Lies & Truths #10 Your Instincts are Your Enemy

Here is number ten in our selections from the book, The Lies My Broker Taught Me and 101 Truths About Money and Investing.

TRUTH:  Most people prefer and easy lie to the hard truth.
 
1.  You can lose weight without dieting or exercising by taking our magic, fat-absorbing pill before going to bed.

2.  You can call the psychic network hotline for insights into your future.

3.  You can beat the market because we have experts who know which stocks will offer the highest return on your investment.

Would you like to see all the 101 truths of investing?  Call us at 920-893-5262 and let us know you read this blog post to receive a copy!

The Truth about Traditional Investing

What's happening to my money?

Margaret Wittkopp Investment Advisor Representative

You may know that I founded Veritas (Latin for truth) after many years of working in the financial industry. It was not an easy decision, but I had to make a change because I had discovered that much of what financial advisors are taught is not the whole truth.

Are you investing with a traditional firm? Or if you are a Veritas client, have you shared with others that you have found a more efficient way to invest?  Here are some things for you to consider (or for clients, things to ask your investor friends and family):

• Many retail financial products, mutual funds and/or other actively-managed funds involve high turnover rates. Each turnover involves a fee. Do you know how often the holdings inside your mutual funds are changed? Do you know the amount charged each time this happens?

• Did you get out of the Market when things looked bad and wait till things looked good before getting back in (the opposite of “buy low—sell high”)?

• Are you, your advisor, or your mutual fund manager attempting to find the next “hot” stock?

•Is your advisor attempting to pick stocks or mutual funds by past performance (checking the 10 year, 5 year or 3 year history of a fund’s returns)? Past performance has ZERO correlation with future performance.

• Do you know what is in your mutual fund? Many people, upon taking a look “under the hood” of their portfolio, discover that they have lots of overlap which means even though your portfolio may have lots of “stuff” it is not really diversified.

The most successful investing strategy involves:

• Appropriate asset allocation and true diversification

• Disciplined decision made on academic research, not just the latest hot stock or complicated retail product

• Consistently capturing market return

• Reducing fees and hidden costs

Would you like to learn more? Or are you looking for a way to help other investors? Email me at margaret.wittkopp@veritasinvesting.com or Jeremy Burri at jburri@veritasinvesting.com or call us at 920-893-5262. 

If you are in the area, don't forget that we offer at least two classes each month on topics related to successful investing. Click on the "Learning Opportunties" link above to see a schedule of classes.

We Wish You an Abundant 2012!

We wish you all the blessings of this season, and a year ahead of abundance and peace. 

Five Tips To Avoid Investment Fraud

Bernie Madoff

Sharing some excerpts from "Five Tips to Avoid Investment Fraud," an article from Ryan C. Fuhrmann , CFA

December will mark the three year anniversary of when it was first discovered that Bernard Madoff defrauded his clients for as much as $50 billion, in one of the largest financial Ponzi schemes in history. The money management industry sustained a significant black eye to its reputation as a result of Madoff's fraud. Unfortunately, there are likely to be future thefts of client funds, though likely not on Madoff's scale. As with any industry, certain players in the investment field will resort to cheating, in an attempt to get ahead. Below are five issues to consider identifying, and best avoiding, investment fraud.

TUTORIAL: Don't Be A Victim Of These Investment Scams

Too Good to be True Returns

An article in The Economist, written shortly after the Madoff scandal broke, cited smooth investment returns as a potential warning sign, given that markets are inherently volatile. In the case of Madoff, investors began to question the steady "returns" of approximately 1 percent per month he posted, in a period of abnormally-high market fluctuations. He even lulled the SEC and many large, well-respected financial institutions into complacency, with supposedly savvy risk-control procedures. Excessive returns compared to benchmarks should also be monitored; in 1981 Dennis Grudman ran off with funds he attracted from some 400 investors, by reporting short-term returns as high as 85 percent.
Background Checks

Another key safeguard includes reference checks, which should be standard when entering into any business relationship. Of course, many Madoff investors were referred from friends and colleagues, but others did end up avoiding his dubious services, after performing due diligence and related background checks on his character and operations. Other financial services industry regulatory bodies can also assist in checking out the background of an investment manager. This includes the Financial Industry Regulatory Authority's (FINRA) Broker Check network, which is available online.

Outside Custodian

A key reason that Madoff was able to operate undetected for many years, was that he operated as his own broker-dealer. This allowed him to falsify trade information and statements that were sent out to clients. Using an outside financial firm as a custodian can help allay these concerns, as the outside party becomes responsible for key back-office functions, including the execution and settlement of trades and the preparation and mailing of client statements. Large, well-respected firms that serve this function include Fidelity and large custodial banks, including State Street and Northern Trust. Clients can also go directly to these custodians to verify asset levels and returns.

Skin in the Game

The phrases "skin in the game," "eating your own cooking" or "putting your money where your mouth is," all refer to the extent that an investment manager has his, or her, own money invested in the same strategies as clients. This serves a number of benefits, including confidence in the manager's own strategy to aligning manager and customer interests, such as avoiding taking excessive risk to keeping fund expenses as low as possible. For commingled assets, this can consist of money committed to the manager's own hedge or mutual fund. There is no set rule for the percentage of the manager's own capital invested along with clients, but the higher, the better. Well-respected managers and businessmen, including Warren Buffett and the managers of the Longleaf Partners, have significant portions of their personal wealth invested along with their investors.

