Demystifying Pie Charts

FAMILY UPDATE

My son had a science project due this week. The topic? Figuring out the fastest way to cool a cookie.
He tried blowing on it versus putting it in the refrigerator versus putting it in the freezer. It turns out that putting the cookie in the freezer cools it the fastest. I'm not really sure how this was an experiment. The answer seems pretty obvious. (but at least we got to eat cookies)
My daughter and my puppy have become very close. He always sleeps in her room at night.
You'll also notice below that when Desmond has to go outside and it's raining, he puts on his favorite raincoat.

Sometimes I forget that many of you don’t understand some of the basics when it comes to investing. It is very easy to lose track when, not only have I been managing money for twenty years, but my Dad has a long history of investing as well. Did you talk about investing in stocks and bonds with your parents? Probably not. So let’s break this down to the absolute simplest terms possible. As I said, I often assume my readers understand certain concepts. If you don’t, the rest of the information may be hard to understand.

When most people invest money, instead of buying a bunch of individual stocks, they put the money into mutual funds. Mutual funds consist of hundreds or thousands of holdings within one investment vehicle.

When somebody says "You should have a diversified portfolio," it simply means you need to spread the money around. Mutual funds are a great way to do this.

I generally recommend against single stocks as they can be quite volatile and unpredictable. History shows a very predictable pattern of the total stock market, but individual stocks can do anything.

I don’t care if a company has been around for a long time. That does not mean it will make money. For example, GE has been around forever. It is down 65% over the past couple of years. Heinz is down 60%. Remember Texaco? It was one of the biggest companies in the country at the time. It went to zero.

Here's one that will really hit home: Facebook is down 75% this year!

When you buy a mutual fund, the mutual fund has a ticker symbol. You need to know the ticker symbol to buy the mutual fund.

Let’s say, you walk into Charles Schwab or Fidelity, and you ask them to purchase $100,000 of SPY. What are you actually investing in? SPY is a fund that consists of the 500 largest companies in the U.S. all in one neat package. It means you would put:

$5,800 into Apple
$5,490 into Microsoft
$4,170 into Amazon
$4,070 into Google
$2,260 into Facebook
$1,480 into Berkshire Hathaway
$1,320 into Tesla
$1,290 into NVIDIA Corporation
$1,290 into JP Morgan Chase
$1,210 into Johnson and Johnson
$1,100 into Visa
$1,050 into United Healthcare
$920 into Proctor and Gamble
$910 into Home Depot

This list goes on and on until it totals $100,000. You will own shares in 500 companies. The bigger the company, the bigger the allotment.

Many of you have 401k funds through your company. Maybe you have been told that "You need a balanced and diversified portfolio." You don’t want to put money only in large U.S. companies.

Besides big American companies, there are other places to invest your money such as:

Small-Sized Companies (they are called "Small Cap")
Medium-Sized Companies (Mid Cap)
International Companies (companies from first world nations)
Emerging Market Companies (companies from developing nations)

You can also invest money in bonds. If you remember from past articles, a bond is simply a loan. For example, you loan Walmart $10,000 to help them build a store. They pay you 3% interest for ten years and then pay the loan back to you.

The types of bonds are:

U.S. Government Bonds (You are loaning money to the U.S. federal government)
Municipal Bonds (Loans to municipalities)
Corporate Bonds (Loans to companies)
International Bonds (Loans to companies and governments overseas)

So a "diversified and balanced portfolio of stocks and bonds" might look like:

30% Large Cap
10% Small Cap
10% Mid Cap
10% International
10% Emerging Markets
10% U.S. Government Bonds
10% Municipal Bonds
10% Corporate Bonds

*This is an example portfolio. I am not giving you advice on how to invest your money.

In addition, different asset classes move in different directions at different times.

In 2007 Emerging Markets made 40% and Small Companies lost 2%.

In 2008 U.S Treasury Bonds made 5% and Large Companies lost 37%.

In 2013 Small Companies made 39% and Emerging Markets lost 3%.

