Mark Zaifman|Money Matters Blog


Subscribe to Money Matters by e-mail

Your email:

Sign up to receive our newsletter:

Follow Us

Mark Zaifman's thoughts on Money, Global Economic Trends and Politics

Current Articles | RSS Feed RSS Feed

Vanguard Shows How Investment Advisors Can Add Up to 3% in Returns


 Vanguard say advisors can add up to 3% return for ClientsHow much of a boost in net returns can financial advisors add to client portfolios? Well according to Vanguard, maybe as much as 3%.

In a recent research paper published last month, Vanguard, the largest mutual fund company in the world and in my opinion, the highest integrity firm out there, believes advisors can generate returns through a framework focused on five wealth management principles.

Below are the five principles Vanguard outlines:

1) Being an effective behavioral coach. Helping clients maintain a long-term perspective and a disciplined approach is arguably one of the most important elements of financial advice. (Potential value add: up to 1.50%.)

2) Applying an asset location strategy. The allocation of assets between taxable and tax-advantaged accounts is one tool an advisor can employ that can add value each year. (Potential value add: from 0% to 0.75%.)

3) Employing cost-effective investments. This critical component of every advisor’s tool kit is based on simple math: Gross return less costs equals net return. (Potential value add: up to 0.45%.)

4) Maintaining the proper allocation through rebalancing. Over time, as its investments produce various returns, a portfolio will likely drift from its target allocation. An advisor can add value by ensuring the portfolio’s risk/return characteristics stay consistent with a client’s preferences. (Potential value add: up to 0.35%.)

5) Implementing a spending strategy. As the retiree population grows, an advisor can help clients make important decisions about how to spend from their portfolios. (Potential value add: up to 0.70%.)

More from Vanguard:

How an investment advisor approaches two additional principles, asset allocation and total return versus income investing, can also add value, but are too unique to each investor to quantify.

Vanguard’s Advisor’s Alpha framework incorporates all of these principles, making it possible for advisors to add up to about 3% in net returns for their clients. This figure should not be viewed as an annual add, however. Vanguard’s research emphasizes that it is more likely to be intermittent, as some of the most significant opportunities to add value occur during periods of market duress or euphoria that tempt clients to abandon their well-thought-out investment plans.

In such circumstances, the advisor may have the opportunity to add tens of percentage points, rather than merely basis points. Although this wealth creation will not show up on any client statement, it is real and represents the difference in clients’ performance if they stay invested according to their plan as opposed to abandoning it.


As a self-described frugal person and a do-it-yourselfer, I’m aware it’s not always easy to justify paying a financial advisor to manage your investments. Why should I pay someone for this when I can do it myself?

So to have Vanguard, one of the most highly respected mutual fund firms in the world, and a definite hub for the do-it-yourself kind of investor, research and quantify the potential value a client could receive when a financial advisor follows their five step framework (which we do) while managing their investments, all I can say is thank you and as usual - job well done.

                        I'd like a

Photo credit

Should I Use Vanguard’s Index Funds or Actively Managed Funds?


should I use Vanguard index funds

To index or not to index - that is the question many investors ask themselves when building a durable investment strategy.

If you’re a savvy Vanguard type of investor, undoubtedly you’re a huge fan of legendary Vanguard founder John Bogle, who pioneered the concept and use of index funds decades ago. Since then, the indexing revolution has taken Wall Street by storm and is now a very common and core strategy deployed by retail as well as institutional investors worldwide. Yet even today, the active vs. passive management debate continues unabated.

For those of us making the strong case for index investing (passive), we rely on what’s known as the ‘efficient market hypothesis’, which essentially says that all known information about investment securities, such as stocks, is already factored into the prices of those securities. Therefore, no amount of analysis can give an investor an edge over other investors. This is one of the primary reasons why investors choose to invest in index funds. It is the “if you can’t beat them join them philosophy”.

But what if some information is not as widely known for some areas of the market as in other areas? Wouldn’t this mean that some areas of the market are less ‘efficient’ than others? If so, wouldn’t it make sense to use an index fund for the efficient areas and actively managed funds for the less efficient?

