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, March 22, 2017

Trump and the "Fiduciary Rule"

Here's a nice opinion piece on the situation with the "Fiduciary Rule" and its potential blockage as it is on the verge of going into effect written by Mitch Tuchman of Rebalance IRA, "Trump's last-second swipe at an Obama retirement rule" (MarketWatch, 3/22/17).

The rule requires investment advisors, in particular  insurance companies and brokers, to act in the best interests of their clients when offering investment products and making investment decisions.

That they significantly affect investor performance in a negative way is supported by mountains of research. How? By charging 1% and higher to manage assets, putting clients' funds into the highest commission products that charge excessive annual fees and tacking on fees that are cleverly hidden.

And, all of this comes out in the wash. Most people don't read the academic studies on performance that track how active managers perform - just insomniacs and academics. Instead investors look at their accounts, read about markets hitting record levels and get a sinking feeling realizing that they are performing way below where they should be. Bluntly speaking, the fast talking fancy suited expensive brief case toters have sold  retirement dreams down the river - and people eventually get it.

And there is an ongoing push back. Investors are flocking to low cost, index funds and managing or considering managing their own assets. Many are moving to robo advisors and in the process disrupting the financial services industry. They are choosing to bet longer term on the entire economy whether it is U.S. or global rather that the touted ability of stock pickers and market timers.

This of course is what DIY Investor has been about for the last seven years and has referenced Buffett, Malkiel, Bogle, Ellis, Solin and others in the process.

For what it is worth, the whole set up of the movement of  retirement investing away from the defined benefit approach to the defined contribution, i.e. 401(k) played a major role in this enabling of the financial services to take advantage of those trying to plan for retirement. It enabled the complicating of the whole process which many saw as an opportunity to obfuscate the fee structure and take advantage of workers. In short, the average person was put in charge of their retirement but not given instruction on how to go about it!

In my opinion the same thing may be unfolding in the health care industry. It is important to understand a basic finding of behavioral economics: choice isn't always a good thing! This is worth keeping in mind when politicians puff themselves up and proclaim that the consumer will have more choices. Sleazy characters hear this and start to plan on complicating schemes that rip consumers off.

Wednesday, January 25, 2017

Retirees Don't Run Out of Money

Polls consistently show that the number 1 fear of retirees is running out of money. But rarely do retirees literally run out of money. It doesn't happen that Joe goes to Mildred and says "darling we've only got $100 in our account. What are we going to do?"

Instead, what people tend to do is run out of lifestyle. More typically Joe will go to Mildred and say, "honey, it looks like we can only afford to visit the kids twice this year instead of three times." And Mildred responds, "but Joe we are only 71, in good health, and my number 1 thing in life is seeing my grand children".

Of course, the academic literature needs to simplify and where possible interject the math. So they frame the problem in terms of how much can be withdrawn over a given period without running the balance to zero. The magic number of course, which is debated, is 4%. With a nest egg, the rule of thumb is that 4% adjusted for inflation can safely be drawn down.

Thinking about lifestyle rather than some percentage can be enlightening however. It gets pre-retirees to focus on what is important in their retirement years. How many times do you want to visit the children? How much does it cost to play golf constantly to realize your dream of reaching the pro tour? How big a house do you need to live in and how much does it cost?

In fact, many people will only have a satisfying retirement if they can continue in the same house they lived in when they had 3 or 4 kids at home. It is important, of course, to know this going in.

Then we also have the world travelers working off a so-called 'bucket list". Some people view their dream retirement as one whereby they will be able to take at least 3 major trips/year.

All of this leads to a type of bottom up approach. It suggests the idea that in approaching retirement a list should be made listing the important things that you want in retirement and their estimated cost.
This then can be used to see if the anticipated income stream satisfies the needs. A tricky part , of course, is to keep  medical needs in mind. A  couple's lifestyle can be upended by medical surprises.

Tuesday, January 24, 2017

On the Difference in Saving Rates

Ben Carlson at MarketWatch has produced interesting data on savings rates in

Opinion: How a slight edge in investing adds up to big money over time.

