Not About The Money

Not About The Money

By Not About The Money
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Not About The Money episodes

  • Ep. 17 – 21 Questions (Series) – 16. How do you report investment performance?
    Welcome to the Real Retirement Financial Planning Podcast.

    This series covers the 21 Questions to Ask Your Financial Advisor.


    The list of questions was inspired by Jason Zweig of the Wall Street Journal, and his blog post: The 19 Questions to Ask Your Financial Adviser.

    Responses to Jason's questions I read from other advisor websites lacked depth.

    "Yes," or "no," sometimes needs more context and a greater explanation into the whys.

    The goal of this series is to target the essence of what I think Jason is trying to protect you from, and help you make a better educated decision.






    21 Questions to Ask Your Financial Advisor

    16. How do you report investment performance?



    Jason wants: "After all expenses, compared to an average of highly similar assets that includes dividends or interest income, over the short and long term."


    At MARGIN, we use a third-party to calculate all our investment performance.
    It's calculated based on time-value weighted returns, and accounts for our fixed retainer fees (if billed from any account, and not paid out of pocket).

    We also provide quarterly formal performance reports, and daily access to portfolio performance through an online portal.



    Do you know how your performance is being calculated?


    Is your investment manager comparing your portfolio to the correct benchmark?

    2 min
  • Ep. 16 – 21 Questions (Series) – 15. How often do you trade?
    Welcome to the Real Retirement Financial Planning Podcast. This series covers the 21 Questions to Ask Your Financial Advisor.   The list of questions was inspired by Jason Zweig of the Wall Street Journal, and his blog post: The 19 Questions to Ask Your Financial Adviser. Responses to Jason’s questions I read from other advisor…
    5 min
  • Ep. 16 – 21 Questions (Series) – 15. How often do you trade?
    Welcome to the Real Retirement Financial Planning Podcast.

    This series covers the 21 Questions to Ask Your Financial Advisor.

    The list of questions was inspired by Jason Zweig of the Wall Street Journal, and his blog post: The 19 Questions to Ask Your Financial Adviser.

    Responses to Jason's questions I read from other advisor websites lacked depth.

    "Yes," or "no," sometimes needs more context and a greater explanation into the whys.

    The goal of this series is to target the essence of what I think Jason is trying to protect you from, and help you make a better educated decision.







    21 Questions to Ask Your Financial Advisor


    15. How often do you trade?



    Jason is looking for: "As seldom as possible, ideally once or twice a year at most."


    At MARGIN, we trade based on what your Investment Policy Statement says; this document is crafted and driven by your financial plan. It defines how far asset classes can drift before they are rebalanced. 

    We trade to harvest gains in low tax years, or, harvest losses when appropriate. 

    Outside of risk and taxes, we don't believe in being "tactical," and we trade as little as possible because of explicit and implicit costs.


    Keeping risk in check by following an Investment Policy Statement is especially important in retirement when you are taking income from your portfolio.

    Being surprised by a large decline because your portfolio drifted is a difficult thing to stomach.

    Keeping your asset allocation in check takes discipline and process to follow.



    Trading too much



    Trading all the time, and being "tactical" is usually a great way to add "value," right?

    No!

    Overtrading and pretending to know exactly what will happen based on the last CNBC ticker tape line, or talking head, is not a way to add consistent value.

    Over tilting toward sectors and/or over-rebalancing can hurt performance; these "strategies" can generate more taxable losses and risk in a feeble attempt to outperform.



    Trading too little



    Losses can offset gains at tax time, just remember, only $3,000 in net losses can be used to offset ordinary income in one year.

    The remaining net loss can be carried over for future tax years.

    Missing opportunities for tax-loss harvesting, or forgetting to take gains in years with low taxable income can be more common than you think, but not as hyped as some robo-advisors would lead you to believe.



    Robo-advisor tax-loss harvesting bonanza 



    Don't believe the hype.

    Wealthfront a popular robo-advisor touts you can add an additional 1.55% in "tax-loss harvesting" to the investment return.




    Please read all the fine print...

    There are some serious assumptions needed to get to this conclusion.

    It doesn't add up all the time.


    And.

    Remember.
    5 min
  • Ep. 15 – 21 Questions (Series) – 14. Do you believe you can beat the market?
    Welcome to the Real Retirement Financial Planning Podcast.

    This series covers the 21 Questions to Ask Your Financial Advisor.


    The list of questions was inspired by Jason Zweig of the Wall Street Journal, and his blog post: The 19 Questions to Ask Your Financial Adviser.

    Responses to Jason's questions I read from other advisor websites lacked depth.

    "Yes," or "no," sometimes needs more context and a greater explanation into the whys.

    The goal of this series is to target the essence of what I think Jason is trying to protect you from, and help you make a better educated decision.







    21 Questions to Ask Your Financial Advisor


    14. Do you believe you can beat the market?



    Jason wants a "no" here. 


    Let's be more specific.

    What I think he may be asking is do we think we can pick active managers, stocks, or have a strategy for consistently beating the underlying benchmark over the long-term?

