photos courtesy of Gary Morrison

Surprising Stock Market Surge Continues

by Steve on July 18, 2014

In the first half of 2014, the U.S. stock market continued its upward trend and has many people wondering “How high can this thing go?” The S&P 500 Index (a representative index for the entire U.S. stock market) increased 6% in the first six months of the year. This is on top of the 32% increase in 2013 and 16% increase the year before. The current stock market surge started in March 2009 and now has run upward for 63 months, the fourth longest in history.

We do not make our living making predictions, leaving that to fortune tellers, palm readers, tarot card readers, and Wall Street “experts.” We do know that, as always, now is a good time to review your investment portfolio and re-balance it if your portfolio holds too much of one asset (stocks) and not enough of other assets (high quality bonds and cash). If your portfolio is divided among these assets in the way you would feel comfortable no matter what the future brings, then you’re fine. If not, then make the changes you need to make in the portfolio that brings it back into line with what you set as your target portfolio mix in March of 2009.

Efficient Markets

by Steve on July 15, 2014

You may hear investment advisers say that investment markets are “efficient.” What does this mean? An efficient market has a large number of buyers and sellers, all the information about a security is known to all the buyers and sellers at the same time and transaction costs are low. For example, the U.S. stock and bond markets are very efficient this way.

In contrast, the residential housing market is very in-efficient. In any neighborhood where there are family houses to buy and sell, there are a limited number of buyers and sellers, the information about a property is not known to all buyers and sellers (typically the seller knows a great deal about their house and potential buyers know very little)  and the transaction costs are high (about 10%).

What does this mean to you as an investor? Just this: in an efficient market, there is very little (if any) persistent advantage that a buyer or seller can gain. Yet, this is how the majority of the big financial houses (Merrill Lynch, UBS, Smith Barney) try to sell their services. That is, that they know something that the other participants don’t know. It’s ridiculous, but Wall Street keeps pumping out the same message that is flat out wrong. Better for you and me to stick to the efficient market idea and use low-cost and highly efficient index funds to create a portfolio.

Are You Income or Balance Sheet Wealthy?

June 14, 2014

I was re-reading some of the research done by Dr. Thomas J. Staley on millionaires next door and it reminded me of this important distinction. On his blog, Dr. Staley wrote that based on his research: “Most millionaires measure success by net worth, not income. Instead of taking their money home, they plow as much […]

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Mindset Is Key In Pre-Retirement Planning

June 10, 2014

Bobby Jones, perhaps the greatest golfer of all time, said: “Competitive golf is played mainly on a five-and-a-half inch course…the space between your ears.” It’s a remarkable thought that a game that is played over a 7,000 yard course comes down to mindset. And it’s the same when it comes to a successful transition to […]

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Money Mistakes in Retirement Planning (part 2)

June 4, 2014

To continue the list we started last time of the money mistakes too many people make when they start their retirement planning, we present the top six money-related blunders in retirement planning. 6. Ineffective investment approach. It seems that people either take too much or too little risk in the last five years before retirement. […]

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Money Mistakes in Retirement Planning (part 1)

May 27, 2014

We’ve spent the last few blog posts discussing a variety of non-financial issues to consider in retirement planning. Most recently we’ve touched on the big three (I call them the three “W’s”): • Where will you live in retirement? • What will you do in retirement? • Who will you spend time with in retirement? […]

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Who to Spend Time With in Retirement

May 22, 2014

We often hear from recently retired people that the social side of retirement may be the hardest part. After all, the automatic social network that you have when you work is lost when you retire. Again, using the work of Nelson and Bolles in What Color is Your Parachute for Retirement, to be happy in […]

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Where Will You Live in Retirement (part 2)?

May 20, 2014

According to, these are the best state in which to retire and their comments. 10. Texas (tie) — warm weather and solid economy 10. California (tie) — good weather and high life expectancy 9. South Dakota — low crime rate and high life expectancy 7. New Mexico (tie) — good weather 7. Florida (tie) […]

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Where Will You Live in Retirement (part 1)?

May 15, 2014

There are three primary questions that you need to answer accurately if you are to enjoy your retirement: • Where will you live? • What will you do? • Who will you do it with? In the last several blogs, we reviewed ideas for the “what will you do?” question. Hopefully, you’ve taken the time […]

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Retirement. The Final Frontier

May 13, 2014

Those of us who remember the original Star Trek television series know that every show began with William Shatner, who played Captain Kirk, solemnly saying in a voice over, “Space. The final frontier.” I want to take that echo from our past and turn it into a thought for your future. Think of retirement as […]

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