December 31, 2012

2013 Prognostications Are Useless

OK, this is the time of the year to both look back and look forward.  I love the 'best of' lists that look back.  I hate the prognostications that look forward.  Maybe it's because there is no accountability.

You will see every brokerage firm and finance guy with an eye to 2013 giving you his/her best ideas or best stock picks for the upcoming year.  Have you ever seen a recap of how that guy/gal did over the previous year?  NO.  And you won't.

I get it, it's fun.  Just don't take it seriously and do not change your investment plan because of it.  Alot of times these predictions are made so you will change investments around which create commissions, get it?

I write an investing newsletter called the INVESTING OPINION and yes, I make predictions too but I am accountable and I compare myself with the market averages all the time so you can see how I rate.  I'll bet your stockbroker or financial advisor cannot say the same!

Do yourself a favor and check your account versus the S&P 500 or the Dow Jones and see if what you are paying for is worth it.  Just sayin'.

November 30, 2012

Biggest Commission

If you've been reading this blog or my book, you know that I was a stockbroker or what is currently referred to as a financial advisor or wealth adviser or financial planner, etc.  You probably also know that I believe that you can invest by yourself for yourself and save a fortune over a lifetime.

If you still insist on using a financial guy to make your investment decisions, let me tell you about some of my biggest commissions.

There was a time, not very long ago that I and everyone else was paid 8.5% for selling you a mutual fund.  That's $8500 of your hard earned money on every 100k that I placed!  And get this, that fund was front-end loaded meaning that the 8.5% came out of your investment right away just to pay me and my firm.  Believe it or not, there are still some very popular funds and stockbrokers getting paid this way and its still as high as 5.5%!  

Times have changed and people have wised up however so did the brokerage and mutual fund industries.  They migrated to B shares or back-end loaded funds which still paid me and my firm right away but you didn't see any commission unless you tried to sell within the next five or so years then of course, you were hit with the commission then.

These days, there is no reason whatsoever to buy into a mutual fund and pay a fee or a load.  Please check at yahoo finance which is a great unbiased website.  Just put the fund symbol where it says 'get quote'.  Then click on 'fund profile' and scroll down and you will see 'fees and expenses'.  They will compare whatever you are looking at to the average in that category.  Here is an example and you will have to scroll down to see the chart.

As always, I am available for coaching to answer any questions you may have.

October 18, 2012

Why Your Financial Guy Loves Buying And Selling You Bonds

Don't get me wrong, bonds are a good investment and should be a part of most portfolios but there is a dirty little secret about bonds that investors do not know.

Your financial guy loves selling you bonds, why?

Because there is a hidden commission in bonds that you do not see.  It is called a concession and on every bond bought or sold, your financial guy gets paid but you don't see how much!

That is gold for a stockbroker, financial advisor, wealth manager, financial planner, whatever they want to be called today, because it doesn't appear to be churning.  

Recently, with interest rates decreasing which means prices increase on anything fixed (like a bond), you can be sure that your financial guy will be all to happy to sell your bond (that you bought only months ago) for a small profit for you AND A LARGE CONCESSION FOR HIM.

Ever wonder why you buy and sell bonds?  Now you know!

Ever wonder why brokerage firms earnings reports are filled with great news from bonds / fixed income?  Now you know!

PS.  Bonds may not necessarily be a good investment in 2013 and beyond since interest rates are likely to go sideways or higher which means anything fixed, like a bond, will decrease in value.

September 27, 2012

What Apple Stock Teachs Us About Investing And Wall Street

Apple is a great company and if you've owned stock for any reasonable amount of time, you are a happy investor.  We can learn a lot about investing looking at Apple.  We can learn plenty about Wall Street at the same time.

Apple was just about $100 in 2009 and has been $700 recently.  Wow.  Nice win SO FAR!  Pretty much every mutual fund owns it by now.

Lesson One - good stocks continue to go higher, until they don't and usually without warning.

