Investment Help

If you are seeking investment help, look at the video here on my services. If you are seeking a different approach to managing your assets, you have landed at the right spot. I am a fee-only advisor registered in the State of Maryland, charge less than half the going rate for investment management, and seek to teach individuals how to manage their own assets using low-cost indexed exchange traded funds. Please call or email me if interested in further details. My website is at If you are new to investing, take a look at the "DIY Investor Newbie" posts here by typing "newbie" in the search box above to the left. These take you through the basics of what you need to know in getting started on doing your own investing.

Wednesday, July 1, 2015

Update: Year-to-Date Performance of BlackRock Diversified Portfollio

Regular readers know my favorite investment chart is the BlackRock 20-year sector performance.  It details the relative performance ranking of asset classes on an annual basis as well as the performance of an easily replicated low-cost diversified portfolio comprised basically of 65% stocks, 35% bonds.  As can be seen by referencing the above link, the diversified portfolio returned 8.7% on an average annualized basis over the 20-years ended 12/31/20114.

The diversified portfolio allocation is an appropriate benchmark for many individuals in their 40s and even early 50s, depending on their specific risk tolerance.  The chart contains sufficient data, however, to construct a benchmark and analyze performance for any specific allocation; and, in fact, the allocation can be changed over time using the data in the table--as it should be as an individual ages.

Voluminous data from unbiased academic studies have been presented over the years showing that a diversified portfolio of low-cost funds outperforms upwards of 70% of active managers over the longer term, after all costs are taken into account.  These studies cover various time periods, countries, asset classes, and investment methodologies.  In line with this data, the low-cost diversified approach warrants consideration as a benchmark for investors.  It shouldn't go unnoticed that the approach economizes on the investor's time.

Below is an update showing the approximate performance of the diversified portfolio's sectors for the 6 months ended 6/30/2015.  Overall, the portfolio returned approximately 1.68%, down slightly from the 2.17% reported for the first calendar quarter.

For the 6-month period, sector performance was mixed with the international (EFA) doing best and large and mid-sized value (IWD) lagging.  The bond market (AGG) had a negative return as yields increased over the 6 months.

Weight (%)
Return (%) 6 months ended 6/30/2015
AGG (Barclay’s Aggregate Bond Index)
EFA (EAFE Index)
IWM (Russell 2000)
IWF (Russell 1000 Growth)
IWD (Russell 1000 Value)

Disclosure:  This post is intended for educational purposes only.  Past performance is not indicative of future performance.  Individuals should consult a professional or do their own research before making investment decisions.

Thursday, June 25, 2015

Dividend Data for DIYers

Here is a table adapted from Barron's 6/15 issue, page M47, showing the quarterly year-over-year dividend payouts of stocks comprising the Dow Jones Industrial Average:

March 2014
March 2015
Am. Exp. (AXP)
Apple (APPL)
AT&T (T)
Boeing (BA)
Caterpillar (CAT)
Chevron (CVX)
Cisco (CSCO)
Coca-Cola (KO)
Disney (DIS)
Du Pont (D)
Exxon (XON)
Gen Elect (GE)
Goldman Sachs (GS)
Home Depot (HD)
Intel (INTC)
John&John (JNJ)

Note that all except Visa increased their dividend.  Apple replaced AT&T, so their dividend experience isn't shown.  Overall dividends amounted to $103.65 compared to $91.94 a year earlier.  The yield increased from 2.22% to 2.25%.

For reference purposes, the yield on the 10-year Treasury is approximately 2.40%.

Tuesday, June 23, 2015

Retirement Calculator Review

Investor Junkie has written a nice review of Personal Capital's retirement calculator.  For those in retirement, or close to retirement, interested in a detailed analysis on whether they have enough to meet spending plans, the calculator appears to answer the outstanding questions.  Note that it is free but does require providing a lot of information.

For what it is worth, my approach is considerably simpler.  Take 4% on an inflation-adjusted basis, and check it every couple of years.

I was at an American Association of Individual Investors (AAII) a couple of years ago where a complicated Monte Carlo retirement analysis was presented.  One of the audience members stood up and said his approach was to do what he had done all his life - calculate a reasonable withdrawal rate and then adjust his spending so that he lived within his means.

