Archive for the ‘Prudence & Fiduciary Duty’ Category
Facebook Scam Hits Close to Home
Posted by: Michael Zhuang on: May 14, 2012
Two months ago, I got a call from client of mine, who asked my opinion about an opportunity to invest in pre-IPO Facebook shares. He explained that he and his business partner were offered the opportunity to invest in a private fund that will hold Facebook shares. I know nothing about these funds, but I [...]
Successful Entrepreneur, Personal Finance Failure
Posted by: Michael Zhuang on: May 9, 2012
I met Joseph in a startup networking event. He was trying to attract investors for his latest venture. He has an impressive resume: he founded a tech company that was later sold for tens of millions of dollars in the 1980s. I was immediately struck by the “never say old” motto of this 75-year-old entrepreneur. [...]
The High Cost of Fee-Based Financial Advisors
Posted by: fredmdonovan on: March 17, 2012
Many people think that fee-based financial advisors are those who charge their clients fees for service; therefore, they have more transparency and less conflict of interest. That’s exactly what the financial industry wants you to think. Fee-based financial advisors are the financial industry’s response to the rise of independent fee-only financial advisors. Fee-only financial advisors [...]
Juggling Investment Odds
Posted by: Michael Zhuang on: March 6, 2012
Investors crave certainty, but the future is never certain. Prudent investment requires juggling odds. Here are the types of odds that go into my decision making process. January Barometer Effect When the market records a positive return in January, the odds that it would record a positive return for the rest of the year are [...]
Can Morgan Stanley Financial Advisors Beat the Market?
Posted by: Michael Zhuang on: February 16, 2012
Recently, a number of people came to me for advice with one thing in common: they all had a financial advisor from Morgan Stanley Smith Barney. These advisors all promised them that they could beat the market because Morgan Stanley, as a major institution in Wall Street, has extraordinary investment research resources. I am just [...]
An Investment Rule for Young People
Posted by: Michael Zhuang on: February 13, 2012
“Only a fool invest without rules” – Jason Zweig A client of mine asked me to teach his young son how to save and invest. The following are some rules I wrote down for him. 1. How much to save? This is just a rule of thumb. If you start investing in your 20s, you [...]
Government Retirees Beware: Your Financial Advisor May Not Be Your Friend
Posted by: Michael Zhuang on: January 14, 2012
I have a client (Let’s call him John) who retired 12 years ago from the government. He had a pension, and he had the option of taking out a lump sum of about $800k or drawing a monthly check of more than $4,400 per month until death. John took his options to his financial advisor [...]
A 2011 Investment Recap
Posted by: Michael Zhuang on: January 8, 2012
My investment approach can be summed up by three principles: Globally diversified Small cap value tilt Short duration tilt This approach endured extraordinary challenges in 2011. 1. Globally diversified Even though the US equity market largely ended up where it started, the global equity markets did a lot worse: the MSCI EAFA Index (world developed [...]
How to Tell if Your Financial Advisor is a Crook? Very Easy!
Posted by: Michael Zhuang on: December 10, 2011
This week, a business woman came to my office for a second opinion financial review. She explained why she came to see me: she bought a permanent life insurance policy because her financial advisor told her it is a great investment. She has been paying $3000 a month for that, and so far she has [...]
The Perils of Chasing a ‘Hot’ Fund Manager
Posted by: Michael Zhuang on: December 8, 2011
On November 17, Bill Miller announced that he would step down as manager of Legg Mason Capital Management Value Trust (LMVTX). From 1991 to 2005, under Miller’s stewardship the fund outperformed the S&P 500 index for an astounding 15 straight years. Since then, the fund has underperformed the index in all but one year, and [...]
How I helped a doctor set up a 401k plan
Posted by: Michael Zhuang on: September 29, 2011
Dr. Smith is a client of mine. He is a facial plastic surgeon with a booming solo practice supported by five non-essential staff members. His staff turnover is very high; no one stays more than three years. This has allowed him to contribute the maximum amount to his SEP IRA without contributing anything to his [...]
When I failed as a financial advisor
Posted by: Michael Zhuang on: September 14, 2011
On March 6, 2009, about lunch time, I got a call from Mrs. C. Apparently she was in some sort of a panic; she asked me when the market would stop falling. I couldn’t predict the future, all I could tell her: the market will eventually turn around, and when it does, it will stage [...]
How can an investor prepare for market corrections?
Posted by: Michael Zhuang on: August 11, 2011
The common approach to dealing with a market correction is trying to get out of the way at the first sign of trouble before the big one hits, like getting out after a 5% dip before the 30% drop hits. This approach requires perfect foresight. God can do that, not you, and certainly not a [...]
How an Insurance Company Misleads Its Annuity Customers
Posted by: Michael Zhuang on: May 30, 2011
I was called a “wing nut” by a commenter for pointing out all the malpractices of insurance companies. Indeed, I could go nuts seeing how they mislead their customers into financial peril. They know full well that their customers are not going to read beyond the first few pages of their hundred-page contract, so they [...]
A Balanced Portfolio to Avoid (II): Hedge Funds Don’t Deliver Outstanding Returns
Posted by: Michael Zhuang on: April 28, 2011
Hedge funds are often peddled as a unique asset class that has outstanding returns that are uncorrelated with the market. In reality, hedge funds are as much an asset class as Las Vegas is. Hedge funds are a general description of private investment companies that are organized as limited partnerships with fund managers as the [...]
Are Financial Advisors Required to Disclose Fees?
Posted by: Michael Zhuang on: April 8, 2011
You may not believe it: the term “financial advisor” is a free title. Anybody can use it; there is no legal requirement, nor educational qualification. In practice, though, generally there are three types of people who use this title: insurance agents, stockbrokers, and registered investment advisors (RIAs). Whether they are required to disclose fees all [...]
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