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Tuesday, January 26, 2016

Adapting to Investment Opportunities

This week's theme is adaptability.
 
"It is not the strongest or the most intelligent who will survive but those who can best manage change."  Leon C. Megginson
 
"There can be no life without change, and to be afraid of what is different or unfamiliar is to be afraid of life."  Theodore Roosevelt
 
"Human nature is water, not stone."  Marty Rubin
 
"Life requires of man spiritual elasticity, so that he may temper his efforts to the chances that are offered." Viktor E. Frankl
 
"Adaptability is about the powerful difference between adapting to cope and adapting to win."  Max McKeown
 
 
Contrary to belief, markets are not efficient or rational. Possibly the bond market is the most efficient or at least is rational. The bond market though, contrary to most thinking, is not without overreaction.
 
Markets are traded. One side has one set of data and assumptions and another side a different set of data.
Downside corrections are not only to be expected, they are healthy as buyers become over enthusiastic without rationale, or sellers become over pessimistic without rationale.
 
As most of you know one of my most liked books on investing is THE INTELLIGENT INVESTOR by Benjamin Graham.
 
On the more technical side is a book I read in early 2000's called A NON-RANDOM WALK DOWN WALL STREET by Andrew W. Lo and Craig Mackinley.  Andrew Lo is the Harris Professor of Finance at MIT Sloan School of Management and founder of the Alpha Simplex Group.
 
Andrew has made a very strong case academically and practically, that, to be successful in finance and investing you need to be adaptive. Life changes and the world changes. That rate of change has increased significantly during our lifetimes.
 
Over the last year we have seen almost every Investment Management Firm develop new products. They are called multi-factor funds, low volatility funds, multi-alternative funds, global funds, global-macro funds, alternative beta funds and smart beta funds.
 
Everyone knows the world and investing must change from plain vanilla capitalization weighted indexes.  The need to be knowledgeable on how to build diversified portfolios, while having expertise to analyze investing factors, strategies and active share is increasing.  All of this is made important because of the increasing levels in the depth of volatility in global markets and the thirty-five year drop in US Bond yields.
 
Some of what he presents is a bit technical, but you can look at the jest of his thoughts.
 
Below is a link to a research paper titled "ADAPTIVE MARKETS and the NEW WORLD ORDER".
 

 
If you want to hear from Andrew Lo there is an access to avideo below.
*Note Andrew is not on the video until after about 13 minutes of introductions.
 

 
"In the Adaptive Markets Hypothesis (AMH) intelligent but fallible investors learn from and adapt to changing economic environments. This implies that markets are not always efficient, but are usually competitive and adaptive, varying in their degree of efficiency as the environment and investor population change over time." Andrew Lo

 

Please forward this on to anyone who you think may be interested.

Tuesday, January 19, 2016

Why I Am Optimistic

This weeks' theme is optimism.
 
Optimism is the faith that leads to achievement. Nothing can be done without hope and confidence. Helen Keller
 
 
Optimism is essential to achievement and it is also the foundation of courage and true progress. Nicholas M. Butler
 
The optimism of a healthy mind is indefatigable.
 
 
Why I am optimistic about the future.
 
I heard a great comment this week from a successful investor, "I don't invest in markets; I invest in great companies!"
On top of investing in great companies and finding top investment managers Marrs Wealth Management builds strong diversified portfolios for our clients.
 
All markets are subject to value fluctuations real estate, commodities, bonds and stocks each one moves up and down. To be a more consistent winner in performance it pays to diversify.

Data from Craig Israelsen January 2016
In the above chart Israelsen shows that the worst three year cumulative return of a diversified portfolio is less than a third of the US Stock Market.
In addition the diversified portfolio shows a higher total annualized long term return than the US Bond market.
 
*Past Performance is not a guarantee of future return. Diversification does not guarantee against loss. This illustration does not represent an actual client portfolio. This is for informational purposes only and not a recommendation. Not to be construed as advice.
 
It is a greater probability that you will be successful if you do not put all your investments in the stock market. Or in a market index.

Put your investments in a diversified basket of good companies and successful investment managers. 


