I Was Trained To Be The Problem

Investor Expectations

Questions Investors Need Answered

The Big Risk Margaret Couldn't See!!

Funny Stuff!!

Who's Smarter Vanguard or Fidelity Investors?

Is it investment or investor performance that counts?

Who's Smarter--Vanguard or Fidelity Investors?

Morningstar Investor Returns reveal who has earned better returns in this decade.I found this little exercise, by Morningstar, noted by the headline above, to be quite interesting.

We like to teach that the key to long-term investor success is not investment performance, but investor performance! The single biggest detriment to investor performance is the malady called: "chasing returns." In other words, looking at past performance (usually very short term) and looking to place one's funds with the hottest manager or stock in the hopes of their or its continuing it's hot run.

“Of course, the pre-cursor to this is leaving a supposedly poor performing investment and / or manager for the "new star" in the firmament! This cycle oft repeats when the current high flyer crashes back to earth, along with the late investors' portfolio -- at which time the investor now goes looking for the latest star!Everyone knows how to make money in the markets: buy low and sell high. The foregoing is the exact opposite and is what most investors actually do (investor performance), which is to buy high and sell low (the last eighteen months and, in particular, since the first of this year, provide ample evidence of this phenomenon).

Back to the Morningstar story. So who had the "better" returns? According to my benchmark, neither one really. Vanguard, the supposed winner, had its investors earn, over the last ten years, the paltry amount of 2.63% while the Fidelity investors earned 1.52%. What is particularly interesting is that the asset weighted returns for the two firms were actually much closer than the investor returns, which isn't really surprising since investor behavior is eliminated from that calculation.

My decision regarding who's the smartest group, is: neither!The lesson here, as most of my readers well know, is that it is always what it is that the investor does and how the investor controls his/her emotions rather than how any underlying investments do. Appropriate diversification matched with imposed, disciplined rebalancing that forces a portfolio to always be buying low and selling high and not chasing returns is the sure and simple way to long-term investment success!

Thanks to Fred Taylor

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Is it investment or investor performance that counts?

Who's Smarter--Vanguard or Fidelity Investors?

Morningstar Investor Returns reveal who has earned better returns in this decade.Ifound this little exercise, by morningstar, noted by the headline above, to be quite interesting. We like to teach that the key to long-term investor success is not investment performance, but investor performance!

The single biggest detriment to investor performance is the malady called: "chasing returns." in other words, looking at past performance (usually very short term) and looking to place one's funds with the hottest manager or stock in the hopes of their or it's continuing it's hot run. Of course, the pre-cursor to this is leaving a supposedly poor performing investment and / or manager for the "new star" in the firmament!

This cycle oft repeats when the current high flyer crashes back to earth, along with the late investors' portfolio -- at which time the investor now goes looking for the latest star!Everyone knows how to make money in the markets: buy low and sell high. The foregoing is the exact opposite and is what most investors actually do (investor performance), which is to buy high and sell low (the last eighteen months and, in particular, since the first of this year, provide ample evidence of this phenomenon).

Back to the morningstar story. So who had the "better" returns? according to my benchmark, neither one really. Vanguard, the supposed winner, had it's investors earn, over the last ten years, the paltry amount of 2.63% while the Fidelity investors earned 1.52%. What is particularly interesting is that the asset weighted returns for the two firms were actually much closer than the investor returns, which isn't really surprising since investor behavior is eliminated from that calculation.

My decision regarding who's the smartest group, is: neither -- they're both dumb groups!The lesson here, as most of my readers well know, is that it is always what it is that the investor does and how the investor controls his/her emotions rather than how any underlying investments do. Appropriate diversification matched with imposed, disciplined rebalancing that forces a portfolio to always be buying low and selling high and not chasing returns is the sure and simple way to long-term investment success!

Thanks to fred taylor for sharing this article

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The article below does one of the best jobs in defining the role of an investor coach.
Please feel free to share this with your friends. If they do not have this kind of relationship, please have them give us a call.
Thanks Fred.

August 2009
The Seven Faces of Advice
Jim Parker, Regional Director, Australia Limited

The global financial crisis and a series of recent scandals have turned a critical light on much of the investment industry and led to public questions about the role and value of financial advisors.

Against the backdrop of the worst market downturn in decades, many advisors report that they have struggled to enunciate their value proposition.

For those whose perceived their value to their clients as an ability to deliver positive investment returns year after year, irrespective of the state of markets, this existential crisis is understandable.

And for those who sell their expertise as consistently accurate forecasters, the self-doubts may have been even more corrosive.

But there is another group who understand that the value they bring is not dependent on the state of markets. Indeed, their value can be even more evident when markets are down and fear is running high.

