Two months ago, we bought another investment property.
Read Condo Agreement!
The condo with two bedrooms and two baths was being sold through a short sale. The asking price was only $80,000. We did our research; the condo could rent for $1,300 per month in the market. So it’s a no-brainer.
At the time, there were four other bidders. We decide to be aggressive and employ an escalation clause. We would bid $80,000, but if someone bid higher than us, we would increase the bid by $500 increments, up to limit of $95,000.
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Don’t Be a “Muppet”
Posted on: April 4, 2012
A Muppet
If you had a busy March, you are forgiven for not paying attention to Greg Smith’s open letter explaining why he is leaving Goldman Sachs. In his “resignation” letter, the Goldman Sachs executive sheds a bright light on the culture of this premiere Wall Street investment bank. Let me quote at length:
What are three quick ways to become a leader?
a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit.
b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them.
c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.
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10. Irrevocable life insurance trust
9. America’s top financial advisors: how they are made?
8. An investment rule for young people
7. Recession and stock market performance
6. Bill Gates: 11 Things You Don’t Learn in School
5. Variable annuity fees you don’t know you are paying
4. Why asset class diversification is superior?
2. Bonus depreciation: Congress wants businesses to invest in 2011
1. Profit from Harry Dent’s prediction? think again!
Also see Top 10 last month.
Get informed about wealth building, sign up for The Investment Scientist newsletter
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Maintaining Financial Wellness
Posted on: March 28, 2012
[By Tom Warburton] We view the primary component of ‘Maintaining Financial Wellness’ to be ‘Maintaining Access To Currency’. Think about this a bit. Wealth is really irrelevant if you don’t have currency!
Think about all of the companies that were Asset Rich, Cash Poor and ended up on the shores of Bankruptcy. Lack of currency sunk the ship.
Imagine that you owned $100,000,000 worth of land in the Brazilian Rain Forest – BUT – there were no buyers! Lack of currency is a huge impediment when it comes to paying the bills.
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Achieving Financial Wellness
Posted on: March 25, 2012
[By Tom Warburton] So…how do we achieve ‘Financial Wellness’?
This exercise sends us on an initial quest to ‘Figure out How Much Money We Need’ and how to ‘Accumulate That Amount’.
Maybe you’ve seen the advertisement on TV where the guy is ‘trying to figure out his number’. The neighbor has a number under his arm and the comic figure of the commercial thinks his number is ‘A Gazillion’!
Well – we think we’ve figured out what ‘The Number’ is for most folks. As a general guideline:
- Multiply Your Net Monthly Need By 300.
If you are 65, the above will be close. (Of course, individual age, health, facts and circumstances vary, so, we would need to meet with you to confirm the accuracy for you – which we are happy to do.)
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What is Financial Wellness?
Posted on: March 22, 2012
[By Tom Warburton] Our view for a working definition for Financial Wellness has been forged as a result of discussions with hundreds of folks. We start our discussions with this question:
- What Is Important To You About Money?
This leads to a variety of responses, and, frankly, there appears to be a strong correlation between age (or maturity or wisdom or whatever) and the answers our question solicits.
- Youngsters Often Say Things Like:
- I Like Money So I Can Buy Stuff
- Older Folks Often Say Things Like:
- I Don’t Want To Outlive My Money
- I Want To Take Care Of My Family
- I Like To Give It Away
- Money Gives Me Freedom
- Money Lets Me Live The Way I Want To Live
- Money Represents Security…However Illusory
So – when it comes to defining Financial Wellness, permit us to synthesize the responses of folks as the following:
- Financial Wellness Exists When A Family Or Person Can ‘Live Worry Free The Way They Want To Live For As Long As They Live‘
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[Guest Post by Christopher Guest] I have seen a number of articles declaring approximately 70% of all Americans do not have a will. If they died, that would mean the distribution of their estate would be controlled by intestate provisions. In my February 2010 Newsletter, I discussed the basics of intestacy. For those in second marriages, the importance of drafting an estate plan and not succumbing to the intestate provisions is very important, as demonstrated below.
As I mentioned in 2010, there is an order of priority in which beneficiaries inherit assets under intestate statues. Order of priority is governed by the familial relationship of the beneficiary to the decedent. In other words, family members related closer to the decedent generally get a share and cut-off those family members not as closely related. But, every state’s laws are different when determining this order or degree of familial closeness.