Data from Craig Israelsen January 2016
 
Whether you are accumulating investment assets or in the distribution phase of taking from investments (see illustration below) it has been true long term that diversification has been a successful strategy.

 Data from Craig Israelsen January 2016
 
If you do not diversify what will be your criteria for investing. Most people look at what has recently done well. That may be the worst way to invest going forward. (see illustration below)


Bonds may not be the best way to diversify either, if interest rates continue to rise.




 Data from Craig Israelsen January 2016
 
Diversified Portfolios have held up relatively well in comparison to other investment strategies during volatile periods.



Data from Craig Israelsen January 2016
 
*All data presented is for illustration purposes only. It is not a recommendation for any investment portfolio or security. Past performance is not an indication of future return. The illustrations given do not represent any individual's investment portfolio.

Marrs Wealth Management manages using a proprietary 7 asset class model, it is not a copy of the 7Twelve model. The 7 asset classes in the Marrs Wealth Management model are cash, fixed income, US stocks, global stocks, hard assets, real estate and complementary strategies.
 
Some want to wait until the market settles down, however when it is better to invest in downturn. The best time is when you have money to invest. Financial markets have trended up long term over time and the most successful investors have kept a diversified portfolio of good companies and investment managers.
 
"A stock is not just a ticker symbol or an electronic blip; it is an ownership interest in an actual business, with an underlying value that does not depend on its share price."
 Benjamin GrahamThe Intelligent Investor


Please forward this on to anyone who you think may be interested. 

Tuesday, January 12, 2016

New Years Resolution 2016 Stick to the Plan

Wishing you charity and clarity in the year 2016.
 
Mark Twain is quoted as saying; "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."

This is in line with what most behavioral psychologists tell us, that most investors are overconfident over irrationally emotional in their ability to make correct investment decisions.
 
See the post below from Dr. Daniel Crosby

"Five Answers For the Voices in Your Head"



If you remember some of your basic psychology classes you might remember Mazlow's Hierarchy of Needs. Investors have a hierarchy of needs also. The most basic is controlling behavior. Having and managing an investment plan, then staying with that plan is the most basic need.
 
Hierarchy of Investor Needs



The single most impotant aspect reducing investor returns and causing harm is the investors own behavior. Investors pull out of investments that are temporarily down and invest when investments have run up.
 
Focusing on the wrong things can greatly reduce your chances of success. It is most likely that you will make the wrong decision if your analysis comes from listening to TV analysts who change their message according to the minute rather than based on your individual portfolio or investment needs.
 
Taxes and Fees are important to pay attention to, even more important to your investment success is the investments, investment allocation and the ability to stay with your investment strategy.
 
"The intelligent investor is a realist who sells to optimists and buys from pessimists." Benjamin GrahamThe Intelligent Investor
 
"But investing isn't about beating others at their game. It's about controlling yourself at your own game."  Benjamin GrahamThe Intelligent Investor
 
"With every new wave of optimism or pessimism, we are ready to abandon history and time-tested principles, but we cling tenaciously and unquestioningly to our prejudices.    "
Benjamin GrahamThe Intelligent Investor


Please forward this on to anyone who you think may be interested. 

Monday, January 4, 2016

Year End Update 2015

Wishing you all a Happy New Year
 
Bonne année
Ein glückliches neues Jahr
Feliz año Nuevo
Shana Tova
Kul 'am wa antum bikhair
Hauoli Makahiki hou
Xin nian yu kuai
 
Can you figure out what languages are written above?

No matter what how you say it we all are looking to have a Happy New Year

The financial markets were very difficult to navigate this year and we forget that markets do not go up all of the time.
It is normal to expect there to be some volatility in making investments. It is important to not get jittery and pull out in volatile times.
 
The Federal Reserve Board has finally moved off of zero or near zero and raised the reserve interest rate. They expect to raise slowly and deliberately with three to four small increases over the next year.
Two years ago Federal Reserve began to decrease their Quantitative Easing program.
 
I pulled the following off of an update I wrote at Christmas time in 2013.
 
Wishing you a very Merry Christmas and Happy New Year.
Enjoy your times with friends and family as that is one of the best gifts you have received.
 
