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Our Comment by J. David Lewis - There is more to money than money®. And, there is more to investing than picking one (or a few) indexed mutual funds. There is still art and the need for judgment in putting together a good portfolio, no matter what instruments you use.
By Jason Zweig
“As a result, investors are equipped with the itchiest trigger fingers ever in one of the touchiest periods in history. To blame the rise in correlation solely on indexing, they argue, is shortsighted.
With active stock pickers still stinking up the joint, indexing remains the cheapest, most convenient and most reliable way to capture the returns of just about any market.
But if the only index fund you own is linked to the S&P 500, too much of your money may be riding on stocks that move in lock step. Think beyond the S&P 500 to baskets like the Russell 3000 index or “total stock market indexes” tracked by Dow Jones, MSCI, S&P or Wilshire, which hold a much broader selection of stocks.
Next, no matter how diversified you are, you probably arent as diversified as you think.”
Read the full column via The Intelligent Investor: Are Index Funds Messing Up the Markets? – WSJ.com.
Contact J. David Lewis directly with dlewis@resourceadv.com or share your thoughts on this topic below. He founded Resource Advisory Services in 1985. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family.
February 24th, 2012
Our Comments by J. David Lewis – It takes a long time to stimulate meaningful change. Three years must have passed since we started seeing public inquiries into abusive expense in retirement plans. Apparently our government is not yet prepared to regulate these expenses outright. Nevertheless, I feel good that we are getting disclosure soon that will help us figure out what a retirement plan costs. Until now, the best we could do was compare the results clients actually got from their plans to results we could simulate using published information for the same investments outside the retirement plan. Some of the differences have really disturbed us. This is a great article for anyone with a 401(k) to read.
Revealing Excessive 401(k) Fees By RON LIEBER – Published: June 3, 2011
“DISCLOSING FEES Thankfully, the basic question of what fees you’re paying in your 401k or 403b is about to become easier to answer. Starting in 2012, according to new Labor Department guidelines, investment and other companies like Fidelity, which is a party to the ABB lawsuit, will need to be more clear with employers about how they are charging them.
Employers, in turn, will have to itemize more information on plan fees and expenses on account statements. In addition, they will need to display the costs of each mutual fund or other investment in a way that makes it easier for employees to compare their choices.
While it’s not yet clear how all of this will work in practice, there is real potential here for employers, especially executives at smaller ones for whom managing the retirement plan is one of dozens of duties, to get a harsh wake-up call about the size of their annual bill. And even if they don’t, their employees may see a menu of high-cost funds staring them in the face and begin to ask for a better plan.”
I encourage reading the full article via Shedding Light on Excessive 401k Fees – NYTimes.com.
Contact J. David Lewis directly with david.lewis@resourceadv.com or share your thoughts on this topic below. He founded Resource Advisory Services in 1985. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family. 53862
June 6th, 2011
Our Comment by J. David Lewis – Because There is more to Money Than Money®, I think this is a really good article for those who are thinking about retirement. There really is a lot more to retirement than figuring out how much spending money will be available. Retirement is also a very big change in lifestyle, which requires a lot of adjustment. I once heard a clients say “I liked him a lot more when he didn’t care how I loaded the dishwasher. We have seen some get very grouchy along about the time they stop work. So, we recommend the article.
“Although its common for couples to discuss how to handle money matters before they get married, even couples whove been together for years dont always adequately explore the subject of retirement before it happens. At best, thats a recipe for domestic discord, and at worst, for retirement disaster, says Mintzer, who spoke on the topic at the 2011 Aging in America conference last week in San Francisco.
With people living longer, its important for couples to talk about how they want to spend those potentially 20 to 30 additional years, Mintzer says. “Its hard enough for an individual to figure out whats next. Its more complicated for couples since you may have different priorities and time tables. Talking together gives you an opportunity to set some times lines and create a shared vision.”
Read the list via 10 Questions Couples Need to Ask Themselves about Retirement – SecondAct.com.
