In this week’s BS in Barron’s Report, Craig Slayen, a San Francisco Bay Area financial planner and investment advisor, reviews an article written in Barron’s Magazine exactly 12 months ago on AdvisorShares. In this video, he exposes an illusion in the marketplace that “stock picking works.”

The financial press, the brokerage firms and the mutual fund companies make a lot of money getting investors to believe that certain investing illusions work. The mission of the BS in Barron’s Report is to make investors aware of these illusions, so that they stop falling into the traps that drag down long term portfolio returns.

The BS in Barron’s Report reviews an article in the Barron’s Magazine that was on the newsstand exactly one year ago each week. The report focuses on exposing the following Five Industry Illusions:

• Our Research Works
• Stock Picking Works
• Timing The Markets Work
• Track Record Investing Works
• Forecasting Works

The post BS in Barron’s Report on AdvisorShares Rockledge ETF appeared first on Winship Wealth Partners.

The financial press, the brokerage firms and the mutual fund companies make a lot of money getting investors to believe that certain investing illusions work. The mission of the BS in Barron’s Report is to make investors aware of these illusions, so that they stop falling into the traps that drag down long term portfolio returns.

The BS in Barron’s Report reviews an article in the Barron’s Magazine that was on the newsstand exactly one year ago each week. The report focuses on exposing the following Five Industry Illusions:

• Our Research Works
• Stock Picking Works
• Timing The Markets Work
• Track Record Investing Works
• Forecasting Works

The post BS in Barron’s Report on Staples appeared first on Winship Wealth Partners.

The New Year offers a great time to reflect on last year’s performance. When looking at your investment portfolio it can be amusing, or frightening, to think about what could have been.

For better or worse, many 2012 economic predictions turned out to be false. Did you fall for the Facebook buzz, or believe in the double dip recession? At a time like this, it’s wise to take what you learned this year and apply it to future investment management.

Financial services professionals have predictions for 2013; one prediction, the financial cliff, is already causing a stir. Pressure to improve your investment strategy may be coming. When it does, think back to failed predictions of 2012.

The Facebook IPO

Mark Zuckerberg decided to throw open the vaults of the largest social media platform in the world on February 1, 2012.

After building up investor anticipation with repeated delays, many wondered if they would ever get a piece of Facebook.  The IPO finally came out at the cost of $38. It dropped 11% a couple days later. It still languishes below $20.

Gold, gold, gold

When combining the steep rise of gold in early 2012, and concerns about inflation, it seemed a no-brainer prediction that gold would reach $2,000 an ounce by years end. In reality, gold currently falls short of this prediction by $300. While the prediction seemed easy, the path gold traveled in 2012 was not as simple.

All year gold bounced between $1,550 and $1,775 but just couldn’t seem to break through the $1,800 barrier.

US Bonds are Junk

With the US credit rating still lower than Canada and France, advisors were predicting serious consequences in the bond market. Throughout the year, U.S. Treasuries were dismissed as junk. And yet, investors fled to bonds as a tried and true remedy for uncertainty. Average yield, which is typically around four percent, has fallen to less than two percent because of demand. Despite the dire forecasts, the bond market remains healthy.

Another Recession

“Double dip recession” is a familiar phrase. And in early 2012, it was painted as inevitable.

Granted, election years evoke daunting predictions because each party casts a horrible picture of failed policies and economic woes of the other. This past year, the forecast was that rising unemployment numbers would cause a dip in gross domestic product (GDP). Thankfully, this did not occur, and while not stellar, the U.S. economy is on track for improvement with a two percent increase in GDP for 2012.

China’s “Hard Landing”

With double digit economic growth for most of the previous decade, at the end of 2011, an influential forecaster predicted the Chinese miracle was about to end. With a slumping housing market and Communist rulings on entrepreneurial advances, how could the country continue to grow? It was thought impossible.