In 2014 Large Companies made 14% and International lost 5%.

So you can see that it is essential to spread your money around. Nobody knows in any given year which asset classes will thrive and which will do poorly. Don’t try to chase good returns.

For example:

In 2017 Emerging Markets made the most and in 2018 they lost the most.

In 2018 Small-Cap was one of the worst and in 2019 it was one of the best.

I hope that helps and demystifies investing a little bit. Don't make it more complicated than it is.

Be Blessed,

Dave

 

Do You Want to Be Remembered as Generous?

FAMILY UPDATE

My son's football team is in the playoffs and during the first playoff game, Chris forced a fumble and recovered it! Very exciting!
My in-laws really want me to like fishing. But this is the problem: I don't like baiting the hook with a live shrimp and I don't like getting the fish off the line. Basically, I want someone to hand me a baited hook, and then get the fish off when I catch one.
It sounds like I need a charter fisherman, but I don't like boats. (I sound very picky).

How much money is going to pass to heirs in the next 30 years? According to Time magazine, the number could reach over $30 trillion.

Yes, that is $30,000,000,000,000.

Today I am going to offer an alternative to leaving money to your kids.
Whenever I create long-term spending plans for my clients, I often hear, "But Dave, I understand you want us to start spending some money as soon as we retire, but we don’t need the money. We don’t even know what to do with it. We’ve learned to live frugally over the past forty years. We really don’t need anything else."

"It’s awesome that you’ve built up those habits," I’ll usually reply, "That is a big part of why you are in the position that you are in. But if you don’t use your money, someone else will—maybe the government, maybe your heirs—but you need to seriously think about what this money is FOR."

No one will ever be as good a steward of your savings as you. Let me say that again for maximum impact: No one will ever be as good a steward of your savings as you.

You’ve worked for it, you’ve earned it, and you appreciate it. You have a more intimate connection to your money than anyone else ever could.

You hear about it all the time. Kids inherit their parent’s money and it causes discord. They waste it. They fight with their siblings. They don’t treat it with the same care and respect as their parents did.

Athletes sign huge contracts, oftentimes straight out of school. They blow through the money because they weren’t prepared for it.

Many lottery winners say that winning the jackpot was one of the worst things that have ever happened to them. They don’t know how to steward the money because they didn’t earn it.

Of course, you need to do the appropriate planning to ensure you don’t outspend your savings, but once you make sure you are not mortgaging your future, you get to start determining how you want to spend the money—right now.

I want to be very clear. I am not asking you to become materialistic. I am merely suggesting that you start living your life with a renewed sense of opportunity.

This brings me back to your kids. As opposed to leaving them a large lump sum of money at your death, I think there’s a better way. Give them a little bit each month now. Or, put another way, dole out their inheritance a little bit at a time for the next 20 or 30 years.

Of course, we don’t want to enable our children; you will have to make that determination.

Benefit #1: Your kids are in their twenties, thirties, and forties which are the most complicated and difficult times in somebody’s financial life. They are having children. They are buying homes. They are starting careers. This is when they need the money. By the time you’re gone, your kids could be in their sixties and seventies.

Benefit #2: You are able to see your kids actually use and appreciate the money. You get to attend your granddaughter’s piano recital (you paid for the lessons). You get to see the relief on your son’s face when he realizes they are able to replace the car that keeps breaking down.

Benefit #3: You are able to see how your kids treat the money. Are they acting responsibly? Are they making good financial decisions? Better yet, you can mentor and guide them on how to better manage their assets. And if they blow your cash?

Well, it’s certainly better you know now.

Benefit #4: It is tax efficient. Taking out a little money from your retirement accounts each month stretches out the tax liability. It is much better to take a little bit of money out each month versus large lump sums here and there.

While heirs are able to utilize a "stretch IRA," which can spread out their tax liability over several years, I often see IRAs cashed out completely. A $500,000 IRA cashed out by your heir could result in over $150,000 in taxation.