You don’t need to be a stock analyst or mutual fund manager to know that information about some publicly traded companies is more readily available, and therefore more widely known, than others. A majority of large-cap stock mutual fund managers fail to beat the best S&P 500 Index funds over long periods of time because there is much more information available on the larger companies than the smaller ones.

Therefore, it takes more effort in the form of research and relative market risk to outperform the broad market indexes. This also increases expenses, which makes it even more difficult to compete with the low-cost index funds.

Choosing Between Index Funds or Active Funds

When asked recently in a Money Management Executive article about using Vanguard’s index or active funds when constructing a long-term portfolio, John Bogle said the following: “If you want to feel good; I tell people to put 95% in a serious money account (big index funds in one form or another) and 5% in your “funny money” account.

My preference when building and managing a client’s investment portfolio is to combine the wisdom of indexing with the advantages of actively managed funds for less efficient markets. For example, a good strategic model for a long term investor would be to have index funds form the core of the strategy at around 60-80% allocation and a combination of small-cap, international, some international bond funds and some sector funds to round out the portfolio.

Each quarter, I monitor the performance of all Vanguard funds we regularly use. Some years the variance between say a small cap index fund vs. an actively managed small cap fund is so minor as to not be worth noting. Other years, the difference is striking.

Below are some results to share with you based on Vanguard funds performance as of Friday, March 28th, 2014, comparing an index fund’s performance to an actively managed fund’s performance for the same asset class.

Vanguard Fund Performance as of 3-28-2014

Vanguard mutual fund performance

Notice how small the variance is between the S&P index fund vs. the comparative large-cap fund at Vanguard. Also, keep in mind, actively managed funds have higher expenses than index funds. For example, the Value Index fund listed above has an annual expense ratio of 0.10% for Admiral shares vs. a 0.30% expense for the U.S. Value actively managed fund. Although that seems like a small difference, over 10, 20 or 30 years, that small difference really adds up down the road.

Bottom line: If you’re drawn to the many advantages of utilizing index funds for your long-term investment strategy, you’re in good company. Now the question remains, do you go all in and use 100% indexing, or 95% as Bogle recommends OR a combination of the two?
I would argue that in this fast changing world we find ourselves living in, with high frequency traders (HFT’s)  looking to gain trading advantages in milliseconds (see article on ‘Flash Boys: A Wall Street Revolt’ by Michael Lewis-  that the answer not be simply either/or.

Disclaimer: The information in this blog is provided for discussion purposes only, and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities. All investing is subject to risk, including possible loss of principal. 


Click here to learn more aboutbecoming a long-term investor


Photo credit


Retirement Planning for Scaredy Cats


retirement planning for scaredy catsImagine you’ve just met a person that not only has a black belt in karate, but a third degree black belt to boot and is a well respected and nationally acclaimed sensei (teacher). You’re in awe of the practice and discipline required to achieve this level of martial arts mastery.

Meet Jay, a soft spoken, warm, gentle person who radiates a calming energy that you feel the second you make eye contact with him. His appearance gives no clue that underneath the hood, so to speak, is a person with immense personal power.

I met Jay for a retirement planning consultation recently and after a few minutes of getting to know each other, we got right into it. He just turned 50, is married and has a son and daughter both currently in college. Jay and his wife Julie have done a fairly decent job of saving for retirement.

About 20 minutes into our conversation, Jay becomes quiet and as I begin wondering what he's thinking, he takes a deep breath and shares the following with me.

“Dealing with money is the one area of my life that I have not mastered. In fact, it’s my biggest challenge in life and I’ve kept that fact a secret from my wife, my friends and my kids up until just this minute.  I’m a scaredy cat when it comes to this stuff. I’m sure this money secret is negatively affecting our marriage, but I’m not sure how to tell her, when to tell her or what to do about it and it’s tearing me up inside”.

At that moment, you could have blown me over with a feather. Here, in my Petaluma office, was a third degree black belt saying he was a ‘scaredy cat’, (his words and the inspiration for this blog post) when it comes to dealing with money. He made himself vulnerable and exposed his true fears. I knew that meant Jay felt safe and trusted me. He confessed a secret that’s been eating at him for years and soon after, we were on our way to exploring his money history.

