Investing for retirement

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The Anti Free Lunch. Investing for retirement. The Bad and The Ugly. Broker Conflict Annuities Churning Pushing under writings Pump and dump Not fiduciaries Inflation Free lunch Manipulation Black Pools Ponzi. Mutual fund Analysis by Forbes. Non-Taxable AccountTaxable Account - PowerPoint PPT Presentation

Transcript of Investing for retirement

  • Investing for retirementThe Anti Free Lunch

  • The Bad and The UglyBroker ConflictAnnuitiesChurningPushing under writingsPump and dumpNot fiduciaries InflationFree lunchManipulationBlack PoolsPonzi

  • Mutual fund Analysis by Forbes

    Non-Taxable AccountTaxable Account Expense Ratio .90%Expense Ratio .90%Transaction Costs 1.44%Transaction Costs 1.44% Cash Drag .83%Cash Drag .83%Tax Cost 1.00%Total Costs 3.17%Total Costs 4.17%

  • The Bad and the Ugly 2Mutual fund success 30%How clients drive bad outcomesHow funds come and goMutual fund survivorship ( Review of Finance )20% Lower when dropped funds are includedMutual fund broker commission 4.5 % 5.75%Stock picking letters ( Like a tout at the track )

  • Advisor and Broker Knowledge Advisors Asset AllocationStyle Sector rotationBrokers The company lineWhat makes money for themWhy are they dealing with you?

  • Who are the Lions?

    TreasuryFederal ReservePension FundsMutual FundsInsurance CompaniesHedge FundsBrokersBanks

  • Being a Mouse with Lions

  • Real interest rates

  • Interest and inflation(1970 to 1980 105.8%)

  • Inflation in Weimar Republic

  • Stable Interest chart

  • Fixed Income SecuritiesBanks - Checking, CDs, Safety BoxTIPS Insurance not a good investmentEverbank Foreign Currency CD Foreign BondsCorporate Bonds in IRA ( Free Municipal Bonds or Funds

  • Bond FundamentalsMaturity dateYield to maturityDiscount / PremiumCallableTaxableRevenue source

  • Alternate fixed Income Closed End Funds cefa.comRoyalty TrustsUtility stocksREITsMLPsDiversify and Ladder

  • REITsIt represents ownership of propertyDepreciation Tax advantageUse all of the stock tools to pickLook at their properties

  • Royalty Trusts99% Oil and Gas SDT,CRT,SBR,SJT,BPT,CHKR,PER,ROYTNot actively managedEarnings distributedDepletion tax advantageWill run outThink of it as an energy cost insurance policy

  • LPsNearly all oil related Use deprecation to show little incomePay a good dividendBasis is reduced by: dividend-income Usually mid stream pipelineTax deferredMust be inherited to avoid big tax hit

  • Why buy stocks?

  • Company Fundamentals - StocksIncome year and quarter Sustainable?GS&AGrowth Balance SheetInventory - Square root rule Debt Sneaky debt itemsQuick ratio

  • Company Fundamentals Stocks 2Other Yahoo itemsIn depth at www.sec.govLitigationPension liabilityAuditor Qualification of opinionDerivatives Capital leasesRelated party transactions

  • Company Technical AnalysisMoving averageLook at 50 day and 200 dayBreakout of 50 above 200 is a buy signalMACD and RSIPositive are buy signalsVolumeStock Technical Analysis web site

  • Buying stocksCheck the market for directionFind candidatesThings you likeGraham VariationsCandidates from ETFsLow P/S, P/E, P/BDo Fundamental analysisUse Technical Analysis for timingDiversify

  • Indirect ways to own stocksMutual funds Good ManagedBad Lower outcomes, tax

    Closed end funds (Also works for bonds)Good ManagedBuy at a discountNot driven by their ownersTax EfficientBadSell at a discount

  • Indirect ways to own stocks 2ETFs Good Tax EfficientLow costDo as well as the marketBad Not managed

    Smart Beta ETFsGoodTax EfficientLow costMay do better than the marketBadAdded risk of the model

  • AAII Recommended ETF PortfolioAs of June 30, 2014Weight YTD2013 ExpenseGuggenheim S&P equal weight 500 RSP 40% 8.435.6.40Guggenheim MidCap 400 Pure value RFV 20% 6.538.3.35Guggenheim SmallCap 600 Pure Value RZV 20% 2.945.1.35iShares MSCI Frontier 100 FM 10% 9.925.6.79Vanguard REIT index VNQ 10% 17.7 2.4.10Performance 100% 7.733.7For Comparison S&P 500 SPY 100%

  • OptionsPut is an option to sellUse Puts as a way of buyingNever sell a put if you do not want to own the stockBuy puts on sinking shipsCall is an option to buy Sell covered call for incomeBuy a call in place of stock for short term gains Use both for Pending major disruptionOpportunistic

  • FOREX way to make and loose moneyTrillions change hands every dayCan be irrational both good and badUse Vegas money not Investment money

  • GoldDoes not keep up with inflation

    Costs to own

    Not productive

    Is insurance against rapid inflation

  • Assent AllocationNo debt: House, car etc.Emergency Fund Three months20-40% Fixed when rates are market rates50-70% Equities5-10% SpecialtiesREITs, Closed end Funds, Royalty Trusts0-2% GamblesDo not have blinders

  • RiskCivilization Collapses -Guns, ammunition and food Inflation Commodities, foreign stocks and bonds, manufacture of things that will appreciate and short term securitiesDeflation - Longer term bonds, money and not CommoditiesExpropriation Investments outside of the US Formerly only a risk in third world countries

  • RulesUnderstand it or dont do itKnow the source of the moneyBe bold when others are fearful and be fearful when others are boldNever give a Broker controlUse only FINRA Brokers and SEC AdvisorsDo not buy Annuities