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Investors are no strangers to cycles. Seasons of the year, business cycles, presidential cycles, tax seasons, holiday shopping, and military engagements are all examples of cyclical types of behavior that are often predictable and definitely influence the markets. What time of the year does the most money flow into retirement plans? What quarter do toy companies earn 70%+ of their profits?
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Remember The Lost Decade?

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February 05, 2015Remember The Lost Decade? It wasn’t that long ago that investing money in an S&P 500 index fund would have yielded a negative rate of return. Specifically, between January 2000 and December 2009 the S&P 500 had a total return of (9.1%), hence The Lost Decade label for that 10-year period.As financial advisors, we don’t think in 10-year increments. We don’t even think in 20-year increments. We think long term, big picture so what happens in any rolling 10-year period doesn’t shake or change our fundamental beliefs.We remind you of The Lost Decade because over the last few years, the S&P 500 has done well. Really well. And when that’s the primary index reported in the U.S. financial media, and you are repeatedly bombarded with its outperformance, it’s hard to ignore. So we’d like to go back to basics and remind you of a few key things:1. Different asset classes are in favor at different times and it’s impossible to predict when a specific asset class ...
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The Pit and the PendulumJanuary 21, 2015In the above titled short story, an unfortunate prisoner has to endure two different types of torture. Readers who search for symbolism may likely view this tale as a figurative journey into the psychological depths of decision-making during stock market tumult. Unfortunately, after hundreds of seconds of internet research, I was able to confirm that Edgar Allan Poe died young (age 40) and poor. It is therefore questionable whether Poe intended to write an allegory about Wall Street with his macabre tale. But intended or not, the connection is clear.As a quick review, the story is about a prisoner, during the Inquisition, who wakes up bound and laid beneath a large razor sharp pendulum that lowers with each back and forth stroke, assuring death by slicing. He ingeniously rubs food on his binds, which are eaten by rats, thereby freeing him before the pendulum kills him. Unfortunately, trouble continues when the walls of the prison become red hot a...
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November 25, 2014Recently, I overheard a friend of mine having a phone conversation. He said, “I heard Schwab is rolling out their version of a Robo-Advisor….yeah and it’s gonna be free if you have $50 thousand with them.”Once I got over my feelings about the prospect that my career was going to be taken over by robots, I got to thinking. “How will advisors like myself compete with the proliferation of online robo advisors? How can I add enough value for my clients over online services to justify them keeping me around?” Thankfully, noted financial planning author/speaker Michael Kitces has already written a thorough explanation of how financial advisors must change to coexist with “robo advisors." Kitces notes that robo-advisors like Wealthfront, Betterment and FutureAdvisor can effectively replace “commoditized” functions of investment management such as: utilizing low-cost, tax efficient investment vehicles, setting up an “optimal” asset allocation, auto-rebalancing and t...
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Passing the Stress Test

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November 04, 2014The headline jumped from the TV screen, “After Record Highs, the Fall is Here.” Being the good investment advisor that I am, I of course stopped to see what had triggered the latest round of market selling only to learn that it was a weather report! What if this had been a stock market report instead? Just how should we react upon hearing of volatile stock market moves? Think carefully now, because your answer likely will determine not only your portfolio returns but your very ability to enjoy your retirement years.European banks underwent a Stress Test in October to determine the soundness of their financial system. Perhaps we as investors could look upon the Stock Market Pullback of September as a Stress Test of sorts to assess the soundness of our own personal financial system. After crossing 2,000 for the first time in history, the S&P500 Index reached a closing high of 2,011.36 on September 18, 2014. Less than one month later, we had dropped almost 7.50% to ...
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Watch What They Do, Not What They SayOctober 08, 2014High school football is in full gear. But for the best players -- those who will be receiving major college scholarships for their prowess on the gridiron, the journey is all but over. For the seniors, it started two or three years ago. During that time, these teenagers have been making grown men (coaches) kowtow – calling, texting, visiting their high schools and homes, and begging these youngsters to visit their universities and hopefully commit to their team. But the coaches are not the only ones. High school recruiting is big business. At least four national online recruiting sites, many connected with university alumni and major television sports outlets, cover these recruits, rating them with numbers and stars to signify their skill level and predicting their college choice. Rabid college football fans hang onto every word from both these adolescent stars and the “analysts” that cover them. Vibrant message boa...
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The Right Way to Invest

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October 06, 2014As financial advisors it is our goal that all of our clients have the most successful investing experience possible, but for many investors, their experience has been more confusing and overwhelming than anything else. More information is available now than ever before, yet that has only served to make the investment process even more complicated. We wanted to take this opportunity to remind you of the different types of investment management approaches and which philosophy guides our investment decisions, so that you can feel as confident in this process as we do. CONVENTIONAL MANAGEMENT: Conventional management can also be called “active management” and you have heard us discuss this philosophy and its shortcomings on multiple occasions. Conventional management believes that it is possible to time the market, identify winning stocks, and predict the future. Conventional managers promise investors that they have superior research and insight that will enable them to ...
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September 09, 2014My first year playing fantasy football, I started the season 0-8. I seemed to consistently make the wrong line-up choices, I was always leaving points on the bench, and even when I had the best team possible, something unpredictable would happen (like Baltimore’s defense scoring 28 fantasy points), once again leaving me winless. The frustration was maddening. Last year I was champion of our fantasy football league.So what changed over 3 years? I started to treat fantasy football like my job. Literally. As a financial advisor one of my responsibilities is to strip emotion out of the equation – and let me tell you, it’s not easy because human beings tend to fall prey to a number of behavioral biases and pitfalls that keep them from having a successful investment experience. I realized that if I wanted to be successful at fantasy football, I needed to take the same disciplined approach I take when it comes to investing. Lesson #1: Don’t Draft with Your Heart In 2011 ...
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August 21, 2014Even if I was not in the profession, I would have to be living under a rock to be unaware of the fears associated with the looming retirement years for baby boomers. This is a concern across the board. Those who have been fortunate and those who have been less than fortunate have the same worry: "will I have enough???" This begs the question, “What is enough?” As one would surmise, the answer is different for everyone. The starting point begins with reviewing what you have, where you want to be, what are your expectations, and what, if anything, do you want to have left (for heirs, charity, etc.)? With longevity on the rise, the length of retirement is quickly approaching 20 years. Less than half of the adult population has no pension benefit, 35 percent have no money set aside for retirement, and Social Security – well – who can count on that?? Those facts equate to a nervous bunch of future retirees. Conventional retirement planning has long advised clients to hold...
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August 04, 2014This past Christmas, my two oldest sons got an 8 foot foam surfboard. Last fall, my wife found an amazing deal at Sam’s Club and bought it for them. I don’t know who was more excited on Christmas morning, them or me. We all have been looking forward to catching some waves on this bright yellow 8 foot surfboard for the past 6 months. In mid-July, we went on a family vacation to Atlantic Beach for a week and were able to use the surfboard. Prior to entering the ocean to attempt to catch some waves, my sons and I talked about the fundamentals of surfing. We practiced the right form. We practiced popping up. We focused on the right footwork. We had a game plan before we entered the water. Finally, we went out in the ocean with the 8 foot surfboard we call “Bright Banana”, and we positioned ourselves to catch waves. Both of my sons were able to ride a number of waves during the week, and they had an absolute blast. They experienced all the emotions – fear, euphoria, conf...
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