Jay remembers vividly watching his father and uncle lose their business to bankruptcy when he was a teenager and the suffering that caused his mother and his siblings. His father tragically ended up committing suicide soon after the bankruptcy.

He thought he worked through all the sadness and pain this tragedy caused him in counseling and didn’t think the trauma he suffered as a teenager was affecting his current relationship with money.

Step 1- Know Your Money History

Your money history has a profound effect on the decisions you make about money. Until and unless you shine a light on all the assumptions and beliefs you’ve been carrying around since you were a kid about money and consciously eliminate outdated or self-defeating money patterns, having a peaceful relationship with money will elude you. You will strive but never arrive.

And lurking in the shadow will be the ever present money demon of self-sabotage. This unconscious and self-destructive behavior poses the greatest threat to your financial wellness. It will also be the most challenging to eradicate because it’s deeply embedded in your ego. And if your self-worth is inextricably linked to your net-worth, the hold it will have on you will be even stronger.

You could have $1 million, $5 million or $100 million - the amount of wealth you have accumulated makes no difference at all. Fear and anxiety around money is an equal opportunity offender. It takes its toll on the rich and famous as much as it does on the average person.

From Scaredy Cat to Fearless Retirement Planner

Jay's story is real, only their names have been changed. Upon my suggestion, he set up a weekend get away with Julie at their favorite vacation spot up in Lake Tahoe and gave her the true scoop about his fears and challenges around money and retirement planning.

When I saw his name pop up on my caller ID the Monday morning after their weekend away, I was eager yet a tad nervous to hear how things went. To my surprise, Julie was also on the call.

They said in the 22 years they’ve been married, this was one of the best weekends of their relationship. Everything was out in the open, and now, together and working as a team, they would move forward with a common vision of their future.

So the moral of this blog is that if a third degree black belt in karate can admit he’s a ‘scaredy cat’ when it comes to dealing with money, so can you. And then you can deal with it and move forward with your life. The truth will set you free.


“To know yourself as the Being underneath the thinker, the stillness underneath the mental noise, the love and joy underneath the pain, is freedom, salvation, enlightenment.”

-Eckhart Tolle

Read our quarterly newsletterand becomeFinancially Empowered!


Photo credit

Yes + Yes = Retirement Planning Success


 success in retirement

Think about the last time you wanted to do x and your spouse or life partner wanted to do y. How did you resolve your conflict? Did you both play fair when negotiating a compromise or does one of you always ‘win’? And if one of you usually gets your way most of the time, is it because he/she is the one that makes more or perhaps all the money in your relationship?

What happens if you’ve been the breadwinner throughout your relationship, but now your spouse/partner has inherited a significant inheritance? Suddenly you find yourself on a more level playing field, financially speaking. Instead of getting your way, as usual, in terms of money decisions, you now need to learn or relearn the art of negotiating with your life partner.

Couples and how they earn, spend and invest their money come in all shapes and sizes. Beyond that, you have to recognize that each person in a long-term relationship has their own money story, core beliefs and many times ‘baggage’ they bring into the relationship.

I Married for Better or Worse But Not for Lunch Every Day

Fast forward through life and now you’re both in your first year of retirement. It’s been a little clunky the first couple of months as you get adjusted to seeing each other every day. There were quite a few loose ends to sort out, but now all that has been taken care of and on to the next phase of your life. Or so you hope….

And then, it happens. You have your first conflict around money since you both retired. Having already developed a retirement income plan prior to launching into retirement, you know precisely the amount of discretionary funds you can use for travel and entertainment. You call this your fun money and you’re eager to spend it albeit, wisely.

Next, imagine you’re the one that earned less, perhaps much less than your spouse during your working years. When you reached financial flashpoints in the past, you quickly learned when to ‘hold-em’ and ‘when to fold-em’. Because he/she earned much more than you, had a far more stressful job than you, and although many times you wanted x and he/she wanted y, as the peacemaker in the family, you went along to get along and keep the peace.

But now, your time has come. No longer are you content being the one that usually lets your spouse get their way. Years and years of not saying yes to yourself, of doing what you knew in your heart was the right thing to do and for all the right reasons; well today’s a new day, it’s your turn, and you’re ready to say yes to yourself, full stop, end of story.