(Mega) Benefit #5: You are teaching your kids an incredible lesson about generosity. Your kids get to see, firsthand, that Mom and Dad are not materialistic, nor are Mom and Dad overly stingy. Mom and Dad place value on what really IS valuable. Relationships. Family. Love and kindness.

If your kids see your generosity, they will grow to be generous themselves. Your legacy will last for generations.

Be Blessed,

Dave

FINAL EXAM

 FAMILY UPDATE

During my Mom's time in Sarasota, she went fishing for the first time in her life. She had never dipped a pole into the water, much less catch a fish. All that changed when she hooked a giant grouper (picture below).
It was enough fish to feed us the entire weekend (kidding). Even though she had such a good experience she doesn't really have any interest in doing it again.

I keep getting requests for cat pictures so I added one below.

This week I’m going to test your memory and your smarts. Only of few of you will know all the answers (let me know if you get 100%). Are you up to the challenge? Good luck.

Note: I tried to put the answers under each question but I don’t want you to cheat. So under each question, you will see a string of letters like this: abccdba. The THIRD letter is the correct answer (“c” in this example).

1. What is a mutual fund?

A. An individual stock.
B. A vehicle that contains lots of stocks and bonds all in one place.
C. A way beneficiaries get around the law to change who gets the money.
D. A stock that you “mutually” agree on with a financial advisor.

Answer: babcbdab

2. What is the stock market's average return over the past 20, 50, and 100 years? (They are all around the same number)

A. 10%
B. 6%
C. 4%
D. 2%

Ebadcba

3. Buying marijuana stocks and bitcoin is:

A. safe
B. speculative
C. gambling
D. A good idea for most people

Ccbbcda

4. Once on Medicare, what is the maximum out-of-pocket cost you could pay for medical expenses in any given year?

A. $30,000,000
B. $10,500
C. $6,700
D. There is no limit.

Ddcdabca

5. The life expectancy for a healthy 65-year-old is:

A. 80
B. 85
C. 90
D. 95

Abccdba

6. Social Security will have a cost of living increase next year of:

A. 3.1%
B. 5.9%
C. 0%
D. 8.7%

Dbddbadba

7. Which investment is the most volatile?

A. A single bond
B. A single stock
C. A bond mutual fund
D. A stock mutual fund

Adbdatry

8. How do taxes work on Roth IRAs?

A. You get a tax deduction when you add money and then a tax deduction when you take the money out.
B. You don’t get a tax break upfront and you have to pay taxes when you take the money out.
C. You don’t get a tax break but can take the money out tax-free.
D. You get a tax deduction but when you take the money out you have to pay income taxes.

Aacabda

9. How do taxes work on 401ks and IRAs?

A. You get a tax deduction when you add money and then a tax deduction when you take the money out.
B. You don’t get a tax break. You have to pay taxes when you take the money out.
C. You don’t get a tax break but you can take the money out tax-free.
D. You get a tax deduction upfront but when you take the money out you have to pay income taxes.

Ddddecba

10. When are you required to start taking money from your IRA?

A. 59 ½
B. 65
C. 72
D. 75

Cacdadca

11. What is the most important variable for your retirement finances?

A. The amount in your 401k
B. Whether or not you have a mortgage
C. Have much you have in the bank
D. Your budget

Dcdadcz

12. How much money can you take with you when you die?

A. $1000
B. $150,000
C. $350,000
D. $0

Ddddacbc

13. If Mr. Smith is getting $2000/mo from Social Security and Mrs. Smith is getting $1400, what happens to Mrs. Smith’s benefit if Mr. Smith dies?

A. She starts getting $2000/mo
B. She keeps getting $1400/mo
C. She gets to add them and get $3400/mo
D. She stops getting Social Security altogether.

Adacads

14. Day trading is a good idea if…

A. You have time to pay attention to the markets.
B. You have the expertise.
C. Never. It’s almost always a loser in the long term
D. You have fancy software you bought off the internet for $1500.

