Getting What You Really Want Through Investing

Values are the intangible reasons (emotional payoffs) to create and follow an investment strategy; goals are the tangible results.  The first step in setting investment goals is a quick brainstorming session, which is more fun to do with a partner or team, but you can certainly do it yourself if you prefer.

To start, have your partner ask you, “What are your tangible goals that require money and planning to achieve?”  Your partner can record the ideas you generate during the brainstorming session on a sheet of paper not necessarily visible to you to prevent ruining your flow.  If you get stumped, ask to repeat the items you have on your list. 

It’s important that you and your team spend no more than an hour brainstorming.  Anymore than that, and the momentum begins to work against you. 

Find a Trusted Advisor and Avoid Salespeople

“Honesty brings responsibility” – that’s what I heard on the radio today!  And as I thought about that saying on my way into the office, I realized that too many salespeople saturates the financial services industry.   Don’t get me wrong, I think salespeople are an essential part of any organization, but at the same time, the question in my mind is “what’s in it for them?”

If you’re going to disclose your entire financial picture, including your values, goals, assets and liabilities and delegate the creation and implementation of a tailored financial plan, you want to work with someone you can trust. 

Someone who is both competent and caring, professional and proficient.  Someone who wants more than to sell you a mutual fund, an insurance policy, or investment management services.  Someone you can count on to keep the big picture in mind, the needs of you and your loved ones foremost, and the details of your personal finances confidential.  What you want is a Trusted Advisor or an Investment Management Team that values honesty and moral integrity.

In your search for the right person, you may encounter three types of individuals:  the “scientific” salesperson, the so-called consultant (who is actually a salesperson pretending to be a financial planner), and the genuine kind: the trustworthy and competent advisor.  It’s unfortunate that they don’t hang a sign on their backs to let us know which group they fall into.  Their titles are no indication, either.  Stockbroker, insurance agent, financial planner, financial advisor, financial consultant, estate counselor, CFP, CFS, CIMC, CLU, ChFC: none of these labels is a clue.  Neither is the big-name company they might represent.  So you must assess each individual based on a set of characteristics and, ideally, recommendations from a friend, family member, or another advisor.  The Trusted Advisor rarely advertises, makes cold calls, or direct markets, so you are most likely to find one by referral. 

Oh, but they do write on blogs, to help you make an educated decision! 

Believing in Your Product or Service

All too often, Financial Advisors who are just starting out (and some veterans, too), get stuck promoting a product or service they know is a dog.  I know this sounds harsh, but lots of people have earned a living simply by taking the money and checking out at the end of the day.  But I promise you this:  If you don’t believe in what you’re doing, you won’t have the energy it takes to find out what you need to understand your customers and the value of your product to them. You won’t want to do whatever it takes to make your idea a success.  And if you’re a “Samurai Worrier,” you probably need a strong belief in your product just to drag yourself into work each day, let alone be successful at promoting it.

The Financial Services industry has the second highest employee turn over rate in the nation!  Second, only to Real Estate sales.  Why?  Because many people find that, while the money and income can be good, the product or service they are required to sell to get to that certain comfort level requires true passion and belief.  Many people get into Real Estate sales because they are on one of these three stages in life.  They were laid off or fired from their jobs, retired, or they have the entrepreneur spirit and wanted to be on their own.

I’ll admit it, I too, got foolish and got into Real Estate sales.  I was 28 at the time, and retired from my full time employment.  CAM Trading was self-sufficient enough and generated passive income for me, so I was able to take some of my time and money to pursue that.  Plus, I had seen an infomercial one late night and thought, “wow, I could be sitting in my own private island right now, wearing a buttoned-down floral shirt, but only if I call right now and order, operators are standing by!”

Two weeks after I made my first real estate sale (and a total time investment of 2 months), I decided that my passion wasn’t there.  I couldn’t get myself out of the house and into that drab Realty office to sit there for an hour answering phones.  I enjoyed the training and learning about real estate law, but it was a means to an end (getting to buy my private island to sip some fruity drink).   I ultimately wanted to relate to, talk to, and manage other people’s investments.  Being a realtor didn’t allow for that.

Unlike my real estate sales experience, I’m in this business because I know we can do better for people regarding their investment choices, in fact, we have in the 5 short years of going pro.

So, when you do what your inner calling directs you to do, you’re more comfortable, happier, more energized, more focused.  And those qualities bring success, whatever success means for you.

Top 5 Economic Indicators that Affect Your Investment Portfolio

When it comes to noise, these five indicators create the loudest.  They could sway the markets to make drastically irrational price moves.  So, it’s probably worth noting their release time and date (which, can be found here: http://www.bloomberg.com/markets/economic-calendar/)

 

CPI:  Consumer Price Index
The CPI is the most widely cited inflation indicator and is used as a measure of the price levels of goods and services purchased by consumers.  The CPI is considered by industry experts as the best measure of the underlying inflation rate in the US Economy.

 

The Employment Report
Made up of two separate surveys, the Household Survey (60,000 households) and the Establishment Survey (373,000 businesses), the Employment report produces the unemployment rate figures.

 

Gross Domestic Product (GDP)
The components of GDP includes, consumption, investment, net exports, government acquisitions, and inventories.

 

Housing Starts and Building Permits
Housing Starts are a measure of the number of residential units on which construction has begun each month.  A start is defined as the beginning of excavation of the foundation for the building.  Housing starts are led by building permits, but permits are not required in all regions of the country, therefore, Starts figure is more telling.

Retail Sales
If your basket of stocks contain Dow Industrial bell weathers, then you might want to pay attention to this figure.  This is a measure of the total receipts of retail stores.  Often analyzed excluding figures for automobiles, food and gasoline, it’s the changes from month to month here that we’re looking for to identify shifts in consumer product demand.  The figure exclude sales of services.

These are important indicators to consider when you are trading on your own and more can be found on the site provided.

The Inability to Predict Future Events

I was listening to an Audio Book called “The Black Swan” by Nassim Taleb this weekend and found the topic of predicting future events through historical events fascinating. 

Summarizing his main point on the topic as it relates to trading and investing is we believe that we can somehow predict future price outcomes by simply studying the past price movements.  It’s as if you were to buy 10 previous copies of the New York Post and with what you’ve learned from those articles, you’ll somehow predict the next few days’ news stories. 

We often get trapped into that thinking when it comes to our investments.  We see a certain high performing mutual fund that is offered in our 401k plan for example and we believe it will continue forever, only to trap us several years later when we realize we got in at the absolute peak price. 

This doesn’t mean we should disregard price charts, and other historical evidence altogether.  But, instead we should consider the probable outcome and include those unpredictable events within our portfolio.