Yes + Yes Wins the Day

As ready as you are to become more assertive, to stand up for yourself and express your desires clearly and passionately, you realize that making up for all the times you didn’t get your way when it came to a money decision by now getting your way all the time is a losing strategy, bound to end in conflict and sore feelings.

I’m not suggesting negotiating with your spouse or life partner is going to be an easy conversation, because it’s not. Often times you’re out of practice and fall into your pre-retirement roles by default. But just like early on in your relationship, there are always differences to adjust to and compromises to be made as you plan for retirement.

But isn’t that the exciting part of growing old together? It’s an opportunity for a fresh start, exciting new changes and opportunities to grow and expand together. It’s a chance to reinvent one’s self as individuals and as a couple as well. 

I recently came across an excellent book on retirement called The Couple’s Retirement Puzzle: 10 Must-Have Conversations for Transitioning to the Second Half of Life, by Roberta Taylor and Dorian Mintzer. 

The authors are relationship therapists and retirement coaches, which is an excellent combination for the millions of baby boomers getting ready to, or have already retired. This book can help you in mapping out how to live your retirement years in money harmony, some would call it ‘money heaven’, with your partner.

Don’t expect to read the book and have all the answers immediately. The real work is in talking with your partner and having real discussions – arguments and all. Don’t expect to see eye-to-eye on everything, but look at these discussions as series of steps in designing the next chapter in the life you’ve dreamed of.

And remember, the goal when deciding how to spend your money in retirement is to seek and find common ground at all times. If a financial decision, whether large or small, results in a yes and no, back to the negotiating table you must go, because retirement happiness and success is all about a yes and a yes.


                 I'm ready to talk



Photo credit

Retirement Planning 101 - Learning the Art of Adapting to Change


financial planning 101

Think about how many years of your adult life you spend accumulating enough money in order to have financial security and the lifestyle you desire when you stop working for money. You do your best, save as much as possible, live within or below your means, fund your retirement accounts, maintain a low cost, well diversified investment portfolio, and then the big day arrives, and you say adios to your job, career or business.

Suddenly, all those years of saving and accumulating come to a screeching halt and instead of being in the accumulation phase, you now move into the distribution phase with your money. On paper, theoretically, this all makes sense, right? Your nest egg now needs to last your entire lifetime. No worries, right?


In the nearly 11 years of specializing in retirement planning, I’ve yet to see an individual client or couple not initially have a minor freak out session once this reality sets in. And these sessions are equal opportunity offenders regardless of net worth.

I’ve observed clients with many millions in the bank initially get just as stressed and worried about running out of money down the road as clients with much less saved up. It’s why I pay particular attention to the emotional aspects of this life transition. When you go from working full-time and collecting your paycheck regularly to suddenly being labeled as “retired”, the emotional impact is often striking.

For better or worse, we tend to derive much of our self-worth from not only what we do and what we have, but even more importantly from our net-worth. For men especially, this loss of career identity along with no longer receiving employment income to validate our self-worth and self-esteem creates a double whammy.

In talking with many of my now retired clients that made the transition successfully to the ‘other side’ they recall feeling lost and out of sorts the first few months of making the transition. For many, second guessing whether they retired too soon seems to be the most prevalent feeling. Usually, by month four, the majority of my newly retired clients have got their mojo back and most seem to adapt and move forward pretty successfully.

Meet the “Joneses”

For 35 years, Cindi and Emily 'Jones' watched their spending and pinched their pennies, all to be able to retire one day with few financial concerns. They read the seminal book on money, Your Money or Your Life, back in 1992, and were determined to be smart with their money. The mortgage on their Berkeley home was paid off in full two years ago, they have zero debt and drive cars that are five and seven years old respectively. They are frugal meisters without a doubt. And as with a few of my other clients, we compete annually to see who has found the most money during the past year.

Last August they were married and the following month they both stopped working for money. Although technically ‘retired’, they prefer not to use the ‘R’ word. The retirement income plan we developed has them withdrawing approx. 6% from their joint savings for the first 5 years, then it begins to gradually taper off but remain dynamic. Although many financial advisors suggest a maximum withdrawal rate of 4% annually, Laura and Emily wanted a more customized and dynamic spending plan that meshed closer with their lifestyle. That was music to my ears.

