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Ignoring the Siren Song of Daily Market Pricing

In last month's blog, "Jelly Beans and Investing Wisdom," we explained how group intelligence leads to relatively efficient markets. Now let's look at how prices are set moving forward. Understanding this will help us see how to work with the market rather than fighting it.

What causes market prices to change? The answer begins with the never-ending stream of good, bad and ugly news. For example, when there are reports that a fungicide is attacking Florida trees, orange juice futures may soar, as the market anticipates shrinking supply.

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Jelly Beans and Investing Wisdom

Written by Brian Puckett, CFP®, CPA/PFS, Attorney at Law.

It's every investor's dream: To outsmart the rest of the investing herd by consistently buying low and selling high. Unfortunately, many an investor has learned that this is easier said than done.

The truth is that the market—that collection of countless investors trading in stocks, bonds, commodities and more—is more skilled as a whole than are its individual participants. And that fact provides a key insight into how to invest successfully.

The collective market is a vast realm where opposing players compete against one another daily to buy low and sell high. In doing so, they help to set fair prices for everything from stocks to real estate.

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In Uncertain Markets, Beware of the Herd

Written by Brian Puckett, CFP®, CPA/PFS, Attorney at Law.

It's fascinating how the behavior of the market reflects the makeup of its participants—not just our enterprising nature but also our behavioral foibles, such as a herd mentality.

Take the recent market environment. On July 31, a run of trades seemed to beget a larger run of trades, culminating in a 2% drop in the S&P 500 index—enough to wipe out all of July's gains. Traders told the Wall Street Journal they saw "no single catalyst for the stumble."

That's another way of saying, "Who knows what caused the panic?" The global news hadn't really changed all that much. All of the social, political and economic promises and threats that existed on July 30 remained about the same on July 31. No one reported an asteroid crash. So why did the market, in its collective wisdom, stage such a significant decline?

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When a Broker is Your Retirement Nightmare

We at Align Wealth Management have long preached the importance of choosing to work with a "fiduciary" advisor—one who is legally bound to act in your best interests.

Now, it doesn't take a genius to understand that taking financial advice from someone with a conflict of interest is a bad idea. But a recent Bloomberg report made clear just how great the damage can be when conflicted advisors "help" clients invest their retirement savings.

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The Latest Reasons To Think, Act and Invest Like Warren Buffett

Written by Brian Puckett, CFP®, CPA/PFS, Attorney at Law.

In 2012, author Larry Swedroe wrote a handy little pocket book entitled “Playing the Winner’s Game: Think, Act and Invest Like Warren Buffet.” In it, Swedroe shares some of Buffett’s most successful strategies, and how every investor can use them to build sound investment habits. It’s a helpful little guide and recommended reading for any investor.

Buffett, of course, has not been sitting idly by since Swedroe’s book was published. As Chairman and CEO of Berkshire Hathaway, he achieves each spring what nearly every other publicly traded business owner can only dream of: He publishes an annual shareholder letter that people actually read. Buffett’s 2014 letter does not disappoint. Jam-packed with “Buffettisms,” it inspires us and reminds us yet again why much of Buffett’s advice about investing—and life—is worthy advice indeed.