Ferguson Shows Investors The Power Of Unchecked Perspective

Unchecked Perspectives Can Kill A Community And Your American Dream

                                              by: Brendan Magee

I know you might be tired of hearing about Ferguson at this point so please pardon my giving you another dose of it, but I believe for societies and investors there is powerful lesson to be learned that hasn't been brought up yet.

Like everyone, I watched the Ferguson Prosecutor announce that there would not be an indictment of Officer Darrin Wilson. From some peoples' perspective, this was an outrage. This was another example of a young black man being murdered and a lack of justice because of a racist legal system. Hence the, justifiable, looting and burning down of businesses that served their community.

Other people listened and found that the prosecutor meted a just decision given the evidence presented and felt relieved that justice had been served. They deemed the looting as baseless and criminal conduct. Here you have the same announcement met with two very different perspectives and there is untold physical, financial, and emotional damage that can't ever be accurately assessed, but it will be felt for a long time.

Investors often react to their perception of world events, an advertisement for an investment product,  something their advisor said or didn't say which sets of a chain of, what feels like logical and justifiable, actions that ultimately prove to sabotage the investors goals.

Say you get a few negative investment statements, what thoughts start going through your head? Should I stick with this portfolio? Can I trust my advisor? Doesn't my neighbor appear to be doing a lot better with their money then me? These thoughts, plus many others, often lead investors to do the exact wrong thing at the wrong time. Studies reveal that the average investor makes changes to their portfolio within a three year period of time. Investments that are supposed to be held for at least 20 years are dispensed of in less than a quarter of the time. The average investor over the past 20 years has barely kept pace with the rising cost of living and the evidence is that it has a whole lot more to with their behavior than the stock market.

So how does someone protect themselves from their destructive perspectives? The first step is to be humble and recognize that you are susceptible to hiccups in how you take in information. To be human is to be flawed. We all have biases built up over many years of experience. We can be distracted when we are watching  or listening to something. We can easily misinterpret something someone said or the intentions someone had in doing something to us. Based on this, we can easily overreact, underreact, become offended, miss the danger signs or blow someone off. We can easily take ourselves down the wrong path and be totally unaware of it.

So if we accept our limitations, we have no choice but to turn to others for help, a coach if you will. Rather than say "This stinks or he can't be trusted," maybe you turn to your coach and ask, " Did I hear that right? Does this seem right to you?, Am I off base here?" That momentary pause may keep you in investments that will help you to realize your American Dream. That momentary pause may keep you with that investment advisor whose advice or coaching rubbed you the wrong way, but ultimately would  keep you from falling prey to a con man or investment scam.

The final and maybe most difficult part  of this process is trusting someone. When is  handing over control over to someone else easy? I know that it is not my natural tendency, but the reality is that I have gotten myself into enough trouble over the years more times than I care to count or admit. When I have looked back at it, the trouble I endured, inevitably, it had more to do with me than anyone else. So I have no other choice to put some things in other peoples' hands if I want to see different results.

I know Ferguson is not the easiest thing to deal with, especially if that person killed or accused is someone you know and love. However, if the people of Ferguson had owned up to the possibility that as the verdict was announced, they had very little hope of controlling the behaviors that resulted from flawed perspectives, people might still have their businesses and people might be able to listen to the opinions of others without completely invalidating them. It's a lesson that investors would do well to learn from.

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

Want To Know What The Best Future Play Is With Your Investments? So Would I!

Who Really Believes They Can Predict The Future, Reliably

                                                                                        By: Brendan Magee

I was in the car the other day listening to my local talk station and an advertisement came on the air and the announcer asked "Want to know what the future play is for your investments? Then tune into this Saturday's Financial Quarterback Show." As I listened to the announcement I had two thoughts:

1. It would be awfully foolish and arrogant of me to announce to the world that I can reliably, consistently predict the future.

This would be especially true when it comes to stocks and the market because all the knowable and predictable information is already factored into market levels and stock prices. When it comes to prices or markets moving, that comes from unknowable unpredictable events and how people, six billion, around the world react to that new news and information.

I find it hard enough to predict how one person who I have lived with for seven years now is going to react on a day in day out basis. What do you think my odds are of predicting how someone in Hong Kong, Germany, Brazil, or Africa who I have never met is going to react to news and world events that have not even happened yet on a consistent basis?

