Secure your Financial Future

Financial choices can have a huge impact on your future. Making wise decisions about money can pay off in dramatic ways. The financial world is full of false promises and self-interest; you have a difficult choice to make!

millions lost through unnecessary costs

If you are overpaying for your portfolio through advisory fees or costly product fees you could be losing a lot of money. $25,000 invested over 35 years will underperform by $1,207,052.84 assuming your investment costs are 2% versus 0.5%. That is a lot of money, but consider what the costs would be on a large portfolio: $500,000 invested for 25 years with a 2% fee underperforms by $7,109,130.68!

market timing and get rich quick schemes

Investors sometimes get spooked into making horrible decisions during market crises. Namely, they bail out of the market when things are at their worst. For every successful market timer there are probably 100 people who have underperformed due to market timing. Dalbar, a market research company, has found that the average investor has a much, much lower return than the market or even the majority of mutual funds. Why? Market timing. In the Dalbar study from 1987 - 2016 they found that the average investor earned about 4% annually in a period during which the S&P 500 earned over 10% per year. That 6% annualized difference amounts to $10,840,908.49 over 30 years!

There are many managers and funds that promise grand things and deliver so much less. If someone promises high returns with little or no loss, beware! There are no free rides in the investment world. There is always a relationship between risk and return.

roth IRA and other tax issues

Not utilizing the Roth IRA can cost you a lot. If during your career you only invest in your employer's tax-deferred retirement plan you are missing a lot of opportunity. If you enter retirement having put the maximum into a Roth IRA for 35 years and earn 8% per year, you will end up with $947,742.42 of tax free money.

Tax efficiency of your investments can also make a huge difference in your long-term investing. Even the way in which you draw on your IRA assets during retirement can have a significant impact on your long-term financial health.

limited exposure to factor-based investing

Small-caps, value stocks, and other factors have been identified that enhance investor returns. Small companies don't always outperform, but over the long term they have significantly enhanced returns. Even just looking at the period from 2000-2018, we find that a market cap portfolio (one primarily invested in large caps) returned 5.2% per year while the portfolio tilted to value stocks and small cap stocks returned 7.89% per year. Extending that margin over 25 years with a portfolio of $100,000 results in an underperformance of $2,287,736.75.

Most investors are gambling on one asset class, usually large-cap growth in the US. Growth stocks can deliver strong returns, but the majority of stocks do not fall into this category. You will benefit from a broad exposure to global stocks in the long run.