These Joneses do not worry about running out of money and here’s why.

  1. They have owned investments during periods of bad economies and bad markets. They have made good decisions and bad decisions and learned why their choices were either good or bad. This gives them confidence in their investment plan and should allow them to maintain a balanced portfolio indefinitely.
  2. They have the ability to reduce their expenses without having to limit their lifestyle. Most of their spending is truly discretionary and because they have strong money management systems in place, they can feel comfortable employing the dynamic spending plan we developed rather than a rigid one-for example, a 4% annual withdrawal model.
  3. Because they have flexibility in their spending, they do not believe they need a high level of certainty to proceed with the spending they currently enjoy.
  4. Perhaps most importantly, we have done real comprehensive financial planning together. This helps them better understand the range of possibilities and the trade-offs that apply to their decisions. Financial planning is a collaborative ongoing process, not a onetime event. They know we will revisit our assumptions and incorporate whatever changes may come.

Lastly, what has garnered the most confidence is that we have identified the trigger points that would warrant a scaling back of their withdrawals. This will be important if we hit a down stock market again, if they underestimate their spending or if future returns are as low as some believe they will be. We have also identified trigger points to resume higher spending levels should the couple experience better-than-expected results.

The planning work we have done together doesn’t offer any of our analytics as a crystal ball. It simply identifies what can get off track and exactly what we should do about it. The Joneses in other words are prepared.

There is an adage in life, “Pressure is something you feel when you are not prepared”. Well prepared Spiritus clients embarking on retirement can enter the unknowable future with confidence that they can adapt to whatever may come their way.


  Discover InspiredRetirement Planning


Photo credit Martin Abegglen

How to Turbo Charge Your Financial Plan? Be a Fearless Dreamer.


super charge your financial plan

I am pro-dream. There, I said it.

Of course, I kid, but seriously folks, what’s up with the lack of dreaming going on? I kid half-heartily because somehow, someway, many potential clients I meet have either forgotten how to dream or dare not utter the d-word.

Is there a mysterious anti-dream organization operating in stealth mode around the country zapping people of their ability to dream? What could explain this bizarre phenomenon?

I for one will not be fooled by these potential tricksters and saboteurs wreaking havoc with our dreams, whoever they may be. In honoring the great Martin Luther King on Monday, one can’t help but conjure up the vision of his inspiring I had a Dream Speech. Look no further than to this historic speech to comprehend fully the power we have if we summon the courage to dream.

Your vision and dreams of the future power and often turbo-charge your financial plan. Financial benchmarks like cash flow, net-worth, return on investment, asset allocation, etc are all necessary for measuring your plans progress, no doubt. But these are numbers on a spreadsheet that unaligned with your vision and dreams are meaningless. 

Pro-Dream 2014

Now back to the pro-dream campaign….. First, if it’s been way too long since you allowed yourself the joy of dreaming, there’s no time like tomorrow to start again.

Dreaming makes you vulnerable. All it takes is a couple times of having your dreams shattered and that’s it, you promise yourself you’ll never put yourself in a position where you could get hurt like that again.

You may have grown up in a family where dreaming about a better life was not encouraged. You may have seen your parents and siblings accept life the way it was and well, that’s the way it is, life isn’t fair, etc,.

You may be someone that rarely uses your imagination and are 'just the facts' type of person. Learning to dream, learning to visualize is a brand new skill set for you. For you, learning how to dream is like learning a foreign language. (check out Shakti Gawains classic book: Creative Visualization)

And you may be like many of the clients I meet that had big, colorful dreams of the future, everything was on track, life was wonderful and out of the blue, the love of your life passes away.

If you’re too scared to dream, dream anyway!

As a holistic financial planner, having clients able to clearly articulate their vision of the future is a must have. When I ask clients how they visualize their lives in their 60's, 70's and 80's, the answers of golf, golf and more golf doesn’t cut it. For some, one of the reasons I just mentioned may be what’s holding them back. But in order to have a successful outcome when creating a financial plan, being able to dream and clearly visualize the future you imagine is crucial to that process.