Contact J. David Lewis directly with david.lewis@resourceadv.com or share your thoughts on this topic below. He founded Resource Advisory Services in 1985. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family. 53254
May 6th, 2011
Smart Advice for 2011 – More than Money Resource
By J. David Lewis
The beginning of a New Year means we have all started another trip around the sun together – nearly 7 billion of us. The end of one year and the beginning of another really does bring changes in people. At least I believe relationships feel different at this time of year. Starting in late November, writers were asking financial advisors for “smart money moves” to include in 2011 New Year stories. They mentioned things like which stocks to buy or tax tricks to use in the coming twelve months. I didn’t respond to any of those. Frankly, my responses probably would not be as exciting as they wanted. We do believe thinking about a few things at this time of year can help your chances of building and enjoying wealth:
- Try to improve your enjoyment and proficiency in your career. From our experience, it is clear that people who really enjoy their work get better at it and have the best chances to build wealth. For some fortunate souls, work is not work. Sometimes it becomes intense. They need a break, but they virtually never regret the things they do to earn their living. If you don’t feel you have this, 2011 will be a good year to find ways you can move closer to it in your profession. If you realize it is not available there, begin looking for ways to get where you need to be. It is never too late. I was in my 30’s when I discovered financial planning and adopted my philosophy of the way I wanted to do it. That was an extreme step that has meant everything to me.
- If you do number 1 well, assuming our society recognized value in whatever that career is, you should be able to earn an appropriate reward for your contributions to the world. And, the lifestyle that income provides will probably feel very good when you consider how much you will have to give up in working where there is less joy and more money. No matter what “smart money moves” you read in publications or hear at parties, earning appropriate income for work you enjoy is the first and largest step in building wealth you can enjoy. Can you improve this in 2011?
- Next, there is a balancing act – to allocate that income among three things. They are things you absolutely need in 2011, amenities to make life more enjoyable and growing net worth. It is not all about accumulation. It is about balance. I don’t remember seeing people who were both happy and totally fixated on building net worth. We are fortunate in helping people see their wealth grow at reasonable rates. They all seem to take great satisfaction in clearly seeing the progress and the activities that affect progress. What can you do to develop a measurement system for seeing how well you balance these elements by December 31, 2011?
- This puts building net worth, or wealth, fourth in our list of “Smart Advice for 2011.” In our society, people really do need to accumulate resources so they can maintain those amenities of life when they no longer enjoy the activities that generate income. In the last while, we have worked for someone who was born and educated in a Communist country. I have an interesting feeling when I think of him telling me he had education, prestige, a better apartment than most and anything else he really needed. He just didn’t have money or choices. I think it is important to keep perspective in an understanding that we accumulate to have choices in our lifetime. In this country, we are not likely to starve. It is the choices accumulated wealth can give us that make increasing net worth important. Income that is not spent on necessities or amenities should increase net worth. It can either reduce debt or contribute to investments. Debts are future income that is spent for necessities and amenities before it is earned. Payments on debt reduce choices in the future. Investments are resources put aside for future spending. Think about your best ways to measure success on both of these fronts in 2011 – while prudently enjoying amenities of life. Balance is important.
- The smartest investment moves you can make in 2011 are essentially the same as they have been every year. First understand that it is impossible to predict exactly what investments will be best in any one year. Pick a variety of very good ones with a personal resolution to hold them until the time you, or your heirs, will spend the money they represent. Understand that this could be a wonderful year for many kinds of investments. It could be very bad for any of them as well. Good investments are not dependent on the year or as solitary instruments. They are elements of a portfolio, where the portfolio results are the measure that is important. It takes five to ten years to know whether an overall portfolio is producing a prudent return.
In 2011, resolve to make the overall portfolio the primary measure of investment results and net worth the primary measure of financial results after you have figured out how to make the source of your income the most enjoyable it can be for you.
Contact J. David Lewis directly with david.lewis@resourceadv.com or share your thoughts on this topic below. He founded Resource Advisory Services in 1985. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family. 51077
January 6th, 2011
Seasonal Gifts with Financial Themes
by J. David Lewis
Every year we see professional publications and colleagues asking about financial Christmas gifts. Consumer publications suggest things like paying for an adult child to visit a financial planner or 529 Educational Savings Plan contributions for grandchildren. The ideas seem to be the same each year.
