Skip to main content

Beware Your Broker

Most brokers or financial management firms will advise you to be fully invested "year in, year out." 

Even my own broker, Schwab, recommends this. In a recent article, they recommend:

  • Is market volatility keeping you on the sidelines? History and context make a strong case for investing in stocks, provided you maintain a long-term perspective.
  • Equities have historically outperformed other asset classes and also provided the best defense against inflation.
  • Diversifying your investments and staying invested long-term are essential for minimizing stock market risk.

The article goes on to explain that long-term, the market has out-performed cash investments, such as savings and money market accounts, as well as bonds. What is long term. 91 years! 

There are many studies that show even for 20 or 30 year periods, this is true. The stock market is the way to go. But there is a problem with this advice.

I've had two full-blown analysis of my financial and portfolio. The first analysis, done by Personal Capital, indicated that I didn't have enough money in equities (stocks). The adviser recommended about 80 percent in stocks, with some gold and bonds thrown in. "You can plan on 4 percent a year," he says. 

The problem with this "you can't time the market" advice is that, while no one has a crystal ball, you can get in and out during trends. 

The other adviser took a different approach. Using a 200-day moving average, the firm uses a 3 percent rule to be in or out of the market. Run by Ken Moraiff, the author of Buy, Hold and Sell, he had clients out of the market during the 2008 to 2009 bear market, and is currently out of equities. While I liked his approach, his target earnings for my account was also 4 percent. 

The problem is my self-managed portfolio returned about 9 percent a year, and I'm pretty conservative. So why should I pay someone else 1.25 percent a year when I can do better?

The problem with riding bear markets: You need to ask yourself if you can handle a 50 percent decline in the value of your portfolio. I'll bet the answer is no. But if you miss most of it, you'll do better long-term. 

There are many different strategies for investing. From dollar cost average to diversification models, there are a lot to choose from. 

My point is that being fully invested, even with proper diversification, is dangerous. Learn how to identify trends and feel good about being in a money market fund. Schwab currently pays 2.3 percent on its fund. 

Here's a couple of videos to help you along:






Comments

Popular posts from this blog

What happened when a Trump Supporter Challenged Me About the Wall

Vicky Alvear Schecter wrote in Medium | Poltics on Dec. 27, 2018 using her headline above. I thought it was pretty well written -- at least she made an attempt to keep her liberal bias out of it -- regardless of a few illogical fallacies

But she does make an attempt, in an effort to avoid her liberal bias, as she ponders  "...in order not to be accused by bias, I explained that I would only use conservative sources to prove my point."

To me, that's bias to start out with that premise. And I believe her premise is that she is against the wall. That's her stance. But she makes some good points, but some are skewed, even though she attempt to take a "conservative" approach, even by citing some "conservative" sources in her footnotes.

Here's the first problem: if she wanted to avoid bias, why not just stick to the the historical facts as written (when you can find them without bias), and not concern oneself with bias. "I must reject that becau…

Weekly wrap for Nov 9

After Thursday and Friday, it might seem the markets are down, but the weekly numbers tell a different story, with the three major indices up for the week. The Nasdaq, with its tech exposure, had the smallest increase. The tech sector is obviously under recent pressure. 

IndexNov 2Nov 9+/-%S&P 5002,723.062,781.01+ 57.95+ 2.12%Nasdaq7,356.997,406.90+ 49.91+ 0.67%DOW 3025,270.8325,989.30+ 718.47+ 2.84%
Over the last 12 months, the Dow is up 10.77 percent, the SP 500 up 7.6 percent, and the Nasdaq up 9.7 percent.  

The weekly chart of the SPY still indicates a long position in the broader market. (The blue line is the 34-week moving average; the red is the 13-week moving average).

















While the U.S. economy still seems to be just fine from most reports, investors seemed to worry about a couple of things on Thursday and Friday: 1) The Eurozone, 2) trade with China, and 3) the Fed and interest rates. Another topic of interest has been oil. 

First, it seems that the Fed has really not indicated …

U.S. Top Oil Producer, Thanks to Obama

\ You read that right.

The U.S. is now the largest oil producer in the world, according to the EIA, producing some 15 million BOE per day, surpassing Russia and Saudi Arabia. (Remember back when Jimmy Carter said in 1979 the answer to our energy problems was to wear a warmer sweater...but you probably don't. He actually said this on national TV).

The United States is the top oil-producing country in the world, with an average of 14.86 million b/d, which accounts for 15.3% of the world's production. This is down from 15.12 million b/d in 2015, but it was enough to land the United States in the No. 1 spot, which it has held for the past four years running. (Source: Investopedia.)

Guess who takes credit for it? Granted, this increase in production began in 2012, but only because of private industry and the fact that the price of oil was at nearly all-time highs. And it dipped in 2016 because of Obama's anti-oil policies! 

But here he is again


Former President Barack Obama sure l…