photos courtesy of Gary Morrison

Six New SmartMoney Rules™

by Steve on November 22, 2014

We created the basic six SmartMoney Rules™ that we encourage our clients to practice:

  1. Protect Yourself
  2. Tie goals to your values
  3. Use cash and debt smartly
  4. Invest wisely
  5. Know how much is enough for retirement
  6. Review regularly

We have six more SmartMoney Rules™ to add to the mix. These are born out of our experience working with many clients and seeing the mistakes they make before we start working with them.

  • It’s not what you make that counts, it’s what you keep
  • There is no such thing as a free lunch (TNSFL)
  • Your house is only worth what someone will pay for it
  • Never borrow to buy a depreciating asset or enjoy a discretionary experience
  • Every dollar has a job.
  • Save at least 10% of every pre-tax dollar you make.


Investors Are Confused

by Steve on October 23, 2014

The recent stock market volatility means investors are confused. One article I read stated it nicely:

“The stock market’s volatility stems from confusion as to whether the economy is too hot or too cold—and it is worried about the Fed response.”
–Bill DeShurko, CFP

Add to this confusion the most recent Chicago Fed report that shows that the economy picked up in September.

“Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to +0.47 in September from –0.25 in August. Three of the four broad categories of indicators that make up the index made positive contributions to the index in September, and three of the four categories increased from August.”

So what’s an investor to do? On the one hand, there is the market drop in October with the return of volatility. And on the other hand, the economy seems to be doing fine in the recent months.
My answer: stay true to your investment approach. Do not change your asset allocation in response to short-term market fluctuations because if there is one thing we know for sure, the future is un-knowable.

Guessing which way the markets are going to move today or next week or next month is a loser’s game. Better to set a course and then stay with it during turbulent times. The ride may be rough some times, but you’re more likely to reach your destination by staying on course rather than veering off course when the wind rises and the seas broil. Stay the course my friends.

The Most Difficult Part of Investing

August 14, 2014

Over 20 years ago, in the book “Get Rick Slowly” William Spitz wrote that, “The most difficult part of investing is understanding and evaluating risk. ” This line struck me when I was reading this wonderful book recently.  The reason that understanding and evaluating risk is so challenging is that there are many types of  […]

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Four Reasons That Active Management Is a Bad Idea

August 12, 2014

Here is what we know about active investment management: 1. Active Management is expensive. The average expense ratio of actively managed funds is 1.29% vs. an average of .80% for all passive funds and .38% for all DFA Funds. ETFs are even cheaper. 2. Active Management doesn’t consistently work well. Over the last 5 years […]

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Predicting Investment Returns

August 7, 2014

We frequently tell clients that we can’t predict the future when it comes to investment return and no one can. However, while we have no idea what will happen to investment returns in the short-term, we can guess with a high level of accuracy about what will happen to investment returns in the long-term. This […]

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Every Dollar Has a Job

August 5, 2014

I read this line somewhere and we often repeat it to clients. The idea of giving each dollar a role or job to do is useful in several ways. It helps clients: 1. Be more aware of their money (“can’t have lazy dollars just sitting around doing nothing”) 2. Have specific purpose for their money […]

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Markets Are Very Efficient

July 31, 2014

Even skilled investment managers have a hard time overcoming the overall efficiency of the stock market, mainly because of transaction costs. Don’t believe me? Check out this chart of average annual returns for the ten-years ended in November 2013 of the legendary Warren Buffett Berkshire A Shares vs. the S&P 500 and the DFA U.S. […]

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Be Aware of Goldilocks Pricing Model in Restaurants

July 29, 2014

Our son and I recently ate out at a Mexican restaurant and when the bill was presented it showed a “suggested tip guideline. ” Now where I come from, a standard tip for good service is 15%. Poor service gets less and on rare occassion, the tip might be more than 15%. At this restaurant, […]

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Three Rules to Jump Start Investing Success

July 24, 2014

Carl Richards, the New York Times columnist, said: Rule 1: Decide to invest Rule 2: Make it automatic Rule 3: Never forget rules 1 and 2.

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Difference Between Saving and Investing

July 22, 2014

I read something recently that Pamela Yellen, author of The Bank on Yourself Revolution, wrote that struck a chord with me. She noted that too many people don’t understand the difference between saving and investing. Saving means putting money you can’t afford to lose in a vehicle that is safe and has guaranteed growth. For […]

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