The bottom line is that some people want more detail and, thus, the Personal Capital calculator may be exactly what they are looking for.  For others, the simpler approach will work better.  I also have to admit I am prejudiced against spreading bank info all over the internet - but that's just me.

Wednesday, June 17, 2015

Look Who's Indexing - Investment Pros

On 4/14 and 4/15, 1,280 Bloomberg terminal users were asked "what do you think is most appropriate for someone who is mid-career and trying to save for retirement?"  Bloomberg terminal users are professional managers.  The choices scored as follows:
  • 42% Passive index funds and etfs
  • 18% Actively managed mutual funds
  • 17% Individual stocks and funds
  • 14% Real estate
  • 3% Hedge funds
The study was reported by Charles Stein, Even Financial Pros Choose Indexing for Retirement Savings.

Sunday, May 31, 2015

Bond ETF Performance Update

The last update of bond funds was done on


The purpose here is to get a sense of how various parts of the fixed income market have performed year-to-date.  We are still in a world of historically low short-term yields heavily influenced by global Central Bank policy led by the U.S. Federal Reserve.  In fact, the number 1 issue in markets today is when the Fed will raise rates (we are beyond the "if" stage) and the path rates will follow from there.

Here are the total year-to-date returns through 5/29/2015 as reported by Morningstar.

The first point to note is that performance was fairly tight.  Not much, if anything, was gained from going off index, i.e. investing in other than AGG.

No advantage was gained by exploiting the yield curve as seen by the 1.68% return on IEI versus 1.66% on IEF.

Some incremental performance was garnered for investing in riskier funds as seen by the 3.03% return on the emerging market fund EMB and the 2.36% on HYS, a short-term high yield fund.

This data is provided for educational purposes.  My clients and I own some funds listed in the table.

Monday, May 25, 2015

Cheap Trick

No, this isn't about the 70's rock band (still apparently going strong).  It is about a financial services industry cheap trick.

The lady was from Texas and called with a bit of concern in her voice.  She was selling land that had been in the family for a long time and was getting approximately $13 million.  In hand, she had a proposal to manage the $13 million and was seeking a second opinion.

The proposal wasn't from an asset manager but actually from an advisor who finds asset managers.  In other words, an asset gatherer.  He was from a large network of advisors who gather assets.  He is a middleman.  In other words, if you were selling or buying a house, you can go directly to a realtor or you can go to an advisor who would recommend a realtor.  If people fall for it, the industry would put on as many layers as they could get away with!

The cheap trick, in my opinion (you can make up your own mind), comes in the fee proposal:

As you look at this fee proposal, recall one of the well-known tricks discovered by behavioral finance researchers.  It goes like this:  if you want someone to donate $1, first ask for $2.  Then, after a pause, when you say you have a lower level of participation ($1), you are likely to get it.

Here, when the client is shown the big discount, it looks like they are getting a good deal with the much lower proposed fee.  What needs to be asked is how many clients this advisor has paying the "Standard Fee."  I would be willing to bet he has nobody paying 2.90% and 2.70%, etc.

At 0.98% of $13 million, the fee for 12 months would amount to $127,000 FOR THE FIRST YEAR!
The next question to put to the advisor would be who gets what?  My guess would be that the investment managers would get approximately 0.60% and the advisor/asset gatherer would get a cool 0.38%.

The rest of the proposal is just as laughable (or sad, depending on how you are looking at it).  The asset allocation is based on an 8-question allocation questionnaire.  The end result is 2 asset categories specified to 2 decimal places.  To the uninitiated, it looks very scientific.

But none of the questions asks about her goal for the funds.  In a short conversation with me, she indicated she intended a chunk of the funds was earmarked to go to heirs.  Did the advisor explain to her that her heirs have a considerably longer investment horizon and, therefore, assets intended for them should be invested in other than municipal bonds (especially given the 0.98% investment fee)!

Friday, May 22, 2015

Look Who's Indexing - Scott Adams

Scott Adams, the creator of "Dilbert," has made a career out of exposing incompetence.  His laugh-out-loud cartoon series makes fun of the business world in a way that is highly recognizable by anyone who has spent any time in an office environment.

Similarly he has strong words to say about active investment management and touts the passive management approach.

Here is his response (from the Wall Street Journal) to whom he would recommend active investment management:  Scott Adams:  It's a Perfect Strategy for My Enemies.