1. Facebook is a great service to help you keep in touch with friends and family. But a great service does not equal great investment.
2. When was the last time you clicked on a Facebook ad? I can’t recall when I ever did. The click-through rate for Facebook ads is 10% that for Google ads, for good reason. Google ads are delivered at the moment you have actionable intent, while Facebook ads are delivered when you don’t want any distraction.
Recently, I got a call from a physician client of mine who asked a fantastic question. The Shiller PE of the S&P 500 index is at 24 now, much higher than the historical mean of 16 – is the market headed for a fall?
What is the Shiller PE?
This is a stock market metric invented by Yale Professor Robert Shiller. Basically, it is the average of the PE ratios of ten consecutive years. Because of that, Shiller PE is also called PE10.
Professor Shiller found it to be a reasonably good measure of valuation of the whole market: the higher the Shiller PE, the more expensive the market.
Back to my client’s question, I told him right away that I don’t know the answer. I don’t make investment decision based on opinion. I have to research historical data. After I hung up the phone, I asked my assistant to study the relationship between the Shiller PE and forward one-year and forward three-year returns.
Posted May 14, 2013on:
Last week, I went to a luncheon seminar hosted by Fidelity Charitables, a division of my custodian company Fidelity Investments.
I went there because 30% of my clients are business owners. I know that one-third of them have strong charitable intent, and helping them do well by doing good is part of my responsibility.
Part of the dilemma of successful business owners who have charitable intent is this: They make a lot of money when they are running their business, and especially at the time they sell their business. But they give away their money to the causes they care about usually in retirement when they do not have as much income to write off. Without careful charitable planning, they will end up paying a lot more in taxes and have a lot less to give to charity.
Here comes the rescue plan: Donor Advised Fund (DAF).
Last weekend, I went to New Jersey to meet a potential client who is an executive at a pharmaceutical company.
He told me that, as part of the executive benefit package, the company refers executives to Morgan Stanley where they get “free” financial advice. I smirked and said: “Well, we will find out how free it is. One thing I know, though, Wall Street firms are not known for charity.”
It turns out that Morgan Stanley advised him to open several, separately managed accounts (SMA), each with a management fee of 1.5%. The reason for the multiple accounts?
Also see Top 10 in February.
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Prospective client A is a physician in his late 60s. He has already reached retirement age but he needs to keep working since he has less than $1mm saved for his retirement.
All that money is in tax deferred accounts, meaning far less than $1mm is available for his retirement. This is NOT retirement security.
Client A is not an extravagant person, so why is he in such dire straits?
Medicine is a profession fraught with legal risk. According to an AMA survey for the period 2007-2008, for every 100 doctors, there were 95 lawsuits.
The survey also reveals that physicians 55 years and older are eight times more likely to get sued than physicians 40 years and younger.
Not that they make eight times more medical errors, just that they are richer lawsuit bait.
That reminds me of a joke. Why won’t a shark attack a lawyer? Professional courtesy.
Back to the topic at hand, many physicians in solo or small practice simply use a SEP IRA as their retirement plan. It is very simple to set up, and the contribution limit is a generous 25% of earned income or an annual limit of $49,000. What is there not to like about it?
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