Sheila Willis |
Most people looking to implement a financial plan are making decisions with the long term in mind. While what long term means tends to vary depending on factors like age, individual, and family goals, it’s safe to say most planners and their clients would agree that long term is usually measured in years not months. Whether it’s the young professional first considering a still-distant retirement age or a retiree trying to leave a financial legacy...
When it comes to our actions, we rely 99% on our rational decision-making and 1% on our emotions, and it’s often that 1% that actually triggers action. So, instead of following the rational line of thought that we so carefully forged in the left side of our brain, our actions are skewed by whatever emotion is swirling around in the right side. Because we can’t put emotions in a spreadsheet, we can’t account for them...
Sheila Willis |
Asset allocation has become an established investment strategy for those who understand the long term nature of investing and the need to achieve an optimum level of portfolio balance and diversification in order to mitigate risk and achieve more stable returns. The core strategy involves selecting a mix of asset classes based on an investor’s financial profile, investment objectives, preferences, time horizon and risk tolerance. The key behind the strategy is the mix of asset...
Back in the 1970s and 1980s when financial planners first began to calculate retirement income needs, many of them latched on to the “70 percent” rule, which says that retirees should plan on needing just 70 percent of their pre-retirement income to live comfortably in retirement. It’s a straightforward rule with assumptions that probably worked well back then, but are dangerously flawed in today’s “new normal” retirement. The “cost” of retirement has increased significantly in...
Sheila Willis |
When it comes to investing, people are often their own worst enemy. Emotions, such as fear and greed have a way of driving even the most rational people to make investment decision that result in under performance. According to a study by DALBAR, Inc., a financial services market research company, the returns most investors experience are significantly less than the actual returns of the mutual funds in which they invest. In 2014, the average equity...
Sheila Willis |
If you are currently contributing a part of your earnings to a qualified retirement plan, such as a 401(k) plan, you are already applying the dollar-cost averaging strategy. Fundamental to the strategy is a commitment to investing a fixed amount at a fixed time- whether it’s $50 or $500 each month of every-other-month for example. Each month, your fixed amount will buy a certain amount at the then current prices. As prices decline, your fixed...
Numerous surveys indicate an increasing number of high net worth investors are willing to pay for solid, unbiased, fee-only investment advice. This is not surprising given the challenges of today’s markets. On the other hand, a number of investors prefer to go it alone, thinking they can do better on their own or that investment advice is not worth the cost. With the average fee charged by an investment advisor around 1%, some investors question...
Most people would argue that living in a digital world with instant access to an endless stream of information has made us smarter and more self-empowered than past generations. Investors often believe that it has “leveled the playing field”, enabling them to make investment decisions based on the same information once only available to the investment pros. The incessant quest for information has reached such a fever pitch that the media outlets (e.g. the cable...
It wasn’t long ago that financial planning was thought of as a discipline that only applied to the very wealthy. If you consider the fact that just a few decades ago, the average life expectancy was just 70 years, few people were concerned with making their retirement income last long. And, back then, the majority of retirees were supported by the three-legged stool of Social Security, personal savings, and guaranteed pensions. Much has changed in...
With more than 10,000 Baby Boomers crossing the retirement threshold every day, the Social Security check writing machine has kicked into overdrive. While the temptation is strong to start taking benefits at “normal” Social Security retirement age of 66, or even earlier at age 62, retirees may be leaving thousands of dollars on the table by not waiting as long as they possibly can to tap into their Social Security benefit. Most people know their...
Behavioral finance is a relatively new field that seeks to combine psychological theory with conventional economics to provide explanations for why people fail to make optimal investment decisions. While financial planners know the core concepts behind investment advice, including asset allocation and modern portfolio theory, we also know that emotions have a LOT to do with financial decision-making. The success or failure of a financial plan is driven by a variety of possible influences. Factors...
Sheila Willis |
Until recently, many retirees have been able to rely upon the three-legged stool of retirement income sources: A defined benefit pension plan that guarantees a lifetime income, their own savings, and Social Security. Within the last couple of decades, the first leg of the stool has all but disappeared as many defined benefit plans have been replaced with cash balance plans such as a 401(k) plan. This has shifted the responsibility for creating a retirement...