Investors Can't Skip Over Fundamentals & Expect Success

Investors, Without Fundamentals Don't Expect Long-Term Success

                                   by: Brendan Magee

For the better part of 12 years, I have refereed basketball games. I have and continue to enjoy being around the game and the kids. I ref at the high school varsity level as well as the little kids just starting out. One thing that often catches my attention is that coaches, coach the little kids in the same way that you would expect to see college players coached. They draw up elaborate plays to score points. They design sophisticated defensive schemes to stop the other team from scoring.

Little to no time is spent on helping the players develop fundamentals like passing and catching the basketball. As a result well designed scoring plays get sidetracked by a kid who is unable to catch a ball. That well designed play becomes a pile of 10 bodies scrambling on the floor trying to gain control of the basketball.

Because the skill in catching and passing the ball is never given the attention it deserves, the scene of a player mishandling the basketball and players diving over one another to secure the  ball is  often seen at the high school varsity level. Countless times it happens at both boys and girls games. The truth is, there just isn't enough time given to helping kids learn and master the fundamentals of the game. As a result, they never realize their potential and can't figure out why they are not the player they expected to be.

The same thing happens to investors. Investors start out with the intentions of having their money grow and attain peace of mind for themselves and their family, but history is showing they are falling well short of their expectations. According to Dalbar Inc., for the 20 year period ending 2012, stock investors annualized returns were on average 4.25% while U.S. Large Company Stocks did an annualized 8.21%. Starting with a $100,000 investment that means over that 20 year period of time the average investor underperformed the market by $187,361. That's the average investor. The below average investor faired much worse.

  Bond investors did worse. Annualized they did 0.98% vs. the Barclays Bond Index which did 6.34%. Who needs fundamentals when you can just start investing, right? The answer is,  investors need them desperately. History is clearly showing that without them investors will not come any where close to accumulating the money they need to achieve financial security. The cost of living in that time rose 2.43%. This scenario doesn't scream wealth and abundance, it screams scarcity and sacrifice.

So what are the fundamentals investors are stepping over? There is a complete lack of understanding as to how the stock market actually works and where returns are coming from. As a result, they are easily deceived and fleeced by brokers and planners more interested in serving their agendas not the investor. Can you say Bernie Madoff or Allen Stanford? There is no attention paid to the purpose for which people are investing. There is no time given to truly understand what people are investing for. As a result there is not an investor driven agenda as to how they are going to use their time energy and money to transform their lives, impact the lives of the people they care about, and the causes they are most passionate about. How or why would anyone start doing something without truly understanding what you are out to achieve first? As a result, investors follow a pattern of doing what feels good or makes sense in the moment, but isn't consistent with fulfilling their true purpose for money. They are following a path of self sabotage.

Now when a basketball game doesn't go the way the coach or players believe it should have who gets blamed? The ref is a convenient excuse. When investors aren't achieving the results they thought they should who gets blamed? Wall Street, the President, Capitalism, to name a few. There is power in seeing where you have not been responsible, seeing that you had as much to do with your  results as anything or anyone, and committing to never let it happen again in the same fashion. Now when the investor or investment industry doesn't allow the time for this responsibility to take root and be acknowledged, the investor is robbed of their power. Authority over how their investments will be directed is handed over to someone else, and that someone else doesn't care nearly as much about the results as the investor themselves.

So take the time to focus in on and master the fundamentals of investing. In time you will see it was priceless.


Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments, call 610-446-4322 or e-mail Brendan@coachgee.com.

Philly Eagles & Investors Need To Protect Their Blind Side

Blind Side Hits Do The Most Damage

                                                             by: Brendan Magee

 

 

Seeming  as how the professional baseball season is, but for all purposes, done in Philadelphia, I paid a little more attention to the Eagles' offseason practices. I wanted to hear how the daft choices looked, I wanted to hear about the drama surrounding Desean Jackson's release, and I wanted to see if Chip Kelley looked like he really had the team headed in the right direction.

 

For over a week, I watched the interviews of Nick Foles, the starting quarterback, and Lesean Mc Coy, the starting running back. Most fans and insiders seem to believe that the team's fate for the upcoming season rests primarily in their hands. There was one player not interviewed that I do not know most fans would say the team's fate lies with,  and that is their starting left offensive tackle, Jason Peters.