The big news of the week was that the Federal Reserve will begin to slowly take away the massive infusing of stimulus to the economy.
This is not much by the way of news and even though stimulus will slow there will still be a very accommodative monetary policy in place.
So the big news is not enough to put us at ease for the unintended damages current policy poses for the future.
 
It may be wise to listen to an opinion out of the past?
 
"A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy..."
Alexander Fraser Tytler, Scottish lawyer and writer

Let us hope a sense of restraint and concern for future generations is made a priority in our hearts and in governance in this next New Year.


It is always important to look back as well as look ahead.
 
At Marrs Wealth Management, it is our expectation that the Fed Funds Interest Rate target will increase over the next 24 to 30 months, to gradually increase to 2% and that the ten year treasury rate will come in, at a peak of around 3.5%.
This will be short of the long term average on the ten year treasury of 4.5%.
In line with that we do not expect GDP growth, year over year, to rise up to the target of 3%. Instead we would expect year over year GDP growth to remain muted at 2.5% or less.
 
Value in equities has been ignored lately, we expect the markets to return to be favorable in value stocks going forward.
We expect volatility to rise in the coming year, as interest rates creep up, this should favor active managers and long short managers.
 
Given the expectations for rising interest rates traditional bond funds may struggle.
 
It would be prudent to diversify. Given present valuations we believe there is opportunity in natural resources, commodities, energy and select emerging markets.
 
We, at Marrs Wealth Management, wish you a good time of celebrating the old and bringing in the new with friends, family and coworkers.
 


Please forward this on to anyone who you think may be interested. 

Monday, December 14, 2015

Cultivate an Abundance Mentality

"MOST PEOPLE ARE DEEPLY SCRIPTED IN WHAT I CALL THE SCARCITY MENTALITY.  THEY SEE LIFE AS HAVING ONLY SO MUCH, AS THOUGH THERE WERE ONLY ONE PIE OUT THERE.  AND IF SOMEONE WERE TO GET A BIG PIECE OF THE PIE, IT WOULD MEAN LESS FOR EVERYBODY ELSE.  
THE SCARCITY MENTALITY IS THE ZERO-SUM PARADIGM OF LIFE.
PEOPLE WITH A SCARCITY MENTALITY HAVE A VERY DIFFICULT TIME SHARING RECOGNITION AND CREDIT, POWER OR PROFIT - EVEN WITH THOSE WHO HELP IN THE PRODUCTION.  THEY ALSO HAVE A VERY HARD TIME BEING GENUINELY HAPPY FOR THE SUCCESSES OF OTHER PEOPLE - EVEN, AND SOMETIMES ESPECIALLY, MEMBERS OF THEIR OWN FAMILY OR CLOSE FRIENDS AND ASSOCIATES.  IT'S ALMOST AS IF SOMETHING IS BEING TAKEN FROM THEM WHEN SOMEONE ELSE RECEIVES SPECIAL RECOGNITION OF OR WINDFALL GAIN OR HAS REMARKABLE SUCCESS OR ACHIEVEMENT.

THE ABUNDANCE MENTALITY, ON THE OTHER HAND, FLOWS OUT OF A DEEP INNER SENSE OF PERSONAL WORTH AND SECURITY.  IT IS THE PARADIGM THAT THERE IS PLENTY OUT THERE AND ENOUGH TO SPARE FOR EVERYBODY.  
IT RESULTS IN SHARING OF PRESTIGE, OF RECOGNITION, OF PROFITS, OF DECISION MAKING.  IT OPENS POSSIBILITIES, OPTIONS, ALTERNATIVES, AND CREATIVITY."  Stephen Covey
 

Please forward this on to anyone who you think may be interested. 

Monday, December 7, 2015

Weekly UpDate 12 5 15

Word for the week is Happiness.
 
"Folks are usually about as happy as they make their minds up to be." Abraham Lincoln
 
"Don't cry because it's over, smile because it happened."  Dr. Seuss
 
"If more of us valued food and cheer and song above hoarded gold, it would be a merrier world."  
 
 
This time of year we hear it often.
Happy Thanksgiving.
Happy Holidays.
Merry Christmas.
Happy New Year.
 
What a very good year it has been for Marrs Wealth Management.
 