The good news is, with a little patience, a pinch of TLC and encouragement, clients eventually breakthrough the fear of letting themselves dream and what happens next is as beautiful a moment as you can imagine.

Dreams that have long been dormant come back to life. Ideas that have long been tossed aside take on a new life of their own. The future suddenly looks less daunting, in fact, the future looks very promising indeed. That wonderful sense of feeling alive again cascades through your body.

You are back. Welcome home. Now get back up there in the Director’s chair where you belong, start directing this movie called ‘your life’ and always, always dare to dream big.

Photo credit Pat Chiappa

Vanguard’s John Bogle Thinks Indexing Has Gone ‘Too Far’


bogleheadsJohn Bogle, the founder of Vanguard, recently conducted an extensive interview with a financial insider publication called Money Management Executive. In this no holds barred interview, Bogle shares his opinions and wisdom on index funds, ETF’s and alternative investments and how they are being used and marketed to the public.

When asked about the proliferation of index funds, with new ones popping up almost daily, Bogle in his usual no nonsense manner had this to say: “ I think it’s gone much too far. Most of them are not worth the powder to blow them to hell. I think there are 1,500 ETF’s in the U.S. It doesn’t work in the long-run. I can’t think of a worse way to invest. All that leverage doesn’t work over the long term."

“It’s 1,450 out of 1,500 ETF funds that I just wouldn’t touch because they’re not diversified enough. Or they have some huge speculative twist to them that if you can guess the markets right you will do very well for a day or two but who can do that? Nobody."

As a self-described ‘Boglehead’ and a long time believer in the value of low cost, well diversified index funds and the high integrity approach Vanguard offers, any opportunity to listen to or read Bogle ‘unplugged’ is just too good to pass up.

As the amount of investment choices continue to multiply daily and it becomes more difficult to separate hype from reality, refer back to this common sense article as often as is needed, tune out the noise, keep your investment costs low, create a well diversified portfolio, develop your financial plan and stick to it.

Vanguard’s Bogle: Indexing Has Gone Too Far   


Click here to learn more aboutbecoming a long\u002Dterm investor

3 Investing Mistakes to Avoid in 2014



John Bogle BogleheadsWith the stock market reaching new all time highs, the temptation will be strong to believe that the rules that govern sensible and long-term investing no longer apply to you. Suddenly the 60/40 asset allocation that has served you well over the years will feel too conservative.

That strong pull you feel egging you on to take on more risk, that voice in your head saying go for it, that familiar feeling of adrenaline rushing through your body as you throw caution to the wind and gamble your nest egg away, all this and more poses unpredictable risk to your long term financial security.

Here are 3 investing mistakes to avoid in 2014.


1. Chasing Performance

Probably the most common mistake investors make is chasing performance. Come January, the usual suspects will publish their list of the 10, 20 or 50 biggest mutual fund winners from 2013. More common now is to slice and dice the winners into more categories than one can imagine.

These mutual fund winners from last year, if chasing performance is your thing, soon replace the core funds in your portfolio as you chase after returns. It’s a temptation many investors find too hard to resist. If they performed so well last year, surely they’ll perform as well if not better in 2014, right? Not always and many times, not even close.

One way to avoid making this mistake is to do what more seasoned investment managers, including myself, do, which is to analyze not just last year’s performance, but instead look at a funds 5-year and preferably 10-year track record. This is a much better way to analyze and judge performance then strictly looking at a one year snap shot.

Keep in mind, mutual fund managers do get lucky sometimes. Looking at last year’s performance only when making a serious investment decision is not doing your proper due diligence. Always check out the 10 year track record if that’s possible as that will be a much better indicator of future performance than last year’s performance. Here’s a link to Vanguard’s mutual fund performance to better illustrate this point: Note the disparity between year-to-date returns and 10-year returns. That’s what you’ll want to pay attention to overall.

“John Bogle, the founder of The Vanguard Group and a longtime champion of investing in index funds said recently that America’s retirement system “is almost rigged against human psychology that says [if] something has done well in the past, it will do well in the future,” “That is not true. That is categorically false.” source:

2. Throwing Your Diversified Portfolio Under the Bus

With bond funds continuing to see record redemptions, the overwhelming impulse for many investors seeking long term growth will be to avoid bond funds all together in 2014 and put 100% of their portfolio into the stock market. With the S&P 500 looking like it’s going to have a record year, this strategy, on the surface at least, seems logical. But don’t fool yourself, doing this is risky business.