The fans might not realize it, but the Eagles and Nick Foles understand full well his value to the team. This is backed up by the four year $41 million dollar contract that includes a $5 million dollar signing bonus they gave to Peters 

 

See most fans see the quarterback as the most important player. They are usually the highest paid player on the team and associated the most with the team's success or failure. A team has a lot riding on and invested in their starting quarterback. What fan's fail to realize is that the left tackle's primary job is protecting the quarterback's blind side. What a right handed quarterback, looking down field to pass the ball can't see, is the defensive tackle or linebacker coming from his left side who is ready to break him in little pieces. Their job is to pound the daylights out of the quarterback.

Most teams realize that if their starting quarterback gets hurt for an extended period of time, their season is for all intensive purposes over. The defenders the quarterback can see can be avoided or they can throw the ball away to avoid the hit. Blind side hits give the quarterback no way to get out of the way and live to play another day. Hence, the most important player on the team is arguably  Jason Peter, given how vital he is to the team's success.

 

Another thing to realize is that teams have eyes every where. They have coaches on the sidelines, up in the coach's box in the top of the stadium, etc. They realize, what they can't see is going to do the most damage. Unfortunately, this same respect for the blind side is not often enough shared by investors, and the problems they cannot see are the ones that do the most damage. They in just about every case cause damage  that is irreversible.

 

They spend an awful lot time going over pie charts that represent their portfolio's holdings, they spend a lot of time and are given a lot of opinions on where the market is going to go next, or looking for the next brilliant money manager. There is no attention paid to the blind side. Their is no attention paid to being able to spot the next Bernie Madoff, no attention paid to making sure they understand the difference between gambling and speculation vs. prudent investing, nor is their any attention paid to making sure out of control emotions or biases don't have them making decisions that ultimately sabotage their financial security.

 

So why is there no attention paid to an investor's blind side? The answer is pretty simple. If the Giants can hide where their blitz is coming from they can cream the Eagle's quarterback which would make it easier for them to ultimately win the championship and their players can get big fat profitable new contracts. If an investor can't see a scam coming, or spot investment advice that will make the brokers rich at their expense, the brokers win, not the investor.

 

So how do you begin to become aware of your investing blind spots and undo the damage being done? You do it with the right questions. You need to ask very specific questions and work with someone who will work with you until you see the answer clear as a bell. This does not get accomplished with the sale of an investment product. It gets done through coaching, much like the coaching the Eagles players get from their coaching staff.

 

How does the market work? Where do an investor's returns really come from reveals a misconception and all the misguided actions that go along with this blind spot. Can you calculate all the costs you are being charged to have your portfolio managed? Will reveal a blind spot that has you paying good money for a service that has no value and plug that leak in  your portfolio. These are just a few of the questions that we will call Your Investing Blind Spot Checklist.

 

Lastly, here's what you should know about a blind spot. You will come face to face with your blind spot, find out how much damage it's doing to you, eliminate it and grow stronger as a result of being more aware, or someone will use it unmercifully to further their financial well being at your expense.  

 

Brendan Magee is the president and founder of Inevitable Wealth Coaching. With questions or comments call 610-446-4322 or e-mail Brendan@coachgee.com.

 

 

 

403b Participants Getting Short End Of Stick

403b Plan Participants Taking A Backseat To 401k Plan Participants

by: Brendan Magee

I met with two employees of a local school district after each had expressed dissatisfaction about the returns of their retirement plans. They are both participating in their school district's 403b plan, a nonprofit employee's version of a 401k plan.

Last year was a great year for the stock market. U.S. Large Company stocks were up 32.33%. Carol's 403b plan returned .0030%. That is 30% of one percent for the year. Worse then that she paid in investment expenses, 1.25%. She is paying more in expenses than she earned! Steven has been a participant for the last eight years. From 2006 through the summer of 2013 he earned just 2.35%, while in that period of time U.S. Large company stocks earned 7.58%. His investment expenses were over three percent per year. Steven's returns not only didn't keep pace with the rising cost of living, he is slowly but surely working his way into the poor house with oppressive expenses.

Now even though Carol and Steven have had investment representatives that enrolled them in the school district's 403b plan, neither had a clue about how bad their investments were really doing. They never heard from them after they signed up. Now, their experience is not the exception. after talking to many 403b plan participant's it seems to be the routine experience for countless 403b plan participants.