The best of these advisors play multiple and nuanced roles with their clients, depending on the stage of the relationship, and are amply rewarded for the manifest skills they bring to the table.

While some may quibble over the exact characterisation, broadly these functions break down to seven important roles that evolve over time:

The expert: Now, more than ever, investors need advisors who can provide client-centred expertise in assessing the state of their finances and developing risk-aware strategies to help them meet their goals.

The independent voice: The global financial turmoil of the past two years has demonstrated the value of an independent and objective voice in a world full of product pushers and salespeople.

The listener: The emotions triggered by financial upheaval are real. A good advisor will listen to client's fears, tease out the issues driving those feelings and provide practical long-term answers.

The teacher: Getting clients beyond the fear-and-flight phase often is just a matter of teaching them about risk and return, the power of diversification, the importance of asset allocation and the virtue of discipline.

The architect: Once these lessons are understood, the advisor becomes an architect, helping clients to build a long-term wealth management strategy that caters to their own risk appetites and lifetime goals.

The coach: Even when the strategy is in place, doubts and fears will inevitably arise in the client's mind. The advisor at this point becomes a coach, reinforcing first principles and keeping the client on track.

The guardian: Beyond these early experiences is a long-term role for the advisor as a kind of lighthouse keeper or guardian, scanning the horizon for issues that may affect the client and keeping them informed.

These are the seven faces of advice and, when properly applied, become testimony to the fact that the value of a good financial advisor extends well beyond the writing of a simple financial plan.

A prospective client may first seek out an advisor purely because of their role as an expert. But once those credentials are established, the main value of the advisor in the client's eyes may be their role as an independent voice.

Knowing the advisor is truly independent — and not a product salesperson — leads the client to trust the advisor as a listener or sounding board, as someone to whom they can unburden their greatest fears.

From this point, the listener can become the teacher, the architect, the coach and ultimately the guardian. These are all valuable roles in their own right and none is dependent on forces outside the control of the advisor, such as the state of the investment markets.

However you characterise these various roles, good financial advice ultimately is defined by the patient building of a long-term relationship founded on the values of trust and independence and knowledge and the recognition of our common humanity.

Now, how can you put a price on that?




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Inevitable Wealth Coaching
Brendan Magee
610-446-4322

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Taming Portfolio Risk

SNL/ A little truth about investing

Baby Boomer Women Only $10,000

1340am WHAT Spot- Can't Afford To Assume

A Conversation With Mark Matson, Abundance CEO

Six Of Ten Investor Commandments

Why Your Fund Manager Can't

The Bottom Line Doesn't Tell The Whole Story!

Inflation, The Silent Killer Of Your Retirement!

Why We Diversify!!

Have You Defined Your Investment Philosophy?

Are You Skating To Where The Puck Was?

Mutual Fund Industry's Lemon List

For those who may have been exposed to the investing equivalent of the swine flu!!!
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Fidelity funds land on Lemon List
Four of the top 10 mutual funds cited belong to the Boston-based firm

By Sue Asci April 28, 2009

Four out of the top 10 largest mutual funds on Doug Fabian’s Lemon List for the first quarter were from Fidelity Investments.

The list, released yesterday, includes 2,335 mutual funds with assets of $718 billion that are considered lemons by Mr. Fabian, president of Fabian Wealth Strategies of Costa Mesa, Calif., and editor of the Making Money Alert and Successful Investing newsletters.

To make the list, a fund must underperform its peer group average by assets for the last 12 months and for the last three- and five-year periods.

The benchmarks are based on data and peer group definitions from New York-based Lipper Inc., according to Mr. Fabian.

“It’s three strikes, and you’re on,” he said. “The first quarter saw a little bit of recovery. There were 200 [fewer] funds on the list, compared to the end of 2008.”
More than 30% of the funds, or 730, had negative annualized returns over the past 10 years, the study found.

Topping the list was the $25.3 billion Dodge & Cox Stock Fund (DODGX), offered by San Francisco-based Dodge & Cox. The fund lost 45.2% over one year, 18.36% for the three-year period and 6.58% for the five-year period.

The Fidelity funds that made the top 10 were: $15 billion Fidelity Magellan Fund (FMAGX), $12.7 billion Fidelity Equity-Income Fund (FEQIX), $8.9 billion Fidelity Freedom 2010 Fund (FFCX) and the $8.5 billion Fidelity Investment Grade Bond Fund (FBNDX).

"We take a long-term approach to investing," said Fidelity spokesman Alexi Maravel.
"Our goals have always been to provide shareholders with very competitive performance over the long-term, coupled with below-average expenses. We believe we have accomplished that over time." He pointed out that the Fidelity Magellan Fund had a return of 8.72% year-to-date as of April 27.