Adcdaba

15. If you invested $100,000 in the stock market from 1979 to 1999, what would it have grown to?

A. $223,500
B. $150,700
C. $1,840,000
D. $940,300

abcdea

16. Buying gold from a commercial on cable TV is:

A. A borderline scam.
B. Good for people looking for a conservative investment.
C. A good idea is today's economic climate.
D. A bad idea for most people.

aaacedjg

17. If you invest in a diversified portfolio of stocks and bonds with at least half of the money in stocks- what is a reasonable amount of money to take from the account each year?

A. 5%
B. 2%
C. 8%
D. 3%

Dbabdacz

18. What percentage of the country dies with more money than ever?

A. 10%
B. 20%
C. 30%
D. 50%

Cdcbea

19. On average, how much money do 75-year-olds spend, compared to those aged 60?

A. 40% less
B. 20% more
C. 10% less
D. 30% more

Bbabdadlkj

20. What is my favorite ice cream flavor?

A. Vanilla
B. Chocolate
C. Mint Chocolate Chip
D. Cookie Dough

Dbbdbadba

How did you do? As for myself, I got 100%, but I made the quiz.

Be Blessed,

Dave

 

Studying How to Become Dumb

FAMILY UPDATE

My Mom is visiting to see my son play the last football game of the year. We are not a particularly athletic family, so to see any of the kids with their names on the back of a shirt is exciting!
My wife just traded in a car for a new SUV. From now on Daddy's main car is the minivan. I don't mind. It has a great stereo and cold air conditioning.
Science fair projects are also in full swing. My son, Jesse, is placing gummy bears in various liquids to see which makes the gummy bear expand the most (Diet Coke, milk, orange juice, salt water, regular water). What would your guess be? I will get back to you with the results.

The following article shows how two different people handled the same financial event in two different ways. With the market showing extra volatility, these people saw their account balances drop by 25% in a relatively short period of time. Their investments had reached $600,000 at their peak. They now sat at $450,000. First off, Paul. Paul had retired a year earlier and began to live off of his savings. Watching his account drop as he was making withdrawals was putting him under intense stress. This is it, he thought to himself. I’m going to have to start looking for a job. I worked so hard for the money and now I’m watching it disappear so quickly. I am sick about this. Paul went out of his way to learn more and more about the financial markets. The more he tried to understand the more frustrated he became. I am more confused than ever, he thought. There are so many options and opinions. Who do I trust? Everything seems to have its pros and cons. All I know is that I see my life savings draining away. Paul started having a hard time sleeping. He would wake up in the middle of the night with a start, thinking about money. All we have to fall back on is Social Security. We can’t live on only Social Security. It would take forever to make that money again. I’m so dumb. I am too old to invest. What should I do? I know I need to at least keep up with the rate of inflation. Paul continued to stress his body each day the markets happened to be down. Sure, there were some really good days in there, but most of them were bad. It seemed like the bad days hurt a lot more than the good days felt good. Paul found himself checking the stock market multiple times a day. It almost turned into an obsession. Any time he had a spare moment, he would check the “stocks” app on his phone. Any time he had any expense he cringed at the thought of running out of money. You can be like him if you want to, but please don’t be like Paul. Now let’s learn about Tina. Tina’s investments also experienced this same scenario, but Tina didn’t know. Tina never got around to opening her statements. She didn’t make much of an effort to pay attention to financial things. She took her monthly check and never thought much about it. Tina thought to herself, what am I going to do today? The weather is beautiful. Really good beach day. I’ve got to plan a trip up to Pennsylvania to visit the grandkids. Being retired is great. You don’t have to answer to anyone, and you get to make your own schedule! At the end, when all was said and done, her strategy of investing in a balanced and diversified portfolio worked perfectly well. The markets rebounded and continued to grow as they had for decades. Both Paul and Tina had identical investment returns and results. Actually, that may not be true. There is a good chance Paul made some emotional decisions along the way which dramatically reduced his earnings. By paying more attention to his portfolio he lessened his returns more and more. _________________________________________________________ Dave’s Motivational Speech: With all the uncertainty in the world and all the volatility in the markets, I know a lot of you are nervous about your investment plan. This is the moment of truth, in a way. These times are what separate successful investors from unsuccessful ones. If you are able to handle temporary reductions in your account values, you will reap profound long-term returns. Many of you have said to me, “I know the markets will come back at some point, but I don’t have time. I’m retired.” Let’s review a quick history lesson. The markets have had significant downturns four times in the past 90 years. World War II. The markets recovered in 3 years. Oil Embargo in the ’70s. Markets recovered in 3.5 years. The internet dot com bubble in the early 2000s. Markets recovered in 3.5 years. The real estate bubble in 2008. It took 3.5 years for your portfolio to recover.