2. What happens to the people who listen to the show and some how believe that this radio show host has the ability to tell them what to be doing with their money based on a prediction about the future? Somehow they have been led to believe that forecasting and investing are the same thing. They are not. Forecasting and speculation about the future is gambling, not investing. When it comes to gambling, the gambler will eventually lose. Academic paper upon academic paper statistically proves this.

If it weren't gambling, and the show host new exactly what was going to be happening in the market tomorrow and all the days after, he would be so rich he wouldn't have time nor the inclination to share with the the public about his investing insights.   Unfortunately, this is not disclosed to the investor tuning into this radio show.

There are three kinds of people who make predictions about the stock market, those who don't know they don't know, those who know they do not know, and those who know darn well they do not know, but get paid big bucks convincing you they know. In any case, stay away from those making predictions and you and your money will be much better off.

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

Humilty Needed To Get Through Life And Investing

Investing Requires Humility

   By: Brendan Magee

Whether or not you are a fan of the Howard Stern Show Radio Show would have a lot to do with how familiar you are with comedian Artie Lange. He has been amongst the show's cast of characters for about the last 10 years and having been a listener from years gone by I recently picked up and read his book "Too Fat To Fish."

Now at first glance, knowing that Mr. Lange appears on the Stern Show, you you'd think that his book is nothing, but foul mouthed comedy. I can't say that there isn't a few sections that you wouldn't want to read to your kids or mother, but there were also some very interesting life stories that surprised and drew me deeper into the book.

For example, when Mr. Lange turned 18 his father, working as a roofer and t.v antenna repair man, fell of a roof and was permanently paralyzed. He walked around with a painful self-destructive guilt at not being there to hold the latter his father was standing on and prevent the fall. Even though Mr. Lange was experiencing a successful and lucrative career in show business, Mr. Lange has battled life threatening cocaine, alcohol and heroine addictions. Fortunately, he appears to have lived and gotten past his addictions.

Towards the end of the book though and as he has come to grips with his demons, Mr. Lange talks about the catharsis he had in putting his life and career in proper perspective, and it is this revelation that I think investors could learn from. Mr. Lange was ruminating on how his life was teetering from the pressure of producing and starring in a movie, Beer League, his daily Stern Show appearances, and trying to avoid drugs and alcohol that were abundantly available to him that could have meant the death of not only his career, but also his life.

From this time in his life he stated " I couldn't have done it alone, and what I learned most of all is I'm surrounded by people who care about me. I'm lucky that way, and I know not everyone is. I'm the kind of guy who keeps things in, who likes to go it alone, and who doesn't like to ask anyone for help. I like to take care of everything myself, because I think I know best. But this episode in my life changed that pointy of view, because I couldn't bullshit myself anymore.  My way wasn't working. I needed help from people in my life. I had to ask for it. And they were there for me. Sometimes your guardian angels aren't just in Heaven. They're all around you if you know where to look."

This is no doubt an expression of humility and if you read the book it took many a destructive life experience to come to this catharsis. Many investors would do well also to have a breakthrough in humility. Let me first say that humility is not failure. Accepting where you need help and asking for it takes courage and wisdom.

So here is your humility test as an investor. Answer the following question, When it comes to building your portfolio, do you know exactly what you are doing and why? If you can answer that question 100% yes, no need to go any further. However, if your answer is any thing less than that swallow your pride, admit your limitations, and ask for the help you need. Avoid the pain and suffering that goes along with not swallowing your pride. Like Mr. Lange, you'll be amazed at how much simpler and enjoyable your life gets. (By the way, I would suggest reading the whole book)

Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments go to www.cocahgee.com or call 610-446-4322.

What If You Could Play Par Golf EveryTime!

Why Par Should Be Good Enough

For Golfers And Investors

                                                                                                                                                             by: Brendan Magee

Like a lot of people. I tuned into last week's Ryder Cup Golf matches between the United States Golfers and the European Golfers. I love the pride the golfers take in representing their countries and the enthusiasm displayed by the galleries. I am also blown away at how great the golfers are. They hit shots under pressure that I could only dream of pulling off maybe once out of 200 attempts. These players truly are the best in the world.

Now professional golfers keep score and it is always best to be under par. By that I mean,  if the hole they were playing was a par 4 they would want to get the ball in the hole in three shots or less. It is amazing though that often times a match was lost by a player who played a hole over par. Par would have won or produced a tie, and thus in a lot of cases would have been good enough. Par, as it turns out, had a lot more value than the golfer may have realized before they even started their match.

The equivalent of par when it comes to investing is market rates of return. Market rates of return would be what a particular kind of investment has produced over a long period of time. It is the cost entrepreneurs and business owners typically pay to use other peoples money to build and make their businesses more profitable. For example, from 1927 through 2012 the long-term rate of return of U.S. Large Company Stocks was 9.82%. The long-term rate of return of International Small Company Stocks was 14.40%, and for U.S. Micro Cap Stocks was 12.26%.

If you were an investor investing in these kind of stocks and had a rate of return above these asset classes it would be the equivalent of shooting below par and outperforming the course. If you invested in these asset classes and got less than what the asset class produced it would be the equivalent of under performing the course and shooting above par.

Now the overwhelming majority of golfers do not play par golf. U.S.G.A. statistics bear that out. Par on most golf courses means you would be shooting every time you played golf between 70 and 72.  There is a very good reason for that. Golf is a hard game to master. Go to any club and look at the scores of that club's best players and you will not see time in and time out that those players consistently shoot 70 to 72.

Fortunately for investors achieving the equivalent of par golf when it comes to investing is not that difficult at all. In fact it is much simpler than most investors realize. To achieve the rates of return mentioned above only required the investor to own those asset classes in their entirety and hold on to them. Sounds easy, but in the midst of a market meltdown holding and not selling seems like the last thing you would want to do.

However simply enough, those asset classes could be owned in their entirety simply by owning an index representing each category of investment. Those markets of investments would have produced the rates of return without the investor having to do a thing to achieve them. To put that in perspective, over a ten year period of time with a seven percent rate of return your principle doubles itself. The rates of return mentioned above outperform that pace. The overwhelming majority of investors do not come close to market rates of return. Statistics bear that out.

So what does the investor have to do to achieve market rates of return (again, the equivalent of playing par golf every time)? First, recognize how great it would be to achieve market rates of return. They need to recognize that that would put them in the upper echelon of  all investors. They need to recognize that like golfers any strategy designed to outperform the course (shoot below par) will lead to under performance (like it does for most golfers playing bogey golf, it causes investors returns to fall well below what they need to achieve independence and dignity).

A golfer who tries to thread their ball through a thicket of trees in the hopes of getting through that small opening in the forest believing they can save a few strokes if they can just pull this shot off,  usually turns a five into an eight, and an investor who loads up on a stock they believe will achieve instant riches usually endures a loss of capital they never planned for nor can afford.

Secondly, investors need to realize they can be assured of market rates of return simply by owning a particular asset classes index. This means the fund manager will not do anything to try and exceed the market rate of return. Their goal is to match it.

Third, investors need to recognize the signs that they are engaging in activities, or they are allowing their money manger to engage in activities, that are designed to outperform market rates of return and put an immediate stop to it. Stock picking, market timing, and track record investing are the activities that are presented to the investor as the strategies to use to produce stellar/above market rates of return. Their success depends on the money manager's ability to consistently predict the future. Just like the average golfer cannot consistently hook a shot around a tree and get over a pond that is 240 yards away, no one can consistently predict the future.

Make no mistake about it, it's not just being right once that would be good enough to outperform the market, those predictions would have to be right time and time again. No one on this planet has that ability. So make sure you have eliminated any and all gambling and speculation from taking place in your portfolio, and own the index that represents the investments you want to be in and you will be assured  of playing the equivalent of par golf every time out.

As needs to be said, rates of return are not guaranteed and you need to consider all risks before investing.

Brendan Magee is the founder of Inevitable Wealth Coaching. With questions or comments go to www.coachgee.com or call 610-446-4322

Dick Morris, Stick To Politics, Stay Out of Investment Advising

Dick Morris Should Stick To Politics

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Stay Out Of Investment Advising

  by: Brendan Magee

Every afternoon Dick Morris, the guy who guided and advised Bill Clinton to the White House, comes on a local radio station in Philadelphia, Pa. and gives commentary on the news and events of the day, and I am a fan of his show. I listen pretty regularly on my way home from work.

One of the station's sponsors promotes himself as a retirement phase advisor and his message is for retired/senior investors  to stay out of the stock market. He believes senior investors should crash proof their nest egg because they cannot afford to take such huge risks with their money. This advisor now has Dick Morris promoting the seminars he holds on a monthly basis. Dick Morris even has said that he will appear at these luncheons and sign his book should anyone bring their copy. Business is business and I have no problem with somebody promoting their seminars until they cross the line and start misinforming the public. Recently, Mr. Morris went over that line.

He agreed that retirees should not concern themselves with the growth of their money, but rather they should concentrate on keeping what they have. In other words, keep what you already have and do not concern yourself with the returns your investments are generating. Stick with investments that guarantee your principle, where you will never see your account go down. The ultimate fear they are throwing in peoples faces is that they could easily lose all their money with a crash of the stock market.

It's when a product is trying to be sold to the public that the truth gets set aside and the investor hears a message that on the surface sounds good but with a few questions seems anything but in the investor's best interests. Maintaining what investors have should not be the goal. That is a recipe that has proven time and again to more than likely have retirees running out of money in retirement. The goal should be to maintain its value, or purchasing power, which is very different from guaranteeing your principle.

We all know that a dollar today does not buy what it bought 25 or thirty years ago. A gallon of gas wasn't $4.00 a gallon in 1989. Tolls to get over the Walt Whitman Bridge were not $5.00. A loaf of bread wasn't $3.00. A new car didn't cost $30,000. These costs in most cases are double what they were in 1989. I know I could get a newspaper for under $1.00 back then. The reality is that 25 to 30 years from now these costs, simple everyday items, will probably have doubled or even tripled by 2039. Inflation has been here for a while and isn't going away any time soon.

If I took my money 25 years ago and deposited it into my bank savings account, no doubt I would have every penny I deposited into that account today plus a little bit of interest. However, if my money didn't grow at least even with the rising cost of living the purchasing power or the value of my money would have gone down.

Charles Ellis in his book "Winning The Loser's Game," showed how if the cost of living rises by four percent the value of money would be cut in half in just 14 years. So you retire at age 65 with $100,000 and follow Mr. Morris's advice and concentrate solely on not losing any money. Your money is safely locked away where it never sees any losses, and by age 79 with perhaps 10 to 15 years until you die, the value of your money is only worth $50,000. You haven't built security. You have experienced a 50% reduction in it.

This doesn't even take into consideration your spouse. What if she should be younger and have 20 years to go until she passes away? She has to make due with 50% less in purchasing power over those years. Inflation doesn't have a heart. It just keeps eating away at the value of her nest egg.

This is why what Mr. Morris is saying is so harmful to investors. He has a huge following and a very powerful radio station to air anything he says. Given that power his voice carries a bit of credibility, and on this occasion he is misleading investors.

If he really wants to help investors protect their financial  security, it's inflation, not the stock market that is the real enemy. He needs to help people realize that retirement is a long-term process. If he were a real student of history he would point out that the only real hedge against inflation, long-term, is stocks. He would help people understand what the rules for successful investing are and how to apply them with discipline. He would try to help people understand and identify who the culprits are in trying to sway you from this time tested approach. He would help investors understand the illusions that the financial community uses when trying to sell commission based products. That is what a coach would do. Unfortunately, Mr. Morris isn't doing any of these things. He is part of a process that is misleading investors and putting their financial security in jeopardy.

Brendan Magee is the founder and president of Inevitable Wealth Coaching. with questions or comments go to www.coachgee.com or call 610-446-4322.

Just Because You've Reeled In A Few, Doesn't Mean You're A Fisherman

Fishing Is About More Than Reeling In A Hooked Fish

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Investing Is About More Than Higher Returns

              by: Brendan Magee

Just this past week, on a trip to the Jersey Shore, my father-in-law and I tried our hand at some surf fishing. We were trying to recapture the glory of a few summers ago when we had a banner day and caught all kinds of fish off the Stone Harbor Beach. On that day we caught blue fish, king fish, and sand sharks. You name it, we caught it and had a lot of fun. Fast forward two years, we fished for about an hour and spent most of that time untangling snags in our fishing line and trying to uncover fishing lines that would snap with every cast. A banner day had turned into a, "Can't wait to go home" kind of a day.

