Archive for the ‘wealth management’ Category
That was a message I got from a new client of mine. I must admit, it really bites. Yes, I sold his Apple stock. And yes, since then the price has gone up 15%. So of course, I can understand he’s upset and beginning to question whether I know what I am doing.
Having studied improvisational comedy, I’m aware that regardless of how I feel, it is wise to always validate others’ feelings. So I replied, “Yes, I should have asked you before I sold it.”
Afterward, I sent him some data to mull over.
Nasdaq just crawled its way back to 4000 a few days ago, and this time Apple is the biggest and hottest stock in the Nasdaq 100.
Last time when Nasdaq passed 4000, the top ten tech stocks (try saying that ten times fast) were, Microsoft, Cisco, Intel, Qualcom, Oracle, JDSU, Nextel, Sun Micro, Veritas and MCI Worldcom.
Since the last time Nasdaq passed 4000, Microsoft has gone down 34%, Cisco 59%, Intel 53%, Qualcomm, the only up stock in the group, has gone up 25%, Oracal has gone down 67%, JDSU 98% and the remaining four are no longer in business; they were either merged out of existence or end ignominiously.
It is exceedingly difficult for mutual funds to beat market indexes. For the past decade, Standard and Poor’s has methodologically documented returns by mutual funds and what they found is something those fund managers do not want you to know: the majority of mutual funds under-performed their respective indexes literally every single time.
Here is an infographic published by MoneySense, a Canadian financial magazine, that shows 90% of Canadian money managers under-performed the market index in 2012; I can assure you that US money managers are doing no better.
My newsletter “The Investment Scientist” is read by over 4,500 people, representing a growth of 41.5%. This portends well for future growth of the AUM.
I am grateful for the people who support my business, especially Nicole my assistant, Vanessa my editor, John my programer and the Fidelity support team.
I am grateful for this year’s Nobel Economics Prize winners, especially Eugene Fama, upon whose theory I’ve built the investment approach that has served me and my clients so very well.
I have started the process of ghostwriting a book on Physician Wealth Management, as well as redoing my website with a sharpened marketing message around the science of investing.
I have won three storytelling contests in DC and Philly, and have failed to win at least the same number of contests.
I have performed standup comedy to standing ovations as well as stoic reactions in corporate, charity and political events.
I have found a new challenge and passion in improv comedy. I am thankful to my teachers Shawn Westfall and Anna Marie Trester, and my many classmates.
My parents and in-laws stay with my wife and I for extended periods of time, helping us to take care of the kids, allowing me time to indulge in my passions.
My kids are growing up strong, healthy, smart and caring, thanks to their mom who is also my wife. I couldn’t be more proud of them.
What are you thankful for in 2013? Share it with us in the comment section.
This is actually the wrong question. The right question should be, “Which license do you have?”
Generally, there are two types of licenses for people who call themselves a “financial advisor.” People who passed the series 65 test and people who passed the series 7 test. The nature of these two licenses are as far apart as heaven and earth.
Series 7 is a securities license. People who have passed this test can legally be a broker. They are actually prohibited by law to give financial advice, except incidental to the financial products they are selling.
He is paying the advisor 1.6% in fees. First of all, this fee is quite exorbitant. For the size of his portfolio, he shouldn’t be paying more than 1% in advisor fees.
Adding insult to injury, for the fee that he is charging, this advisor puts his money into a collection of very expensive mutual funds like ODMAX.
It is very easy to check the expenses of a mutual fund. I just googled ODMAX and I found out it has a load of 5.75% and an expense ratio of 1.36%. (For those who don’t know, load is a one time charge to pay commision to the Ameriprise advisor who doubles as a broker. Expense ratio is an ongoing annual charge.)
ODMAX is a mutual fund that invests in emerging market stocks. If you use the low cost alternative, aka a Vanguard fund, you will pay no load and the expense ratio is only 0.33%, a saving of 1.06%.
Don’t ever underestimate these tiny savings. Because in ten years, the savings will be more than 10%, in twenty years, more than 20%. This businessman is in his 50s; he can easily live another 30 years. I asked him: “How would you like to be more than 30% poorer in retirement?” That is exactly what this financial advisor will make him.
Today I sat down with a bunch of professionals for our quarterly wealth management meeting. As the talks turned toward the implementation of the Affordable Care Act, I realized the mal-functioning website is the least of its problems.
In our group there is a professional, Andrea, who specializes in helping small to mid-sized businesses procure group health insurance. Andrea said insurance companies are cancelling old plans and giving their customers “upgraded” plans that cost more and provide less benefits.
This hasn’t just been happening in isolated cases, but is rather wide-spread. Why? For one, the ACA has many mandates, such as covering reproductive health. So if a man’s insurance plan does not cover a pap smear, he just lost his plan! OK, I made this up for comedy, but Andrea did mention a 55 year old woman losing her plan because it did not have maternity benefits.
Today I went to listen to Professor Jing of Renmin University speaking about US – China relations. The last time I went to listen to the same subject, it was Professor Mearsheimer of the University of Chicago speaking. His theory predicts that the US and China will come into conflict inevitably. I was curious to hear a Chinese perspective.