This idea that you’ll have to wait ten years to get your money back is historically unprecedented.

Risk equals reward, but luckily the only “risk” you are facing is the risk that your portfolio temporarily goes down for a couple of years. The reward is significant and permanent.

I’ve been through this a few times in my career and it always ends up the same way. People that obsess over their portfolios do not have better gains than those who have no idea what is going on.

In a couple of years, this will be a blip on the radar.

I know this time is different. But that is just how the economy and the world work. We face new situations and we make it through. Human ingenuity and progress are incredible things.

Be Blessed,

Dave

P.S. - I am starting up my Social Security Strategy classes again. Please let your friends know that they can sign up at www.SarasotaClass.com. Everyone needs to take this class before they start Social Security.

 

What Makes a Stock Go Down?

FAMILY UPDATE

I haven't given any pet updates in a while. We currently have a nine-month-old puppy named Desmond, and two nine-month-old ragdoll kittens, Hemingway and Coconut.
Everyone is getting along very well. Coconut is a house escape artist, which is a problem. Ragdoll cats are extremely docile. They can't survive outside. We don't know how we are going to keep her indoors. She darts out in the blink of an eye.
The puppy is pure love and sweetness. I have never been a dog person but I have to admit, I am falling in love with this dog. He adds so much to the family.

Question from a reader: “Dave, why does the stock market go up and down? Fiduciaries, like yourself, always remind us to stay the course during volatility. But what creates volatility in the first place? If everyone is staying the course, why does the market move so much?” Super Question! Let’s take a look…. Some Theories: 1. Some economists believe it is simply a matter of supply and demand. If more people want to own a given stock versus wanting to sell a given stock, the price of the stock will go up. Just like Beanie Babies in the 1990’s. Supply was low, people went nuts over those adorable teddy bears, and the prices shot up. Then people came to their senses and realized a stuffed animal is not worth $500. But this doesn’t explain why the stock market as a whole fluctuates. 2. Major world events. On 9/11 stocks lost 7.1%. The market was so volatile that the government shut down the exchanges until things cooled down. But this still begs the questions: Did Coca-Cola sell fewer sugary beverages or did McDonald’s sell fewer hamburgers due to 9/11? No. So why did the market go down so much? People were scared. They didn’t know what the future would hold. Are we going to war? Are these kinds of attacks going to continue? The movement had nothing to do with the profitability of companies, but all to do with unadulterated human fear. 3. Speculation and day trading. In my opinion, this is what drives the most volatility. Professional market traders and institutional investors base their buys and sell on possible future stock values. How do they do this? They look at trends and market environments and expected future profits from companies. They are not basing their decisions on actual financial data from companies. They are guessing what may happen in the future. This all sounds pretty fancy, right? The inconvenient truth is this: All this fancy prognostication, according to multiple academic studies, in no way increases the returns on their investments. But that doesn’t stop them from making the markets volatile with all the buying and selling. 4. Actual company profitability. This is probably the only legitimate reason for the market volatility. In 2008 when the housing market crumbled and the economy plunged into recession, actual company profits were affected. Dividends were cut, some bonds defaulted, and investments related to real estate were producing significantly lower returns. But there are only a few instances in economic history where there were obvious economic factors in play. 2008: Real Estate Bubble 1973: Oil embargo, gas prices quadrupled, mass unemployment, the resignation of Richard Nixon, and the cost of the Vietnam War. 1943: World War II 1929: The Great Depression. Banks were poorly regulated, and over 8000 of them went bankrupt. This understandably created incredible panic, and the loss of people’s life savings. This took away the fuel needed to drive an economy. With all of this being said, I often find myself yelling at the TV or in the newspaper. Everywhere I turn someone is giving their rationale for why the market went up or down that day. But the truth is 99% of the time, nobody has any idea what is making the markets move. The stock market is an incredibly complex system. Think about it like the weather. Meteorologists will admit that beyond a couple of days, predicting the weather is incredibly difficult. The weather patterns on this planet are utterly unknowable and unpredictable. There are just too many factors in play. No matter what you hear, just say to yourself, “Even though there are men in suits on my TV who sound very educated, at the end of the day they are just speculating.... All I need to know is that markets might temporarily go down but they permanently go up. The stock market is an incredibly powerful way to grow my money. I don’t need to pay attention to the man on the screen. It has no bearing on my life or money.” Be Blessed,

