Are you Satisfied with the Financial Advice you are Receiving? “If you can’t explain it simply, you don’t understand it well enough ” Albert Einstein How long are we going to subscribe to the typical investment advice on just building assets for retirement?   Is there a better way?   While we are talking about it, is investing only in stocks or stock funds really diversification?   When we have another stock market correction, will it only affect large-cap stocks? Small-cap ? Emerging markets? International markets?   Finally, should financial planners keep forecasting future results in their overly complex financial plans riddled with too many assumptions?   If you follow my blog, you will notice a common theme in my writing—typical financial investment advice has failed.   The baby boomer generation in retirement now validates the poor investment advice provided to investors in previous years.   What happened to the 401K?   Where are the defined pension programs?   What

1 Page Financial Plan

A One Page Financial Plan? Gerald House MSM “The Contrarian Investor” Is a full-blown financial plan necessary?   What are you getting for the money invested in a comprehensive financial plan costing $2500-$5000?   Comprehensive financial planning begins by organizing your financial data and inputting that data into an expensive financial planning software tool.   Once the software has worked its magic, the financial planner reviews the analysis.   Finally, the financial planner interprets and explains the results to the client.   This method, at first blush, sounds like a very professional process.   However, the devil is i n the details .     The 5 False Assumptions Have you ever heard the saying “garbage in garbage out”?   Computer software can only analyze the data inputted.   In a typical financial plan, much of the data is erroneous because it is analogous to guessing.   Financial planners use proposals to construct an investment portfolio for your retiremen

Life Planning

Life Planning Gerald L. House MSM “The Contrarian Investor” As many of you know, I am not a fan of the term “retirement .”   However, this term still lingers throughout the financial service industry.   And, why not, financial advisors continue to promote financial planning using the old typical investment strategies because many people have succumbed to this thinking.   Nonetheless, a couple of new terms recently emerged challenging the way people structure their financial needs.   Life Plans and Holistic Planning Actually, “holistic planning” recently morphed into the new term “life plan .” This new term defines your life according to various stages and goals you defined.   “Life planning is a guided process by which an individual takes stock of his or her life, clarifies goals and challenges, and identifies the steps needed to move forward. A life planning professional can help address relevant issues and find resources - people and information - needed for a
Retirement Savings Shortfall Gerald House MSM Researchers continue to analyze the methods and procedures for calculating the ideal savings and investment rates needed for individuals without considering that life happens .  There are events and circumstances in our lives which determine our financial savings and accumulations once retirement approaches.  Therefore, more theories and assumptions are not going to change the fact most Americans are not financially prepared for retirement.  Pang, Gaobo, and Schieber (2014) discuss the numerous studies aimed at discovering the right mix of retirement withdrawal rates and portfolio allocation strategies.  One item which the authors discuss is the disproportionate allocations without considering the pre-retirement income of the individual.  Also, according to the authors, the life cycle accumulation models do not consider life events throughout the savers working life which may severely impact their savings rates such as caring for e
The Yale Endowment Model         The Yale endowment model incorporates the mean-variance approach as described in Modern Portfolio Theory (MPT) designed by Harry Markowitz and James Tobin ( Yale Investment Office, 2017).  Markowitz (1952) based his theory on the idea of minimizing investment risks within the investment portfolio by enhancing diversification strategies designed to optimize an investment portfolio given any level of risk. The Yale Endowment Model, using this method, has changed its mix of investments from nine-tenths in stocks, bonds, and cash to just one-tenth in recent years.  Currently, the Yale Endowment model uses an alternative investment mix for the bulk of their investments to include private equity, real estate, leveraged buyouts, venture capital, absolute returns, foreign equity, domestic equity, fixed income, and cash and it’s equivalent.  Endowment models in general usually have a long-term investment horizon, but the use of alternatives far exceed most

Stock and Bond Replacements

Stock (Equity) and Bond (Debt) Replacements            Financial advisors and investment managers should consider absolute returns in all market conditions, not just traditional asset classes when building an investment portfolio for a client.   Investment strategies necessitate the need to look outside the traditional stock and bond portfolios of  yesteryears and include assets which are viable replacement vehicles (Alternatives) such as  Crowdfunding (CF) and Peer-to-Peer lending (P2P).  The DNA of an investment portfolio cannot  afford to limp around after a stock market correction because of the confinement of products to a  single mindset of correlated investments in one area of investing.  Background    Crowdfunding (CF), like Peer-to-Peer lending (P2P) is a method to raise funds or capital for various projects, like start-up businesses or real estate investments.  CF uses the Internet and software platforms to appeal to a wide audience (The Cr

*The Living Balance Sheet

*The Living Balance Sheet How accurate is financial forecasting?  Many financial planners use both a past and future forecasting to design a financial plan for clients.  As a matter of fact, Monte Carlo simulations (computerized simulations designed to model various outcomes and risks) are run to supposedly add credibility to the financial plan outcome.  However, why do you need to forecast future results which may or may not happen?  Perhaps this allows people to sleep better at night?  Life happens.  Therefore, why not just keep a personal balance sheet which is easily updated automatically from your existing checking and investment accounts?  These online accounts are very secure and can chart your progress 24 hours a day.  I use Mint (A Quicken Product) which recently was voted best personal financial service software by PC Magazine for 2017—and it is free.  Sure, it takes some time to get all your accounts set up but you will soon find out all this work is well worth the ef