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.)