Other Considerations

Additionally, the illusions of secrecy or exclusivity and/or the inability or unwillingness to clearly explain an investment strategy, should be met with suspicion. Finally, and perhaps not completely in jest, Lucy Kellaway, a popular journalist in the "Financial Times," has speculated that a menacing name could indicate the degree to which an individual can be trusted. In her words, Bernard Madoff "made-off" with client funds, while Michael Milken "milked 'em" out of their funds, while at the helm of Drexel Burnham Lambert.

The Bottom Line

There is no fool-proof strategy to avoid investor fraud, but there are a number of approaches investors can take to minimize the risk of an outside manager using his, or her, hard-earned funds improperly. Taking these five tips into consideration is a good step in protecting yourself and your investments

The Dirty Little Secret of Investing

Some words of wisdom from Symmetry, one of our partners in a non-traditional approach to investing...

Contrary to conventional wisdom or what pundits might have you believe, it's really hard to beat the market. Many try; most fail. (The term "beating the market" refers to an investment manager generating higher returns than the market of stocks within which they are investing.) Investors often lose sight of this widely documented phenomenon for one very simple reason: we place too much weight on recent events. This inherent bias is called Representativeness and is quite common among investors. Ability shouldn't be judged based on short-term success because most of us are long-term investors.

To be fair, yes, there have been active money managers who have found success in playing the market by delivering superior returns above the market rate of return. Here's a little realistic perspective: Beating the market for 5 years garners respect, beating it for 10 demands recognition, beating it for 15 years warrants the title of investment icon. One of the biggest mistakes that end investors make is assigning this extraordinarily rare skill to the general population of professional money managers. If indeed you do decide to put your faith in someone's ability to actively pick stocks, consider the following three part test:

First, you as an investor would have to believe that financial markets don't work very well, meaning stocks are often mispriced, and that the current price of a stock isn't a good judge of what it's worth. You would have to arrive at this conclusion because active stock pickers believe that they can identify these mispriced stocks.

Second, you would also have to believe that successful, active stock pickers exist - that have consistently (consistently being the keyword) shown an ability to outperform the broad-based market over very long periods of time.

Finally, and most importantly, as an investor, you must be confident in your ability to identify these individuals BEFORE they beat the market. Not after! Essentially you would be looking for the next great money managers BEFORE they became the next great money managers.

There are investments that are actively managed that may make sense in your portfolio, and as your advisory firm, we have the resources available to conduct due diligence looking for the right fit for your portfolio. However, our belief is that a passive investment strategy at the core of your holdings makes good sense.

This has been an exercise in rationality, and to a degree, advocacy for the benefits of passive index style investing. However, recognizing the difficulties of beating the market isn't to say that achieving market rates of return using a passive buy and hold investment strategy is easy. It requires patience, emotional discipline and strict attention to detail when building, maintaining, and adjusting your portfolio over time. Therein lies the critical role of the financial advisor.

Content written by Symmetry Partners, LLC. Our firm utilizes Symmetry Partners, LLC for investment management services. Symmetry Partners, LLC, is an investment adviser registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, or excluded or exempted from registration requirements. All data is from sources believed to be reliable, but cannot be guaranteed or warranted. No current or prospective client should assume that future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this article will be profitable. As with any investment strategy, there is a possibility of profitability as well as loss. Symmetry follows a passive investment strategy that involves limited ongoing buying and selling actions. Passive investors will purchase investments with the intention of long-term appreciation and limited maintenance. Passively managed portfolios are designed to closely track their respective benchmark index rather than seek out performance. As a result, the portfolio may hold securities regardless of the current or projected performance of a specific security or particular industry or market sector. Maintaining investments in securities regardless of market conditions or the performance of a specific security could cause the portfolio to lose value if the market as a whole falls. Please note that you should not assume that any discussion or information contained in this article serves as the receipt of, or as a substitute for, personalized investment advice from Symmetry Partners or your advisor.

Copyright (C) 2011, Symmetry Partners. All rights reserved.

The 20 Must-Answer Questions for Investing Peace of Mind™

Investing can be one of the most complicated aspects of your financial life. One of the reasons that investing may seem daunting is because many people don't know what kind of questions to ask that will help build their confidence and peace of mind. The 20 must-answer questions are specifically designed to help you identify the areas of investing where you can build your confidence as an investor.  Dilemma™.

If you can answer 'Yes' to ALL of The 20 Must-Answer Questions, you will be on your way to a high level of peace of mind with your financial investments.

1.  Have you discovered your True Purpose for Money, that which is more important than money itself?

2.  Are you invested in the Market?

3.  Do you know how markets work?

4.  Have you defined your Investment Philosophy?

5.  Have you identified your personal risk tolerance?

6.  Do you know how to measure diversification in your portfolio?

7.  Do you consistently and predictably achieve market returns?

8.  Have you measured the total amount of commissions and costs in your portfolio?

9.  Do you know where you fall on the Markowitz Efficient Frontier?

10.  When it comes to building your investment portfolio, do you know exactly what you are doing and why?

11.  Are you working with a financial coach versus a financial planner?

12.  Do you have a customized lifelong game plan to guide all of your investing and spending decisions?

13.  Do you have an Investment Policy Statement?

14.  Have you devised a clear-cut method for measuring the success or failure of your portfolio?

15.  Do you fully understand the implications and applications of diversification in your portfolio?

16.  Do you have a system to measure portfolio volatility?

17.  Are you aware of the incentives brokerage firms and the financial community have when selling commission-based products?

18.  Do you know the three warning signs that you are gambling and speculating with your money versus prudently investing it?