However, China proved strong. While GDP did shrink, it stayed above seven percent, a remarkable number given sluggish performance in the U.S. and Europe. Pair this failed prediction with a similar bet against Greece, which looks to be on track to survive until at least 2014 (http://www.cnbc.com/id/100282664/page/3).

Euro and Dollar

With all the tough talk about austerity in Europe, economists were predicting a serious fall in the value of the Euro against the dollar. In fact, some claimed it would be equal value in 2012. However, even with dips, the Euro remains a healthy $1.30 at the end of the year.

While some hope this will happen, and thus restore the European economies, others say this happening will cause trouble for major economies like U.S. and China, as Europe will become competitive in exports.

12-21-2012

The expiration of the Mayan calendar didn’t lead to much investment advice. The much talked about end-of-the-world may have inspired some to dump everything on one last spending spree, but mostly, as December 21^st came and went, the financial markets (and the public in general) shrugged and wondered what would lunch be the next day.

• Why the brokerage firm model must subordinate client interests to shareholder interests
• How equity research is skewed to increase corporate profits
• Why stockbrokers can’t provide conflict-free advice.
• How the media traps investors into taking unnecessary action
• Why “conventional wisdom” portrayed by the media can hurt investment performance

Image made available by  live w mcs on Flickr through Creative Common Licenses.

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Can You Really Blame Small Investors For Being Scared?

Since 2000, for many it felt like the boom and bust years of the 1849 Gold Rush – the 2000 dot.com bust; the real estate bust; the 2008 market crash; the 2010 flash cash; and the 2011 summer slide, all following significant booms. It’s enough to make any right-minded person throw up their hands.

On top of that, investors have watched big banks and brokerage firms, embroiled in shady deal, scandals and deception, turn their assets into vapor only to be bailed out using their tax payer dollars. And these were not just Bernie Madoff-type weasels – we’re talking about Goldman Sachs, JP Morgan Chase, MF Global, Standard Charter to name a few. Who wouldn’t want to walk away from that?

Of course, there is also the sluggish economy and the uncertainty it breeds in investor minds. Couple that with the “fiscal cliff” that is pending if politicians don’t stop campaigning and actually start leading and addressing the critical fiscal issues our nation faces.

All of this makes it really difficult for people to consider risking their own capital in the face of so much uncertainty. But you need to!

In order to to keep up with the inevitable increases in your cost of living over the next 30 years, you need to be taking risk and investing in the global equity markets. (Baby boomers…  I am talking to you.  If you are married and a non smoker – you are expected to live for another 30 years)

Follow Investment Principle #1: Have Faith in the Future

Unquestionably, these are difficult and uncertain times. And there is every reason to feel as if things are rigged against us.  But, history gives us every reason to have faith in the future.  The stock market has increased in value more than 100-fold since World War II. This in spite of multiple recessions, increasing global strife, massive debt and deficits, and a financial meltdown that nearly crippled the world’s banking system.  In that time there have been as many bear markets as bull markets, but the duration of bear markets has been far shorter. And, on average, the percentage of market declines has been just a fraction of the market gains during bull markets.

What that means, in essence, is that with each bull market, the losses of the preceding bear market decline were made up and the gains of the prior bull market were extended. To sit out the market, even temporarily almost guarantees that you will lock in your losses and miss the eventual opportunities for gains.

Successful investors view the future optimistically, because, to do otherwise would ignore the historical record. It is, therefore, the practical view. And when we have faith in the future, we can invest accordingly.

You can not be a good long term investor if you do not have faith in the future.  If you ever have any doubts – go walk into an Apple store.  See the technology there and remember 5.5 years ago, no one owned an iPhone.  The world’s companies are going to continue to innovate.  The middle class is growing around the globe.  They are going to want the products of the great companies around the world.  As their wealth grows they will be investors in the markets.

Turn off the negative news coming from the financial press.  Think long term (that’s 20 years, not 20 days) and take the attitude that we don’t know exactly how things will turn out all right;  we just know that they will turn out all right.