The addition of Nate Brammer as a partner in our firm.
Nate has brought with him his exceptionally helpful assistant, Stacie Hostetler.
Nate MBA, AIF® brings 23 years of investment experience to our already deep bench of advisory experience.
 
Andra Reason CPA, CSEP® also joined us this year. She brings 15 years of experience in tax planning, accounting and estate planning experience. She is our company CFO and Director of Estate, Trust and Tax Planning Services.
 
Jim Kain MBA has also joined us as a new investment advisor representative. Jim grew up in Ames and has 9 years of experience in corporate accounting.
 
This added experience and expertise has added growth and added services to our clients.
 
With over 80 years of combined experience in financial and investment services and 12 combined advanced educational designations, to provide excellence in fee only advisory services to you, Craig and I are looking forward to the future of Marrs Wealth Management.
 
It has always been our most important goal, that you that have put your trust in us, always are given the best advice, service and care.
 
Judy, Kent and Stacie are exceptional at giving that care and service.
 
As we move in to the end of year we are evaluating the best way to bring information to you.
The regular weekend update is changing. I won't be writing this every week.
We are planning on putting together more occasional targeted communications and video blogs. To be technical, I guess they are called Vlogs.
 
Happy Holidays to you all.
Looking forward to seeing you in the New Year.
 
I will leave you with three principles of Investing from Ben Graham.
 

 
Principle No. 1: Always Invest With a Margin of Safety
Principle No. 2: Expect Volatility and Profit From It
Principle No. 3: Know What Kind of Investor You Are
 
Marrs Wealth Management can help you develop discipline in following these principles and keep you on track to successfully achieve your financial goals.
 

Please forward this on to anyone who you think may be interested. You can view past weeks updates at www.marrswealthmanagement.blogspot.com 

 

Monday, November 23, 2015

Weekly Update 11 21 2015

This week the focus is on Legacy
 
"Carve your name on hearts, not tombstones. A legacy is etched into the minds of others and the stories they share about you." Shannon L. Alder
 
"No legacy is so rich as honesty." William Shakespeare
 
"I had an inheritance from my father,
It was the moon and the sun.
And though I roam all over the world,
The spending of it's never done."
 Ernest Hemingway
 
"Inside of all of us there is the need and the desire to be heard, to have our innermost thoughts, feelings and desires expressed for others to hear, to see and to understand. We all want to matter to someone, to leave a mark. Writers just take those thoughts, feelings and desires and express them in such a way that the reader not only reads them but feels them as well."
Vicktor Alexander
 
"We don't inherit the earth from our ancestors, we borrow it from our children."  David Brower
 
"We must begin thinking like a river if we are to leave a legacy of beauty and life for future generations." David Brower
 
The focus on earning money, living the lifestyle that we want and saving for future personal needs is the focus of money and investing throughout our lives.
At some point, hopefully, you are asked by your financial advisor about planning for beyond your own needs.
Have you talked to your investment person, children or attorney about; beneficiaries, probate of your accounts, court costs, how your wishes are carried out for children or grandchildren.
Do you know how difficult it may be for your executor, spouse or children to gather up all your bank, insurance, home and investment information and transfer those assets according to your personal wishes?
Will your planning enable your heirs to remember you fondly or will it be a battle that exasperates?

If it has been more than three years since you have reviewed your benificiaries, will or discussed your overall planning you should have those items reviewed. 

Did you know rules around social security are changing? 



Many of you know and have begun to use the added services of Andra Reason CPA®, CSEP® our Director of Estate and Tax Panning and Trust Services.
She can work with you, in conjunction with your attorney and accountant to put in at ease regarding what legacy and memory your heirs and representatives might experience.


Related to this there is an event we are planning for next spring.
Tuesday April 26th 2016 we will be having Dick Edwards an author of the book "MOM, DAD Can We Talk?" and former Director of Elder Care at Mayo Clinic.


You can learn more about Dick on his website.

This will not be a sales pitch and no products will be offered. This will be an informative meeting on personal planning for the benefit of each of us as we plan for our life and legacy.

Please mark your calendars and save the date to come and hear more about how to talk to parents and others about important planning issues.
 
"All things excellent are as difficult as they are rare." 

Please forward this on to anyone who you think may be interested.