything?”
“Compound interest is the most powerful force in the universe.” – Albert Einstein
I have heard this quote many times over the years. I, like most people, have just assumed that Albert Einstein said it since it is so widely attributed to him. However when I looked it up, I realized that it may be just another urban myth. There is no context for his quote or specific mention in writing of which he has made it.
Regardless of whether he said it or not, it is a very important concept to understand.
I was recently notified that I was ranked #7 on the Investopedia list of Most Influential Financial Advisors. I am very grateful to receive this honor. It was somewhat unexpected. I have spent so much time trying to help investors that I have not stopped long enough to reflect on the impact I have made in the lives of my clients and social media connections. This award supports that all my efforts to educate investors and help them navigate the uncertain financial markets has not been in vain.
It means a lot to me to be recognized with such a notable group of financial advisors. Investing has always been a passion of mine. This passion started at a young age with small ventures such as a lemonade stand and lawn mowing services. In college, it continued with investing in the stock market. When I graduated, I got my first job at Paine Webber. Almost 10 years ago I co-founded Innovative Advisory Group. Investing and providing financial advice is in my blood.
As my knowledge of investing has grown, so has my desire to help others understand the mysteries of the financial markets. I hope to impart some of that wisdom to you in this post as well as other articles on this site.
Once again, I would like to thank Investopedia for this acknowledgment of my efforts. I also want to thank my clients and social media connections. I would not be where I am today without you.
Top 10 pieces of financial wisdom that can help you invest better
Investing is challenging, but it doesn’t have to be. It requires some extensive knowledge to become a highly successful investor in the stock market, but there are many ways to invest successfully. I will discuss some different ways to figure out how you can invest successfully below, however you will need to understand these simple concepts if you want to be successful long term.
Inflation Monitor – June 2017 – Introduction
“The equity market continue to float on a cloud of who knows what”. | “This is not like any market anyone alive has seen before.” | “There is no euphoria, which is usually not a sign of a market peak.” | “There is enough pessimism for the market to continue climbing higher.” | “The engine seems to be running, but no one has bothered to look under the hood.” — These are just some of the comments I have heard from portfolio managers in the past month.
This month I want to discuss the topic of value. Value is a term that means different things to different people. Frequently. people use the term to describe investments that are “cheap”. Of course, “cheap” also means different things to different people.
“You can be young without money, but you cannot be old without it.” – Tennessee Williams
Imagine… you are sitting on a beach. Listening to the waves slap the sand in a rhythmic melody. It is the same soothing tune you hear each day since you left your job. As you relax in your beach chair reading a thrilling novel on this quiet stretch of sand, a horrible thought comes into your mind. Then, just as quickly as it came, you smile and go back to your reading.…
This horrible thought was that you have not saved enough for your retirement. Fortunately for you, you have prepared for retirement. You don’t need to worry about anything other than what time you are going to tee off at the golf course.
Unfortunately, this is not the case for 41% of Americans between the age 55-64 years old…
I like investment quotes. They are snapshots of wisdom. An insight into the minds of genius investors. Many of these quotes individually could be the basis of an entire book.
I have been collecting these quotes to add to each post I write. Unfortunately I have way more quotes than I have posts up on this site. So I thought I would compile this list to provide more bite-sized pieces of wisdom for your enjoyment.
Financial Markets are driven by emotions: Fear and Greed
Master your investing emotions, or they will master you
The stock and bond markets are driven by four primary motivations. These four motivations are based on only 2 emotions, fear and greed. Investing is scary if you don’t know what you are doing. It is even scarier if you fully understand the risks through your own experience. Fear is a primal and instinctual emotion. Fear has kept our species from getting eaten by sabertooth tigers and jumping off cliffs trying to fly like a bird.
However when it comes to investing, that same primal instinct clouds the judgment of an otherwise rational educated person and causes him or her to make silly mistakes. In order to be successful as an investor, that fear has to be understood and harnessed in a productive way. I find fear to be the trickier of the two emotions because most people don’t understand how it applies to their own psychology.
Fear: The two fears of investing
The emotion of fear when investing can be broken down into 2 subcategories: Fear of losing money, and fear of under-performing the market (or more commonly known as, the fear of under-performing your friends).
Inflation Monitor Summary – Composite Ranking
Inflation Monitor – March 2017 – Introduction
Wow! What a winter we have been having this year. We have had some big changes in recent inflation data. It is a mystery to most people as to why this has taken place, especially with the pre-election slowdown. However, this month we will be discussing a number of things including, a big surprise to earning growth, the mystery of the big jump in inflation, Trump’s potential impact on inflation, and most importantly the biggest change in inflation trends in the past 8 years. You will not want to miss this month’s Inflation Monitor.