What most 403b plan participants do not realize is that when it comes to a Non-Erisa 403b plan, they are completely on their own. If their investments go bad, unlike a 401k plan, there is no one they can hold accountable. In a 401k plan, the plan sponsor has a fiduciary responsibility to the participants and the beneficiaries of participant. Often times to alleviate some of the liability, 401k plan sponsors will hire investment advisors who are also operating under a fiduciary responsibility. This means that if a 401k plan participants investments do not work out and they can prove that the sponsor and advisor did not live up to their fiduciary responsibilities, they can be held personally liable to the participant and their families.

One of the biggest requirements of a sponsor of a 401k plan is to monitor the plan. For the sponsor of the plan this means having an idea about investment expenses, returns, what types of educational material is being put in the hands of the participants, reviewing the results of the investments being offered to the participants, and making sure the plan's performance is meeting certain benchmarks.


 No such protection exists for employees who are making payroll deposits into a Non-Erisa 403b plan. The benefits manger or whoever has the responsibility for choosing the vendors for the plan does not have the responsibility of monitoring the plan. The vendors are free to approach the employees however they see fit and convince them that theirs are the right investment products for that employee. Unless properly educated before hand the, the employee is completely at the mercy of the vendor. Public school 403b plans and a few others fall into the Non-Erisa category.

So what does this mean to the Non-Erisa 403b participant? They have no right to hold the benefits manger or business manager responsible for anything. They could, unknowingly, be sold underperforming, over priced, completely unsuitable investments that do not keep pace with the rising cost of living and not have the right to hold anyone but themselves responsible. They can't even hold the company rep who sold them the products responsible, if they signed forms that they agreed the investment was suitable to their circumstances. They also could wave their right to take a rogue salesman into court if they signed an arbitration agreement which basically means you have agreed to waive your right to a trial which would be decided by a jury of your peers. (Before financial services companies will open the account they require their reps to have these forms signed)

It's unfortunate, but without that liability hanging over their necks, a lot of school district benefits managers and business managers do not have the motivation to stay on top of their 403b plans. They take the out of sight, out of mind approach and try to leave well enough (or substandard to dismal investment options) alone.

In this school district's case, when Steven, Carol, and a few other employees found investment options that were less expensive and performed more to their liking, the business manager told the employees they already had nine other vendors to choose from. He wasn't about to add a vendor or even listen to their side of the story. He had no idea, or didn't care to know,  that the other vendors that were available were just as expensive and performed just as miserably as the ones the employees already had.

This would not be the case for 401k plan participants. They would have the right to contact the Department of Labor and plead their case. They could initiate an audit of their 401k plan. The plan sponsor is never out from under their fiduciary responsibilities.

Unfortunately, for some reason when it comes to employees of a public school districts, their retirement, their income, and the securities they invest in through the school district's plan, they do not deserve the same kind of protection.


Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions call 610-446-4322 or e-mail Brendan@coachgee.com.

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The Wall Street Bullies Better Not Mess

With These Wall Street Warriors

 

 

 

 

 

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Pelosi's Words Haunt Investors Too

Pelosi's Quote Haunts Investors Too

                         by: Brendan Magee

As the media coverage of the Obama Care Rollout intensifies we hear time and time again the famous quotes the President and Former Speaker of the House, Nancy Pelosi used in trying to get the Affordable Care Act passed. Speaker Pelosi's famous quote, "We'll just have to pass it before we can find out what's in the bill," will be played for years to come. It's probably going to haunt her come election time.  Basically, the country was left pretty much in the dark about  one of the biggest pieces of legislation in its history. A lot of people were and still are scared and nervous by not knowing what impact the law would have on theirs and their family's lives. It doesn't get too much more serious than a person's health insurance.

I think you'd agree that a person's investments are a pretty important subject as well. Investors like to have as much certainty and confidence as possible. I think a big reason a lot of people are walking around on egg shells is because they have money invested in the stock market, but have no idea how the stock market really works. By that I mean, they don't know where the returns are coming from or where they are not coming from. From the moment their money is deposited into a brokerage account they have little to know control over their success or failure. How do they know they have gotten the whole truth before they've invested their money? Unfortunately, too many people can't say for sure they have the truth on their side. It's like they are at the mercy of the all knowing, all powerful, but never seen stock market god. You never know what tomorrow is going to bring.

There are thousands upon thousands of advertisements about where people should be investing their money. There are tons of statistics about the analysts having been right so many times in the past, and it is difficult to know who to believe. Ultimately, an investor is left to make a decision that they hope will be the right one, but also will do the least amount of damage to their portfolio and dreams for retirement. How exciting is that?