19.  Can you identify the cultural messages and personal mindsets about money that destroy your peace of mind?

20.  Are you ready to shift your personal experience of money and investing from a scarcity mode to an abundance mode?

If you would like to learn more about working with a financial coach, give us a call.  920-893-5262

What Is Financial Coaching?

Why do our Financial Advisor Coaches, Margaret Wittkopp and Jeremy Burri, use that term to describe themselves.  Just what is a financial coach?

Coaching is different from traditional financial advice. How is it different? An investment coach is a financial professional who goes beyond typical financial planning and advice to help you identify your investment philosophy, understand your investment strategy, and provide discipline throughout your investment experience.

Margaret often asks investors, "Do you want me to tell you something that will make you feel better, or do you want me to tell you what you need to know?"

A coach will not only help you identify the right strategy for you, but help you keep your decisions and behavior regarding your investments on track for achieving the results you want.

So, how do you distinguish whether you are working with a coach or not? A coach helps you answer 'Yes' to the 20 Must-Answer Questions for Investing Peace of Mind™.


We will post those 20 questions tomorrow.

Should You Get Out of the Market in Volatile Times?

Jim Cramer, who is featured on MSNBC's "Mad Money" was recently interviewed on The Today Show. He advised investors to "avoid" the stock market because of its recent ups and downs. Is this wise advice?

Consider the following headlines:

1. “Wave after wave of selling again moved down prices on the Stock Exchange today and billions of dollars were clipped from values.”
2.“The…volume of retail sales went down an estimated 10% last year."

3. “In one hectic week, the paper value of the 1,545 stocks listed on the Big Board plunged by $30 billion—which is more than the GNP of Australia, Sweden, and Ireland.”
4. “The U.S. banking system has been stretched very nearly to the limit.”
5. “The recent crash bears an uncanny resemblance to the crash of 1929.”
6. “Most Americans have lost faith in the stock market.”

What may surprise you about this gloomy list of quotes is that the first one is from 1929, the next is from 1947, then 1962, 1974, 1989, and the last one is from 2002.

I could share many more such headlines, but the point is that market ups and downs happen.  The reason stocks have historically returned more than fixed income over the long-term is precisely because stock holders endure the volatility of the market. Without the volatility (risk) that goes hand-in-hand with stock ownership, the returns associated with stocks would diminish, and so would the attendant wealth. 

Emotions (and sometimes the advice of so-called experts) cause many investors to do the opposite of what will grow their portfolio over the long-term. 

If you live near Plymouth, Wisconsin, I invite you to join us for a complimentary meal and our last investor education class of 2011. We'll be presenting "Myths and Truths: the Story of Investing" on December 15th at both 11:30 AM and 5:30 PM here at Veritas Financial Services, 506 E. Mill St.

If you are out of the area, we still may be able to set up a meeting, or perhaps we can connect on Skype.  Jeremy or I would be glad to talk with you about your investments.  Just give us a call at 920-893-5262.

Margaret Wittkopp
Investment Advisor Representative

Market Behavior

In light of recent market volatility, I thought I'd bring up a little bit of market history from way back in..... 2010.  When I refer to "the market,"  I am talking only about the  S&P 500 Index, a commonly accepted measure of the US Stock Market.

Back in April of 2010, the market suffered nearly a 16% decline from April 23rd, to the market bottom on July 2nd. Our most recent episode was a 17% decline from July 7th to August 8th.

And yet, 2010 went on to be a positive year for the market.

Market declines and sell-offs come in all shapes and sizes. Long term investors should remained focused on managing risk, controlling costs, and staying diversified.

Jeremy Burri
Investment Advisor Representative

Lies and Truths #9 No One Can Forcast the Future

We began this series with the seven lies many investors believe. To see the whole "Lies and Truths" series, click the link that you will find at the bottom of this post, or in the Labels section of the sidebar.  If you are reading this as a note on Facebook, click the "see original post" link at the bottom of the note to be redirected to the blog where you can see the entire series.  

Today's truth, "No one can forecast the future" seems so obvious that it shouldn't need saying, right?  Well, it does need saying.  Just take a look at commercials, financial magazines, websites, etc. and you will see just how many people are trying to convince investors that they can do exactly that.

Because NO ONE can accurately predict the future consistently, no one can predict what the market, or individual stocks will do in the future.  If they could predict the future, why would they tell you?

We're Now in Oshkosh

We are excited to announce the opening of our new office in Oshkosh, Wisconsin!  Jeremy Burri will divide his time between Plymouth and Oshkosh, and other staff will use the Oshkosh office for meeting with those of you who will find that more convenient. 

Office hours at the Oshkosh location will vary, so call before stopping by.

The address is:

923 South Main Street, Suite E

Oshkosh, WI 54401

Phone: 920-893-5689

Jeremy outside the entrance to our Oshkosh office.

In the reception area

The office space

Happy Halloween from the Staff at Veritas Financial Services

Perhaps you have seen some of the photos of the Occupy Wall Street protesters dressed as zombies? 

We understand being spooked by the traditional financial industry.  However, the secret to being a wiser, more successful investor is NOT to get out of the market altogether, nor is it to move everything to cash, nor to hide your money under the mattress, nor to purchase the next "safe" sounding insurance product.

If you are an investor, should you do nothing and hope for the best?  No.