Are you looking for a new self-directed IRA custodian or administrator? Perhaps you are already using one and are not happy with their performance or service. Whatever your reason may be, this report should provide you with a better understanding of self-directed IRA custodians and help you assess which one is the best fit for your investment needs.
The process of choosing a self-directed IRA custodian can be challenging. There are a lot of things to consider, the financial industry jargon can be confusing, and it is hard to find unbiased information. In order to make things easier for you, let’s start off by defining…
This is our 2017 Tax Reference Guide. We created it to make your life easier. Each year we collect this data so you don’t have to. You might want to bookmark this page for future use.
Inflation Monitor Summary – Composite Ranking
Inflation Monitor – December 2016 – Introduction
We have a lot to cover this month in the Inflation Monitor – December 2016. This is the end of 2016. It is a time for reflection for the year past and for pontificating the future. We all know no one can predict the future. And so much is up in the air with the recent populous trend changes, let’s focus on last year.
Let’s start with the US presidential elections. Donald Trump will be our next president (#45) in the US. Some people are happy, and others are sad. Regardless, we have a huge potential shift in the US with the results of the presidential election finalized. The first thing to address is that Trump may or may not pursue the same policies he campaigned on. Every presidential candidate has their platform, but not all of the promises actually happen. Let’s put these in the wait and see category up for discussion after his first 100 days. He will have about 100 days to prove his worth and keep the positive (market-related) momentum going.
While I have seen a lot of positive signs since Trump was elected, the US is overdue for a recession. The S&P 500 had a string of 5 quarters in a row of declining earnings. Apparently, no one noticed. I would consider this a recession, but the markets did not. The markets are always right regardless of what I think. It will be interesting to see what happens once the “new president hangover” wears off.
I have a question for you…
“What is the one industry that you can walk into an establishment and not know what you are going to pay before you get your goods or services? It is this industry where if you ask the price for their service they will say they cannot tell you or don’t know?”
You might guess the legal profession. I have never met an attorney who wants to give an estimate on their services, but they do tell you the hourly rate, so at least you have some sort of baseline to compare with other attorneys.
It’s not the legal profession.
It is health care.
“A goal without a plan is just a wish.” – Antoine de Saint-Exupery
12 Smart Actionable Tips For You To Maximize Your Year End Financial Planning Strategies
The end of the year is fast approaching. Now is the time to plan your year end activities so you can make the most of your financial planning and tax strategies.
In a perfect world, you would have a comprehensive financial plan that you review often to ensure you are on track. However, I’m more realistic. I know you are probably not going to do this…
And to be frank, you would not be reading this in December if you had already done your planning for the year.
Having a financial plan is an important step in making sure you have a path to reach your goals. Financial planning is about figuring out where you want to go, putting together a path to get you there, and monitoring your progress along that path to adjust for unexpected events.
While most financial planning should be done continuously throughout the year, many people wait until year end to complete their checklists. This post should help provide you with 12 immediate actions you can take to get up to speed on your financial planning before year end.
“Wealth is the ability to fully experience life.”
– Henry David Thoreau
“Wealth” — can be defined as assets or resources which are in excess of present or future expected expenses. A more simple explanation is that wealth is made up of assets which exceed what will be needed for this generation, and could be passed onto the next one. Even though a family’s assets may not be needed for this generation, proper stewardship is required to make sure those assets will last for future generations.
The main considerations in protecting wealth for future generations are that the assets must be sustainable over several generations, resistant to inflation, and resistant to political and economic turmoil. It is possible to invest in certain assets that can fortify your wealth against some of these external risks. However, there is a much greater risk of future generations not being good stewards of the sustainable wealth. Whether you are the first generation to create generational wealth, or whether you are researching how to sustain the wealth you have inherited, this list will give you some guidance.
Timeless Wall Street Wisdom: The Wall Street Shuffle
The Wall Street mentality is the art of the possible, where optimism rules the day. While bears may be intellectually correct, they are rarely proven so, and they are never invited to parties.
Wall Street is made up of creative people who can find ways to turn a little money into a lot of money: mathematicians, rocket scientists, astrophysicists, and people who can sell ice cubes to Eskimos.
Youth, ego and arrogance quickly turns wealth into wisdom and experience. Wisdom and experience is transmuted back into gold, cash, and reputation… if you can wait long enough.
The career risk of trying to be different on Wall Street
The financial service industry has a notorious problem which very few people outside the industry are aware of. This problem is generally referred to as career risk. Now, most of you reading this might think, “Who cares if some overpaid fund manager gets fired for not performing well enough?” While having your fund manager keep his job might not be high on your holiday wish list, you should realize that it is an enormous problem at Wall street firms and that it is causing many funds to underperform their potential.
