Archive for December, 2011

Mutual Funds vs ETF

Posted: December 29, 2011 in Uncategorized

As my business moves forward and grows I am always looking into ways to improve both my service and performance as an advisor. One of the most asked questions I get from my clients is what is the difference between Mutual Funds and ETF’S.

According to Investopedia a mutual fund is:

An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund’s capital and attempt to produce capital gains and income for the fund’s investors. A mutual fund’s portfolio is structured and maintained to match the investment objectives stated in its prospectusd

A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold.

As ETF’S explode onto the scene I am faced daily with the decision of indexing vs the active management of the mutual fund industry. As 2011 comes to a close I am beginning to see many of the benefits of moving away from the mutual fund model. While performance is important for my clients, diversification and keeping the portfolio in line with the objectives is more important.

As the year is coming to a close I am having a hard time justifying the fees involved in the mutual fund model. Most equity managers trailed the benchmark or are in line with the benchmark. While there are some exceptions to this most funds have underperformed across the board.

ETF’S do provide a cheaper and more liquid access to many of the same things and frankly if the fund managers do not get there act together the industry will go out of business. While I am not quite ready to jump ship on the fund industry as a whole, incorporating ETF’S will be a part of my re balancing act going into 2012. As far as I am concerned the additional diversification and added liquidity will only enhance the portfolio’s I manage.

Hopefully many of the fund managers I have trusted for years will get back on track this year, many are calling 2012 a stock pickers market. If that is the case I suppose we can chalk it up to bad luck. If not the fund industry is going to have a hell of a time raising capital and keeping outflows at a minimum.

2011 has been very very good to me

Posted: December 28, 2011 in Uncategorized

As the year closes I have been taking the time to sit back and reflect on the year that was. All in all 2011 was a watershed year in my life and subsequently my career. The year began with hope and promise as many do, at the time I was unaware of the impending roller coaster both in my business and in the market.

The year starts with hope, promise, new relationships and vigor. As January led into February I was personally convinced that 2011 was going to be the year of my life. I had a brand new relationship with an established accountant, I was presiding over a networking group that was finally showing signs of life, and most importantly my younger brother was getting his life back on track after a long fight with addiction. But as we learn not all that glitters is gold.

As the January led into February and tax season began I started to notice some kinks in the metal. My home run accountant was not what I thought, the market volatility was keeping me up at night and for the first time in a long time I was not so sure about some of my choices.

Since I started in the business  of financial planning/advisory my goal has always been to provide my clients with top-notch advice and service. I learned quickly however not everyone shares my philosophy. After about 2 month of working with my new accounting partner I learned that churning out a commission to sustain a lifestyle was the number one goal of this accountant. Suddenly my “home run” had turned into quite a problem.

As the relationship began to sour so did the market. Greece was rearing its ugly head, debt ceiling fights we dominating the news, and volatility was dominating the conversation and keeping my clients scared out of their fucking minds. Uncertainty in the market was driving the uncertainty in my business. There was no training or chart for me  to turn to in this instance this was for me to figure out and for me to fix.

The decision to move on is never an easy one. When a relationship goes south whether in business or in life there is plenty of blame to go around. But if you can look back and honestly tell yourself that you did all you could there is no reason to hang your head.

My long-winded point is that even though the year started with such hope and promise nothing in this life is guaranteed. Whether in relationships or markets there is going to be peaks and valleys. I am proud to say that this year ended right where it began with hope and promise going into the new year. I learned more in 2011 than I ever could imagine, I grew personally and professionally and am ready to move on to 2012 with even more vigor than I did in 2011. And even though everything did not work out as planned I can honestly say thank  you.

Santa is that you?

Posted: December 21, 2011 in Uncategorized

Today was a wild ride up for the equity markets, just when we thought that Santa was going to leave us coal in our stockings we have a 3% rally to the upside. It was a rip roaring ride that made me think Santa had NOS boosters in his sleigh, not even President Obama could him down. For those traders who were long equities going into the day congrats, investors however have been missing these moves all year it seems. Most if not everything I do as a Financial Advisor is manage expectations and mitigate risk. As nice as a 3% rally is, I can’t for the life of me think this is a healthy market. Day’s like today make investors feel like they are missing out on the egg nog. According to CNBC:

Worldwide, investors have yanked $34 billion out of equity funds this year and put $75 billion into bonds.