The post Warning to Small Investors; Don’t Be Scared of The Markets appeared first on Winship Wealth Partners.

This belief can carry into adulthood.

In fact, millions of adults repeat this phrase when standing in line to buy lottery tickets.

When it comes to retirement planning and financial management, too many investors are like children in the school yard believing the myths in the marketplace.

Most recently a question came in by email from a prospect of ours….

My main challenge is that I don’t have anyone who can tell me “watch out for a time bomb on X,Y,Z” or “this asset class is about to crater because ____”

Investors need to be aware when they are searching for unicorns in the financial markets.  The reason why he has been having so much trouble finding the advisor who can successfully do this – is because one does not exist.

Believing in Market Myths

So what are the 3 market myths to watch out for?

• The unicorn:  Stock picking works. Watch out when a portfolio manager or your stock broker tells you they have some great way to research what is going to happen in the future for a particular company.  Most CEOs don’t know what sales are going to look like over the next 12 months.  So don’t believe that the mutual fund managers you see on TV can do so.
• The toad:  Track record investing works.  We all see the warning… “Past performance is not an indicator of future results.”  Investors unfortunately don’t believe it.  But there is no correlation between a managers past performance and what they are able to do int he future. So don’t be kissing this frog when choosing what advisor or mutual fund to invest with.
• The fairy god-mother: Market timing works.  No one has a crystal ball looking into the future and thus no advisor is going to be able to consistently predict when you should be getting in and out of the market.

Find your Unicorn

Avoid asking your investment advisor to find you a unicorn. It can’t be done. Ask instead to balance risk with reward in a rational manner, using their skills and expertise.

Trying to frame investments as winners and losers is a mistake. Instead, stick with a basic structure:

1. Allocate between multiples asset classes, geographic diversity, size and value/growth companies
2. Diversify by investing in large baskets of stocks (index or asset class funds)
3. Rebalance
4. Repeat Steps 1-3

If you can’t stop believing in myths, try this, it’s the same thing and cheaper: go to a casino, phone your advisor and ask, “Red or black?

• Why the brokerage firm model must subordinate client interests to shareholder interests
• How equity research is skewed to increase corporate profits
• Why stockbrokers can’t provide conflict-free advice.
• How the media traps investors into taking unnecessary action
• Why “conventional wisdom” portrayed by the media can hurt investment performance

The post Do you believe in unicorns? The 3 top financial industry myths. appeared first on Winship Wealth Partners.

The financial press, the brokerage firms and the mutual fund companies make a lot of money getting investors to believe that certain investing illusions work. The mission of the BS in Barron’s Report is to make investors aware of these illusions, so that they stop falling into the traps that drag down long term portfolio returns.

The BS in Barron’s Report reviews an article in the Barron’s Magazine that was on the newsstand exactly one year ago each week. The report focuses on exposing the following Five Industry Illusions:

• Our Research Works

• Stock Picking Works

• Timing The Markets Work

• Track Record Investing Works

• Forecasting Works

The post BS In Barron’s Report on Hewlett Packard appeared first on Winship Wealth Partners.

]]> http://winshipwealth.com/bs-in-barrons-report-on-hewlett-packard/feed/ 0 http://winshipwealth.com/bs-in-barrons-report-on-hca-of-america/?utm_source=rss&utm_medium=rss&utm_campaign=bs-in-barrons-report-on-hca-of-america http://winshipwealth.com/bs-in-barrons-report-on-hca-of-america/#comments Tue, 06 Nov 2012 01:17:01 +0000 Craig Slayen http://winshipwealth.com/?p=1436 In this week’s BS in Barron’s Report, Craig Slayen, a San Francisco Bay Area financial planner and investment advisor, reviews an article written in Barron’s Magazine exactly 12 months ago on HCA of America and their suspect accounting practices. In …

The post BS in Barron’s Report on HCA of America appeared first on Winship Wealth Partners.