Dave

 

Bear Market Country

FAMILY UPDATE

The family took a quick trip to Pittsburgh for a couple of days. My kids have never seen the colors of fall before, and we thought it would be a great experience. The weather was absolutely perfect: crisp days, lots of colors, and blue skies.
Having lived in Pittsburgh for thirty-four years, I forgot how much I miss fires in the fireplace. There is just no way to recreate that feeling in Florida. Up north, you can be lazy because it is so cold outside you have no choice but to cozy up to the fire.
My kids thought loved fires too. They especially liked roasting marshmallows over the fire in the fireplace. I never thought to do that as a kid. It seems so obvious now.

We are in Bear Market country. I have been through several of these during my career. I have zero concerns for those of you that utilize a balanced and diversified portfolio of stocks and bonds.

What is a bear market? It is very simply a drop of 20% or more in the stock market indexes (Dow Jones and S&P 500). A bear market is symbolized in the form of a bear that is clawing down, compared to a bull market symbolized by a bull striking up with its horns.

Some things to remember:

#1 While bull markets are fueled by optimism, bear markets are just the opposite. Bulls are generally powered by economic strength, whereas bear markets often occur in periods of economic slowdown and higher unemployment. This particular bear market is very strange in that unemployment is almost at zero.

#2 Instead of wanting to buy into the bear market, investors want to sell, often fleeing for the safety of cash or fixed-income securities. The result is a seller’s market. The sellers are guaranteeing their losses.

#3 Volatility such as you are seeing now has no long-term effect on your financial well-being. Why? Because markets recover. Stocks lose 36% on average in a bear market. By contrast, stocks gain 114% on average during a bull market.

#4 Understand that bear markets are normal. There have been 26 bear markets in the S&P 500 Index since 1928. However, there have also been 27 bull markets—and stocks have risen significantly over the long term.

#5 Realize that bear markets tend to be short-lived. The average length of a bear market is 289 days or about 9.6 months. That’s significantly shorter than the average length of a bull market, which is 991 days or 2.7 years.

#6 It is essential to understand that half of the S&P 500 Index’s strongest days in the last 20 years occurred during a bear market. The best way to weather a downturn could be to stay invested since it’s difficult to time the market’s recovery. Missing a few strong days could badly damage your long-term returns. The market was up over 5% during a two-day span last week. That is 5% you will never get back if you had cashed out your investments.

#7 Bear markets can be painful, but overall, markets are positive the majority of the time. Of the last 92 years of market history, bear markets have comprised only about 20.6 of those years. Put another way, stocks have been on the rise 78% of the time.

#8 It is also essential to understand that the combination of fast-moving information and more market participants means that the stock market in general is more volatile than it used to be. With more day traders and speculators, the markets move up and down more often (usually for no real economic reason).

