Fidelity's Ironic Announcement and True Independence

Today's post is a two for one. 

The first is a comment about a recent sales flier I got from Fidelity just a few days ago.  It stated that now may be the time for US Equities (stocks).  Inside the brochure it details the various reasons, such as a rebounding housing market and a resurgence in manufacturing that may take place.  I find it ironic that Fidelity makes this announcement now, as the DOW is sitting at a new all time high.  Where was this announcement in March of 2009?  This is an all too familiar theme in the investment industrial complex.  As a retail investor you are "sold" what feels right at the time and seems to make sense.  If Fidelity was really on your side, they would have been saying this forever, and especially in 2009. But, from a sales perspective what is easier, telling people to buy stocks in 2009, or trying to sell them something safe like bonds or some alternative investment like commodities?  There is a difference between giving investors what they want and what will sell, and telling what they need.  Sometimes doing what is necessary does not feel good at the time.

Also, today I had to laugh on the way home.  On a local channel I heard a wealth management firm advertise how it was "independent" and not beholden to any large national financial firms.  It wasn't influenced "by the manufacturers of financial products".  Sounds nice, doesn't it?  But, then comes the fine print.  Any investment office out there is either a) a brokerage office, or b) a fee based planner.  If they have a broker dealer, they ARE affiliated with a larger firm and DO sell financial products. This firm that claimed to be independent, is, in fact not.  They are an Linsco Private Ledger (LPL) office.  Thus, they have to do things that LPL says it must do.  Secondly, they DO then also sell manufactured financial products.  If they really wanted to act in the best interest of the client, they would not need a broker dealer.  The only reason you need a broker dealer is to collect commissions on the sale of commissionable products (financial products).  So, in short, this ad was a sham in my humble opinion.  The firm is not truly independent, and it also does sell the very products it pretends to eschew. Now, no one outside of the industry is going to be able to tell you about this distinction, but that is our mission at Veritas- Investor Education.  Catch our next class on March 28th.

Value of an Advisor

Margaret Wittkopp brought up this article at our investor education class on Wednesday in Plymouth.  This is from Financial Advisor magazine, and was a study that tracked retirement plan participants going back from 1994 through 2008.  I like this study because it looks at the average investment results of different categories of investors that we commonly see, and how their actions have likely effected their bottom line. 

The yellow line is pool or group of participants/investors that had no plan.  They had no advisor, nor did they personally try to implement any plan.  This is the "head in the sand" group.  It is probably no surprise to anyone that this group performed the worst. At the end of this study in 2008, this group had far less money than any other.

The next line from the bottom is the self directed group.  This group was actively involved with planning their retirement, but they did it on their own.  The DIY crowd.  While I can only speculate, I am guessing the reasons for this is that they did not want to pay for the services of an advisor.  That mindset is pretty common actually.  With the wealth of financial "information" out there, many people feel that paying for the input of an advisor would be an unnecessary expense.

The green line represents people that worked with someone in the financial services industry, but not necessarily a comprehensive planner; like someone that may have sold you an annuity, or a few mutual funds.  You may even own an IRA through them.  Although they can provide financial products, they really aren't giving you tax advice or overall financial guidance.  This group trailed the self directed group until later in the 2000s.  Why?  My theory is this:  I am guessing many of the self directeds after 2007 and 2008 stopped contributing or pulled out of their plans in fear (remember the market in 08?).  By contrast, the group who at least had a casual advisor was able to stay the course.

The last and best performing group worked with comprehensive advisors, people who were not just there to sell them stuff, but who helped them look at the whole picture.  Sure, these people also probably paid the most in fees, but there is evidence to suggest that the fees they paid did earn results in the long run.  These investors also weren't afraid to engage their advisor frequently for advice and education. Don't ever be afraid to call your advisor or planner.  That is what we are here for.  There is a positive correlation between how much client/advisor interaction there is, and the ultimate client experience in the end.  Both the advisor, and the client have a responsibility in that regard.


 

A Discussion About Gold

This morning we had an interesting discussion about gold in the office.  Gold has been a hot topic for a few years now so this may be a bit after the fact, but good to discuss none the less.

It is often said that gold has intrinsic value versus our "paper" money (and things denominated it in like stocks).  It is somehow implied that these assets will lose their value, but since gold is a hard asset it will retain it's value.  But, what are you buying when you buy stocks?  Is it just a piece of paper, or an electronic entry in some corporate database?  Or is it something more?  We'd argue that it's much more.  When you buy stock you are buying equity, or ownership, in the companies that produce the goods and services that make the world economy run.  And as owners of that, part of the profits come back to us, the owners of those firms.  The value of stock investments are determined by the market's view of how valueable and or profitable it is to own a slice of the world's economic markets.  When the economic outlook is doom and gloom, stock values fall, and when the outlook brightens, markets tend to rise.  Over the course of human history, the long term direction has been up.

