Kansas City fee-based advisers, financial planning firms and brokers should consider these questions before making recommendations to their clients to “buy”.    You don’t need to know EVERYTHING to be a better financial manager and investor.  You just need to know the answers to a few critical questions.   Thanks to Dan Solin, a regular contributor to Huffington Post for highlighting these.

Leave me a comment below and tell me what you think of these questions too.

1. Why are you able to identify just a couple of managers who you believe have genuine investment skill out of the thousands out there?

2. If you are basing your recommendation on their past performance, doesn’t the SEC require disclosure that past performance is no guarantee of future results?

3. Did any of your clients actually capture the returns you are touting?

4. How many years of data did you look at before you concluded the fund manager has genuine investment skill?

The answers to these questions will quickly expose the folly of the exercise of trying to identify in advance fund managers with legitimate investment skill.

Kansas City and Overland Park investors need investment advice and financial planning solutions that anticipate the death of a spouse.   Having a TRUST doesn’t guarantee your assets will avoid the expensive and long process of PROBATE.  Contact me to analyze your holdings and beneficiaries to help make this process go smoothly.   Here are 5 Easy Steps to follow when a spouse inherits your IRA.  Thanks and credit to my fellow coach Michael Stokes in Irvine, CA for the content of this post.

First, who is a spousal beneficiary? A spousal beneficiary must be married to the account owner at the time of the account owner’s death and he or she must be named on the beneficiary form (or inherit directly through the document default provisions). A spousal beneficiary who was the sole beneficiary of an IRA for the entire year in which the account owner died has a number of unique options.

1. Split the inherited account if necessary. A spousal beneficiary can take advantage of the special spousal rules if they are the sole beneficiary of an IRA account. If other beneficiaries have been named, the spouse can still take advantage of these special provisions by transferring their portion of the inherited IRA to a separate account by December 31st of the year following the year of the IRA owner’s death.

2. Will a spousal beneficiary need money prior to 59 1/2? If a spousal beneficiary needs money from the IRA prior to age 59 1/2, they will likely want to remain a beneficiary of the inherited account. Death is an exception to the 10% early distribution penalty, so by staying as a beneficiary they’ll avoid paying the 10% penalty. The account should be retitled as a properly titled inherited IRA. A spouse that remains a beneficiary does not need to take RMDs from the account until the year the deceased spouse would have turned 70 1/2.

3. Transfer the inherited IRA into a spousal beneficiary’s account. Once a spousal beneficiary reaches age 59 1/2, there’s no advantage to remaining a beneficiary, and a spousal rollover should be made into an IRA in the spousal beneficiary’s name. There is no deadline for this transaction, and NO other beneficiary has this option. By doing this rollover, a surviving spouse ensures that their own beneficiaries will be able to stretch distributions over their own life expectancies.

4. Name new beneficiaries. A surviving spouse should name their own beneficiaries. If no beneficiaries have been named and the surviving spouse dies, the remaining assets will pass according to the default provisions in the custodial document. This is frequently the estate of the surviving (now deceased) spouse, which could eliminate the stretch option for beneficiaries or add unnecessary time and expense by tying the assets up in probate.

5. Consider a disclaimer. Before taking any action regarding an inherited IRA, a surviving spouse should evaluate whether a full or partial disclaimer would be beneficial. Using a disclaimer, some or all of the inherited IRA can be passed to contingent beneficiaries, potentially extending the stretch IRA and reducing the future impact of estate taxes.

Financial planning and investment advice in Kansas City and Overland Park shouldn’t be negatively influenced by what the media wants you to believe are prudent strategies.   Prudent investment strategies share this believe: returns come from the market.

Imprudent strategies (or activities) include stock picking, market-timing (moving in and out of the market based on a prediction, forecast or feeling), track-record investing (looking at past performance of a fund or fund manager to choose an investment) and ignoring costs.  Active-management firms (which include virtually all broker-dealers) sell commission-product that enable imprudent activities like these.

As an Investor Coach, it’s my job to help you be a better investor.

The first step to be a better investor:  Eliminate imprudent activities.

Next: Identify your personal risk tolerance?  Do you have a system to measure volatility in your investments?  If not, start with an unbiased analysis of your current  investments.