Lesson Two - even super great well performing stocks have significant pullbacks which is usually when supposed long term investors sell (and later wish they hadn't).

Lesson Three - eventually all growth companies and their stocks become too large to grow at the fantastic rates of the recent past and level out, Intel is a wonderful example, Microsoft too.  With all that cash, they usually start to pay a dividend, are sold by growth investors and bought by value investors.  Apple is very likely close to this.

Lesson Four - Wall Street will get it wrong again.  Over forty brokerage firms cover Apple and only one has a hold rating, no sells and plenty of buys and strong buys.  REALLY?  It is reminiscent of the tech bubble when almost no analysts would dare tell investors to sell anything.

Do yourself a favor, if you own Apple, consider selling here around $700, probably a great chance you can buy it back at a lower price.

August 23, 2012

Almost Buy And Hold

If you are like most investors, you've tried pretty much every strategy there is to make money in the stock market.

I hope you have come to the conclusion that trading is a waste of time and money and alot easier on paper than in the real world.

So you've decided, ok that's it, I'll just buy and hold, since most of the stocks I sold before are higher today.  You're getting warmer :)

No, the truth is that the best 'strategy' for making money in the stock market is somewhere close to buy and hold but not to the point of buying, hoping and putting your head in the sand.

The secret is threefold:
  • buy quality individual stocks, funds or exchange traded funds
  • dollar cost average, that is buy more with time
  • buy and hold but with exceptions
By exceptions, I mean buy and hold but occasionally, it makes sense to sell and stay away for awhile.  Buy back sometime in the future.  That doesn't mean sell today and buy back later in the day or even next week (that is trading and all traders lose money).  It means buy and hold but use your common sense and sell occasionally all the way to cash.  This gives you a fresh outlook, I promise.

The problem is when to buy back in and admittedly that's tough to know.  It does take some market savvy.  The newsletter INVESTING OPINION is designed to help you (and your financial guy, if you have one) decide when might be a good time to sell, when might be a good time to dollar cost average and when might be a good time to buy back in.

The INVESTING OPINION is your second set of eyes and ears on the market.  As the PGA slogan says, these GUYS are GOOD!

July 12, 2012

End Of The Month Stockbroker Sales Call

Every stockbroker, financial advisor and financial planner starts the month at zero. 

The commission month usually ends a few days or a week before the 30/31 and is payable in the middle of the next month. 

As with all commission salesmen and make no mistake, your financial guy is a salesman, the end of the month means it's time to do business. 

As you can imagine, the end of month comes all too quickly and everyone has bills to pay, your financial guy hopes that he can bring in some new money to save the month and bring home the bacon but if not, you know what happens next - you get the call to make a move within your account (which of course creates commissions, concessions or fees). 

Brokerage firms report massive increases in phone usage and costs near the end of the month. Sales managers have contests and incentives for placing product near the end of the month. Mutual fund wholesalers working with your financial guy provide increased commissions over short periods, usually near the end of the month. 

What are the chances that the best time for you to invest or change investment are coincidentally near the end of the month? None. Fiduciary responsibility will take a back seat to increased commissions every time.

Check the calendar next time you get the call and beware!

June 29, 2012

Why Your Financial Guy Won't Sell Your Bonds

With current yields on bonds at record lows which translates to record high prices for bonds, you are probably wondering why not sell and take a profit?  Why your financial guy won't sell your bonds?

Let me tell you why.  Bottom line is that most stockbrokers or financial advisors get paid via fees nowadays as opposed to commissions.  They get paid for money that is invested.  If they sell your bonds and go to cash, then they do not get paid at all.
the bond bubble of 2012 is about to burst!

Cash on your stockbrokers books is useless to them which is why you are arm twisted to be fully invested all the time, whether it is stocks or bonds or mutual funds or ETFs or insurance.

Remember that in order to collect the wrap fee, you, the client, must be invested in something and cash does not count, after all, no one is stupid enough to pay a fee for someone to watch their cash!