#9 In the short term, pulling your money out of the market might be the easy thing to do. But the thing that gets people is once you're out, it's hard to convince yourself to get back in, especially in the near term. So don't let your ego convince you that you're capable of timing the market, and don't let your emotions drive your decisions. If you plan on becoming a market timer, remember that you will have to be correct twice. Once when to get out and again when to get back in.

Be Blessed,

Dave

 

Buying Marijuana with Bitcoin

FAMILY UPDATE

Some people are reading this live in the Ft. Myers area and my prayers go out to you. I never thought I would see this kind of devastation on the Gulf Coast in my lifetime.
My family evacuated to Miami and watched the hurricane on TV from our hotel room. Watching the hurricane wobble one way and another was one of the most stressful experiences of my life.
Our house had several trees down and my lanai needs new screens, but that pales in comparison with what some of you are dealing with.
Desmond did not know what to do with this downed street sign.

I am constantly asked, "Can’t we just take the money out of our portfolio when the markets are going down, and then put the money back in, right when it hits the bottom?"

While this may sound like a reasonable plan, in reality, it is absolutely impossible to actually accomplish.

No one knows when the market will "hit bottom." Anyone that says they can time the market is either lying or delusional.

Dalbar, a highly-regarded financial services research firm, has quantified the perils of market timing.

In a study they conducted from 1995-2014, they looked at what various investments actually returned vs. what average investors actually made. From 1995-2014 (averages):

Stocks: +9.9%
Bonds: +6.2%
Int’l Stocks: +5.0%
The Average Investor: +2.5%
Inflation: 2.3%

That means that the average investor only captured about one-quarter of the total return of the stock market. The primary issue the average investor faced? You guessed it—market timing. Investors were switching in and out of funds at inopportune times.

Human beings are emotional creatures. Everyone knows that you should "buy low and sell high" but very few people actually do it. People panic. People make irrational decisions. By selling during these volatile times you are almost guaranteeing long-term losses.

You need a plan and you need to stick to it. Stop thinking you can outsmart the markets. You can’t.

I hear all kinds of alternative investment ideas that sound good to some people, and, while I can’t guarantee what will happen in the future, I can’t help but notice a pretty remarkable history of success when it comes to good, old-fashioned stocks and bonds.

It seems we human beings can’t help but try to find the "next best thing." Why are we trying to reinvent the wheel?

The wheel is not broken. At all.

During the course of my day-to-day business, I see a myriad of people just like you with portfolios filled with non-traditional investments.

Some Examples:

Marijuana Stocks: You were a product of the 60’s. You would think there would be a huge demand, right? It’s not as simple as that.

Problems: Mutual funds focused on the marijuana industry lost 70% in 2020. The industry is so new and there are so many unknowns. Believe it or not, there is an incredible oversupply of cannabis. Not to mention it is not even federally legal.

Bitcoin: I have no problem with Bitcoin. It could become a big player in the global financial markets. I have no idea. But the daily volatility is incredible. It is pure speculation. You are gambling.

Collectibles: Want to stake your future on classic cars, coins, art, and jewelry? Then this is for you!

Problems: Uncertain pricing, forgeries, doesn’t produce any income, high costs for storage, no consistent track record, no income, limited transparency, high commissions.

Venture Capital/Private Equity: Want to get in on the ground floor of a new business? Do you really like watching the TV show Shark Tank? Then this is for you!

Problems: Illiquid, highly speculative (you could lose all of your money), lack of transparency.

Currency Trading: Want to bet on what direction the dollar is going to trend in relation to the Euro? Have fun!

Problems: Zero sum game, no consistent track record, a short-term trading strategy with no academically provable benefit, wildly volatile.

Shorting the Market: Want to make money when the stock market goes down? Be my guest. But, remember, the stock market has been going up by an average of 10 percent over the past 200 years. It’s kind of like betting on the Detroit Lions to win the Super Bowl.

So what am I trying to say?

A diversified portfolio of stocks and bonds is a strategy with an incredibly long, consistent, and successful track record.

Don’t make this more complicated than it is. Use the wheel. It works. It will get you where you want to be.

Be Blessed,

Dave