At Thanksgiving, two of our grandchildren visited our new office one evening. They were curious about what we do here and each of our roles. It was a perfect opportunity to learn more about their Christmas presents that started three years ago – monthly contributions to investment accounts. I wrote Grandchildren and 401(k) Contributions in June 2009 and Revisiting Grandchildren & 401(k) Contributions with Positive Dollars of Return in September of that year. Those articles were to encourage people who were concerned about the recent economic stresses.
While people are thinking about Christmas 2010, I want to reinforce the educational and relationship value of financial gifts for children. There is more to money than money®. Kids learn best when their curiosity initiates the conversation. It does not work nearly as well when an adult initiates “money talk.” Parents generally have many more opportunities than grandparents. At our office, I got my chance. They watched us print their personal reports to hold. Very easily, they could comprehend how much the accounts have grown above my contributions. More important, they can relate the amount to something “cool” in their lives. At ages 8 and 6, they are old enough to understand that investments produce growth without work.
This is exciting. Their understanding is worth far more than the dollars contributed or amounts they will grow – even the tax benefits some forms of gifts offer. It is not about transferring wealth to their names. The relationship that helps them understand, in small steps, is the key. Christmas fits well for growing relationships. This gift is about teaching them something that should find its way into the mature adult they will eventually become. If we help them achieve that understanding, they will take pride in their own ability to build and enjoy the wealth they are capable of creating.
My parents were not inclined to buy fancy things. Friends had flashier Christmas presents. I almost always felt deprived relative to such things. Yet, I knew I had a savings account and sometimes saw how much interest it earned. Growing up with that as a subtle backdrop in my life gave me confidence to do many things. My grandchildren saw a little of their version of this story and seemed to understand it. That can be their Christmas gift to me, no matter what material things I see this year.
There will be another financial crisis. I hope the next one waits until they are old enough to comprehend its affect on their accounts. If it is too soon, there will be numerous opportunities for them to see bulls and bears in their never ending struggles. I hope our relationship gives me chances to help them understand the context for the ever changing times.
There is more to money than money.® The important message I want to convey with this writing is that financial Christmas gifts are not about giving money or what the giver believes the money should be used for. For my grandchildren, it might be used for academic education. I will be just as happy if it is used for the experience of a trip to an interesting distant place. They might lose it starting a business and learn from that and try again. I don’t care. For me, this gift is about them learning. The crucial element is relationships with adults who see and act on the moments they are ready to learn. Others can write what they will about financial Christmas gifts. This is my story and I am sticking to it.
Merry Christmas!!!
Contact J. David Lewis directly with david.lewis@resourceadv.com or share your thoughts on this topic below. He founded Resource Advisory Services in 1985. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family. 50645
December 6th, 2010
Our Comment by J. David Lewis – This article points to the importance of good financial communication within couples. One of the things Resource Advisory Services has always tried to facilitate is improvement of theses communications. Preparing regular Quarterly Reports that describes the current state of each family’s resources, along with our thoughts on ways to improve the management, gives information that enhances these discussions. Our reports are addressed to both members of each couple. Most couples have asked for each individual to receive a separate copy by email. They get to see the results of financial decisions and events independently. We find that couples seem to develop better common understanding of their circumstance as this foundation of accurate information works its way into the culture of the family.
Marriages financial minefields
By Jason Alderman
For the HeadlightPosted: 10/07/2010 12:00:00 AM MDT
“As with all challenges in a marriage, often what starts as a small issue can fester and grow into a large problem, given enough time. Its not surprising that after being together a few years, some couples realize that the financial quirks they initially found amusing or simply ignored in their spouse now dominate their marital disagreements. In fact, money issues tend to top the reasons for divorce.
If youre having financial difficulties, long before they escalate step back and examine how and when you and your spouse discuss — or dont discuss — your financial situation, and explore ways to ease the tension.”
Read Mr. Alderman’s recommendations via Marriages financial minefields – The Deming Headlight.
Contact J. David Lewis directly with david.lewis@resourceadv.com or share your thoughts on this topic below. He founded Resource Advisory Services in 1985. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family.
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October 13th, 2010
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