]]> In this week’s BS in Barron’s Report, Craig Slayen, a San Francisco Bay Area financial planner and investment advisor, reviews an article written in Barron’s Magazine exactly 12 months ago on HCA of America and their suspect accounting practices. In this video, he exposes an illusion in the marketplace that “researching stocks works.”

The financial press, the brokerage firms and the mutual fund companies make a lot of money getting investors to believe that certain investing illusions work. The mission of the BS in Barron’s Report is to make investors aware of these illusions, so that they stop falling into the traps that drag down long term portfolio returns.

The BS in Barron’s Report reviews an article in the Barron’s Magazine that was on the newsstand exactly one year ago each week. The report focuses on exposing the following Five Industry Illusions:

• Our Research Works

• Stock Picking Works

• Timing The Markets Work

• Track Record Investing Works

• Forecasting Works

The post BS in Barron’s Report on HCA of America appeared first on Winship Wealth Partners.

]]> http://winshipwealth.com/bs-in-barrons-report-on-hca-of-america/feed/ 0 http://winshipwealth.com/long-term-investors-have-nothing-to-fear-except-fear-itself/?utm_source=rss&utm_medium=rss&utm_campaign=long-term-investors-have-nothing-to-fear-except-fear-itself http://winshipwealth.com/long-term-investors-have-nothing-to-fear-except-fear-itself/#comments Sun, 26 Aug 2012 17:19:35 +0000 Craig Slayen http://winshipwealth.com/?p=783 The stock market seems to be at the crossroads again, which is always a disconcerting place to be for investors who prefer a little more clarity in its direction. Crossroads are not uncommon for the market which has seen many …

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]]> The stock market seems to be at the crossroads again, which is always a disconcerting place to be for investors who prefer a little more clarity in its direction. Crossroads are not uncommon for the market which has seen many over the years and investors have come to expect them periodically. In a pattern reminiscent of last summer, the S&P 500 has been bucking wildly up and down since its rally peak in April, yet it currently sits just 8 points below its April 30 close.  Since April, equity funds have experienced a steady cadence of outflows while bond funds are becoming gorged with inflows, all of which tells us that investor uncertainty is palpable even as the market hovers near its three-year high.

Of course the financial pundits are of no help whatsoever. A recent scan of the articles posted over the last month at RealClearMarkets.com shows a nearly equal number of analysts predicting a market decline as there are forecasting a big market rally. Go figure.  Investors focused on short-term returns are left to decide which half is going to be right. Except, if we look back at the market in 2011, when the S&P 500 finished where it started they both could be wrong.

Unquestionably, over the last few years the markets have been driven by fear. But, it’s not just the typical fear normally associated with the gloomy prospect of another recession. This time around it stems from a nearly complete lack of confidence in U.S. and European governments to forge any kind of solution that will stave off a collapse of the global financial system.  With the inevitability of a Greek default, investors are paralyzed with a sense of déjà vu a la Lehman Brothers 2008, only on a more devastating scale.  And, as serious as the situation in Europe is, investors view the current stalemate in Congress and lack of fiscal leadership in our government as a whole as a larger threat to economic stability here at home.  It’s possible that what investors fear most is that the future direction of the market hinges almost entirely on the calculations of government and central bank policymakers. With more than 80% of Americans having little or no faith in the government to do what is right, that is not just frightening, it can be sheer terror.

The More Likely Scenario

Unquestionably, the ominous clouds of a perfect global storm is enough to strike fear in the bravest among us, especially with the terror of the financial crisis still fresh in our minds. And, we are mindful of the precarious state of our economy as it continues to deleverage itself and find its footing.  But, as it stands, there are just not enough of the signs in place that would indicate we are tipping towards a recession. Job growth, while anemic, is at least occurring, and the current rate of corporate profit growth and capital spending portend improving payroll growth. The biggest weight on the economy and business expansion right now is the declining sentiment that has dragged the value of risk assets down which is self-fulfilling in its effects on the economy.

