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Old and Fat, Lazy and InfertileJuly 22, 2014No, we’re not talking about your brother-in-law. Rather, it’s a fair description of the underlying trends that are helping to define the future global economy. Let’s take them one at a time: OLD Humans have been adding to their life expectancy for centuries.* The average lifespan for Romans during the Roman Empire was 22 years. In 1900, the world’s average human life expectancy was only 30, and in 1985 it was 62 years. All these figures calculate at birth. If someone lives through their first year, their expectancy increases dramatically. The average life expectancy in the US is currently around 77 years. It is calculated that over a third of children born today in a developed country will live to age 100. Food supply, nutrition, healthcare technologies and increased personal hygiene are deemed to be the major reasons for this. Bottom line -- we are living longer, and this will have major ramifications for families, go...
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To Boldly Go Where No Man Has Gone BeforeApril 23, 2014You don’t have to be a “Trekkie” to recognize this phrase. It was used in the opening lines of each episode of Star Trek starting in 1966.Space: The final frontierThese are the voyages of the Starship, EnterpriseIts 5 year missionTo explore strange new worldsTo seek out new life and new civilizationsTo boldly go where no man has gone beforeTo a younger generation, William Shatner is likely just as famous for playing a wacky lawyer during weeknight prime time, or hawking cheap flights and hotel rooms for Priceline, as he was for wearing Captain Kirk’s form-fitting sweaters and making the big decisions from the flight deck of the USS Enterprise. But even tweens watching old reruns of the show can become addicted to all the fun stuff that happened to Kirk and his crew while they zipped around the Final Frontier. Boldly going where no man (or alluring alien female, for that matter) has gone before was a big hit,...
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SURVIVORI'm a survivorI'm not gon give upI'm not gon stopI'm gon work harderI'm a survivorI'm gonna make itI will surviveKeep on survivin'Back before Beyoncé used a single name, before she married Jay Z and named her daughter “Blue Ivy”, and before she became a close friend to the Obamas, she was simply a talented teenage singer. Back when her mom made her costumes and her dad was her manager, Beyoncé Knowles and two other girls performed on an album entitled “Survivor”. You probably remember the hit single on that album by the same name. (The song’s beautifully poetic refrain is printed above.) But you probably didn’t know that this 2001 album contained three other #1 hits, earned three Grammy nominations and was certified quadruple platinum. All this took place before she ever became a solo artist. Then she really became famous. She has done a great job of remaining relevant and sober in a remarkably compet...
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The Eggheads Did It AgainOctober 17, 2013Richard Nixon called Adlai Stephenson an “egghead” during the 1952 presidential campaign. It was not meant as a compliment. Intellectuals, college professors and even the broader category of teachers just don’t get much respect in our society. I’m sure you have heard, and maybe even voiced, some disparaging remarks about these really smart people. “They live in their ivory towers, and could never make it in the dog-eat-dog world that the rest of us must survive in.” “They are pretentious, lack common sense, and are out of touch with the real world.” Finally, there is the ever popular witticism: “Those that can, do. Those that can’t, teach.”Regardless of your opinion of academics, we here at Dixon Hughes Goodman Wealth Advisors love them. Well, maybe not all of them, but the ones who have found ways to add value to our investment process hold a particularly special place in our hea...
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All That glitters...July 16, 2013Everyone likes gold. It is so pretty and shiny. Rappers, (old) dentists, prospectors, historic James Bond villains, Scrooge McDuck (Huey, Dewey and Louie’s great uncle), King Tut’s mortician and the Rothschild family were/are all gold lovers. There are many more, too numerous to list. But most people don’t know an awful lot about this precious metal. For instance, a large majority of gold on the planet is located near the Earth’s core, having gravitated there during the earth’s formation. All “discovered” gold is the result of meteorites, which carried it and crashed into the Earth’s crust. Really.Gold is a frequent topic in the investment world, too. Just like other assets, its popularity is often inversely related to its potential future value. It is often more desired when it is trading at a high price than when it is priced at lower levels. Less than two years ago, gold hit its all-time high price (in ...
