Sound Advice

What Can A Good Financial Adviser Do For You? A good financial adviser can offer a range of services tailored to your individual needs and goals. Here are some key things they can help with: 1.      Financial Planning: They can create a comprehensive financial plan that covers budgeting, saving, and managing debt. This plan will help you understand how to manage your money in the short and long term. 2.      Investment Strategies: They can provide advice on investment options that align with your time horizon, investment experience, risk tolerance and need for current income. This includes recommending asset allocation (stocks, bonds, etc.) and specific investments for each asset class. 3.      Retirement Planning: They can help you set retirement goals and develop a strategy to achieve them, including choosing the right retirement accounts and estimating how much you need to save. 4.      Tax Plan...

Dow Jones Industrial Average: Up 50 times in 50 years Please feel free to find a better investment than the stock market, but judging by the results of the latest half century, you’ll be hard-pressed to come up with a better option.   Back on June 28, 1974, the Dow Jones Industrial Average closed at 779.72, a level that’s occasionally been exceeded by one-day movements of that index in recent years.   Since that time, much has taken place: the collapse of the Soviet Union, the war in Vietnam, two oil embargoes, the 9/11 attacks, Brexit, Covid-19, the rise of the internet, smartphones, AI, and the rise of social media, just to name a few. What all of this adds up to is an average annual gain of 9.76%, by most standards a hefty advance.   Yes, that includes inflation, which was about 3.8% per year over the period.   So the real return of about 6% was still an impressive achievement, especially considering the seemingly endless offerings of what are billed as spec...

Avoid New Investment Recommendations   When considering new investment recommendations from stockbrokers or other “experts” offering what they would like you to think is the key to great wealth, it's wise to approach them with a healthy dose of skepticism. Here are some good reasons to doubt new investment recommendations: Why are they being promoted? If the “strategy” works so well, you have to wonder why they don’t keep it to themselves and not try to sell it. Investment strategy improvements lose their edges in short order.   Once they’re widely adopted (usually quickly), they tend to lose whatever advantage they may have had. Lack of Transparency: If the recommendation doesn’t provide clear information about how the investment works, its risks, and the underlying assumptions, it’s a red flag. Overly Optimistic Projections: Be cautious if the recommendation promises high returns with little to no risk. Unrealistic exp...

Don’t Depend on the Better Business Bureau The dependability of Better Business Bureau (BBB) ratings can be questioned for several reasons: 1.      Subjectivity in Ratings: BBB ratings are not purely objective and can be influenced by various factors such as the volume of complaints received, the speed of complaint resolution, and whether the business responds to complaints. These factors may not always reflect the overall quality or reliability of a business. 2.      Not Based on Reviews or Complaints: That’s odd since comments, both positive and negative, from parties who had actually interacted should have been considered.   Perhaps a Ouija Board played a role in the grades assigned. 3.      Limited Criteria: The criteria used by the BBB to assign ratings may not cover all aspects of a business's operations or customer satisfaction. Some businesses may receive lower ratings due to factors that are not indicative...

What You Need to Know about Do-It-Yourself Investing Do-it-yourself (DIY) investing refers to managing your own investment portfolio without relying on a financial adviser or investment manager. Here are key aspects to consider if you're thinking about DIY investing: 1.      Financial Goals and Risk Tolerance: Before starting, clearly define your financial goals (e.g., retirement, education funding) and assess your risk tolerance. Understand how much risk you are comfortable taking on based on factors such as your age, financial situation, and investment timeline. 2.      Education and Research: DIY investing requires a solid understanding of financial markets, investment products, and strategies. Educate yourself through books, online resources, courses, and reputable financial websites. Stay updated on economic trends, market news, and potential investment opportunities. 3.      Asset Allocation: Determine the appropr...

Is Private Equity a Good Investment? Private equity (PE) can be a potentially lucrative investment for certain investors, but it comes with significant risks and considerations that may not make it suitable for everyone. Potential Benefits of Private Equity: 1.      High Potential Returns : Private equity investments have the potential to generate high returns, often outperforming public market investments like stocks over the long term. This is because PE funds typically invest in private companies that may experience significant growth and value appreciation before going public or being sold. 2.      Diversification : Investing in private equity allows investors to diversify their portfolios beyond traditional stocks and bonds. Private equity investments can provide exposure to different industries, geographies, and stages of company development (e.g., early-stage startups, growth companies, buyouts). 3.      Active...

Hedge Funds: Great for Cocktail Parties, Bad for Investments Hedge funds are often viewed as intriguing and exclusive investment vehicles, but they come with significant caveats that make them less suitable for most investors seeking reliable returns. Here’s why hedge funds are often considered more suitable for cocktail party conversations than as prudent investments: 1.      High Fees and Expenses : Hedge funds typically charge high fees compared to traditional mutual funds or ETFs. These fees often include a management fee (usually 1-2% of assets under management) and a performance fee (typically 20% of profits). These costs can significantly erode potential returns, especially during periods of modest market performance. 2.      Limited Accessibility : Hedge funds are generally only accessible to accredited investors, who must meet certain income or net worth requirements. This exclusivity limits the pool of potential investors and restr...