Last, work with an Investor Coach to capture markets rates of return in an investment portfolio that matches your capacity and/or tolerance for risk.  Using structured asset-class investments and academic measures for diversification and risk, you can have a portfolio you can live with for 10, 15, or 20 years.

Wealth Renovators, LLC doesn’t sell commission-based investments and the firm is a Registered Investment Adviser.  Rest assured you’re getting the best possible advice and portfolios when working with this firm.

Educate yourself, understand what market rates of return are and work with a coach to capture them with proven investment strategies.

Why do you think Kansas City business owners, investors and investment advisory firms need capitalistic markets to thrive?  If capitalism rewards those that create value in the form of a product or service, why is this important to if you want to be a better investor?

Free markets  allow the consumer (and not a government) to choose who to buy stock, goods and services from.  As companies grow, so does the value of the stock you own in that company.   If you could stock in one or 10,000 companies—which would choose?

With all of the wars, recessions and depressions, there has been no point in history where if you invested in equities, you didn’t come out extremely well.  The Main street investor has to learn that nobody on wall street can tell you with certainty where the next 10% market move is.

Watch this video, leave a comment and tell me what you think!

Kansas City investors and many recipients of retirement income say they WANT things like “guaranteed-income” and “income for life”.  While the need for a specific income stream at retirement is in fact a NEED, don’t be confused and think you WANT actively-managed mutual funds and annuities to satisfy the NEED.  Consider this:  if you’re a company selling a product, won’t you market it in a way that you want your target market to perceive it?  The traditional industry will do all they can to make you believe this is what you WANT when in fact you don’t NEED either.

Here’s an observation of what the average investor is experiencing.  Do you see yourself in  any of these examples:

1)      Invest with a mutual fund manager that has a good track-record and/or one that guarantees returns.  Perception: the mutual fund manager (or industry) can capture returns in predictable fashion.  Problem: returns come from the markets and NOT managers actively-managing (gambling and speculating) with your money.  Don’t fall victim to another Madoff-like Ponzi scheme or unexpected/massive losses because of active-management strategies.

2)      Invest in an annuity and give control to an insurance company. Perception: I’m too old have money in the stock markets.  Problem: lose access to money in case of emergency needs; live on lower retirement income (compared to a properly diversified investment portfolio); don’t keep up with inflation without costly riders; and leave beneficiaries with a higher tax bill because they don’t get the stepped-up basis in value upon inheritance.

3)      Invest into “safe-haven” products like CD’s, money-markets, bonds. Perception: I’ll move money back into the stock market when it’s doing better.  Problem: don’t keep up with inflation and missing the best days in the market due to “market timing” leads to inevitable losses and frustration.

What investors NEED is 100% control and access to their money in a broadly diversified and properly allocated investment portfolio. They also need to re-balance the portfolio when the allocation is more than 5% out of balance.  This insures that buying-low and selling-high happens.   Over time, this enhances returns and controls the volatility of a portfolio.   Owning this satisfies both WANT and NEED.

How do you know you have this?  A starting point is to know the answers to the right questions.   Here are a few:

1)      Are you working with a financial coach or financial planner?

2)      Do you have a system to measure portfolio volatility?

3)      Do you know how to measure diversification in your portfolio?

4)      Do you consistently and predictably achieve market returns?

5)      Do you know where you fall on the Markowitz Efficient Frontier?

The traditional

Wealth Renovators, LLC is a Registered Investment Advisory firm specializing in coaching clients to be better investors.  We’ve translated financial science into real world investing solutions by capturing what the markets have to offer.

Educate yourself, understand what market rates of return are and capture them proven investment strategies.

Kansas City investors and investment advisers shouldn’t give emotionally-driven decisions the opportunity to shape their investment portfolio or philosophy about investing.  Paying too much attention to global uncertainty and the media can lead investors and their advisers into behaviors that invariably penalize the investor with lower rates of return and lower account balances yet reward the adviser or company brokering a product (or a trading platform) to facilitate negative activities or behaviors.

Here’s an example of one such behavior:  market timing.   Think about your employer-sponsored retirement plan.   How many times in the last year have you changed your 401k allocation?  Most individual investors will lower the % of money invested into stocks when they hear recent news highlighting the poor performance of the S&P 500 ending this last quarter.   Is this is a positive or negative behavior and why?