When I told Professor Jing about Dr. Mearsheimer’s theory and prediction, I was surprised to learn that the two professors are friends. In fact, Dr. Mearsheimer teaches at Dr. Jing’s Renmin University as a visiting scholar.
Dr. Jing does not agree with Professor Mearsheimer’s theory and prediction.
He does however agree that the rivalry between China and the US will intensify in coming years. In his words, “This is structural.” No matter how hard the leaders of the two nations try, the most powerful nation on earth and the second most powerful will always be suspicious of each other.
However, Professor Jing believes this rivalry need not result in open conflict. “Both the US and China are nuclear states. Should war break out between us, only cockroaches will survive.”
One very very sharp reader of my blog sent an email to me, and here is what it said:
Aren’t these 2 philosophies opposites of each other? If the market prices correctly based on all available information, how can the stock price be different from the expected dividend? Aren’t these 2 prize winning economists speaking in opposites?
As far as investment philosophy is concerned, I am solidly in the camp of Nobel Prize winner Eugene Fama and Vanguard founder Jack Bogle. They both believe that the market is by and large efficient, and there is no point in picking stocks.
Most of my money is in broad-based passively managed asset class funds, but I do set aside 5% just to have some fun with and right now I only have three stocks in my fun account.
I bought SWY last November after going to the Chicago Booth Entrepreneur Advisory Meeting. From the meeting, I learned that big retailers routinely write off their inventory at a huge loss. The reason being that they can not control demands as they have little information about the needs of the individual consumer, though they can usually make a rough guess on aggregate needs.
I noticed my wife had been shopping at Safeway more and more. After a little digging, I found out Safeway had set up a technology system to track each individual’s needs and price sensitivities. Then it can make targeted offers to shoppers like my wife that unfailingly brought her back over and over. I recalled my earlier meeting and realized they would save tons of money just from better inventory management.
OK sure, I can understand his point. Why invest outside of the US when the US markets already account of 40% of world capitalization? “The U.S. market is so well-diversified already that combining it with global markets doesn’t really matter,” so said Fama.
However, I think it actually does matter ….
Proportionally, the US market is getting smaller. Right after the second world war, the US market accounted for 70% of world capitalization, now it only accounts for 40%. For a country that boasts only 5% of of the world’s population, this is still exceptionally high.
For the foreseeable future, there are better than even odds that the combined markets outside of the US will grow faster than the US market will do alone. Why forego those opportunities?
The diversification benefit you’d get is certainly not negligible either. During the so-called ‘lost decade’ of 2000 to 2009, the US market, as measured by the S&P 500, had a net loss of 9.1%, while international developed markets went up by an anemic 12.4%, but emerging markets went up by a whopping 154.3%.
It would have made a bog difference if you have a piece of emerging markets in your portfolio.
Seriously! Congress established it in 2008 in House Resolution 1499.
I only know this after getting an email from my estate planning attorney friend. I think you should read it as well.
According to the resolution passed by Congress, “Many Americans are unaware that lack of estate planning and financial illiteracy may cause their assets to be disposed of to unintended parties by default through the complex process of probate.” The resolution goes on to state that “careful planning can greatly assist Americans in preserving assets built over a lifetime for the benefit of family, heirs, or charities.”
Professor Mearsheimer is a geopolitical realist. He has an intriguing theory about global political order which states that there is a 75% chance that the US and China will come into conflict.
I care about this subject because, being a Chinese American, I know that my life would not be too pleasant should that come to pass.
Professor Mearsheimer’s theory is based on the assumption that the global order is anarchic, by that he means there is no higher authority above states, and that each state will fight for a better position in the order.
The US, now being number 1, is not going to willingly give up the top spot, and China, if given the opportunity, is not going to settle for second best.
Professor Mearsheimer explains how the US became #1 in the first place:
I jumped out of my chair in delight when I learned that Eugene Fama and Robert Shiller had won this year’s Nobel Prize in Economics. These are two economists that greatly influenced my investment philosophy and their works have been an integral part of how I help my clients build and preserve wealth.
Let me explain their contributions:
He accurately pointed out, “If I spent like that, I would be bankrupt in a few years.” He believes so strongly that the US is going the way of national bankruptcy that he has moved substantial amounts of his money overseas and has invested a great deal in gold.
I happen to believe that gold is the most unproductive of assets, since it does not generate dividends or interest and it actually costs money for upkeep in a safe in a Singapore bank.
On top of that, by throwing so much money into gold, one could over prepare for a disaster that is very unlikely to happen and thereby miss out on all the opportunities to grow wealth in this country.
But I still need to explain why the US won’t go bankrupt anytime soon. Here are two explanations:
A colleague of hers got a call from her son’s teacher. He had come up to her to complain about chest pain when he suddenly collapsed right there in front of her.
My wife’s colleague ran to the emergency room only to find that her son was already pronounced dead. Doctors there couldn’t figure out how this could have happened to a healthy ten year old.
The child’s mother had refused to give up and gave CPR to her lifeless son for an hour until his rib cage nearly cracked.
My wife and her colleague used to swap stories about their respective children regularly and this son was the one she talked about most often. Now he is gone.
I don’t know her, but my heart is overwhelmed by sadness and I am reminded yet again that money and material trappings mean nothing. Life alone is the real treasure.