In his article he starts with a short story from Atul Gawande on how small changes have a big impact in the medical field where people look for big, miraculous changes. As an aside Dr. Gawande is one of my favorite authors and I highly recommend his

The Checklist Manifesto.

So, what is the impact of a small change in the saving rate? Carlson first looks at an example of a household income of $100,000 saving 10%/year and achieving an investment return of 8%. After 10 years this will produce a portfolio value of $132,822. Increasing the saving rate to 11% results in a portfolio of $146,104. He shows portfolio values for 1% incremental returns up to 15% where the portfolio value approaches $200,000.

It is important to note that the period is relatively short in terms of the saving horizon most retirement savers experience. In fact, most savers should be saving over a 30 year plus period!

Carlson also provides an interesting chart showing the impact of marginally increasing your saving rate. He starts, again, with 10% and then increases by 2% to 10.2%.

The big take away is that incremental changes have big impacts over longer periods of time (both in a person's health as well as their retirement program)  but it is difficult to appreciate them because they are barely noticed in the beginning.

Sunday, January 8, 2017

A Good Year For Retirees

2016 was a good year for DIY investor retirees in the investment markets. For a basic asset allocation using low cost ETFs the results were approximately as follows:

Large Cap 35% = +11.80% SPY
Small Cap 10% = +19.89% SCHA
International 15% = +4.66% IXUS
Bonds 35% = +2.56% AGG
cash 5% = +0.1%

The total portfolio return approximated +7.77%.

The important point is that it exceeded 4% (the benchmark 4% drawdown rate for retirement) plus the rate of inflation (approximately 2%).

The bottom line is that the DIY investor retiree took his or her drawdown and had more than they started the year with and they are one year closer to the grim reaper. What more could one ask for?

There are some assumptions in here of course. If you invested with an investment advisor who charged 1 percent or more and who invested you in active Funds that follow the
"hokey-poket style" of jumping in and jumping out you likely did considerably less than the above results.

In fact, the above portfolio could have easily been set up on 1/1 and the DIY investor retiree set about enjoying his or her retirement to the fullest. Let the hair pulling over the UK leaving the EU and the Trump election with the barrage of analysis over the stream of tweets to others.

And, oh yes, the grim reaper part is no big deal either. Everyone is one year closer, retiree or not. It is just that many retirees know it and appreciate their time a bit more because of the fact.

Have a great and prosperous New Year and enjoy the ongoing 3 ring circus. As long as they don't get us into a nuclear war it should be pretty entertaining!

Friday, December 23, 2016

A New Year's Resolution

This resolution is for your mid sixties self. If you haven't met him or her there are aps out there whereby you can take a picture of yourself and age it. If you have problems saving then do it and meet your future self. It helps some people.

Now I know many people don't like to think about getting older. Get over it. I'm older and semi retired and it's great. Admittedly there are days where it is harder to get up in the morning and I get tired earlier in the evening. But balanced against this is the wisdom I've gained over the years ;) I don't do nearly as many stupid things as in my youth.

Anyways what about the resolution? It is simple. Save at least 15% of your paycheck towards your retirement. Not for a new pick up truck, not for an exotic vacation but towards your retirement. Have it taken out of your paycheck and learn to live on what is left.

Ok, so now you're protesting. You can't live the life style you are accustomed to if you are putting aside 15%. First off consider that for some (many?) of you it isn't 15% less income because you get a tax break if using a 401(k) or an IRA and secondly some of you have a company match. So, to get at the 15% isn't such a burden.

But if it is still a stretch take a hard look at your lifestyle. Think about functionality versus other motives for what you spend on. Is that car for getting from point A to point B or is it to send a message that you hope gets people to think you are making the big bucks.

Thorsten Veblen 

wrote a famous book, The Theory of the Leisure Class, in 1899 in which he introduced the concept of "conspicuous consumption". The idea was that people emulate the economic class above them. As such we buy many things not for their use but for the image they project. Consider that we buy silverware because it is similar to what the wealthy use not for its functionality.