What many investors too easily forget is the sound reason and basis for developing and maintaining a broad diversified portfolio. What did well last year may underperform the following year. Large cap growth may have outperformed large cap value, small caps may have out performed emerging markets, short-term bonds may have out performed long-term bonds, etc.

Regardless of which asset class we’re talking about, it's much better to construct and maintain a well diversified portfolio than making the mistake of thinking you can outsmart or time the market.

3. Buying Investments on Margin

Before the market crash in 2008, buying stocks on margin, meaning you borrow money from your broker to purchase more stock than you have the cash to do, using your current investments as collateral, also known as utilizing leverage, was very common. Some brokerage firms even enabled their customers to purchase 3X the amount of stock they owned. So if you had a portfolio of $500k for example, you were able to leverage that portfolio and purchase up to $1.5 million of other investments.

The rules since the crash are no longer that loose, but it’s only a matter of time before we’re back to the bad old days of 2 to 3X leverage of your portfolio. Yes, of course, borrowing money against your portfolio provides you the opportunity to double or triple your profits. But as many investors found out the hard way in 2008, when the market turns south quickly, the ‘opportunity’ to lose 2 to 3X your portfolio value, (check out the movie Margin Call) happens as well. Call this what it is - gambling or speculating, but don’t call it long-term investing.

If you have a high propensity for risk, this temptation will be one of your biggest challenges to overcome. The thought of doubling, perhaps even tripling your returns feeds into your emotion of greed, and in this case, unlike the movie Wall Street, greed is not good.

To avoid this mistake, pay attention to what’s driving your emotional need to take on this type of high risk. With a stock market that seems to be headed in only one direction, up, it’s easy to forget how quickly global events can turn a market around on a dime.

Finally, do yourself a favor. Please bookmark this website: Bogleheads Investment Philosophy  So when you’re feeling tempted to do something risky with your investment strategy, go back and read these investing pearls of wisdom as many times as needed and get back on track to being a smart and savvy long-term investor.


Click here to learn more aboutbecoming a long\u002Dterm investor

5 Questions You Should Ask Your Financial Advisor



The following definition of ‘fiduciary’ is taken from the Center for Fiduciary Studies, fi360 website:

"An investment fiduciary is someone who is managing the assets of another person and stands in a special relationship of trust, confidence, and/or legal responsibility. The word “fiduciary” comes from the Latin word “fiducia,” meaning “trust.” An investment fiduciary is held to a standard of conduct and trust above that of a stranger or of a casual business person due to the superior knowledge and/or training of the fiduciary."

In the past, I've written a couple of blogposts about the various financial designations one can encounter in the alphabet soup of the financial services field. But as an investment manager, being a fiduciary is a very important designation to understand. The following list of five questions you should ask your advisor is taken from the Center for Fiduciary Studies, fi360 website.

Five Questions You Should Ask Any Advisor

Some advisors always operate in a fiduciary capacity, others only act as a fiduciary for certain specified services, and yet others are not permitted by their company to take on the obligations of a fiduciary at any time. In order to better understand the standard of care your advisor is providing you, ask the following questions:

1. Will you put my best interests above all others?

2. Will you act with prudence; that is, with the skill, care, diligence and good judgment of a professional?

3. Will you provide conspicuous, full and fair disclosure of all important facts?

4. Will you avoid conflicts of interest whenever possible?

5. Will you fully disclose and fairly manage, in my favor, unavoidable conflicts?

An advisor should be able to provide clear and concise answers to all of those questions and be willing to disclose that information in writing. In addition, any AIF® Designee should be able to describe how their relationship with you will operate and list the resources and tools that are incorporated into their business practices.

If you have any questions about my role as a fiduciary and what you can expect in our work together, please feel free to contact me - I'd be happy to illustrate the benefits of working with an AIF designee.