While the market still faces a challenging environment and has a wall of worry to overcome, we believe that patience and a vigorous commitment to your investment plan is the best strategy to weather this bout of uncertainty.  Those investors who stay true to the sound principles of successful investing, and who avoid the costly behavioral mistakes that almost guarantee underperformance, have nothing to fear.

For more information on “fearless” investing download our special five-page report on “Laying the Foundation for Successful Investing” (click here).

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]]> http://winshipwealth.com/long-term-investors-have-nothing-to-fear-except-fear-itself/feed/ 0 http://winshipwealth.com/investors-beware-the-media-noise-is-deafening/?utm_source=rss&utm_medium=rss&utm_campaign=investors-beware-the-media-noise-is-deafening http://winshipwealth.com/investors-beware-the-media-noise-is-deafening/#comments Sun, 26 Aug 2012 17:18:05 +0000 Craig Slayen http://winshipwealth.com/?p=780 Most people would argue that living in a digital world, with instant access to an endless stream of information has made us smarter and more self-empowered than past generations. Investors believe that it has “leveled the playing field”, enabling them …

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]]> Most people would argue that living in a digital world, with instant access to an endless stream of information has made us smarter and more self-empowered than past generations. Investors believe that it has “leveled the playing field”, enabling them to make investment decisions based on the same information once only available to the investment pros. The incessant quest for information has reached such a fever pitch that the media outlets, including the cable channels, print media, and now the blogosphere, are churning out content 24/7, and it still isn’t enough to satiate peoples’ ravenous appetite for information. So, it’s all good? WRONG.

There is a much stronger argument that can be made that, for people in general and investors especially, information overload not only makes it more difficult to make rational decisions, it often leads to behavior that can be harmful, if not devastating to your financial health. While there has obviously been a marked increase in the quantity of information, the quality of the information will always be in question. Where you have quantity without quality, all you really have is “noise.” And for people who really should be listening for legitimate financial advice and relevant information, it can be deafening.

With 85 percent of the population wired to the Internet and mobile devices, information has become so ubiquitous that it has become an entitlement for people who take its availability for granted. The media is taking full advantage of that entitlement attitude to layer on as much content as it thinks the public can consume. In order to attract the attention of a pre-occupied public, and therefore the advertising dollars its viewership generates, the information has to be entertaining, pithy, and compelling. To that end, the media has no fear or shame in hyping a story beyond a reasoned reality, in order to make its information more essential.

In the investment arena, stories can’t be compelling, or entertaining, for that matter, unless they are consequential in the short term. In other words, the Facebook IPO, even though it was of little actual consequence to most investors, is a much more compelling story than an essay on the superior, long-term performance of index investing, even though it could benefit the vast majority of investors. The problem is that the information we, as investors, receive is filtered through an “excitability” gauge. Can you imagine an analyst or stock guru spending 20 minutes on CNBC talking about the 5-year growth prospects of the stock market and how a diversified portfolio is your best opportunity to outperform the market? Three-quarters of the audience would switch over to the food channel where they could find much more “consequential” information.

In the same way the media likes to hype the stock-picking gurus, it also over-glamorizes professional investors, such as mutual fund managers. The hottest fund managers of the year are plastered over the airwaves and magazine covers with the same fervency as sports heroes. Never mind that fewer than 25 percent of fund managers are able to repeat their market-beating performance two years in a row. Never mind that index funds – fund portfolios that require little or no fund management – consistently outperform the entire universe of mutual fund managers. Yet, you won’t see an index fund featured on the cover of U.S News. They’re too mundane, or perhaps they’re just too obvious, and the obvious is always boring.

Unfortunately, access to more information and technology has not improved investor performance over the last couple of decades. While I’m not suggesting that you should turn off your cable news or refrain from surfing investment sites, you do need to remind yourself that these sources of information don’t necessarily share your agenda. Gathering information and educating yourself are essential parts of the process, but it should be done in the context of your clearly-defined objectives and a well-conceived financial plan.

