Print
PDF

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?

Print
PDF

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.

Print
PDF

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.

Print
PDF

“Sell in May and Go Away”: It Rhymes, But It’s Wrong

Mark Twain believed there were three kinds of lies: Lies, damned lies and statistics.

The author would have had a field day with the way statistics are used to “prove” dubious investment theories. A perfect case in point is “Sell in May and go away.”

The idea behind this persistent old idea is that stocks have traditionally had higher returns from November through April, and weaker returns from May through October. At first glance this makes sense: Since 1926, stocks have returned an average of 1.16% each month from November through April, and just .72% the rest of the year. The course of action is obvious: Earn your higher returns during the traditionally “strong” half of the year, and then get out so that the “weak” half of the year doesn’t dilute those returns.

But sometimes a great idea just doesn’t survive the trip from the paper it’s written on into the real world. “Sell in May and go away” is a case in point. The first problem that this legendary piece of advice runs into is a practical one: Once you’ve pulled your money out of the market in May, where do you put it?

Print
PDF

Separating “Flash” from Substance

"Flash Boys"—Michael Lewis' new bestseller about how the investment markets are supposedly rigged—has garnered an avalanche of media coverage, including a feature on "60 Minutes."

There's no doubt that Lewis' expose of how certain high-frequency traders enrich themselves at other investors' expense is fascinating. But it's also worth noting an event that was overshadowed by the release of the book: The five-year anniversary of the U.S. bull market that began in March of 2009, lifting the S&P 500 more than 170%

As investors, it's important to decide for ourselves which news is likely to have the largest impact on our ability to reach our goals. While there's definitely more sizzle to a story of wrongdoing on Wall Street, we believe it's more instructive for long-term investors to look at longer-term trends such as the stock market's remarkable run.