Bear Markets

In this post, I am not going to be talking about recent economic news, the current state of politics in the U.S., geo-political tensions or the global economy.  I am going to discuss stock ownership, specifically stock ownership for the long term.

During times like January (and some days in February), people ask me what my job is like when the markets are acting like the Incredible Hulk rollercoaster at Universal Studios in Orlando. (I refused to ride it, but my daughter loved it.)  I jokingly say that my avocation is 90% calm and 10% terror, and now we are experiencing the 10% part. In the stock markets, you really cannot have one without the other.

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401(k) vs. Pension

Freelance author Helaine Olen wrote the book  Pound Foolish: Exposing the Dark Side of the Personal Finance Industry.  While I did not read the book, I can certainly understand why someone would want to explore this topic.  However, you could also write a book exposing the dark side of virtually any profession or craft, whether it be law, medicine, plumbing, electrical, car sales or car repair.  It is like Cosmo Castorini n the movie Moonstruck saying that the plumbing repair would be thousands of dollars.  Is that fair or a rip-off?  I have no idea and neither did the hapless homeowners.  A link on Twitter today took me to an article Ms. Olen wrote for Salon in August of 2013, entitled “401(k)s are a sham”.  While some of her points are valid, like brokers selling inappropriate annuity products to seniors, the basic premise of the article is flawed. The article can be found here. (Read the comments for additional enjoyment and an insight to others’ opinions.)

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Beware the Rocky Coast

While I do not consider myself a Twitter addict, I do have Twitter up all day on one of my monitors (of course we all have two monitors, it’s not the 90’s) to get current information and opinions on the financial markets, investing and the economy. I do not follow the people who sit at home and have 5,000 tweets about their cat or sports teams. You know who you are. I have been very selective in who I follow and prefer to read intelligent tweets rather than be prodigious in my own tweeting. Two of the people I follow are Patrick O’Shaughnessy, @millennial_inv and Ben Carlson, @awealthofcs.

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Asset Location vs. Asset Allocation

In our previous blog post we discussed the benefits of having a diversified portfolio.  This comes down to how an investor establishes an asset allocation.  However, asset location can be just as an important factor as asset allocation.  I am not talking about having assets offshore vs. in a domestic account, but what should be owned in a tax-deferred account vs. a normal, after-tax account.  Michael Kitces has done some great work in this area and a more detailed description than what I am offering in this post can be found here.  https://www.kitces.com/blog/asset-location-the-new-wealth-management-value-add-for-optimal-portfolio-design/.  If you want more detail, come to my office and check out Investment Management for Taxable Private Investors, published by the CFA Institute.

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Fees vs. Value

There has been much discussion regarding the fees that advisors charge in the financial media over the last year or so.  Some of this has come about due to the success of low-cost index funds in a bull market and some of this discussion is the result of the success of "robo-advisors" or, more appropriately, "robo-allocators" and their computer-driven, internet-based, low-cost model.  The proliferation of lower-cost exchange-traded funds (ETFs) in the recent past has also brought more attention to this issue.

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