Anonymous "corporate zombie"

VERITAS Financial Services offers a non-traditional, more efficient, less costly method of investing.  We do not try to sell you a product.  We do not recommend the tool most American investors use -- actively-managed mutual funds).  We also do not think (in most cases) that annuities are the investment of choice. (For more information on why not, click the "annuities" link in the sidebar.)  We also don't try to pick the next "winning" mutual fund manager or hot stock. 

We do offer a better way.  What is that way?  Structured, free-market funds.  These funds are diversified, academically proven, and involve fewer costs and fees.  Find out more. Join us for an investor education class (see the Learning Opportunities tab on the top of the blog) or call 920-893-5262 and talk with Margaret or Jeremy.

Meanwhile, have fun today, but don't let Wall Street scare you!

Congratulations, Cathy Knuth!

We are pleased and proud to announce that Cathy Knuth, our office manager and all-around "go to" person has completed her studies in Organizational Managment and Marketing, receiving the Bachelor of Arts degree Magna cum Laude.  GREAT JOB, Cathy

Some of us were able to join Cathy and her family for the graduation ceremonies.  Here are a few pictures of the day.

Dorcas, Paulette, Cathy (the GRAD!) and Margaret

Cathy is happy but already wondering what she will do with all the free time ahead...

A hug from Paulette



Cathy in cap and gown.  The cord is for consistently making the Dean's List and the stole is for being a member of the honor society of Alpha Sigma Lambda 



Wearing Purple Today

If you happen to stop by the Veritas office today you will see that several of us are wearing purple.  Why?   October is “Domestic Violence Awareness Month.”  By wearing purple on October 25th, we are joining a national effort to raise awareness about the prevalence of domestic violence in our community.   By wearing purple we are saying:

Yes, we will…

• Be violence free and never commit, condone, or stay silent about an act of violence

• Educate myself and others about healthy relationships

• Call 911 if I witness domestic violence

• Talk about domestic violence and break the silence

• Teach my sons to respect women and that strength is not defined by violence or domination

• Teach my daughters (and sons) self-esteem and self-worth

• Support programs that provide crisis intervention

• Believe victims

We believe that support and services should be available to all victims of abuse. These simple gestures recognize that it takes the support of many to bring an end to domestic violence.”

What Do You Believe (Who's Side are You On)?

There is a battle raging in the world of finance. Two ideologies are at war, and every investor, even you, has taken a side.  Does this sound surprising?  Did your financial advisor ever ask you whose side you were on?

The stock market, with its images of bulls and bears, Wall Street, ticker tape, and bell ringing, is a part of American culture. The allure of “getting rich” in the stock market has attracted investors for decades.

Benjamin Graham was one of the first people to seriously study investing. His book, Security Analysis, was considered the ultimate stock picker’s guide. He was very much admired by a young Warren Buffet, so much so that Warren used Graham as a middle name for one of his sons.  Many of Graham's ideas live on today.

Jim Cramer is picking stocks on CNBC.  You can watch shows like Fast Money (also on CNBC).  Many brokers are touting their “stock picking” ability, and a legion of mutual fund managers are dutifully trying to pick the "best stocks" to include in their mutual funds.

In the 1960s, academia first started to take an interest in the markets. A burgeoning mutual fund industry was emerging. Scholars wanted to determine if all of these stock pickers could add any value to investing. Could they "beat the market" by finding the best stocks, thus delivering a superior return to their clients?  This was first tested in 1965 with a study by Beckencamp, and it was determined that mutual fund managers were NOT beating the market. But the industry was not concerned as people at that point had no alternative.

But in 1976, shortly before his death, the very father of stock picking said the following:

I am no longer an advocate of elaborate techniques of security analysis in order to find superior value opportunities. This was a rewarding activity, say, 40 years ago, when [the bible of fundamental stock analysis, Graham and Dodd's Security Analysis] was first published; but the situation has changed. I doubt whether such extensive efforts will generate sufficiently superior selections to justify their cost.

But the industry forged on unaffected. Fast forward to today, and the lines are clearly drawn. Academia has come a long way since the 1960s, and volumes of academic work have been produced which show repeatedly that stock picking and “active management” do not work. But we still have a flourishing financial services industry, using investor’s money to pick stocks, speculate, and gamble with your hard earned money.

Not in your portfolio you say?  Really? Can you tell me the turnover rate of your mutual funds?

So I ask you, what do you believe? Do you believe that someone can "beat the market" through stock picking and speculation (the methods of many in the financial services industry)? Or do you believe academia and in their findings that the market is random and not easily beaten by any money manager, financial guru, or stock picker?

If you believe in the later, don’t give up hope. There are ways to invest in the market which avoid Wall Street’s games. If you are interested in learning about this disciplined, common sense approach, please contact us at 920-893-5262.

Jeremy Burri

Investment Advisor Representative

Veritas Financial Services

Golf Outing 2011 Pics Are Here!

Click here to read a little about our Charitable Golf Outing - 2011.  And to see some of the pictures of this terriffic day, click the "Events" tab at the top of the blog,  To see them all, click on the Facebook link in the sidebar to go to our  Facebook page.  



Back Row, L to R, Golf Pro Lynn Stellmann, Paulette Ruminski, Cathy Knuth and Golf Pro, Debbie O'Connell
Front Row, L to R are Dorcas George, Margaret Wittkopp, and Jeremy Burri



Global Stocks on Sale Now!

Did you read our post a few days ago, "What to Do When the Market Takes a Dive?"  If not, click HERE to take a look.   And then come back.  :-)  because we have some something else related for you to think about.

With equity markets seeing significant downside volatility in recent weeks, and the economic uncertainty across the globe, many investors have given up on international diversification.

