Archive - June 2011

1
If You Haven’t Started Saving Enough For Your Retirement Yet; It May Be To Late
2
Why Our Economy Needs Negative Interest Rates
3
Why Index Funds Beat Actively Managed Mutual Funds
4
How To Invest Over the Long Run Like Warren Buffet
5
Ten Ways to Save Money Without Limiting Your Lifestyle

If You Haven’t Started Saving Enough For Your Retirement Yet; It May Be To Late

Everyone understands, at some level, the need to save for long-term goals. Buying a house, preparing for retirement, or sending a child to college are goals that we know we have to save for. But how much difference does it make whether we start saving now versus saving later?

When I began studying to become a financial planner, one of the first books I was required to buy was on “the time value of money.” The effect of earning compounding interest is fairly non-intuitive for most people, so it’s one of the first concepts that’s emphasized when you begin studying …

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Why Our Economy Needs Negative Interest Rates

People ask about things like “will the dollar be devalued?” Or “what investments hedge against devaluation”? To answer these questions one should look at the big picture of the economy and see that there is a need for interest rates to be negative in order to stimulate the economy.

With the risk of an unfundable series of sovereign bond defaults in the Eurozone, and a potential for a crash in China, the whole world is at risk of falling into Japan-style deflation.

If rates become negative then foreign investors would sell their dollar holdings to invest in countries with higher …

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Why Index Funds Beat Actively Managed Mutual Funds

There has been a lot of research that explains why index funds outperform actively managed mutual fund. I thought I’d share a distilled version:

An index fund has low turnover because it knows what stocks it will invest in; whatever stocks are in that index. Furthermore, because it knows the stocks it is going to invest in, it doesn’t have to pay a manager big bucks to beat the stock market. That means low fund expense ratios.

Actively Managed Funds

On the flip side, an actively managed fund has to try to beat the stock market by constantly buying and …

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How To Invest Over the Long Run Like Warren Buffet

In his Preface to the Fourth Edition of Benjamin Graham’s legendary book The Intelligent Investor, Warren Buffett wrote the following:

To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information.  What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.  This book precisely and clearly prescribes the proper framework.  You must supply the emotional discipline.

I’ve seen the same sentiment boiled down and paraphrased a bit, also attributed to Mr. Buffett (although I couldn’t find the original source) as:
It only
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Ten Ways to Save Money Without Limiting Your Lifestyle

As a fee-only advisor I often speak with clients in regards to their cash flow. We sometimes drill down to fine detail. When this occurs I always seem to find ways to cut corners without negatively impacting the client’s lifestyle.  Here are a few of the examples I have learned over the last several years.

  1. Eliminate Bank Fees- Banks are battling for assets and usually are willing to work to retain quality clients. Recently, I found out that a client was paying $100/ month for a few specialty services. After a quick phone call to the bank and a
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