To remedy the nerves and anxieties an investor feels, amongst the first questions an investor has to ask and answer honestly is, "Do you know how the market really works? By that I mean, do you understand where the returns are coming from and where they are not coming from? Do you know for certain that you have invested your money in such a way that your are taking full advantage of where and how to capture additional rates of return that the market delivers and you will need to meet your investment goals?  If your answer is anything less than a 100% yes, stop everything and get the answer to that question. Answering it will tell you some very important things, Amongst which are:

-Is my money invested properly for my circumstances and goals?
-Am I with the right advisor?
-Did I fall for a story that sounded good in the moment, but really isn't sound at all?
-How much risk am I really taking?
-Am I in a portfolio that is designed to give me the long-term returns I need?

I know how much anxiety investing your money in the market without the answers to these questions can produce, but just for a second take a minute to think about how much peace of mind you'd have about your investments if you actually had the answers to these questions? You'd have complete control over your investments. No one could get a fast story past you and talk you into investing money in a way that you knew was inconsistent with your goals.

Compare that with state of mind for a good portion of the country. Run away premiums, losing coverage, no clear place to turn to replace the coverage they are losing, and very little faith in the words our leaders are using to try and calm your nerves and regain their credibility. Who knows if the country would be in such turmoil if its citizens had an idea ahead of time what the impact Obamacare could bring? Maybe it wouldn't have passed in the first place. Maybe it still might have passed.  It would still be hard to find out that your health insurance had been cancelled, but it might not come as a complete shock if the President had said that if this law gets passed, you could lose your coverage and be face with considerably higher premiums.  Again, it wouldn't be pleasant, but at least it wouldn't come as a complete surprise.

Your health insurance situation may be out of your hands, but when you ask the right questions, your investments and the peace of mind you experience from them are completely in your hands. Would you want it any other way?

Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments call 610-446-4322 or email Brendan@coachgee.com.

Pelosi's Quote Haunts Investors Too!

Pelosi's Quote Haunts Investors Too

                         by: Brendan Magee

As the media coverage of the Obama Care Rollout intensifies we hear time and time again the famous quotes the President and Former Speaker of the House, Nancy Pelosi used in trying to get the Affordable Care Act passed. Speaker Pelosi's famous quote, "We'll just have to pass it before we can find out what's in the bill," will be played for years to come. It's probably going to haunt her come election time.  Basically, the country was left pretty much in the dark about  one of the biggest pieces of legislation in its history. A lot of people were and still are scared and nervous by not knowing what impact the law would have on theirs and their family's lives. It doesn't get too much more serious than a person's health insurance.

I think you'd agree that a person's investments are a pretty important subject as well. Investors like to have as much certainty and confidence as possible. I think a big reason a lot of people are walking around on egg shells is because they have money invested in the stock market, but have no idea how the stock market really works. By that I mean, they don't know where the returns are coming from or where they are not coming from. From the moment their money is deposited into a brokerage account they have little to know control over their success or failure. How do they know they have gotten the whole truth before they've invested their money? Unfortunately, too many people can't say for sure they have the truth on their side. It's like they are at the mercy of the all knowing, all powerful, but never seen stock market god. You never know what tomorrow is going to bring.

There are thousands upon thousands of advertisements about where people should be investing their money. There are tons of statistics about the analysts having been right so many times in the past, and it is difficult to know who to believe. Ultimately, an investor is left to make a decision that they hope will be the right one, but also will do the least amount of damage to their portfolio and dreams for retirement. How exciting is that?

To remedy the nerves and anxieties an investor feels, amongst the first questions an investor has to ask and answer honestly is, "Do you know how the market really works? By that I mean, do you understand where the returns are coming from and where they are not coming from? Do you know for certain that you have invested your money in such a way that your are taking full advantage of where and how to capture additional rates of return that the market delivers and you will need to meet your investment goals?  If your answer is anything less than a 100% yes, stop everything and get the answer to that question. Answering it will tell you some very important things, Amongst which are:

-Is my money invested properly for my circumstances and goals?
-Am I with the right advisor?
-Did I fall for a story that sounded good in the moment, but really isn't sound at all?
-How much risk am I really taking?
-Am I in a portfolio that is designed to give me the long-term returns I need?

I know how much anxiety investing your money in the market without the answers to these questions can produce, but just for a second take a minute to think about how much peace of mind you'd have about your investments if you actually had the answers to these questions? You'd have complete control over your investments. No one could get a fast story past you and talk you into investing money in a way that you knew was inconsistent with your goals.