In order to win long-term, investors need to build a globally diversified portfolio that includes small-cap and distressed stocks which are great diversifiers across the board.

Uncertainty is bad for the economy but academic studies show that it increases long-term expected returns for equities. If investors wait until they feel the uncertainty is gone from the economy and the stock market, they will have missed significant growth opportunities.

For more on this, see our friend Mark Matson's recent interview. Click HERE to be redirected. 

Call us if you would like to discuss this further with Margaret or Jeremy.  920-893-5262

Financial Confidence at Any Age

Our friend, Michelle Matson, Vice President of Matson Money (who joined us earlier this year for our Dressed to Invest event--see picture), shared a great blog post recently. 

Ladies, click HERE to check it out.

If you would like to know more, call us at 920-893-5262.

And if you would like to see pictures of our "Dressed to Invest" event, click the events tab at the top of the blog.

Seven Deadly Investor Mistakes

Yesterday we promised a follow-up post about Margaret Wittkopp's SEVEN DEADLY INVESTOR MISTAKES presentation at Veritas' Charitable Golf Open.  Unfortunately, we can't share the whole thing, but here are some highlights.


Mistake 1:  Missing the Basics
     Own equities (small and value)
     Diversify
     Rebalance (so you buy relatively low and sell relatively high)

Mistake 2.  Poor Design
Do you know there is a "science" of investing based on Nobel-prize winning research?  One that does NOT involve, market timing, track-record investing or trying to pick the next hot stock?  Most people don't.

Mistake 3.  Investing on Instinct
What "feels" right is often wrong!

Mistake 4. Focusing on the Wrong Things
It can be hard, when the market is see sawing, to take the long view, but if you don't your finances will suffer. 

Mistake 5.
No TRUE Diversification
Most American investors have a lot of "stuff" (most often in actively-managed mutual funds) but no real diversification.

Mistake 6.  No Discipline
Most of us tend to overextend, overcompensate and overreact.

Mistake 7.  No Coach
You may have a planner, an advisor, a broker, a wealth manager...but that is not the same as a Financial Coach.  Margaret Wittkopp and Jeremy Burri are financial coaches. 

What does a coach do?  A coach:
Motivates
Educates
Helps you Strategize
Adjusts for "false feel"
Specializes in one thing
Analyzes

Would you like to know more about the science of investing and what the academic research reveals? Would you like to find out if you are genuinely diversified or just have lots of "stuff?"  Do you need help to become a more disciplined, peaceful investor?  We can help.

If you are in the Plymouth area, pleas join us for one of our upcoming classes.  Just click on the Learning Opportune tab at the top of this to find topics and dates.  Or you can call Margaret or Jeremy for a no-cost initial consultation, 920-893-5262.

For more about Margaret's journey from "advisor" at a large brokerage firm to "coach" at her own firm--and why it matters--click HERE. 

Veritas Charitable Golf Outing--2011



Here is the Veritas staff with Debbie O' Connell last year.
Jeremy and Dorcas are on the left, Debbie is in the middle, and
Margaret and Cathy are on the right.

It was a cool, crisp, sunny day last week as Veritas staff and golf pros, Debbie O' Connell and Lynn Stellmann (of Ladies Links Fore Golf) welcomed guests to the third Veritas Charitable Golf Open.  Once again, we were hosted by Tom and Rachel of Quit Qui Oc Golf Course, Elkhart Lake, WI.  

The day began with light refreshments, and then guests accompanied our gold pros ooutside for a couple of coaching clinics and some time at the putting green. 

Later, Debbie shared some common golf mistakes and Margaret presented "Seven Deadly Investor Mistakes" as guest enjoyed lunch.  

Lots of laughter echoed around the course as our clients and their friends tried out the tips they had learned during a nine-hole golf "scramble." The day concluded with a complimentary photograph of each foursome, drinks, snacks and conversations with our golf pros, and Margaret, Jeremy, Paulette and Dorcas, Veritas Financial Services "pros."

Veritas sent a total of $2,000 in donations, in the names of our winning guests, to the following:

The American Cancer Society

Sheboygan County Humane Society

Family Services of Sheboygan

Holy Rosary Roman Catholic Church, New Holstein

Jubilee Assembly of God Church, New Holstein

Sheboygtan County Salvation Army

If you would like to be included in future special events, just contact us at 920-893-5262 or email Cathy at cathy.knuth@veritasinvesting.com to be kept informed. 

The photo up top is from last year's event, but we will post pictures from this year soon.  Just check the "events" tab at the top of this blog page.   

Would you like to know the SEVEN DEADLY INVESTOR MISTAKES?  Check back tomorrow!

Lies and Truths #8 -- Information is Toxic

To see the entire series, click on the "Lies and Truths" link at th bottom of this post or the one under LABELS in the sidebar.  If you would like a copy of the book "The Lies My Broker Taught Me: and 101 Truths About Money and Investing," just give us a call at 920-893-5262.

Here is the next truth. Information is toxic.

Since we usually believe the saying, "information is power"--a very positive thing,--why is #8 so negative?
The nightly news, daily stock market shows, and cable new (think about the scrolling market info on some channels) focus on variability. This is to get your attention.  They bombard you with the equivalent of "noise," short-term data, and statistics that are mostly useless. Paying attention to the short-term market fluctuations and newspaper headlines will completely disintegrate your peace of mind and ultimately your portfolio.