Do yourself a favor and learn to invest for yourself and by yourself and put the person who cares the most about your money in charge of it - you.

You can start by selling your bonds or bond funds for a profit now, sit on cash and wait for the bubble to burst and then you can buy it all back later when they yielding something more reasonable.

May 8, 2012

Rainy Day Fund

Saving for retirement, like dieting is one of those things easily put off and easily derailed. 

You finally got your stuff together and signed up for your 401k at work or you opened an IRA (individual retirement account) and just started to make contributions, feeling good about yourself when your cars transmission goes out.  Now you have to go to the trouble of stopping or suspending the 401k or IRA contributions to have the money to make the necessary car repairs. 

A week goes by. A month goes by. And another month. Before you know it, you haven't contributed to your retirement account for months. It's a hassle to get those contributions rolling again so you put it off and off and off.

This is the cycle you need to break and now. 

The best long term investment plan can easily be derailed by not having a rainy day fund. A rainy day fund is an amount of money, set aside so that unexpected expenses will be covered without a disruption to your investment plan, so that your on-going contributions stay that way. 

It's hard to invest, especially in the beginning when the gains are slow to accumulate (a lot like dieting and finally seeing some progress). Make sure you have taken all the precautionary steps so that you can expect the most out of your retirement planning. 

First off, contribute only as much as you can easily afford, you don't want to have to stop and start your retirement plan.  Second, make it automatic so that you almost forget about it (like taxes taken out of your paycheck except its hard to forget about that :).

Your rainy day fund should have $1500 - $2000 in it which should bridge most unexpected bills so your retirement funding continues without a hitch. This is not to be confused with an emergency fund which is a larger amount set aside in case you lose your job, etc. 

Put your rainy day fund in a separate bank account, a savings account with no access via credit card or debit card.  Easy access means you will be tempted to spend it (and you know yourself :).  Sure savings accounts aren't paying much at all, less than 1%, that's not the point.

Some people ask why not just save that money in money market / cash within your retirement account and the answer is that should you need it, you do not want to have to pay taxes on the withdrawal. 

So get started on that rainy day fund now! 

April 16, 2012

Insurance Is A Scam

Insurance as a hedge against catastrophe is a good idea.Insurance as an investment is a terrible idea.

Insurance was originally intended to be a risk management technique to hedge against loss. 

Car, health, home and business insurance are all good ideas.  Term life insurance too, that is a hedge against you dying early in life and thus unable to provide for your family.

What is not a good idea, in fact, a terrible idea is buying insurance as an investment.  No one actually buys insurance, they are sold insurance.

Whole life, variable annuity this and fixed annuity that.  Stay away. 

The fees on these products are absolutely mind boggling.  The commissions that we make to sell them to you are equally mind boggling which is why they are so popular with insurance licensed stockbrokers, financial advisors and financial planners.

A financial planner can actually make more in commission for selling you a policy than your first year’s premium.  The reason for the high commission is the higher fee inside and a surrender charge of sometimes 20% before 10 years!

You have to be specially licensed to sell insurance which is why some financial guys push these products and others don't but there is some really sweet commissions in them so watch out!

The commission is so good that when a stockbroker lands a new client, one of the first things he does is scour your current investments for insurance products and you can bet you will be receiving a call for what is called a 1035 exchange. 

A 1035 exchange is very unlikely to be in your best interest.  The 1035 is the insurance form that you will need to sign to allow your financial guy to sell your current policy and buy another in its place; they call it an exchange but its ‘churn and burn’.

Just remember that most insurance is a scam.