In contrast, what do you get when you buy gold.  Well, you get ownership of a physical commmodity, or input (like sand, steel, cotton, oil, or any other commodity).  [Gold is unique in that it has been used for many many years as a form of money, but sea shells have also served that purpose].  Gold does not make a profit, and it's physical uses are limited.  (True, there is demand for gold to produce things like electronics and jewelry obviously).  In the direst of circumstances you can't eat it, drink it, or burn it for heat.  That being said, gold is often sought after in turbulent economic times as it's viewed as a safe haven.  Gold certainly has had a run in the past few years, but as long term investors it's important to take the long view.  It is not uncommon for commodities to have wild fluctuations in price.  Does anyone remember oil prices in the late 2000s?

The link below is a good comparision between stocks, bonds, and gold.
http://www.investorsfriend.com/asset_performance.htm

There have certainly been stretches of time when gold outperformed, just like there have been periods when bonds have done better than stocks. But if you take the long view there is a compelling case for stocks.  The only other fault I have with this article is that their only comparision to gold for stocks is "large company stocks". This is a very narrow look at stocks.  A truly diversified stock portfolio would have returned much more, and held stocks in the US, abroad, and of all sizes.  A further thing to note is that as a commodity gold can be just as, if not more, volatile than stocks.  We were just checking yahoo finance today, and an investment in GLD is down about 8%  from it's high in 2011, while stock investments in many categories are up double digits.

Lies and Truths #12 Less Can Be More

Here is the next installment in our series, a short but powerful TRUTH:  

"He who trades less wins."

A broker's "job" is to get you to buy and sell as much as possible.  That is the primary way he or she gets paid.  This is a huge conflict of interest because what is good for you is bad for the broker.

Would you like to explore ways to get OUT of this trap?  Call Margaret or Jeremy at 920-893-5262. 

To see the other "Lies and Truths" posts, click on the link at the bottom of this post.  And if you would like to receive a free copy of this book, just call to let us know you read this post. We will be happy to send you a copy (unless all our remaining books are gone).

Lies and Truths #11 You Are Already Rich

Here is another TRUTH in our series from the book "The Lies My Broker Taught Me and 101 Truths About Money & Investing."

TRUTH:  You are Already Rich!

"In comparison to all of the humanity that has inhabited this planet in the past and today, you already have vast amounts of wealth available to you.  You have access to food, clothing, education, shelter, technology, and freedom; unimaginable to the masses in the world today and suffering without running water, health care, food, shelter, or sanitary living conditions.  Even the kings of a thousand years ago could scarcely have imagined the wealth of your kind.  Indeed, you are already rich."

So, maybe all of us in this country are really part of the 1%?  Something to think about.  Let's live today in an awareness of how RICH we are! 

We have a few copies of this book to give away.  Just call 920-893-5262 and tell us you read this post and we will send one out to you--unless they are all gone.'  If you would like to see all the posts in this series, just click the "Lies and Truths" link at the bottom of this post.

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!

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?

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.

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.

Lies and Truths #6: Magazine Covers

This post continues our "Lies and Truths" series.  To see the other posts, click on the link "Lies andTruths" found both at the bottom of this post and in the sidebar under LABELS. 

Here is the next TRUTH:

No one ever prints a magazine cover with NEXT year's top performing funds.

Not even the fund companies or brokerage companies know what funds or stock are going to do well next year.  If they did, they wouldn't NEED hundreds of funds and fund managers.  Instead, they would have one predictably sound mutuall fund. They don't.  They hedge their bets.  They create new products for you. 

In reality, they have no idea what their so-called "experts" will produce.

Lies & Truths #5: You Don't Know What You Don't Know

This post continues our "Lies and Truths" series.  To see the other posts, click on the link "Lies & Truths" at the bottom of this post or the one found in the sidebar under LABELS. 

Most investors know what the brokerage community or financial press want us to know.  They have trained us to accept their version of reality over the span of our entire lives. 

There is a complete body of investing information discovered and develped in the halls of academia.  Most people do not even know that it exists.  This is the real wisdom you need to create wealth and abundance.

We believe, "An fnformed investor is a better investor."  This body of information is so vital to you that we offer at least two classes every month drawn from this proven, academic research.  Click here to find our upcoming workshops, or call us at 920-893-5262.

We're Back!

Well, we never really left, but we did have to discontinue our blog for a while. We are now operating independently of a broker-dealer so we can utilize Blogger once again. We also have a Facebook page. To find our page just click the Facebook link in our sidebar.

Our series "Lies and Truths" will continue soon! You can check the first four entries in the series by clicking "Lies and Truths" in the Links section found in the sidebar.

We'll be tweaking things here for a bit, so bear with us and check back often.