Also on the list were: the $22.6 billion American Funds Bond Fund of America (ABNDX), which is advised by Los Angeles-based Capital Research and Management Co.; the $13.4 billion Davis NY Venture Fund (NYVTX), offered by Davis Selected Advisers LP of Tucson, Ariz.; the $12 billion Dodge & Cox Balanced Fund (DODBX); the $9.7 billion T. Rowe Price Equity Income Fund (PRFDX), offered by Baltimore-based T. Rowe Price Group Inc.; and the $8.9 billion Franklin Income Fund (FCISX), offered by Franklin Resources Inc. of San Mateo, Calif.

"Obviously 2008 was a disappointing year and that year has had an impact on our results," said American Funds spokesman Chuck Freadhoff.

"If you look over a longer period of time, a period that includes numerous market cycles, Bond Fund of America has produced an average annual total return of 8.2% which is very respectable. Investors usually invest in bond funds for income. Even in 2008, investors in Bond Fund of America had an income return of 5.9%."

The other funds mentioned were not immediately available for comment.

Investor Pornography In Action

To Be A Successful Investor You Need The Following

Harry Kalas Was Love

Where Your Returns Really Come From

Why Investing Is So Hard!!

Officiate The Defense!!

March Madness/Stock Picking

Before We Trust

The Bid/Ask Spread

Investors' Biggest Risk Factor

Bond Investing Done Wrong!!

How CPA's Decked The Banks

Ponzi Prevention

Funds Adding Insult To Injury

Advisors Kept In The Dark Too...

“I Don’t Understand How This Is Not Diversified!!”
AXA financial advisor, Sept. 5, 2008
A story of the investment industry keeping their brokers in the dark…

I had a trying phone call from a professional acquaintance on Thursday, Sept. 4th, 2008 and I would like to share it with you.

Kathy was frustrated. She had been asking David, their advisor the same questions over and over again without getting an answer. Mike felt David didn’t have the expertise they needed.

Mike and Kathy wanted to know if they were headed in the right direction. So we did an analysis of their portfolio.

What did the analysis tell us? They had no diversification at all. They only had their money in three kinds of investments.
Second their costs in some cases were as high as nine percent, not the one percent David told them about.

In returns, they would be out nearly $8,000,000 if they continued to go down the path David had laid out for them.

The analysis had answered Kathy’s questions and confirmed Mike’s suspicions. They were with the wrong guy.

They had to tell David they were terminating their business relationship.

At that conversation, David wanted to know what they were doing and why. He wanted to make certain his clients and friends weren’t making a bad decision.

He called me and wanted to meet with me in front of his clients to have me explain what he was not seeing. Professionally, I knew he was trying to not lose clients, and I feared a hostile debate. I declined the invitation.

A one on one meeting didn’t seem like a good idea either. Mike and Kathy had already made their decision.

However, we did have a one on one conversation the next day.

Nervously, I asked David a few questions.

I asked him if he understood how brokerage houses managed money. He admitted he did not.

I asked when a mutual fund or annuity traded a stock, to whose advantage was it done for: the investors or the brokerage house’s? He answered the brokerage house.

I asked if an individual could consistently pick the best stocks and stay away from the losers how wealthy they would be? He answered, billions.

I asked, “If an individual could consistently produce returns of 30%, 40%, and even 50%, would they trade that income for a career paying less than one percent as is the case with mutual fund managers? He chose the one making 30%, 40%, and 50%.

David said that he felt speculation was natural by product of how funds produced returns.

When I asked him if anyone could consistently predict the future he said no.

Then we got to diversification

He said he didn’t understand how with a portfolio of real estate, bonds, stocks, etc. how there can be so little diversification.

I asked him if he ever saw what those funds were investing in. He said “no.”

David, just like so many, is a victim of the investment industry. He is caught in the fog.

This episode put some questions in my head. It’s one thing for the Investment Industry to keep the investors in the dark, but, why would they leave their advisors in the dark?

A while back I came to an understanding about the investment industry. The reason they were keeping investors in the dark was because they couldn’t afford to do it any other way.
Now I am coming to the same conclusion about how they train their advisors.

It appears as though there is not enough money in it to properly train their advisors.

It’s a bottom line driven industry, and if it isn’t adding to the investment industry’s bottom line time doesn’t get spent on it.

More than ever I am convinced that in order to get out of this trap investors need to be dealing with an independent coach, and they need to get the answers to the 20 must answer questions for gaining peace of mind.
www.coachgee.com

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