July 1, 2013

JP Morgan stock picks versus the market - 6 month update

OK, at the end of last year, JP Morgan gave us their stock picks for 2013.  I wanted to see how they'd stack up against the market.  Here are the results for the first six months of 2013.
I've been curious if the so called professionals were any better than the market in general.
I figured the fairest way to do this was to pretend to buy their stock picks on January2 during the day, an average price and then compare it to a few broad based ETF's (exchange traded funds).  The original article is here.

The closing prices for JP Morgan picks at the close of June28 below.
BA $102.44
BAC $12.86
COF $62.81
MCD $99.00
V $182.71
AAPL $396.53
EBAY $51.72
WFM $51.48 (after a 2-1 split)
SBUX $65.51
TGT $68.86

The closing prices for the ETF's are below.
VTI $82.70
SCHB $38.91

The bottom line is that the JP Morgan picks (without dividends) averaged a nice 9.3% gain.  That's pretty good and you'd probably pat your broker on the back, six months, not bad.  BUT WAIT.  If you bought the broad based ETF's, you'd have averaged 10.9% (without dividends).

Most likely you would have paid commission to your stockbroker or a flat fee to your financial advisor for those picks which would have lowered your returns.  To be fair, you would have paid a transaction fee to buy the ETF's as well but it would have been considerably less.

Once again, as I've always said, with all due respect, your stockbroker or financial advisor has proven here they provide little in the way of value to an investor and that you should have the person who cares the most about your money handling it - YOU !!!

April 30, 2013

Retirement Planning Is Useless

We all know the saying, rather be lucky than good.  Well, that saying is never more true than when looking at retirement.  As a former stockbroker / financial planner, I hate to admit it but a lot of retirement is luck.  Saving for retirement is extremely important BUT planning is not.  

You can easily see what I mean.  Imagine two people with basically the same incomes (adjusted for inflation) and one person retires in 1980 and parks the bulk of their retirement money in safe CD's paying 15%!  Now that is good timing but is really just plain luck, not planning.

Imagine a second guy who retired just a few years ago, in 2008, ouch, first off, he likely lost some of his retirement money in his 401k or IRA and then had the unfortunate timing to choose between a stock market that is pretty darn scary or a CD or other fixed income paying virtually nothing.  This is also luck, bad luck, but again, has nothing to do with planning.

The point is that while retirement planning is fine idea and looks good on paper, its really a useless exercise with little value.  Financial planning is propagated by the investerati to keep your assets under their control and is a multi-billion dollar industry based on nothing!

A better idea is to be fiscally prudent (buy what you can afford), save what you can when you can (set a goal of 10%-15%), don't stress too much about retirement and when it comes time to retire, then and only then can you truly plan.

Planning when retired (or within a year at most) is infinitely more accurate, you will know what assets you have, what liabilities you have and can adjust your lifestyle to match, its that simple.  In my book,  How The Investment Business REALLY Works, I offer a worksheet in the back of the book that will walk you through the simple steps to what I call Realistic Retirement but you can see a free version here.

February 28, 2013

You Need To Be Invested For Your Financial Guy To Get Paid

The way the brokerage business is set up now is not necessarily great for the individual investor.  

The reason is the way stockbrokers, financial advisors, etc get paid.  Unfortunately, the way it works now is that your financial guy gets paid in two ways;
  • buying and selling in your account (commissions)
  • as a percentage of your total assets (fees)
Neither is good for you, let me explain.

If you go the commission route, to be sure, there is a conflict of interest.  You can never be sure that when you get a call to buy or sell or move investments that it's in your best interest!

If you go the fee route (which is increasingly common), then your financial guy gets paid a percentage (usually 1-2%) of your invested assets.  That is a huge problem which is very under reported.  Bottom line is that your money has to be invested for him to collect a fee.  Do you think he'll ever call you to say its time to be conservative and go to cash?

So if you have ever wondered why you don't get a call to go to cash when times are tough, 2007 for example, now you know.  It is simply not in your financial guys best interest for you to be in cash!

January 2, 2013

JP Morgan Individual Stock Picks Versus The Market

Watching CNBC on the last trading day of 2012 and they showed JP Morgan 2013 stock picks.  I couldn't help but think that this list looks alot like buying the entire market so here are their picks along with prices the morning of 1/2/2013.  So often we see analyst individual stocks picks before the market opens when a stock reported great news.  This creates a fake price which no one could have got so here are the real prices after the market opened as if you were buying them and compared with a few market based ETF's.
Boeing (BA) - 76.93
Bank of America (BAC) - 11.96
Capital One (COF) - 60.05
McDonalds (MCD) - 90.21
Visa (V) - 155.71
Apple (AAPL) - 547.76
Ebay (EBAY) - 52.28
Whole Foods (WFM) - 92.42
Starbucks - (SBUX) - 54.51
Target (TGT) - 58.34
Vanguard Total Market (VTI) - 74.65
Schwab Market (SCHB) - 35.04

I've said it before and I'll say it again, you can do many things to increase your ability to invest well but #1 is to invest on your own.  Keep up with this post, I will monitor and provide updates below.