Lies & Truths - #4 Almost Nobody Wants You to Know the Truth

If you would like to read this series from the beginning, just click on the Lies & Truths link in the sidebar. You will find it under LABELS.
Back to our Lies & Truths series, here is the first TRUTH.

The financial industry and the financial press have a huge monetary interest in convincing investors that there is little or no difference between speculating and investing. They perpetuate the lie that by forecasting the future you can pick stocks, time the market or pick future winning money managers.

If you don't believe this works, they are out of business.

Here They Are: The [Dirty,Filthy] Lies My Broker Taught Me - #3

As Mark Mattson told us here, sometimes these lies were known to be lies, and sometimes they were unintentional because your advisor just passed on what he or she had been taught.

But even an unknown lie is still--a lie!

Here they are:

1. Stock picking works. We know which stocks you should own to get above average returns.

2. Timing the market works. We have experts who can accurately predict market movements.

3. Our research works. If you trust us and buy and sell based on our analysis, you will beat the market.

4. Track-record investing works. We have expert money managers who, based on past performance, have a better-then-average chance of beating the market going forward.

5. Commissions work. We always put your best interest first. We work for you.

6. We know what is likely to happen next, and you can use that to beat the market.

7. Markets don't work. We know what the correct price of a stock or bond should be, and we can buy mispriced stocks so you can make a big profit.

A few more Mark Mattson quotes from the book before we move on to the TRUTH:

In the first three years of the new millineum, investors lost over 7 trillion dollars in the U.S. Market. This represented real money...entrusted to...brokers and financial consultants. This is money...needed to fulfill life dreams of retirement and financial security.

The media panders to the public with magazine covers that titillate and tantalize the human psyche with a voyeuristic rush. With little or no regard...they hook into the human instincts of fear and greed...These...abuses are paraded in front of the investor as reliable analysis and advice.

The drivel that Wall Street so profusely spews at the retail investor creates the...illusion that if you study their research you will receive superior returns. The problems and secrets that large broker-dealers have fought...to hide are coming to light. The financial community's reputation has been greatly tarnished by scandals, abuses and conflicts of interest.

Whew! No need to ask Mark to tell us how he really feels. Remember, Mark Mattson, like Veritas owner, Margaret Wittkopp, saw many of these abuses first hand. They both established independent firms as a result. As Margaret recently told me, "I had to find a different way or leave the industry altogether."

More next time...

Lies & Truths - #2

With this post we began a series from the book, "The Lies My Broker Taught Me and 101 Truths About Money and Investing" (pictured next to the Veritas piggy bank).

In an introduction, Mark Matson has this to say.

This is an insider’s look at the industry. As representatives of a large brokerage firm, we were fed a steady diet of…investing lies. Most of these lies were subtly implied, NOT loudly proclaimed or put down in writing. Most of them were lies of omission. The underlying message was that by using brilliant and knowledgeable experts and money managers, it was not only possible, but likely, that you would consistently and predictably pick the best stocks and time the Market.

This was taught to us in countless seminars, presentations, brochures, conventions, mutual fund pitches, conference calls, keynote speakers, books, magazines, and industry articles. The industry propaganda brainwashed us to believe really smart experts could, over time, make investors rich.

The truth is…you don’t have to believe any of the lies we believed to be a successful investor.
Do we have you wondering just what those lies are? We will share all seven lies in the next installment of this series.

The Lies My Broker Taught Me & 101 Truths About Money & Investing - #1

The book in the picture is authored by Mark Matson and the preface is written by Veritas' owner, Margaret Wittkopp. Here is a little of what Margaret, who grew up on a rural Wisconsin farm, has to say :
Farming has a lot of lessons that relate to sound investing...[one lesson] I learned from the strawberry patch was...don't spend everything you make.  It was tempting, but it was important not to eat all the berries I picked.  If I ate all the berries, I would have nothing left to sell...and I'd get sores in my mouth and a tummy ache.
Margaret relates her childhood experience in the family strawberry patch to these lessons as well:

• Preparation and knowledge are essential to good results.
• Patience
• It takes hard work and sacrifice to get ahead.
• Ownership gives the most profit.
• The amazing truth of savings accumulation.
• Generosity begets wealth.
• Saving is important.
• Diversification makes a difference to the total return.

In the next few posts we will share some common misconceptions about Wall street and your finances, and then we will follow up with some truths that are essential to sound investing. No, we probably won't share all 101--but who knows?

If you would like to read how Margaret learned about prudent investing by picking and selling strawberries, or if you would like to read all the lies and truths, contact us to purchase your personal copy of the book.

Even better, contact us to find out how to get your FREE copy.  Email Margaret at margaret.wittkopp@veritasinvesting.com or call us at 920-893-5262. Meanwhile, come back to learn about some of the lies many of us have believed.