I just love to watch Wall Street scramble in an effort to generate revenue and keep up with the competition as more people tune in to the philosophy of Coffeehouse Investors.
It’s hard, (dare I say impossible?) for an industry, bent on following every tick of the market’s movement, to adjust, and actually provide investors with what they want and need. As a result, Wall Street’s business model is floundering.
To counteract the successful approach to constructing portfolios and building long-term wealth the Coffeehouse way, the financial industry heads the other direction, making this thing called investing even more complicated than ever, as witnessed in this humorous article I came across in The Economist.
As a side note, another article in The Economist shed some light on the true state of the Hedge Fund Industry.
Stay tuned. In the coming days I will share a real life example of the complexity Wall Street is bringing to investors.
I wanted to thank all of you who attended “Examining the Coffeehouse Portfolio” webinar on Wednesday night. There was a lot of positive energy about investing and I appreciate all of the great comments submitted. Thank you also to those of you who stuck with me to the very end, I know the presentations can go long!
Many of you asked a lot of great questions and particularly around the Vanguard article I referred to. I hope you find it as beneficial as I did.
I look forward to talking more about the ever important topic of rebalancing in our next webinar in May. Stay tuned for dates and times!
After ignoring Wall Street, let’s get on with our life one blog at a time … by Julie Klingler
I came about this rule of thumb when researching car buying strategies, the 20/4/10 rule. You put down 20% of the cars total price, only finance for 4 years (Suze Orman suggests financing only for 3 years) and your monthly car payment shouldn’t exceed 10% of your income. Have you ever heard a car salesman tell you this rule?
It got me thinking about the mortgage crisis and the irresponsibility of lenders (and borrowers for that matter) creating mortgages way over homebuyer’s heads and home values crashing. We have learned a hard lesson and tighter sanctions on borrowing have been created. It can be nearly impossible for a family to buy a home, but responsible and wise, nonetheless.
Now I realize a car isn’t a fraction of the financial commitment a house may cost. However as car salesmen, what responsibility do they have in ensuring me, as a consumer, that I am making the wisest financial decision I can make? Why don’t they ask what I can afford, evaluate my debt-to-income ratio, and provide me a list of cars that fit my assessment?
You can argue that as an adult consumer, I have a responsibility to make my own financial decisions and understand my own limits. However, the mortgage crisis and the average consumer credit card balance have taught us a valuable lesson – we are easily persuaded by bright and shiny objects. Those bright and shiny objects include bright and shiny cars with car salesman willing to over promise and under deliver.
You owe it to yourself to do your homework, be diligent and disciplined with your purchases, and avoid bright and shiny objects. Unfortunately, you may be the only one with your best interest in mind.
The one great secret of investing is that there is no secret.
John Bogle, John Bogle On Investing – The First 50 Years.
In 1976, John Bogle, founder and retired chairman of the Vanguard Group, created the first retail index fund. This security allowed investors to match the returns of the S&P 500 index through one simple mutual fund.
Over the years, Vanguard’s S&P 500 index fund has evolved into the largest mutual fund in the investment arena.
With the “indexing” revolution unfolding across the investing landscape, Wall Street has been drug along, kicking and screaming, as more and more investors recognize the wisdom of “matching,” not “beating” the stock market average.
For instance, at last count, there were over 1200 Exchange Traded Funds (ETFs) to choose from – thinly sliced segments of the market that Wall Street labels “index funds”, but can hardly be thought of in the same manner as Vanguard’s first S&P 500 fund.
How can investors make sense out of this chaos when building an intelligent portfolio for retirement?
I am presenting a webinar tonight, “Examining The Coffeehouse Portfolio” that will offer you clarity and guidance on this topic amid the clutter of choices available to investors today.
We will review why The Coffeehouse approach to building long term wealth is far superior to Wall Street’s concept of owning thin slices of the market. In addition, we will explore why diversification and rebalancing is essential to your long term investment success. Hope you can tune in!
One of the significant benefits of The Coffeehouse Investor philosophy is its simplicity, at least when it comes to investing in the stock market.
Take for example a 25 year old who has just signed up to participate in her company sponsored 401(k) plan. All the person has to do is invest in a couple of low cost index funds within the plan (provided they are available) allowing her to focus solely on “saving enough” to reach her financial goals.
Things get a little more complicated on the other end of the spectrum, for those who are nearing retirement or are retired.
Am I still saving enough?
When should I retire?
Does my allocation match my ability and need to take risk?
How much money can I take out of my portfolio without running out of money?
These questions are so important that I wrote an entire chapter on this in the third edition of The New Coffeehouse Investor.
Christine Benz a personal finance columnist at Morningstar, and has written a wonderful article on addressing some of these issues, including the all important “withdrawal rate” as you move through retirement. Rarely does someone write with such clarity on such an important topic. I am sure you will find it helpful as you contemplate how these issues affect your retirement planning decisions.