Compare that with state of mind for a good portion of the country. Run away premiums, losing coverage, no clear place to turn to replace the coverage they are losing, and very little faith in the words our leaders are using to try and calm your nerves and regain their credibility. Who knows if the country would be in such turmoil if its citizens had an idea ahead of time what the impact Obamacare could bring? Maybe it wouldn't have passed in the first place. Maybe it still might have passed.  It would still be hard to find out that your health insurance had been cancelled, but it might not come as a complete shock if the President had said that if this law gets passed, you could lose your coverage and be face with considerably higher premiums.  Again, it wouldn't be pleasant, but at least it wouldn't come as a complete surprise.

Your health insurance situation may be out of your hands, but when you ask the right questions, your investments and the peace of mind you experience from them are completely in your hands. Would you want it any other way?

Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments call 610-446-4322 or email Brendan@coachgee.com.

Pelosi's Quote Haunts Investors Too

Pelosi's Quote Haunts Investors Too

                         by: Brendan Magee

As the media coverage of the Obamacare Rollout intensifies we hear time and time again the famous quotes the President and Former Speaker of the House, Nancy Pelosi used in trying to get the Affordable Care Act passed. Speaker Pelosi's famous quote, "We'll just have to pass it before we can find out what's in the bill," will be played for years to come. It's probably going to haunt her come election time.  Basically, the country was left pretty much in the dark about  one of the biggest pieces of legislation in its history. A lot of people were and still are scared and nervous by not knowing what impact the law would have on theirs and their family's lives. It doesn't get too much more serious than a person's health insurance.

I think you'd agree that a person's investments are a pretty important subject as well. Investors like to have as much certainty and confidence as possible. I think a big reason a lot of people are walking around on egg shells is because they have money invested in the stock market, but have no idea how the stock market really works. By that I mean, they don't know where the returns are coming from or where they are not coming from. From the moment their money is deposited into a brokerage account they have little to know control over their success or failure. How do they know they have gotten the whole truth before they've invested their money? Unfortunately, too many people can't say for sure they have the truth on their side. It's like they are at the mercy of the all knowing, all powerful, but never seen stock market god. You never know what tomorrow is going to bring.

There are thousands upon thousands of advertisements about where people should be investing their money. There are tons of statistics about the analysts having been right so many times in the past, and it is difficult to know who to believe. Ultimately, an investor is left to make a decision that they hope will be the right one, but also will do the least amount of damage to their portfolio and dreams for retirement. How exciting is that?

To remedy the nerves and anxieties an investor feels, amongst the first questions an investor has to ask and answer honestly is, "Do you know how the market really works? By that I mean, do you understand where the returns are coming from and where they are not coming from? Do you know for certain that you have invested your money in such a way that your are taking full advantage of where and how to capture additional rates of return that the market delivers and you will need to meet your investment goals?  If your answer is anything less than a 100% yes, stop everything and get the answer to that question. Answering it will tell you some very important things, Amongst which are:

-Is my money invested properly for my circumstances and goals?
-Am I with the right advisor?
-Did I fall for a story that sounded good in the moment, but really isn't sound at all?
-How much risk am I really taking?
-Am I in a portfolio that is designed to give me the long-term returns I need?

I know how much anxiety investing your money in the market without the answers to these questions can produce, but just for a second take a minute to think about how much peace of mind you'd have about your investments if you actually had the answers to these questions? You'd have complete control over your investments. No one could get a fast story past you and talk you into investing money in a way that you knew was inconsistent with your goals.

Compare that with state of mind for a good portion of the country. Run away premiums, losing coverage, no clear place to turn to replace the coverage they are losing, and very little faith in the words our leaders are using to try and calm your nerves and regain their credibility. Who knows if the country would be in such turmoil if its citizens had an idea ahead of time what the impact Obamacare could bring? Maybe it wouldn't have passed in the first place. Maybe it still might have passed.  It would still be hard to find out that your health insurance had been cancelled, but it might not come as a complete shock if the President had said that if this law gets passed, you could lose your coverage and be face with considerably higher premiums.  Again, it wouldn't be pleasant, but at least it wouldn't come as a complete surprise.

Your health insurance situation may be out of your hands, but when you ask the right questions, your investments and the peace of mind you experience from them are completely in your hands. Would you want it any other way?

Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments call 610-446-4322 or email Brendan@coachgee.com.