    (Mostly) No.

    Even with published academic research stating the benefits of tilting toward certain anomalies that have persisted over time, it's still uncertain if these will hold up in the future. 



    Defining "the market"



    Most of the time the market is defined as the Standard and Poor's 500 index, or the Dow Jones Industrial Average.

    These are the most widely published United States stock benchmarks quoted in the media.



    Getting short-term lucky  



    There's too much research that states it's difficult to persistently beat the market over the long-term after fees.

    Fewer and fewer can...

    Yes.

    Of course.

    Some strategies, managers, stocks, industries, and your cousin Vinnie, can outperform the market over the short-term. 

    Taking on more risk can lead to outperformance as well, but it can also lead to tears, and financial ruin when taken at the wrong time.



    The most expensive hobby



    Taking above market risk is not free. You pay for it with more uncertainty, and greater variation in returns, and (many times) more losses than "the market."

    As you get closer to retirement, you may have more time on your hands, and fancy yourself a stock picker in training.

    Outside of a small portion of your portfolio, mostly it's a great way to get overconfident at the wrong times, or rack up losses when you've already won the game (you're going to be retired, right!?).

    Understanding the market, is understanding that you will never understand the market, and that it will consistently humble great investors.

    Getting lucky is gambling.

    Not investing.

    But. You may be better than some of the greats. I don't know...


    Most of the best of the best turn into the rest.

    Falls from glory (flashy or slowly) are common even among the "legends" of our industry.

    5 min
  • Ep. 14 – 21 Questions (Series) – 13. Do you believe in technaical analysis or market timing?
    Welcome to the Real Retirement Financial Planning Podcast.

    This series covers the 21 Questions to Ask Your Financial Advisor.


    The list of questions was inspired by Jason Zweig of the Wall Street Journal, and his blog post: The 19 Questions to Ask Your Financial Adviser.

    Responses to Jason's questions I read from other advisor websites lacked depth.

    "Yes," or "no," sometimes needs more context and a greater explanation into the whys.

    The goal of this series is to target the essence of what I think Jason is trying to protect you from, and help you make a better educated decision.







    21 Questions to Ask Your Financial Advisor


    13. Do you believe in technical analysis or market timing?  



    Jason wants a "no" here. 


    At MARGIN, after personally studying technical analysis, we don't believe in it, nor in our ability to "time" the market.


    Technical analysis is the study of price and indicators that generate "signals" to trade into and out of the market.

    Price does provide an additional lens, but too much of it is viewed in hindsight through the windshield.

    Let's take a look at moving averages as a "buy" or "sell" signal for example.

    Unfortunately, following a trigger like moving averages, can lead to selling a stock right before it rebounds, or buying a stock, and then having it retreat.

    Transaction costs, taxes, and additional risk are often an afterthought in a quest for something that usually isn't consistently there: a crystal ball of outperformance.



    Does the firm you work with "know" just the right time to get you in and out?


    How much in taxes, transaction costs, and lost gains does it really cost you to try and "time" the market?


    Do you look for just the "right" time to get in and out?
    2 min
  • Ep. 13 – 21 Questions (Series) – 12. What is your investment philosophy?
    Welcome to the Real Retirement Financial Planning Podcast.

    This series covers the 21 Questions to Ask Your Financial Advisor.


    The list of questions was inspired by Jason Zweig of the Wall Street Journal, and his blog post: The 19 Questions to Ask Your Financial Adviser.

    Responses to Jason's questions I read from other advisor websites lacked depth.

    "Yes," or "no," sometimes needs more context and a greater explanation into the whys.

    The goal of this series is to target the essence of what I think Jason is trying to protect you from, and help you make a better educated decision.







    21 Questions to Ask Your Financial Advisor

    12. What is your investment philosophy?



    This is the only question Jason doesn't specifically answer. 


    At MARGIN we believe in low-cost, tax-efficient, diversified investing. We craft and follow a personalized investment policy statement that meets your goals.

    Our investment strategies are founded based on practitioner and academic research.

    We believe in passive management, but that anomalies persist over the long-term.

    These sources of return can be captured in a cost-effective manner known as "factor" investing. 



    What we don't do 



    There are some firms that tout the benefits of buying and selling active managers, and investing in separately managed accounts to the tune of a 1%+ asset management fee.

    Their "screens," "due-diligence process," and "experts" will surely find the best of the best, right?

    An elaborate team of CFAs, and PhDs (if you're lucky) usually don't find managers with performance glory that will persist even over a three-year period.

    This (magical) 3-year number is usually professed as: "just give us a shot for the performance to go full-cycle."

    But. Surely somebody can do it!?


    Been there; sold that



    I've worked as an analyst on a private banking team, and as a product analyst trying to help get funds approved on major platforms (i.e., UBS, Wells Fargo, Merrill Lynch, etc.).


    Selling the due diligence

    From firsthand experience, it's very difficult to identify managers that will persist over the long-term. (Usually persistence is found in underperformance,
    9 min

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