Granted that Veblen may not be the easiest to relate to in today's world. Instead you may want to check out

  Money Mustache.

IMHO he is the best current writer on frugality and the early retirement movement. If he can't inspire you to live a more moderate life style then you are uninspirable.

Bottom line: Resolve to save at least 15% of income in 2017. Your future self will thank you!

Wednesday, December 21, 2016

I Apologize

I apologize to all those people over the past three years to whom I talked and tried to the best of my ability to get into the stock market. I wish I was more persuasive. We sat together at the table (or Skyped) and looked at the huge amount you had in Certificates of Deposit at .75% or  in  money markets at 0.1% and I pleaded for you to open an account at Schwab (or the discount broker of your choice) and choose a low  fee S&P 500 Index Fund for 60% of the assets.

I argued that the U.S. economy is the most innovative in the world, that products will be forthcoming that neither of us could foresee that would be in demand. We couldn't foresee Fitbits, or driverless trucks, or drones delivering packages. We couldn't foresee virtual reality. But all of it came and is coming big time.

You worried over government shutdowns, a slowing economy, the European Union breaking up and more recently Brexit and Trump. In your thinking you kept going back to the downturn in 2008 despite the fact that you had many years to recover if the market experienced a meltdown in the short run. To no avail I tried to emphasize that such a meltdown is a gift to the long term investor who is accumulating a nest egg for retirement.

The saving grace for me are the many who did invest for the first time and who gained the confidence and knowledge that  put them on the path they need to be on. They  held to a well defined asset allocation and have seen their assets appreciate significantly to return well above the rate of inflation. They learned to manage their own assets and avoid the egregious fees charged by the industry.

They are excellent examples of how straight forward it is to become do-it-yourself investors and participate fully in the free market capitalistic system.

Saturday, December 17, 2016

Are You Freaking Out About Bonds?

Interest rates are rising and do-it-yourself investors know that pushes bond prices down. The mainstream media loves this kind of story. Scaring investors is a whole genre within the financial reporting sphere. The reporting today anticipates the shock coming when investors check out their quarterly statements.

Well, actually (here's the news for the mainstream news) most investors, if interested, can go online and see their up-to-date results. Waiting for quarterly statements is last century for many investors, especially DIY investors.

So, what about bonds? Let's take the perspective of an investor, i.e. someone who  invests longer term.

The index most widely used to measure bond market performance is the

Barclay's (formerly Lehman) Aggregate Bond Index.

It is an intermediate bond index and is to the bond market what the S&P 500 is to the stock market. It tracks all investment grade bonds in the U.S. with a maturity of greater than one year (once a bond comes to within a year of maturity it is dropped from the index). Thus, the index includes U.S. Treasury Notes and Bonds, Corporate issues, and U.S. Agency issues. It is the most widely used benchmark by professional bond managers to assess and report on their performance. As a point of reference, most surveys are reporting that professional, active bond managers are under performing the Aggregate Index this year.

So how has it done? The yield on the benchmark 10 year Treasury Note has had a nasty back up from 2.22% at the beginning of the year to 2.60% as of Friday's close. So what has been the impact on performance? Shorter term the fear mongers are right. Over the past 3 months the Index has had a total return of -3.55%. But for the year-to-date the return is +1.62%! Pretty good compared to what people are getting on certificates of deposit and especially on money market fund.

In fairness, the return is not great compared to inflation. Still not something to freak out about. The yield on the index is 2.36% and this will be an important return determinant of the the longer term performance.

Most often investors capture this return by using the


exchange traded fund which has an expense ratio of .06%, i.e. 6 basis points.

Also, it is notable that, just as there are many way to play off the S&P 500 in the stock market, there are many ways to buy bond index funds that will perform differently than the Barclay's Aggregate Index. There are funds, for example that focus on different sectors and funds that have much different durations.

The above information as well as much more can be found by plugging the ticker symbol AGG into


You'll note at the site that there is a "performance" link which provides up-to-date performance.