Inflation Monitor Summary – Composite Ranking
Inflation Monitor – October 2016 – Introduction
Happy October! We are in the heat of the presidential election cycle which thankfully will end in early November. We have the two least liked candidates fighting for control over the POTUS position. We have already had three debates… If you could call it that. After watching the first debate… On to brighter topics… Deutsche Bank has been in real trouble lately. The kind of trouble that Bear Stearns, Lehman Brothers, and many other US financial institutions were in in 2008. High leverage, holding bonds of questionable quality, and institutional investors starting to pull their money and run for the doors. If you are familiar with the concept of yelling fire in the theater, a bank run is very similar.
Inflation Monitor Summary – Composite Ranking
Inflation Monitor – September 2016 – Introduction
We are back… After a summer of great weather, we have returned with the September 2016 edition of the Inflation Monitor. I want to apologize to all our readers for not writing an August edition, but if you were paying attention to the global economy in August (and you might be the only one), then you will realize that virtually nothing happened of note. Sure prices changed and economic numbers moved, but if you look at the stock markets, no one noticed and the volume shows that very few people were even working. However, kids are going back to school, Wall Street traders are back from vacation, so should we expect to see more activity? We will soon find out.
If you start to notice the obvious elephant (or donkey) in the room, the US presidential elections are coming up and the ensuing fireworks will most likely be moving the markets. In July, I watched an interesting assessment of the presidential election presented by Larry Lindsey and it provided a few scenarios of outcomes based on certain events happening. While I don’t have the slides, it was truly astounding. I’ll spare you the details except to point out two notable items that I took away from the event….
“The major fortunes in America have been made in land.”- John D. Rockefeller
After more than 75 years John D. Rockefeller is still considered the richest man in history when you adjust for inflation.
According to the New York Times as of 2007, his net worth reached $192 Billion. Compare this with Bill Gates whose fortune is only $82 Billion. This shows how enormous the fortune of John D Rockefeller actually was. Only Commodore Vanderbilt and John Astor have even come close with $143 Billion and $116 Billion.
Rockefeller at one time controlled 90% of the nation’s oil and his fortune was approximately 1.5% of the nation’s economy. That is legacy wealth. Wealth that is hard to lose of destroy.
Even though all his wealth was made from oil, he still attributes major fortunes being made in land or real estate. That is a powerful statement.
What I am going to discuss here is one of the reasons why real estate is able to create legacy wealth. Wealth that can last for many generations if it is managed properly. Interestingly enough this is also one of the least understood benefits of owning real estate.
This post is the second part of a four part series about real estate. The last post, These Top 7 Powerful Tools Can Create Legacy Wealth from Real Estate, briefly touches on the importance of inflation to your real estate assets. I plan on going into much more depth this week.
The Advantages of Investing in Real Estate
Real estate is one of my favorite asset classes. Here is why.
In the prior post of this series I touched on a few of the reasons that real estate is such a favorable asset to invest in.
- You can easily use leverage to buy it,
- there is a limited amount of real estate
- Tax benefits
- It can create cash flow
- Appreciation potential
- It is inflation Proof
- You can reduce the debt in real terms over time.
Just one of these alone would be a good enough reason to invest in this asset class, but all 7 make it especially powerful. With exception of the tax benefits and the limited supply of real estate, all of the other benefits rely on inflation to enhance the performance of real estate over time. While I will discuss these in more detail, let’s first discuss what inflation is and how it works.
Inflation Monitor Summary – Composite Ranking
* The Inflation Equilibrium is a quick summary of the whole data series of the inflation monitor. If you don’t like statistics, this is the chart for you.
Inflation Monitor – July 2016 – Introduction
“Debt is future consumption brought forward. Once debt is incurred, consumption that might have happened in the future won’t happen, and it should come as absolutely no theoretical surprise that at a certain level of debt, growth and income begin to diminish. That is exactly what we are seeing in the real world, even if those who espouse the reigning economic paradigm (Keynesianism) are still in love with their beautiful theory.”
I hope you had a happy Independence Day. A day that is in remembrance of the US’ independence from Britan. How ironic that only 11 days prior to our independence day, the UK declared its independence from the EU. If you don’t know about the Brexit, you must have been living in the woods for the past month. Everyone has been discussing this monumental vote with varying degrees of opinion as to what it could mean.
I have not wanted to discuss it much prior to the vote, because despite what you hear on TV, no one really knows what will happen. Sure there are plenty of “smart” people who have an opinion about what will happen. Some think the world will end, or we will spiral into WW3, others think it is a great thing for the UK. Let me rain on the parade of all these “smart” people. No one knows what will happen. There are too many variables to count and although there are some very important issues that may come up due to this vote, this has never happened before, so we have no reference point of what could happen.
Many people have some relevant thoughts on the issue, but in terms of what will happen, it is mostly political, so unless you know the minds of all the various politicians involved with the UK, EU, and each individual country, you cannot make a thoughtful prediction as to the outcome.
Here are some of the relevant points you should consider.