For More Financial Q \u0026amp\u003B AVisit our FAQ\u0026#39\u003Bs Page

The Seven Habits of Frugal Millionaires


frugal millionaires

Like most financial advisors that have been in practice for over ten years, I have my fair share of clients that are millionaires. So with that said, what makes our millionaire clients different than your “average run of the mill” millionaire client? The answer; the majority are frugal and proud of it.

If you’ve read the best-seller, The Millionaire Next Door, you know many of the people portrayed in the book are, relatively speaking, pretty frugal. Keeping that thought in mind, and based on years of observation, below are the seven most common frugal habits of Spiritus millionaires.

1 - Living Below Your Means

As your income rises, so do your lifestyle expenses. That’s the American way, right? Not for Spiritus millionaires. They consciously live below their means. The habit of saving money, lots of money, is deeply ingrained in their psyche.

Being frugal is a habit that comes naturally and easily for these clients. The ability to absolutely control their spending leads to higher self-confidence around their money habits. And it’s that higher awareness, that knowing that you have mastered cash flow 101 that creates the feeling of financial empowerment, which ultimately, at the end of the day, is how these millionaires stay millionaires.

2 - Seeking Symbols of Abundance

When was the last time you picked up a coin from the ground? Whether it’s a shiny quarter, thin dime, nickel or penny, think about it, when was the last time you not only spotted a coin but actually stopped to pick it up?

One of my favorite clients, a physician in Colorado, keeps track of every cent he finds and gathers. His income is ultra-high, yet he will not hesitate for a second to pick up any coin he spots. On top of that, he tracks his findings in Quicken annually. For fun, we actually compete to see who has found the most money at the end of each year.

These coins you spot and find are obviously not going to change your financial life, but seeing them as symbols of abundance, being thankful for those symbols continually showing up in your life keeps the abundance flowing and keeps these millionaires grounded and centered.

3 - Avoid Paying Retail Prices

This habit is probably the most common trait I’ve observed. Whether it’s finding bargains on Craigslist, gadgets on eBay, travel using or, checking the library instead of Amazon for the latest best-seller, our frugal millionaires are well aware of how much money they save when seeking better value for goods and services.

4 - Spending Money = Spending Life Energy

If you’re a fan of the best-seller Your Money or Your Life, then the term ‘life energy’ is very familiar to you. Think about your life energy as your precious time on this planet.

Now think about how you consciously or sometimes unconsciously trade/exchange your life energy for money. You take your most precious and valuable asset, your time, and you exchange that time for money. Surely knowing the value of that exchange develops the habit of spending your money very wisely and prudently.

5 - Will Splurge When Warranted

For some, the word frugal is another way of saying your cheap. I could not disagree more. Being frugal is about stretching the value of the dollar you earned. Cheap has nothing to do with that equation.

One of my millionaire clients recently purchased a brand spanking new Tesla. Another just spent a small fortune inviting and also paying for his close friends and relatives to join him in Hawaii for his 50th birthday celebration. On and on I could go. The habit of treating yourself, splurging even when desired, is a habit that keeps the money flowing into your life. It’s grounded in the belief that the more you give, the more you receive.

6 - Money Aligned With Your Core Values

Aligning your money with your core values is a habit that takes time to build and sustain, yet one that continues to reward year after year. Think about it as developing and fine-tuning your internal moral compass.

For our frugal millionaire clients, this habit is non-negotiable. They know staying in money harmony and keeping balance in your life allows you to continue to not just survive but thrive. Practice makes the master with this habit. Soon enough, before you know it, your intuition responds instantly to your financial decision making and your inner guidance system automatically points you in the right direction.

7 - Having a Plan and Sticking to it

How did our frugal millionaire clients become wealthy? They had a plan and they stuck to it. Planning is a habit that takes time to cultivate as it does not come naturally for most people. It begins with tapping into your imagination, visualizing the future you intend to create in bright colors then putting your plan into action.

Sticking to your plan is about your capacity to be resilient. It’s an inner awareness that setbacks are learning opportunities and signals that allow you to course correct. Because your plan is strategic, you take comfort in knowing where you’re headed, how you’re going to get there and how you can get back on track if needed. Ultimately, having a plan and sticking to it is the ‘secret sauce’ if peace of mind is your ultimate destination.


Read our quarterly newsletterand becomeFinancially Empowered!



Image credit

All Posts