A Lesson from Investment History

If we roll back the clock to 1974, investors (like today) were not feeling particularily thrilled about their portfolios. The Dow Jones was down more than 40% (and fell further still by the end of that bear market*). Although we don't advocate any actively-managed funds, Jim Fullerton, former chairman of The Capital Group, offered some very fitting perspective to the investment community at the time, perspective that I'd like to share. He began by taking his audience back to 1942.

 One significant reason why there is such an extreme degree of bearishness, pessimism, bewildering confusion, and sheer terror in the minds of brokers and investors alike right now, is that most people today have nothing in their own experience that they can relate to, which is similar to this market decline. My message to you, therefore, is: “Courage! We have been here before. Bear markets have lasted this long before. Well-managed mutual funds have gone down this much before. And shareholders in those funds and we, the industry, survived and prospered.

I don’t know if we have seen the absolute bottom of this prolonged bear market, (although I think we’ve seen the lows for a lot of individual stocks).  Each economic, market, and financial crisis is different from previous ones. But in their very difference, there is commonality. Namely, each crisis is characterized by its own new set of nonrecurring factors, its own set of apparently insoluble problems, and its own set of apparently logical reasons for wellfounded pessimism about the future.

Today there are thoughtful, experienced, respected economists, bankers, investors and businessmen who can give you well-reasoned, logical, documented arguments why this bear market is different; why this time the economic problems are different; why this time things are going to get worse — and hence, why this is not a good time to invest in common stocks, even though they may appear low.
Today people are saying: “There are so many bewildering uncertainties, and so many enormous problems still facing us — both long and short term — that there is no hope for more than an occasional rally until some of these uncertainties are cleared up. This is a whole new ball game.”

In 1942 everybody knew it was a whole new ball game. And it sure as hell was. Uncertainties? We were all in a war that we were losing. The Germans had overrun France. The British had been thrown out of Dunkirk. The Pacific Fleet had been disastrously crippled at Pearl Harbor. We had surrendered Bataan, and the British had surrendered Singapore. The U.S. was so ill-prepared for a war that the cavalry school at Fort Riley was still teaching equitation, and I would guess that probably 75% of our field artillery was equipped with horse-drawn, French 75mm guns, Model 1897 (including the battalion in which I was then serving).

In April 1942, inflation was rampant. A Federal Reserve bulletin stated: “General price increases have become a grave threat to the efficient production of war materials and to the stability of the national economy.” Today there is concern about the slump in housing construction. On April 8, 1942, the lead article in the Journal was: “Home construction. Total far behind last year’s; new curbs this week to cut further …private builders hard hit.” Today almost every financial journal or investment letter carries a list of reasons why investors are standing on the sidelines. They usually include (1) continued inflation; (2) illiquidity in the banking system; (3) shortage of energy; (4) possibility of further outbreak of hostilities in the Middle East; and (5) high interest rates. These are serious problems. But...April 11, 1942...the Wall Street Journal stated: “Brokers are certain that among the factors that are depressing potential investors are, (1) widening defeats of the United Nations; (2) a new German drive on Libya; (3) doubts concerning Russia’s ability to hold when the Germans get ready for a full-dress attack; (4) the ocean transport situation with the United Nations, which has become more critical; and (5) Washington is again considering either more drastic rationing with price-fixing or still higher taxes as a means of filling the ‘inflationary gap’ between increased public buying power and the diminishing supply of consumer goods.” (Virtually all of these concerns were realized and got worse.)

On the same day, discussing the slow price erosion of many groups of stocks, a leading stock market commentator said: “The market remains in the dark as to just what it has to discount. And as yet, signs are still lacking that the market has reached permanently solid ground for a sustained reversal.” Yet on April 28, 1942, in that gloomy environment, in the midst of a war we were losing, faced with excess-profits taxes and wage and price controls, shortages of gasoline and rubber and other crucial materials, and with the virtual certainty in the minds of everyone that once the war was over we’d face a post-war depression in that environment, the market turned around.

What turned the market around in April of 1942?

Simply a return to reality. Simply a slow but growing recognition that despite all the bad news, despite all the gloomy outlook, the United States was going to survive and that strongly financed, well-managed U.S. corporations were going to survive also. The reality was that those companies were far more valuable than the prices of their stocks indicated. So, on Wednesday, April 29, 1942, for no apparent visible reason, investors again began to recognize reality. The Dow Jones Industrial Average is not reality. Reality is not price-to-earnings ratios and technical market studies. Symbols on the tape are not the real world. In the real world, companies create wealth. Stock certificates don’t. Stock certificates are simply proxies for reality.

Now I’d like to close with this: “Some people say they want to wait for a clearer view of the future. But when the future is again clear, the present bargains will have vanished. In fact, does anyone think that today’s prices will prevail once full confidence has been restored?”  That comment was made 42 years ago by Dean Witter in May of 1932 — only a few weeks before the end of the worst bear market in history.  Have courage! We have been here before — and we’ve survived and prospered.

I hope this has given you some positive perspective and hope regarding the future of our country. So much in the media today is fear-based rhetoric. I believe in the strength and resourcefulness of the American people,  and (as we have shown in the past) in our ability to meet adversity head on. I witness it every day in class when I teach. I can't tell you how many single mothers, returning military, and laid off manufacturing workers I have taught in my Economics class. American may be adjusting to a new world, but we certainly are not taking it lying down.

Jeremy Burri
Investment Advisor Representative
Veritas Financial Services

* A "bear market" means things are heading downward, and a "bull market" means things are heading upward.