In the U.S., stock funds, including both exchange-traded funds and mutual funds, squeaked out a miniscule $4 billion net inflow this year, while fixed income-focused managers collected a monster $86 billion, according to EPFR.

I supposed being crushed by 2 major market corrections in the last 10 years and a cyclical bear market will kill whatever investor confidence is left.

This gets back to managing client expectations, my clients understand that we are not trading this market, the dizzying volatility will drive even the most seasoned investors batty. Between Greece, the Jack Asses in Washington (on both side of the aisle), and talk of a double dip recession  everyone is running for the hills. Days like today are the exception not the rule. We know that most of the clients we deal with on a daily basis are not suited to handle the daily swings in this market. And while they look nice and keep the phones quiet, we know that it is not healthy. No advisor worth his salt is telling their clients to jump into the fray right now, to many factors heading into 2012 could cause a neck breaking move to the down side. By managing expectations we manage risk in this New Normal (Thanks Bill Gross). Currently the risk is not to the upside or to the downside, the risk is letting your clients feel like they are missing out on something. Santa will come and go as he does every year, I would recommend leaving him the traditional cookies and milk but don’t expect a bag full of goodies. This year he may just disappoint you.

Christopher Hitchens..Farewell

Posted: December 16, 2011 in Uncategorized

I write today with a heavy heart. Though we never crossed path’s I am comfortable to call Christopher Hitchens a friend. As an aspiring writer/blogger I was very fortunate to come across the writings of Christopher Hitchens when I did. Many of his thoughts and idea’s were considered sacreligious, racist and blasphomous.For me it was his delivery and belief in himself that I found inspiring. As humans we find out what we are all about when we are cornered by others.Will we stand up and fight or will we run away. I am of the belief that if you do not stand for something you will fall for anything. Christopher Hitchens never shied away from controversy or a good fight. In the eye of many he was different, a man without a clue some would say. I see it a tad different, the man opened doors and eyes alike. Many of us never have what it take’s to be our own person and follow our own beliefs, not Christopher Hitchens. For those of you who are unaware, Hitchens had very strong beliefs and he was not scared to speak them. A hardline Atheist, who was open to the belief that you could wish god existed but would never acknowledge its presence as an absolute, hardline supporter of the Iraq War after bashing Kissinger and Vietnam years before, a believer in the eradication of fundamentalist Islam, and rather unapproving voice against those who in his mind abused religion ie. Mother Teresa, he never would shy away from controversy. Whether it was his criticisms of religion, god, politics, economics, or culture Hitchens had a delivery about him that made you listen. I can’t say that I agree with everything that the man wrote but I respect the path he took to deliver his opinions. Through the use of sarcasm, he made seemingly untouchable subjects easy targets. The institutions we have come to know and respect were simply no match for the man. Many people despised him for his opinions. However in this day and age I cannot think of a more important writer this world need’s a dash of realism every so often. Hitchens opened my eyes to a different way of thinking and doing, I will always remember the first time I saw him as a guest on Real Time with Bill Mahr, as soon as his segment was done I began reading his works, needless to say I was hooked,finally a writer who for lack of a better word was a wise ass who spoke to me and my beliefs. Many find it hard to believe that someone so against the “grain” was able to influence as many people as he did, to that I say; take a look around today’s blogosphere; Christopher Hitchens was a rock star. In the world of writing he was Hendrix,Morrison, Wallace and Shakur all rolled into one,  a touch of controversy, balls, talent, brains, and humor. Farewell my friend you will be missed.

I’m Baaaaaaaaack

Posted: December 13, 2011 in Uncategorized

After much contemplation I decided today was a good day to get back to blogging. The past few weeks have been interesting to say the least. For starters; we have  Europe being taken to the woodshed, more congressional gridlock,  Herman Cains frolics, NBA lockouts, Tim Tebow, and a myriad of other fun topics to discuss.

But before I get into all things market I must vent. After many discussions with some of the top social media experts in my field I was very excited to get my social media pilot going. But as things go in this industry my idea was given a big, fat NIGO. With the advent of social media and the opportunity it presents as a cost-effective  tool to inform, entertain, and educate you I was disappointed. How does a young advisor find a niche when one of the few that has not been saturated is  still not allowed to be used? I understand the reasoning behind a compliance department wanting to monitor any and everything I write, post, and recommend. With all that being said I will be an anonymous blogger, much to my dismay.