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Rich and Richer, Dumb and DumberApril 16, 2013No, we're not talking about the inequities of our economic class structures, nor the 1994 comedy starring Jim Carrey and Jeff Daniels with bad hair cuts. Rather, the topic is about investors, and how on average, they repeatedly shoot themselves in the foot, market cycle after market cycle. In their attempt to ease their fear and embrace their greed, they historically do the wrong thing at the right time, or vise versa.Dalbar, the stock market research company, recently announced their Investor vs. Market research data (Dalbar.com). They found that over the last 20 years, the average return of all stock mutual fund investors was 4.25%, or only about half of the 8.21% annualized return enjoyed by the S&P 500 Index over that same time period. That means for every dollar an average investor invested, it grew to $2.30. Had they just invested in an S&P 500 Index fund and held tight, their $1.00 would have grown to $4.85. That's no...
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A Sheep In Wolf's ClothingJanuary 10, 2013The inverse of the above idiom comes from the Bible. "Beware of false prophets, which come to you in sheep's clothing, but inwardly they are ravening wolves." In every day usage, this verse has become a warning about bad guys disguising themselves as good, or at least harmless, and tricking an unsuspecting victim.But that's not what we're talking about here. In fact, we are talking about just the opposite. More like a meek and harmless animal dressing like a big, aggressive creature to attempt to get your attention, or in this case, your money. In the investment world, there is a great example of this phenomenon, and it is being perpetrated by some of the biggest, most well known mutual funds in America.Large actively managed mutual funds attempt to portray a potential for beating their passive index/benchmark performance. The only reason an investor would choose an active manager, and pay the much higher expense ratio...
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ObdurateSay what? For those who think we haven’t been erudite or scholarly enough in these quarterly reports, we hope your mind will now be changed. For non-English majors, the word “obdurate” means pig headed, inflexible, rigid, unyielding. Not the stuff that makes for a good marriage. You might be hard pressed to find an instance where being obdurate is good. However, in the investment world, you should really hope that your investment vehicles are all very obdurate. If they don’t have this quality, there is no way to maximize the diversification of asset classes in your portfolio.Most of our clients realize that we use very distinct asset class vehicles to build our portfolios. That is because each vehicle must represent a particular size and style and geographical location within the equity universe. Why? Because during most segments of a market cycle, each asset class performs somewhat differently in terms of risk, re...
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Same Old, Same OldThere always seems to be some type of unpleasant revelation lurking on Wall Street. It hides in the darkness until its discovery causes surprise. The huge trading loss by J.P. Morgan Chase is in that category. It seemed to take everyone, including most JPMC officials, by surprise. The blatant overvaluation of Facebook's IPO was another type of surprise, especially if you were a retail investor who was "lucky" enough to get in on that "deal." But perhaps the most baffling Wall Street discoveries aren't really surprises, because they are based on circumstances that are fully known, and have been for a long time. Yet these unfortunate lessons seem to continuously repeat themselves, year after year, market cycle after market cycle.Already in 2012, three studies point to some basic investor mistakes that we have been discussing with prospective clients since our company was formed. The first has to do with choosing an advisor. In a recent paper ...
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Breaking A Bad HabitSmoking. Talking with your mouth full. Forgetting to put the seat down. All bad habits. Some will kill you; others will simply make you unpopular. But bad habits in investing are the worst, because they are guaranteed to make you poorer!One of the most insidious of these habits is known as Recency Bias. It occurs whenever we use our more recent experiences as a basis for expecting a future event. It happens all the time with the stock market. People often forget about market cycles when they invest. Here is an example. The NASDAQ index had these annual returns from 1992 until 1999:In the first quarter of 2000, investors purchased more shares of NASDAQ Index mutual funds than any previous quarter in history. Can you guess what happened next? Here are the following three years' returns for the NASDAQ Index:Why in the world would investors gobble up shares of a volatile index that had gone up (almost) nine years in a row and finally spiked to a record setting 85.6%...
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