Baby Boomers, Medicare and YOU

Dorcas George

Insurance Advisor Coach

The dramatic increase in births from 1946 to 1964 is called “The Baby Boom.” In the USA, 79 million babies were born during those years. Many of us grew up with Woodstock, the Vietnam War, and John F. Kennedy as president.

Listening to the radio this a.m., I heard that most people say “old age” begins at 60. Boomers say 70. I’m not surprised (since I hate to even use a Senior Citizen discount). Remember the silly adage, “Never trust anyone over thirty?” Well, in 2011, the oldest Baby Boomers turned 65 years old, including the first two Baby Boomer presidents, Bill Clinton and George W. Bush. This means the first wave of “boomers” were enrolled in Medicare, the federal health insurance program primarily for people 65 or older but also available for certain disabled individuals.  More than 2.77 million people turned 65 in 2011.* That's 7,596 people aging into Medicare every day! 

We boomers may never admit to being “old” but the fact is that most of us will enroll in Medicare. Enacted in 1965, the program has changed somewhat over the years, but Medicare is still designed primarily to cover acute medical care, and there are still significant gaps in coverage. Most Medicare members also purchase insurance designed to fill in the gaps.

It’s important for boomers to be informed about the details of Medicare, which tends to be more complicated than many insurance policies offered by employers.

Some people delay enrollment, but signing up late can cost thousands of dollars in extra premiums and expenses over a lifetime. The enrollment period for first-time Medicare beneficiaries spans seven months surrounding your 65th birthday.  If you are eligible for Medicare due to disability, your seven-month window begins three months before your 25th month of receiving Social Security disability payments. In either situation, the initial enrollment period is also the best time to sign up for any additional insurance. 

Open enrollment for those who’d like to switch insurance plans will begin Oct. 15, 2012 and ends Dec. 7, 2012. If you make a change during this period, your new coverage will begin Jan. 1, 2013.

It’s a good idea to familiarize yourself each year with the changes in Medicare, so you can make sure that the insurance plan you have continues to be the right one for you.

If you would like to learn more about Medicare and ways to finance the coverage gaps, join my colleague, Paulette Ruminski, and me for a“Medicare and You” class, offered in the spring, summer, fall and winter here at Veritas, and occasionally in other places like Chilton, Fond du Lac, etc. 

Call 920-893-5262 for the schedule or email me at dorcas.george@veritasinvesting.com for more information. 

If you are unable to join us but would like to compare options, we will be happy to meet with you. Our independent status allows us to help you compare several popular plans to see what works best for you. 

 
Neither Dorcas George nor Paulette Ruminski nor Veritas Financial nor its agents are affiliated with the Federal Medicare Program.  The classes mentioned are educational events only and no plan specific information will be shared.  

What to Do When the Market Takes a Dive

Margaret Wittkopp
Investment Advisor Representative
Veritas Financial Services

This is the headline you might have seen on Monday morning: “Investors Panic as Wall Street Plummets Amid Global Fears.” Whew! Sounds terrible, doesn’t it? None of us like to see those negative numbers. Is it time to panic? To get out of the market altogether? To buy nothing but fixed income--or--?

Here is my advice: AVOID WALL STREET MEDIA HYPE!

It will get better—and no, I’m not being a “Pollyanna.” We know that our economy is in a slump, and we know there may be hard times ahead for many, but here’s something else we know, a bit of investing wisdom almost everyone has heard but few follow, “Buy low. Sell high.” When the market drops and people panic and start selling, someone else (the next "Warren Buffet," perhaps?) is buying. Why?

Here is a simple example from everyday life. Let’s pretend you are going shopping for a new dress. And let’s say that last week you saw “the dress” in a window with a $100 price tag, but this week it’s on sale for only $50. Would you see a great opportunity to buy the same dress for less money, or would you wait till the price went back up? You know the answer, of course. You’d buy the sale item and go home happy at your bargain.

When the market is down, your investing dollar buys more. When the market rebounds, as it historically has always done, you have more than you did to start with. For example, let’s say that you have a Simple IRA that invests $100 a month for your future. We’ll keep it simple and say that last month your stock purchasing dollars bought ten shares at $10 a share. And then the S&P 500 index drops 10% (as it did on Thursday). Time to panic? No. Now your same $100 buys more than eleven shares. What a bargain! It’s like getting a share of stock for free because eventually, over time, the market rebounds.

Here are some other things we know about the stock market:
• Without the volatility (risk) that goes hand-in-hand with stock ownership, the returns associated with stocks would diminish, and so would the attendant wealth

• We have never endured a recession that hasn't ended.

• The highest historical returns have followed a crash. In fact, the single largest recovery followed the single largest crash.

While I am saying that it is not a time for panic, I am not saying that you should do nothing. Here are some things to consider:

• Are you appropriately diversified across a wide range of asset classes, or do you have lots of overlap and similar “stuff” in your portfolio? (Hint: You can’t just go by the name of your mutual funds. You must take a look at the holdings inside.)

• Are you taking a long-range and disciplined approach to investing, or are you trying to find the next hot stock or fund?

• Do you have a financial coach? Investors are emotional about finances (aren’t we all?) and usually need someone to help them stay on track.

To learn more about investing, join us for our next Investor Education class or call Jeremy or me at 920-893-5262.

Annuities: A Great "Guarantee?"

Here is another article about annuities.  Does the word "GUARANTEE?"  make you feel safe?  Jeremy Burri urges you to take a closer look.  To read more about annuities, just click the link at the bottom of this post.

Annuities have enjoyed a profound resurgence over the last 15 years as the average investor’s portfolio has been whipsawed back and forth.

