Friday, July 5, 2019

Most important factor in investing success!

What is the most important factor in investing success?
Picking the right stock? Using the star advisor? Investing with the largest firm? Using the advice of a trusted friend/family member? Doing your own research? Buying the most successful tip sheet? Listening to TV gurus? If you are relying on any of these investing patterns, you may be surprised to learn that for your long-term goals, cost is the secret to success. Wall Street is finally getting the message that John Bogle prophesied years ago: Cost Matters. Bogle thought this was just common sense. If your investment returns cost you too much, you are earning less than you could. For most of us saving/investing for retirement, the results are in: stock index funds over time earn 11%. Even more interesting are the returns by stock sector compared to other investment vehicles. Most advisor-led investors are earning 3.79% or less over time. Trading securities is a losing game! The house is the only winner. What are the best stock sectors to own: Energy, Health, Info Tech, Consumer Staples—from 12% to 10% over 20 years?

Are you saving/investing enough for the retirement you want?
This is the No 1 question people ask. First, take the FREE money from you employer if you have a 401k. It is FREE money! Of course the earlier and the more you save/invest the happier you will be. However, since most people take home about what they did since they began working (inflation-adjusted) it may be impossible to save/invest more. If this is your situation, rethink the type of investments you use. Why? This may be the only way you will have enough later. EX: $250 a month invested in a low-cost S&P Index fund for 35 years provides enough ($1 million) for most retirement income needs. If you wait just 10 years, the same benefit will cost you $825 a month. If you use stable value funds, you will need 55 years to match this goal. The lesson is that stock index funds are better for your goal IF you have more than 15 years before retirement. Either more time or more money. That is how investing works. Over time stocks have LESS risk of goal failure than bonds. Bond earnings don’t beat inflation.

Will Social Security survive for your benefits to be paid?
No one can predict the future but actuaries come pretty close. By 2035, benefits will have to be cut according to a recent trustee report. However, since many people will receive less because they are taking the lower-benefit option early, it may not be as bad as it seems. New research says beneficiaries are giving up $3.4 Trillion. A person eligible for a $725 monthly check at 62 could get a $1,280 check if they wait to start at age 70. About half of older Americans get most of their income from the program. Only 4% of retirees are waiting until age 70 to claim Social Security even though they could earn an extra 8% per year. Originally, the plan was set up for benefits to end soon after age 65. Now a 65 year old will need 20 years of benefits. Unfortunately, the techies have not made an ‘algorithm’ for the optimum benefit age. Paid advisors have not been much help since they get paid to sell products not calculating your best benefit age. Politicians are not going to raise taxes to help the poor. Other solutions have been discussed but none are likely by the 2020 D.C. officials.

Broker/advisor skills are changing
With the industry maturing, advisors need to become specialists for our specific needs. Robo advisors, planners, target-date and sector funds, ETF and discount trading platforms will take each segment and provide very specific services. We need to know what we need so we don’t become victims of fraud and excessive costs. Like medicine, we obtain a diagnosis (plan) from a fee-only planner, and then fill the script (product or service) from a drug store automatically (stock or monthly IRA contribution). Only the rich can afford a full-service brokerage firm like their lawyer on retainer. We will be better served by getting what we know we need and not paying for stuff we will never use (global asset management). Most people need nothing more than a low-cost 401k or IRA invested in stock or stock/bond fund. The rest is just a drag on our future Wealth Reserve.

Are you following Warren Buffett’s strategy?
Buffett’s simple strategy beat 5 different hedge fund strategies over 10 years. Buffett bet $1 million he would win for his charity. He won. Buffett’s strategy is simple—but hard. Over time, this strategy produces over 11% whereas the average investor managed by an advisor produces 3.79% according to DALBAR. Unless you enjoy gambling with your future retirement income, why would you give most of your potential nest egg to your broker/advisor? Buffett’s strategy is hard because we are not allowed to stop investing or trade or market time with our long-term investment money. This is why the Target-date funds are so popular. We are having our contributions invested every month automatically. We can’t miss a stock sale if we don’t think about our money as bank savings that we lose permanently like a bank failure. Even if the market falls 50%, we still own the same number of shares so when it rises we will still be able to meet our goals. If you would rather have $1 million in 35 years (@11%) vs $220,000 (@3.79%) after investing $250 a month then you must leave your money alone to work. You own the shares of the biggest 500 firms in the world. They aren’t going to fail.

Easy way to save for the future—
Use the money you save by buying direct: auto, home, life, other insurance and expensive 401k and mutual funds. Create a Wealth Reserve: use savings on financials you already pay for. The financial industry has changed so you can buy with discounts or at Costco-type outlets. Example: MetLife charged $983 for the same $300,000 30-year term policy as SBLI provided for $384. Their financial strength ratings are A+ and their underwriting requirements are the same. The difference, $599, over 30 years is $17,970. If invested, this difference can add $175,000 to YOUR Wealth Reserve later when you need it. The SHOCKER: the median net worth of a 33-year-old is just $8,525 including home and car! Buy direct—cut out the middleperson: benefits are the same.

CA employers gain easy way to offer retirement fund
CA has created an IRA-type account for workers who have no 401k. In coming years, employers with at least five California workers will be required by law to provide retirement savings benefits to their workforce, which can be done through CalSavers or the private market. CalSavers solves 3 problems: “it’s easy to facilitate, employers have no fiduciary liability, and there are no fees for employers. Employers are only responsible for providing us with their employee roster and then remitting employee payroll contributions each pay period.” Employees keep the account when they change jobs. They can pick their own investment options. The account is a Roth IRA for tax-FREE retirement. Employees don’t have to do a thing—automatic enrollment. Unfortunately CA has chosen State Street as the money manager which costs 0.825 to 0.95% of assets every year whether you do well or not. This is high compared with Vanguard and Schwab at 0.04%. However, for most working people who do not have an alternative, this is great.


Can gov do anything? How about shutting RoboCallers, Scammers, Fraud?

Drugs that are associated with dementia: strong anticholinergic drugs
Assault is crime for some and not for others: Pick ‘Good Family’ every time!
Is Ted Cruz really like Rosa Parks? He wore blackface in the back of the bus?

Will gerrymandering and Citizens United kill democracy: 1 person; 1 vote?

Kristofor Behn Fieldstone caught stealing $1 M by misleading clients: no jail

Your cash keeps your brokerage firm afloat: Sweep Accounts steal your cash

10 best entry-level jobs for college grads: electronics, nursing, etc. 

Who owns your account now?
NJ creates own state health exchange to maintain ACA protection of coverage.
28% of us have no emergency savings; One in four have a rainy day fund, but not enough

Chick-fil-a worker jumps from window to free child choking on seatbelt: cut with knife.

Radio listener heard plight of payday loan victim and paid off the loan.

Arctic fox walks 2,700 miles from Norway to Canada in 4 months in the [really] cold.

Teachers learn how their students worship: diversity training for adults

41 Watchung Plaza, B242
MontclairNJ   07042

No comments: