Ryan Howard & Investors Pay Dearly For Lack of Verification

Ryan Howard & Investors Pay Dearly 
From Lack of Verification!

by: Brendan Magee

There certainly are far worse things in life to happen to you then being the victim of theft, but realizing the people that are stealing from you are your mother, father and brother would have to be one of the worst things that could happen to anyone. Such was the nightmare that Ryan Howard woke up to in 2012 when he opened the financial books to a company he started as his career in baseball started to take off back in 2006. 

Being as busy as he was with the life as a professional baseball player he turned the day to day running of the business and its financial management to people he felt he could trust implicitly, his family.  In openning up the books he comes to find out his initial $8 million dollar investment in the business and the money he was paying his family to provide for his financial future was being treated more as their personal piggy bank then his. 

He found out his Mom, the company's financial officer paid out over $2.7 million to family members for services that were never rendered. All this comes to head in series of lawsuits and counter lawsuits back and forth between family members where the lawsuits are eventually settled out of court. In other words, it cost Ryan Howard more money to have the financial mess go away. The emotional and family scars can't be handled as conveniently. Going on blind confidence just didn't cut it.

A lot of this turmoil could have been avoided if, from the beginning, Ryan had a system in place to verify that the jobs assigned to his family members and the money being spent were being done as agreed upon.

Investors often times suffer unneccessarily because they assume their money is being handled as it should. Just like Ryan, they are doing business with people they trust. They don't follow through or see the need to verify that what is supposed to be happening with their money actually is. 

For example, a couple I met with a few weeks ago. They have their money in a life cycle fund promoted by many of the mutual fund companies. Basically, the investor picks a year in which they feel they are going to retire. The mutual fund will diversify accordingly and as the date of retirement approaches the diversification will be adjusted so that less money is in stocks and more is moved to bonds and cash. So the investor walks away after depositing their money in this fund feeling they are diversified. The mutual fund company said that that was what they were going to do so why doubt a big reputable company that everyone has heard of, right?

So in our coaching session we look at the fund and how it has diversified this couple's money. It is allocated amongst three different kinds of investments: 60% in U.S. Large Company Stocks, 30% in International Stocks, 6% in Bonds, and 3% in Cash. With this discovery Jim says "That's not diversified." Worst of all he finds out that the majority of his money is in an investment that has experienced a 40% loss twice in the last 15 years. He's taking on a lot more risk than he had been aware of or would have agreed to. Ouch! He's not a baseball player earning millions of dollars a year. This is serious money that can't be played with.

Like Ryan Howard, Jim and his wife, would have been better served with an awareness of what they wanted done and the ability to verify that their wishes would be carried out. This awareness only comes when the right questions are asked from the beginning. "How do I measure diversification/", and "How do I verify that the allocation of my portfolio will be carried out over a lifetime of investing?" These are the questions that every investor needs to ask. The price of not asking the right questions and having the ability to verify how your money is being handled is way higher than Ryan Howard or any investor knows they're going to pay. 

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. 

Investors Who Get Guarantees Agains Stock Market Crashes Guarantee They'll Never See Market Rates Of Return.

Guarantees Against Market Crashes Guarantee Investors

 Will Eventually Lose Money

                   by: Brendan Magee

I was listening to a radio advertisement for a show that guarantees to educate investors how to never lose money should the stock market crash. Sounds like a good idea, especially for retirees. Who would ever want to go through the pain and heartache of 2008's market crash again?

Unfortunately, investors in their attempts to find the holy grail of investing often give up way more than they realize. In this case if they are in the position that they will never have to experience losses due to a stock market crash, they also guarantee they will never enjoy market rates of return.  

To make this point we have to go beyond what the media typically reports on when talking about investing, the S&P 500 and the Dow Jones Industrial Average. These are benchmarks that report solely on U.S. Large Companies. The market consists of many more categories of investments and we will take a look at what a few of those investment categories have done in the recent past.

Investment Category                                                         Annualized Returns 2000-2014
S&P 500                                                                                           4.24%
U.S. Large Cap Value Index                                                            7.84%
U.S. Small Cap Index                                                                       11.50%
U.S. Small Cap Value Index                                                            13.95&
Int'l Small Cap Index                                                                        8.55%
Int'l Small Cap Value                                                                        7.57%
Emerging Markets                                                                             7.38%

Now here's a couple of things to bear in mind, over the past 20 years ending December 31, 2014, the cost of living has gone up 2.80% and the average stock mutual fund investor's return was only 3.69%, according to the Dalbar Report.

The market rates of return mentioned above do two things: outperforms the average investor by a considerable amount and outpaces the rising cost of living. That means market rates of return are more than enough to have an investors money maintain its purchasing power and last longer. How upset would you be if over the past 14 years these were the returns you achieved?

Now where the idea of "Crash Proofing" your portfolio comes from is off the heels of 2008 when the S&P 500 fell almost 40%. So how do I as an investor make sure I never go through that pain again? Answer, take my money out of the market all together.

Unfortunately, investing is a counter intuitive process. What appears to be the logical solution isn't. Matter of fact the most logical solution most likely will do more damage than the investor realizes. In the case above, if I take my money out of the various markets, my money is in something else that won't generate the kind of returns listed above. The problem is that when ever there is a lot of investor turmoil there is always someone who stands up and shouts they have the solution that will cure your problem for ever.  That solution usually has the investor breaking the rules for long-term successful investing.

Here's what I mean by that. The market tanks. You're ticked off at seeing your portfolio take a beating. You're scared that if the beat down continues, you'll be left with nothing. Someone offers a solution that you will never have to suffer like that again. All you have to do is move your money over to their account. You proceed and you just broke the golden rule of investing, you sold low after buying high. The impact of the loss you just experienced is permanent. If you ever do get back in the market it will only be after the market has gone on to record highs  and you don't want to miss the party. Now you sold low and then bought high. you compounded the mistake. The odds of your money lasting through retirement are getting smaller by the minute.

The solution isn't Crash Proofing anything. It's the investor staying true to the rules of successful investing no matter the situation. It might also be having someone in your corner who won't let you waiver even if you consider straying from the straight and narrow. Josh Hamilton of the
Los Angeles of Anneheim Angels could have used a coach. Maybe you could too.

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

The rates of return listed above are not guaranteed. Investing involves the risk of losing principle. Consult with an investing professional before making any investment decisions.

Study Shows Education Not Helping Investor's Results

Education Not Helping Investor Results

By: Brendan Magee

Here is one of the conclusions of 2014's Dalbar Report, Qualitative Analysis of Investor Behavior, "Attempts to correct irrational investor behavior through education have proved futile. The belief that investors will make prudent decisions after education and disclosure has been totally discredited. Instead of teaching financial professionals should look to implement practices that influence the investor's focus and expectations in ways that lead to more prudent investment decisions."

These findings are backed up by the results of stock fund investors returns as compared to their benchmarks. Over a 20 year period the average stock investor's returns were an annualized 5.02% while the S&P 500 did an annualized 9.22%. The findings even showed that when investors did well, their results lagged behind the benchmark. In 2014 the average stock fund investor did 25.54% as compared to the S&P 500 which did 32.41%

Now if you did a Google search of the word investing, millions of pages of information and education would appear on your computer screen. So the question is this, if massive amounts of investor educational material is readily available and it is not having a positive impact on the results investors are achieving, why is it continually distributed to investors?

First one who responds with a good answer to this question wins a gift card to their choice, Starbucks or Dunkin Donuts!


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

Should Friends And Family Handle Your Investments?

Should Friends And Family Handle Your Investments?

                                                                                         by: Brendan Magee

We all like to do business with people we like and trust and who do we trust more than good friends and family? They aren't going to do anything to hurt us or our family, especially when they are handling something as important as our retirement money or the kid's college fund, right?

Along with this high level of trust comes a bias that can also be dangerous to our financial security. Because of our loyalty or close ties to our friend or family member we may not be as quick, or blinded all together, to see or confront some pretty big red flags when it comes to our investments.Let me give you a couple of examples of this.

Helen is the owner of a very successful marketing firm. She is in her late fifties so she is getting close to retirement and is looking forward in the next few years to becoming a doting grandmother. She recently told me that a good friend was doing a great job of handling her investments. I asked her how much she was paying to have her money managed, and she said all she pays is about one percent on the amount of money she has invested with her advisor. She told me she sees the amount she pays on her investment statements she receives quarterly.

Then I asked her how much does she pay when the funds her advisor has invested in makes a trade. She looked at me with a blank stare. She had no idea that beyond the advisor's fee, she was subject to paying any other fees. So how does Helen determine whether or not she is getting value for what she is paying? At present she can't. I would bet you, if Helen, went into a restaurant and ordered a meal she would know,based on the menu, what she should be paying. I bet if there was a mistake on the bill she would bring it to the waiters attention and have the bill adjusted. When it comes to her investments, why is it that she has become so less vigilant?

Another couple, very smart and  highly educated professionals, John and Tina, spoke with me about their investments. They were disappointed with their returns over the past few years. They were doing business with a cousin. They felt like with the market having done so well over the past few years, they should have been doing a lot better.

My first question was, had they gone to their cousin and let him know that they were disappointed with their returns? John and Tina said they were reluctant to do that. They were concerned about hurting somebody's feelings. They had even secretly gone to another planner to see if he could offer any other solutions, but couldn't go with him because of the family dynamics.

 I asked them a few questions to see how sound their investment decision making process was. I asked if they were aware of the warning signs that they were engaged in or were allowing someone to engage in gambling and speculation with their money versus prudently investing it. John wasn't sure about the answer, and Tina was was quick to say that that sounded like an underhanded way of investing money and that she didn't believe her cousin would engage in that sort of behavior. She didn't really even want to entertain the possibility.

So neither John nor Tina have a grasp of the differences between gambling and prudent investing, nor, more importantly, do they have the ability to verify whether or not their advisor is investing their money or gambling and speculating with it. This being in the dark about how their money is or isn't being managed may be coming from a lack of knowledge, but you can't ignore that there is lack of desire to confront the possibility and deal with the consequences of finding out their cousin might not be the person to have handling their investments. If they were dealing with someone who wasn't a friend or family member would they be so willing to  be in the dark about what is going on with their investments?

The unfortunate thing for John, Tina, and Helen is that there could be untold damage being done to their investments and their American Dreams could be in real jeopardy. At the root cause of their problem is blind faith in their advisors because they are dealing with close friends and family members. Their financial security is taking a back seat to their loyalty to friends and the desire to keep peace in the family.

The problem is that investors are human beings and human beings make decisions and act emotionally. I do not believe investors have enough  appreciation for just how strong their emotions are. Therefore, there is no awareness how quickly their emotions can subtly over power what they know to be the prudent things to do or not do. The only way to deal with this phenomenon is to admit how powerless you are in dealing with their emotions and make sure they have a coach  empowered with the ability to tell them when their emotions are getting the better of them.

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.

Are You Killing The Messenger?

Investors Choice:

 Kill The Messenger or Grow From The Coaching

                                                                                                by: Brendan Magee

The end of the year, for some, is a time to self assess. Am I still in shape, or do I need to get serious about my workouts? How are my finances? Are my money and investments where they really need to be? From an ego standpoint, it's safe and comfortable to do a self assessment. However, we do not usually get as much value out of a self assessment as we do in letting an outsider tell us what our blind spots are. There's a lot more of our ego involved in opening ourselves up to that sort of critique. However, it's in seeing our blind spots and dealing with them that breakthroughs occur and isn't that what we are looking for when doing our self assessments?

No one likes to have anyone to point out their warts. I know my initial reaction to someone pointing out one of my faults isn't to embrace them. My first reaction is usually to deny the shortcoming exists. Then only in my head, I'll say things like "That guy is crazy or off his/her rocker!" Then, I will look for some flaw in their logic that completely invalidates the perceived criticism. Bear in mind this is all in hindsight. In the heat of what I think is  putting me down, I am enraged, ticked off and looking to get even. Scorpios have no other choice. 

Earlier this year, a gentleman and his wife came into my office and were looking for some answers to questions they had about their 401k plan. The wife was in the finance/investing profession  so the gentleman and her felt very confident that they could make good decisions if they just got some answers to a few questions. Seems innocent enough, right? That's what I thought.

The meeting starts off with them listing all the questions they had on their minds. What company is our money with? Should we keep investing this way? There were a few questions that were important to be asking as well, but hadn't been asked, so to be sure they were not basing any decisions on assumptions, I started, after getting their permission to do so. Amongst my questions were: Could they measure the risk of one portfolio vs another? Could they come up with a mathematical measurement of how diversified their current portfolio was? Could they account for what they were being charged to have their investments managed?

With each answer came a sort of kind of a yes. There was never a 100% positive "yes" I know how to do that. So my concern, which I expressed, was that we wanted to make certain any decisions were made at least covering the basic necessities of prudent investing:, risk, costs, and diversification.

It's sort of like asking a 16 year old "Do you know how to drive?" They either do or they don't. There is only one answer that has you allowing your teenage daughter get in the car with him for a date. Anything less is a huge red flag.

So before any decisions were made about what to do with their 401k plan, I suggested that we first work together to make sure these critical questions get answered and we booked a time to get back together where we could compare one of their other 401k plans against their current 401k plan. They both agree that would be a good way to proceed, but unfortunately, that appointment gets cancelled by this couple and never get rescheduled.

I come to find out almost six months after the fact that the woman left my office and exasperatedly asked her husband, "Does he think I am stupid!"

The, unintended,  result of being asked a few questions, but not being able to answer them was not only her ego getting bruised. The upset was a big part in this couple dumping an investment portfolio that over the past 16 years had performed in the 98 percentile. Only two percent of investors have performed better than they did. What's worse is, they really don't have a good grasp of what went into into producing such glowing results so they have very little chance of reproducing them in the future. More importantly, they have no desire to  Why? Perhaps the idea of being in the position where admitting they really needed some coaching was a little too personal. Maybe the path of least resistance is to get rid of the person who appears to attacking their self worth, rather than helping them achieve a breakthrough.. It's certainly a lot quicker then getting the answers to questions you can't completely answer and experiencing a breakthrough.


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.

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.