Essentially a life insurance product that insures against outliving income, annuities have brought the investor a sense of safety through their advertised “guarantees.” An investment designed to provide a "guaranteed income" is not new. A hundred years ago you could have purchased what is now called an “immediate annuity,” and you still can purchase one today. A new feature in many annuities offers “guaranteed income for life” while keeping your money invested in the market. Does this sound familiar to you?

Assume you are a 55 year old who plans on using an annuity for retirement income at age 65. You could buy a deferred annuity, with special riders, today and in 10 years (at age 65) have guaranteed income for life. Or you could wait until age 65, buy an immediate annuity, and get that same income for life (again, assuming you are only considering annuities.) Both options can give you what you want at age 65. So how do these options differ? Which is better? Further, what is the insurer actually guaranteeing you, since the stated guarantees on the deferred annuity do not relate to the cash value (like a CD guarantees a rate of return)? How do you translate these guarantees into an actual number you can relate to?

Let’s say you chose option one, and at age 55 you purchased a deferred annuity with riders that guarantee that your “income base” (the amount of money you put in) will grow at 5% a year and that you can receive a 5% income benefit each year, no matter what happens to your contract or to the market. If you start with a $100,000 investment, by age 65 your income base will grow to $162,890. (Remember, this is not cash value, and you cannot withdraw it.)  Based on that income base, you can receive $8,144 per year (5% of $162,890) for the rest of your life.

You could also have chosen option two, waiting 10 years to buy an immediate annuity to provide yourself with the same $8,144 for life at age 65. However, if you only have $100,000 now at age 55, it will need to grow some in order to provide you with the same amount of income in 10 years. How much growth is “enough?” If you wait, you run the risk that in the meantime your investments will not earn enough, or worse yet, decline in value.

Let’s do the math. In order for the immediate annuity to be the better option, over the ten year wait your $100,000 must earn only 3.1% per year. Do you believe that is an attainable goal? If so, then you would be better off not paying for the guarantees of the deferred annuity. These costs, seldom discussed in detail, are very high and have significant impact.  Furthermore, many times once these extras are selected on the contract, they cannot be dropped.

But this is not to say that the immediate annuity is the investment of choice. We believe there are even better, more cost-effective, non-annuity options. If you would like to learn more about annuities and other investments, please give me a call at 920-893-5262 or email me at jburri@veritasinvesting.com to learn more.

Who Wants to be a Millionare?

Our friend, Michelle Matson, shares some info about what it actually takes to be a millionaire. It is possible for many of you! (This is the Michelle Matson who joined us for our recent "Dressed to Invest" event; pics available under out EVENTS tab up top.)

Lies & Truths #7 The Graveyards are Full of Gurus

Today we continue our Lies and Truths series (from the book pictured at the left with our own Margaret Wittkopp on the cover).  To see the entire series, just click on the link at the bottom of this post or in the sidebar.

The media loves to promote the wisdom and insights of managers with ""hot hands" or the "Midas Touch."  They gleefully put them in advertisements and on magazine covers.  These gurus are often featured one or two years later in derogatory articles about how their investing prowess has mysteriously disappeared.  They die in the the pages of the Wall Street Journal or Money Magazine.

The truth is, stock picking does not work.  Period.

Annuities: Buyer MUST be Aware

This is the first of several articles we'll be sharing from time to time about annuity products.  This one is from Margaret Wittkopp, Investment Advisor Representative and President of Veritas Financial Services.


When financial markets head downward, many investors become fearful and look for “guarantees.” Every day I am bombarded with offers from insurance companies that promise me, “easy sales and BIG commissions” for selling indexed annuities and other “stuff.”

Annuities are retirement savings tools backed by life insurance companies. Annuities can sound great, but there are many reasons for caution when purchasing annuities. These include: loss of control (once you annuitize, your decision is final), sometimes unfavorable tax consequences, and hidden costs and fees. These include either “back end” surrender charges (called Contingent Deferred Sales Charges), which can last as long as 20 years and be as high as 13%, or “front end” charges (commissions). You will pay an “add on” charge for each benefit rider. Hidden mutual fund fees are also charged in sub accounts. These charges are buried into the cost of your annuity contract and take away from your returns. Make sure you can calculate your total fees and that they are not excessive.

Annuities offer “guaranteed income.” To receive just $12,000 yearly ($1,000 a month), you would need to invest $264,000 in an immediate annuity at age 60. If you die before age 82, the insurance company keeps the remainder of your investment—not your intended beneficiaries. Consider inflation and longevity--what will $1,000 buy in 20 years? How long will you live?

Here’s something to think about, using data from 1973-1994. Twelve thousand dollars is about 4.5% of $264,000. Invested in a moderate, balanced Free Market Fund, you could receive 4.5% (that same $1,000 a month), and by age 82 your yearly income would have grown from $12,000 to $64,000. Your portfolio value would be $1,486,000.

Complex insurance products and nice-sounding terms like “indexed annuities," “living benefit riders,” and “guaranteed withdrawal benefits” are the trendy thing today. These products make it seem as if you cannot lose. Unfortunately, you may not really win either.

Remember, insurance companies are in business to make a profit. They calculate the risks to assure they do not lose. Annuities can be a useful investment tool if you've exhausted all other tax-deferred retirement plan options, but the buyer must be aware. Companies are collecting outrageous (and needless) charges, and most commission-based financial advisors are highly motivated to sell these products to you. Want to know more? Have questions about your financial future? Call us at 893-5262.