Weekly Clarity Coaching
Trading Treadmill….avoid the hype
I ran across a recent press release this morning from Business Wire that announced some activity for Charles Schwab Corporation in August. I found it interesting that there was a large in-flow of new assets that came into Schwab about $62B and what I really found curious was the amount of trades that were taking place. Trades are up substantially in August about 57% in and 35% in July. Now what reasonable explanation can justify this amount of activity? Why is this happening? FEAR, FEAR, FEAR!
A friend and fellow Investor Coach from NJ shared a story of a recent trip.
While in Europe with his wife a earthquake and then hurricane hit the East Coast and they couldn't get home. All flights from anywhere in Ireland to anywhere in the United States were canceled, So, he bought a newspaper, The Irish Times to be specific, and a cup of coffee, to settle down for a long wait.
While browsing through the paper, an article jumped out at him entitled "Investor 'prediction addiction' now most relevant." He shared that he was pleasantly surprised at the positive portrayal of our Investment Philosophy that he found in the article.
The television or radio nowadays is being bombarded with advertisements to "buy gold." Firms selling gold now have a huge cash influx and are using it to attract more buying creative marketing. You will hear that it’s the "new gold rush" and get in now because "prices will continue to go to through the roof."
The month of July (and now August) must have been the worst nightmare for advisors who recommend market timing (otherwise known as tactical asset management) as the investment method of choice to their clients.
Market timers, of course, have to be right two times - they try to predict not only when to get out of the market, but also when to get back in. This is an impossible task during normal times, and doubly so last month.
Burton Malkiel had a great article in today's WSJ. Malkiel is a highly regarded professor from Princeton and the author of the investing bible, A Random Walk Down Wall Street. Here's a link to the article:
The title really says it all....Don't Panic About the Stock Market, Investors who resist the urge to get out during rough times like this will be glad they did.
Supposedly, Freud once posed the question: What do Women Want?
It seems to me the Financial Industry is still trying to figure that out. (But then again, aren’t most men?)
Smart Money reports that over 70% of women feel underserved and dissatisfied with the financial-planning services they receive.
This crazy economy has handed advisors a golden opportunity to reach out to women…who know they need help and, according to the question I get most often, are desperately looking for advisors they can trust.
Here’s where I believe the financial industry has missed the boat. Advisors are talking to women just like they do men…because the financial world is based on the male model of communication. Big mistake.
Women are not men!
You've probably heard Einstein's definition of insanity...doing the same thing over and over again and expecting different results.
Seems that the majority of sophisticated institutional investors as well as individual investors could be deemed insane by Einstein's definition. Seems like most people are looking for the money manager with the "hot" hand. This usually ends up with very disappointing results. Yet, investors continue the same process over and over again.
Listen to this short video were Larry Swedroe discusses this phenomenon.
What's the Little Known Secret that many mutual fund managers wish you didn't know? You won't believe itwhen I tell you. Many mutual fundmanagers do not invest in their own funds. Kind of unbelievable, isn't it!
Investment News, a trade publication that guys like me readat the breakfast table, recently ran an article about a new Morningstar study.(Morningstar is a company that tracks and rates mutual funds.)
According to Investment News, the Morningstar study foundthat only about 40% of fund managers actually invest in their own funds.
Would you like to know what percent of mutual fund managershad ownership stakes in the study Morningstar conducted two years ago? It was 49%. Not exactly going in the right direction.
Whenever I review a prospective client's investment portfolio, I rarely see one that is truly globally diversified. The biggest problem I see is that most people are woefully over-weighted in US stocks. To make matters even worse, its usually exposure to just large US company stocks.
Their advisors might have placed them into General Motors, GE, Verizon, Proctor & Gamble, Johnson & Johnson, and similar large stocks.
The problem here is that the investor thinks he or she is properly diversified, but in reality, they have several sectors representing only two asset classes. So when one of the stocks rises, generally they all rise. But when one drops in price, more often then not they all drop. The result: unintentional wild swings in account values.
Just getting back from the Dimensional Fund Advisors (DFA) conference in Austin. Other than 104 degree temperatures, it was a great conference.
Anyways, I got to meet and talk to Eugene Fama and Kenneth French. They will probably win a Nobel Prize at some point for their ground breaking research on which our portfolios are based. They are some big brains!
I'd like to share with you a little of what French had to say. I love the consistency of his message. He doesn't change with the wind. Based on his extensive research, he knows what works and he sticks with it through all market cycles. He only has ONE message.