For more information on avoiding investing mistakes, download our special five-page report, “The Biggest Mistakes Investors Make.”

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]]> http://winshipwealth.com/investors-beware-the-media-noise-is-deafening/feed/ 0 http://winshipwealth.com/does-market-timing-ever-pay/?utm_source=rss&utm_medium=rss&utm_campaign=does-market-timing-ever-pay http://winshipwealth.com/does-market-timing-ever-pay/#comments Sun, 26 Aug 2012 17:13:38 +0000 Craig Slayen http://winshipwealth.com/?p=775 Does Market Timing Ever Pay? In December of 2011, Reuters reported that U.S. equity funds experienced a record net outflow over the last four months of the year which suggests that investors were anxious to get out of the market …

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]]> Does Market Timing Ever Pay?

In December of 2011, Reuters reported that U.S. equity funds experienced a record net outflow over the last four months of the year which suggests that investors were anxious to get out of the market after a partial recovery from the summer market collapse.  Having failed to see the massive decline coming at the end of July, investors sprang from the market at the first sign of recovery, perhaps thinking that the worst was yet to come. Once again, the market timers missed the mark as the stock market roared ahead over the next six months with record-setting gains.  As was the case with the steep decline of 2008, and as is typically the case in any market cycle, all they accomplished was to lock in their losses and guarantee portfolio underperformance for years to come.

Who could blame anyone for ditching the stock market at the first signs of the financial meltdown in 2008?  It looked very bleak to even the most passive investor.  But most market declines are not so starkly telegraphed. Most market shifts occur more stealthily, and with little indication as to its long term direction.  Yet, many investors hold on to the notion that they can call the shift and make the right move at the right moment.

Although we may read about some investor successes in timing the markets, we have yet to come across anyone with a verifiable record of consistently outperforming the market for any length of time. Morningstar, which probably tracks investment strategies more than most publications, revealed that, in a ten-year period (2000) – 2010, the performance of portfolios engaged in market timing returned 1.5 percent less than the average return of stock mutual funds. Morningstar points out that, in order to have beat the market averages, a market timer would have to make the right move at least seven out of ten times, which only a very small fraction of market timers might be able to do.

The Cost of Market Timing

Even for those who manage to time the market correct 50 percent of time, a closer analysis will show that the returns are likely to be offset by the increased costs associated with market timing. These additional investment costs, which can be significant, include:

Opportunity costs: Market timers may be able to miss the worst periods of the market, but, as the research shows, they are more likely to miss the best periods as well. It’s well documented that investors who bailed out during the last one-third of market decline in 2008 also missed the first 70 percent of the market recovery over the next 18 months. In effect they locked in the temporary losses  the 2008 crash for years to come.

Transaction Costs: Mutual fund investors already need to earn returns be able to offset the fees and expenses which can amount to 3 percent annually. But, moving in and out of funds can increase costs if sales charges or 12b1 fees are involved.

Taxes: Successful market timers will incur more capital gains taxes upon the sale of their securities. And, for mutual fund investors, the hidden taxes of high turnover portfolios (paid out of portfolio returns) further erode potential gains.

Is the Potential Gain of Market Timing Ever Worth the Costs?

We are all, inherently, lousy timers. Just think about the last time you were at the DMV and chose the shortest line only to watch crawl to halt, while the longer line churned quickly through; or switching to the fast-moving lane on the freeway only to see long river of red brake lights in front of you. Is it ever worth the extra risk, time or irritation when the potential gain is so small?

If you are not adept at picking stocks or forecasting the direction of the market – and, by-the-way, who really is? – your best long-term investment strategy is to allocate your assets to reflect your clearly defined objectives and structure your portfolio through diversification in order to capture market returns wherever they occur and minimize your risk through reduced volatility.

For a more in depth look into asset allocation and portfolio diversification, join us at our next Winship Webinar, Wednesday, ___________ at 10:00am. Register here.

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