It’s a negative behavior because historically investors making moves like this miss the upside of volatility with too much (or all) of their money allocated to what they believe is a “safe-haven”, i.e. cash, money market or bonds.   So the reason it’s negative is because the investor invariably misses the next opportunity for gains.   (See my video on “Market Timing” at the home page for additional info.)

The next reason this is considered a negative behavior is emotion and not logic initiated the process of making the allocation change.  (Don’t be confused when it’s easy to say logic was used to make the decision when logic only justified the process that emotion began.)

One of the easiest ways to avoid this negative behavior is to focus on the long-term expected rates of return for the asset-classes your money is invested into.   If you have no idea what asset-classes you’re invested into, contact me right away to have an analysis done so you can see “what’s under the hood” in your investments.   The results will surprise you and you’ll understand what it takes to own a portfolio designed to capture market rates of return with lower risk.  You’ll also be a better investor because ups-n-downs in the S&P 500 won’t impact you as negatively as they are right now.

Take control by educating, understand what market rates of return are and capture them with proven investment strategies.

Kansas City investors and givers of financial and investment advice talk about the benefits of “diversifying-your-investments” and controlling risk.   If this is so important, how do you know it’s actually happening and is it possible to measure it?  Is it possible to hold the “advice-giver” accountable.

ANSWERS:  it’s called “standard-deviation” and YES you should hold the advice-giver accountable.

Most people believe they’re diversified when looking at the names of multiple mutual funds on their 401k and IRA statements.   If you don’t know what individual stocks and bonds are inside the mutual fund (I call this “under-the-hood), there’s a high probability your investments are concentrated in a single asset category like US Large Cap stocks–tracked by the volatile S&P 500 index.   Making investment account balances change even more rapidly is the high probability stocks and bonds in one mutual fund are also in other mutual funds you own.  This is called overlap and also measurable.

The first step to better performing investments and greater peace of mind is “knowin-what-ya-got”.  If you don’t know this—we need to talk!

Enjoy a good article further explaining diversification and the academic measure of risk everybody should know about their investments.   Click here for the article……

Thank you Kansas City investors for feedback to messages about prudent investment advice!  Keep the emails coming and post comments on the web site so others can join the conversation.

Being a “long-term investor” doesn’t mean each of you share the same percentage allocated to STOCKS and BONDS.   A 64 and 30 year old investor should BOTH be LONG TERM investors BUT NOT SHARE THE SAME ALLOCATION (% of your money invested in STOCKS versus BONDS).

For your peace of mind, the percentage you allocate to STOCKS versus BONDS should be personalized to your risk tolerance by knowing what the expected rate of return and volatility measurement for the allocation is.   Systematically, 1-5% per year of this allocation should be shifted to more BONDS thereby making your allocation less volatile and more CONSERVATIVE.  This is a systematic adjustment like quarterly re-balancing of your investments.

You shouldn’t change your allocation because of unpredictable and unknown events that make markets move like they have in the last 8 weeks.  This is “market-timing” and academically proven to lower your investment returns.   It also decreases your “peace-of-mind-factor”.

Said with further clarification–”Don’t let ‘news-of-the-day’ and current volatility influence you to treat your investments like a day-trader and therefore lose a LONG TERM VIEW of your investments.”

If you don’t have an allocation you can live with for at least 10 years, we need to talk.

Inevitably downward market volatility causes stress, anxiety and in some cases panic. My message today for investors is not to lose sight of your long-term goals and time horizon. Short-term volatility is to be expected, and doesn’t mean that your portfolio isn’t working. While it goes against all of our human instincts, this is the time to remain disciplined and rebalance. For those of you feeling distressed, confused, or anxious talk to your coach and get your questions answered. Your long-term peace of mind is on the line.

Prudent investment advice for Kansas City investors will eliminate speculating and gambling with their money.   How do you distinguish between these two activities:  GAMBLING and INVESTING.  Wall Street Journal published and interesting article that will help you know the difference.   Knowing the answers to the right questions will too.   Here’s the most important one:

“What’s your true purpose for money; that which is greater than money in and of itself?”

Click here to read the Wall Street Journal article