Sound Advice

Why Investors Need Advisers Who Are Fiduciaries Pity the average investor looking for the answer to the question we all face: "Will I have enough?"   With millions of baby boomers now facing the challenge of retirement and the desire to maintain a hoped-for lifestyle, the search for a competent adviser who will put the interest of the investor first is not one that can be easily undertaken.   Over my decades in the industry, it has become abundantly clear that most individual investors are clueless about how to go about finding a proper adviser.   Although the major brokerage houses and insurance companies will happily sweet talk you with offerings that are best positioned to improve their own bottom lines, the odds of finding the right person are not good.     In the absence of a fiduciary requirement, all that is required of the nonfiduciary financial adviser is that the product or service being offered is suitable.   And, no surprise, the definition of suitability is

Are stocks getting too pricey?   If our only focus is on Wall Street and a stock market that seems to know only one direction, one might think that once again we're in a Goldilocks era.   Not too hot.   Not too cold.   Just right. The hitch is that there's a lot more going on than what takes place during the midday trading hours of each weekday.   As usual, Congress is making a lot of noise and getting little done.   Israel is again jockeying for a change in leadership.   And, countries around the globe continue the struggle to get the pandemic under control. Back in 1849, Alphonse Karr, editor of Le Figaro , said "the more things change, the more they stay the same".   Over time, people tend to repeat long-term behavior patterns, which is why history is an essential part of our educational curricula.   So much of what we are seeing now has already been done in perhaps a different fashion in the past.   The point is that there are developments and there are resu

Growth vs. Value? One of the longest-running dichotomies in investing is the ongoing tug of war between growth stocks and value stocks.   Growth stocks are generally seen as companies that are growing consistently and, typically, at above average rates.   Value stocks, on the other hand, are companies whose progress is less consistent and often relatively slow.   At first glance, one wonders why investors would look beyond growth stocks to fill out their portfolios, but there’s more to the task of portfolio construction than just picking market stars such as Amazon, Apple, Facebook, and the like. Here’s the hitch.   Over time, most growth stocks will turn in better returns than most value stocks.   The key word here is most.   A portfolio of diversified growth stocks will usually be selling at significantly higher valuations (price-earnings ratios) than a portfolio of diversified value stocks.   Why?   Because more rapid and more consistent growth rates give investors greater con

Sell in May and Go Away?   Thank our British cousins for the thought that it’s best to pull up one’s investment stakes in May and come back in the fall.  It harkens back to the custom of businesspeople leaving London and going off to the countryside during the warmer summer months.  Over extended periods of years, the data supports this idea, though the results, especially most recently, have been mixed. To get a clearer view of how this works, I tallied the results of the Dow Jones Industrial Average from May 1 st to October 31 st and from November 1 st to April 30 th for every year from 1950 to 2020.  The numbers appear to be compelling. During the May thru October span, on average, the gains averaged a paltry 0.3%.  But if you reinvested from November thru April, the typical advance was 7.3%.  No brainer, right? Wrong? It turns out that the results over the latest six years didn’t follow the pattern.  In 2016, 2018, and 2020, the market’s summer months were far stronge

Is It Time To Get Nervous? Six months and counting since the November election and it appears that the recent market euphoria may be beginning to fade. Expectations of a more robust pace of business activity are one thing, but the advance in stock prices seems to be discounting gains rather far into the future. With that said, however, rich valuations alone generally are not the triggers for market retrenchments.   Invariably, it’s shocks such as interest rate hikes or negative economic developments that start to blacken the picture. In April, consumer confidence rose to one of the highest levels of the past 50 years and is hovering below the short-lasting peaks of the dot-com era of two decades ago.  That optimism is at least partially justified by the still-high savings rate and the probable pickup in spending that it will eventually engender.   The improved outlook is also a reflection of hopes for further gains in the market, which has staged an extraordinary bounceback fro

Budgeting: The Key to Planning All of us look to the future and hope for the best, but not everyone makes the effort to collect the data needed to answer the question: "Will I Have Enough?"   Indeed, most people just roll the dice and trust that an optimistic attitude will be sufficient.   Yet the reality is that in most cases the future may not be the most comfortable of times.   A proper budget and financial plan require input on four key categories: what you earn, what you spend, what you own, and what you owe.   The information needed for three of the four categories is relatively easy to find.   It is the spending that's trickier, sometimes a lot trickier. Plan for Changes The hitch with spending is that it needs to be viewed from four different perspectives.   What most of us focus on is current spending.   But then we get into the retirement years and the what-ifs.   The time of retirement is generally predictable.   What is not predictable is the early dem