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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 are paid solely through fees for service paid directly by clients; they are not licensed to receive third-party commissions. Consumers rightfully associate this compensation model with integrity and unbiased advice.
Firm | Youtube | Facebook | Twitter | LinkedIn | Newsletter
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Old Age
Believe it or not, you are a stranger to yourself. That’s the finding of Hal Ersner-Hershfield et al. in their published research detailed in Social Cognitive and Affective Neural Science.
This unconscious assumption of a different self in the future is demonstrated graphically by brain scans. In their study, Ersner-Hershfield et al. found that when people think about their future selves, the same brain region lights up as when they think about strangers. The implication for saving behavior? Saving for the future instinctively feels like giving money away to a stranger. No wonder only 9% of Americans are saving enough for their retirement.
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I am not a big fan of IPO shares. Research has shown that IPO shares usually underperform seasoned shares by about 2% a year. Business owners tend to time their IPOs at the optimal time for them, not for the future shareholders.
With Facebook (FB), there are so many people chasing so few shares that the IPO will create a “Winner’s Curse” effect – whoever wins the shares will end up overpaying for them.
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Juggling Investment Odds
Posted 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 90%. If not, the odds drop to 50%. This January, the market had a positive return.
Seasonal Effect
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10. Portfolio rebalancing returns
9. How to tell if you financial advisor is a crook? Very easy
8. America’s top financial advisors: how they are made?
7. Variable annuity fees you don’t know you are paying
6. Recession and stock market performance
5. Why asset class diversification is superior?
4. Bill Gates: 11 Things You Don’t Learn in School
2. Bonus depreciation: Congress wants businesses to invest in 2011
1. Profit from Harry Dent’s prediction? think again!
Also see Top 10 last month.
Get informed about wealth building, sign up for The Investment Scientist newsletter
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Can You Retire?
Posted on: February 27, 2012
Financially Secure Retirement
According to Shlomo Benartzi, a University of Chicago economic professor, 50% of Americans don’t save for retirement. Of the other 50% who do save, only 11% save enough, according to their own estimates, which are probably optimistic.
This is not surprising to this financial advisor. For nearly all of my clients, I have created a savings and investment plan for them. The plan is designed so that they can live the lifestyle they desire in retirement. They are all committed to the plan. But while the commitment is there, the will power is not. When it comes time to implement the plan, they can always find important spending that justifies putting off saving to another day.
My clients are all very educated and highly intelligent. Why do even they have a hard time saving enough for a secure retirement? It all boils down to two words: instant gratification.
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Tax Aspect of Self Employment
Posted on: February 19, 2012
[Guest post by Jeremy Bendler] As a sole proprietor, you would report net income or loss from your business on your personal income tax return. However, there are several important rules that you should be aware of:
(1) For income tax purposes, you will report your income and expenses on Schedule C of your Form 1040. The net income will be taxable to you regardless of whether you withdraw cash from the business. Your business expenses will be deductible against gross income (i.e., “above the line,” and not as itemized deductions subject to the 2%-of-adjusted-gross-income floor). If you have any losses, the losses will generally be deductible against your other income, subject to special rules relating to hobby losses, passive activity losses and losses in activities in which you weren’t “at risk.”
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Morgan Stanley Smith Barney
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 amazed how the financial industry (not just Morgan Stanley) uses the same trick to seduce people. Unfortunately, people fall for it over and over without fail.
If Morgan Stanley’s research is so good that it can beat the market, why can’t the company use some of that research to help its own stock price. I did a comparison of Morgan Stanley’s stock (MS) and the S&P 500 and found the following: Read the rest of this entry »
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- In: Life
- Leave a Comment
This morning, I got an unexpected call from a client of mine. He asked me how the little one was.
My younger son was born with nasal cleft and lipoma corpus callosum, a benign form of brain tumor. This Friday, he will go into surgery to fix his cleft.
My client was calling to ask for his name, so that he can ask his rabbi to pray for him.
I am not Jewish but his gesture has sent positive shivers down my spine. This is why my job is so rewarding and why I am passionate about what I do.
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