March 8, 2012

Bad Investments Cost More Than You Think

I had a client that put well over 100k into a chinchilla farm.  I had another client throw real money to buy Ostrich eggs and had a friend sink money into a 'B' movie.
Of course, I had many clients lose all their money buying into sure things on the pink sheets, OTC bulletin board, private placements and Canadian Venture Exchange.
The commonality is obviously stupidity.  Bad investments cost you more than you think.  The monitary cost is hard to measure.
Sure you can look at whatever your investment was and write it off versus gains in another year but its more than that, its what we call opportunity cost which is simply the next best alternative.
For example, say you sank $100,000 into one of the above investing disasters fifteen years ago.  You would have missed out on fifteen years of growth at 'X%'.  Assuming just a measily 2% would be $134,000 today.  At 10%, you'd be missing $417,000 today, not just your original 100k.
So when looking at investments, keep the lost opportunity cost in mind.
Remember that successful investing has as much to do with not losing money as making money!

February 23, 2012

The INVESTING OPINION enewsletter now open to public

Until recently, Scott Barclay's eNewsletter was only available to a select group of former clients but it  is now available to the public.  

The INVESTING OPINION and has been hailed as the best new newsletter having called the top in stocks in October 2007 and the bottom in March 2009.  We told subscribers to sell equities and go to cash in October 2007 and to stay in cash until October 2008 at which time we suggested it was time to start dollar cost averaging back into equities. 

The INVESTING OPINION favors a modified buy and hold strategy (buy and hold with periods holding only cash) and is suitable for investors with considerably assets.  This is not for traders or those looking to get rich quick.  We don't sell investments.  We don't sell insurance.  We don't sell anything!  We don't have an agenda.  Instead, investors will be told;
  • when to buy
  • when to sell
  • when to dollar cost average
  • what percentage in equities and fixed income
ONLY $295 for an entire year of great information!

February 8, 2012

How Spock Would Invest

I'd like to think that Spock would have made a great investor.  Why?

Simply because his unfailing logic would force him to look at the options and make the right choice.

Choice #1 - pay someone else to 'manage' your money and skim 1-2% off the top every year regardless of how they compare to the market averages

Choice #2 - 'manage' your account by trading constantly, making moves based on the daily news, buying into newsletters that claim they have the 'picks' you need to beat the market and/or buying some crazy software for thousands of dollars that can help you beat the market

Choice #3 - dollar cost average buy into a very low fee diversified ETF or mutual fund as often as you can

Spock would have no problem figuring out that the logical choice is #3.  He knows that simple strategy will have his portfolio in the top 10-15% of all investors and will have achieved it without spending valuable time, money or stress.

January 25, 2012

Direct Stock Purchase Plans

Most of the biggest companies are also the best performing stocks.  While I'd rather see small investors dollar cost average into a diversified index fund, there are some people who insist on buying individual stocks and there is one solid advantage, virtually no fees at all.

One very under reported way to accumulate shares of your favorite company, $50 or $100 at a time is through Direct Stock Purchase Plans or DRIP's which is simply buying stock directly from the company itself.  Actually you will be getting the shares through what is called a transfer agent who physically handles stock shares.  No middleman.  No brokerage account.  You get your statement from the company.

DRIP actually stands for dividend reinvestment program which is exactly what happens to your dividends automatically, they buy more shares directly from the company.

This is a great way for investors to avoid the brokerage firms which is why you will never hear this from your stockbroker or financial adviser.

Almost every company in the S&P 500 has a DRIP program, Google for the toll free number, call for shareholder services and get started, you can do it online as well for some.

Let me know if you need some help, money coaching available or send me an email.  Happy to help!

January 9, 2012

War Games - The Only Winning Move Is Not To Play

Did you ever see the movie from the early 80's called War Games?  Great movie about a computer geek who hacks into a government computer to play games and ends up playing the government computer called the WOPR a game called Global Thermonuclear War.

Fast forward to the end of the movie and the computer decides ultimately that the only winning move (in a nuclear war) is not to play.

This is a great analogy to trading the stock market.  The only to way to win this game is not to play.  Period.

Do not listen to someone who tells you that you can trade for a living or increase your returns by trading, by buying this and selling that.  Its a losing proposition.

The only rational and logical approach to the stock market is to invest, that is to buy the indexes, not to trade.

This approach will land you in the top 10% of all participants in the market!