So what really went wrong? The major problem was my father-in-law and I, because we reeled in a few fish, believed we knew how to fish. The last time around we had a fishing guide with us. He not only knew when and where to go fishing, he also made sure we had the right equipment, understood how to cast the rod, and made sure that when we reeled in a fish we didn't damage the fishing rod. Captain Frank made sure made sure we got out of our own way.

Without Captain Frank, my father-in-law and I had no idea we were buying rods and tackle unsuitable for casting in the ocean. We bought equipment that assured we would do anything but catch fish this time. We had a false, and dangerous to ourselves, sense of confidence in ourselves.

The overconfident fisherman syndrome can also hit investors and financial advisors. They invest money and experience some positive returns over a relatively short period of time. From there, they conclude that they really do have some expertise when it comes to investing. They conclude they have exceptional skill when it comes to investing, not that they just happened to get lucky. Now they start dabbling in more speculative, or sophisticated forms of investing. Whether they made a killing or lost money, that doesn't matter. For sure they have an expertise, otherwise they wouldn't have ever experienced any success from their investments. So keep at it.

The only problem is without real expertise they cannot distinguish between gambling and speculation versus prudent investing. With that, the odds are they will continue to engage in gambling and speculation where there is a mathematical formula that says they will lose. The only problem is, it is not a $30 fishing rod they stand to lose. They stand to lose the money they needed for a secure retirement or their children's educations.

The lesson here is be humble. Don't be too quick to crown your self a champion fisherman or investor. Have some one who you trust to show you your blind spots and make sure you are not getting in your own way.

P.S. If you want to have a great and enjoyable day of fishing , I have Captain Frank's phone number.

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

$20,000 Lost To The IRS In Two Minutes

A Phone Call From Her Broker, An Uninformed Decision, And A $20,000 Tax Bill

                                                    by: Brendan Magee

Sue called me up in a bit of a panic. She is a long time friend of the family and needed someone to confide in.  She just found out she had made a decision earlier in the week that was going to cost her big time. She received a phone call from her broker asking her if she wanted to surrender her annuity accounts. She had the accounts for a while and was ready for something different so she said yes she was ready to surrender her annuities. Her broker, whom she was with for the past five years, said he would move the money from those accounts to mutual funds.

In a follow up conversation with her accountant she found out the ramifications of that decision, a decision, she didn't fully understand. When she surrendered the annuities, that was a taxable event. Every dollar that was coming out of her annuities was going to count as income for 2014. She and her, since passed away husband, had been saving in those accounts for years and had built up a sizeable nest egg. Not only was the money coming out of her annuities going to be taxable, but also since she was substantially increasing her taxable income for 2014, 85% of her Social Security Income benefits would now be taxed. For Sue, it was like having a two ton safe fall out of the sky and land right on top of her head. She couldn't understand how all this bad stuff was happening to her.

The first mistake Sue made was was assuming her broker had her best interests at heart. His agenda was to serve his needs, not Sue's. To not take the time and sit down with Sue and help her fully understand the ramifications of closing out her annuities is criminal in my opinion. To callously say he was moving her money into funds where he gets a nice commission after Sue has to needlessly shell out $20,000 in taxes is completely unforgiveable. Her broker is not an advisor at all. He was and is a salesman serving his agenda only.

The second mistake Sue made was to be completely disengaged from decisions involving her financial security. You don't have conversations about medications you will take or discontinue taking over the phone. You sit in the doctor's office, get examined, discuss how you are feeling, talk about side effects of medications, and set up protocols for what to do if an emergency occurs. Nothing is left to chance. For Sue to allow her broker to talk her into a decision involving hundreds of thousands of dollars over the phone is asking for trouble.

Sue should have insisted on a face to face meeting, perhaps involving her accountant and the broker so that she would have all her bases covered before making a decision. Frankly, Sue needed someone to point out what she couldn't see. She needed someone to point out her blind spots.  She didn't and now has to deal with a lot of  needless expense and anxiety.

What every investor has to ask themselves before making an investment decision is this, what is it that I am not seeing here? Be humble enough to realize that your perspective can be flawed. The biggest problems, the ones that do the most damage don't come from what you can see. They come from what you can't see. Just ask Sue.

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.