Category Archives: Investing

5 Reasons March Madness Is Just Like Investing

Here is a great article from 2017 we had to share…

Filling out a bracket for the NCAA championship basketball tournament is an annual highlight for sports fans like myself. Like most people, I don’t watch much of the regular season games, but every March I start reading expert picks and researching bracket strategy in preparation for pools with my family and friends.

The process reminds me so much of investing because filling out a bracket balances expertise, risk, reward and future expectations. Winning a pool also requires some luck along the way.

With that in mind, here are five lessons from March Madness that apply to the world of investing.

1. It’s not about being perfect, but positioning yourself to get the most right.

The odds of filling out the perfect bracket are 1 in 9,223,372,036,852,775,808. Let’s just round that to 1 in 9 quintillion. The odds of consistently selecting market beating investments over a long period of time are equally daunting.

The key to successful investing is about focusing on the things you can control. From an investment perspective that means building a portfolio that is positioned to capture return premiums (such as size, value, and profitability) that improve risk-adjusted returns. Other areas of focus that are within your control include asset allocation, keeping investment costs low, minimizing taxes, optimal asset location, etc.

2. Past performance guarantees nothing about the future.

It is easy to let a team’s recent success influence your bracket picks, but last year’s tournament was last year’s tournament. Similarly, investors should never assume that their best pick (asset class, sector, country, or stock) from last year will have a repeat performance.

In addition, the winner of your bracket pool might be skillful, but he/she might also just be lucky – there is no reason to believe that success will be repeated in the future. The same goes for mutual fund managers, their outperformance in any given period may be the result of skill or luck – in fact, it is quite common to see funds that have outperformed in a given period proceed to underperform in the subsequent period.

3. The drama goes up the more you watch.

The more you watch the NCAA tournament, the more emotional you become about the outcomes. Watching the drama of March Madness is a great form of entertainment, but watching the market closely almost never helps an investor.
Myopic loss aversion tells us that the more you watch the markets, the more susceptible you become to making poor investment decisions. The best investors stay as detached as possible from daily stock fluctuations.

4. Success requires removing emotional and cognitive biases from your decision making process.

Humans are hardwired to see patterns and our tendency to only remember the times they work only engrains that pattern seeking behavior. For example, I always pick a #10 seed to upset a #7 seed based on my perceived frequency of that type of first round upset occurring in the past, but not based on any background knowledge of the skill sets of the opposing teams. Another example is picking your alma mater or a local school to advance further than what evidence and probability suggest.

Investment decisions should not be based on technical indicators, patterns or hunches. Instead, a quality decision making process emphasizes evidence-based investment theory and research. A quality decision making process should also protect us from our faulty mental hardwiring that causes us to misinterpret (or ignore entirely) probabilities, find patterns where none exist and elicit emotional responses.

5. People will brag about their success, but ignore the role of luck and past failures.

Chances are that many winners will attribute their success to skill and leave out the role that luck played in the outcome. For example, some people who win their pool by taking an extremely risky approach of picking lots of low probability upsets and having several come to fruition by chance. People that take this approach every year will frequently finish near the bottom of the standings, but they never mention those bad years.

Other winners might fill out multiple brackets, compete against only a handful of people or simply make their picks by blending together multiple expert brackets. Still, all of these people will undoubtedly share their success through the lens of skill when a conversation arises about March Madness. Conversations on investing in social situations work much of the same. I always hear people talking at social gatherings about their investment successes, but never do I hear about their failures.

 From Forbes March 2017 Peter Lazarof, 


How American Families Pay for College

From ThinkAdvisor,com:

Here’s how a typical family financed a college education in 2016-2017 according to the latest annual report, How America Pays for College, from Sallie Mae:

  • Scholarships & grants:                     35%
  • Parent income & savings:                23%
  • Student loans:                                   19%
  • Student income & savings: loans:     11%
  • Parent loans:                                       8%
  • Relatives & friends:                          4%

There was little change in the breakdown from last year – just a 1 percentage point difference up or down in all categories except for parent income and savings, which fell by six percentage points, and student loans, which rose by six percentage points.

Neither saving less nor borrowing more is good news, and they are related.

“When parent income and savings are less available, the funding gap appears to be bridged by borrowing, more student borrowing than parent borrowing,” according to the study,  which is based on telephone interviews with 800 parents of undergraduates, ages 18 to 24, and 800 undergraduate students, ages 18 to 24, conducted by Ipsos Public Affairs.

(Related: 30 Best Paying College Majors: 2017)

Forty-two percent of families surveyed borrowed money to help pay for college this year, according to the report. The typical loan amount was just over $9,600 for students and almost $3,900 for parents, and federals loans were the most popular for both.

Borrowers were more likely than non-borrowers to attend college full-time and in a four-year program, and more likely to venture out of state, attend a private school and choose one based on its academic program.

The study also found a disconnect between parents and children concerning loan repayment.

While 84% of student borrowers expect to be solely responsible for repaying their loans, only 58% of parents concurred with that and 12% of parents expect to repay those loans. In contrast, 41% of parent borrowers expect to be solely responsible for repaying their loans while 21% of students expect the responsibility lies with them

Despite the decline in savings and increase in borrowing, families and students are focused on college affordability, according to the report. Not only are they seeking scholarships – 7 in 10 families did but only 49% reporting using them – but most are completing the Free Application for Student Aid (FAFSA) (86%) needed to qualify for student aid, and 73% report choosing an in-state schools.

In addition, 50% of  students were living at home in the 2016-2017 academic year, 26% were enrolled in an accelerated program to graduate early (and spend less), 76% were working to help pay for college – working year-round or during school breaks—and 26% were enrolled in accelerated programs to graduate earlier (and save money). Many families were also reducing personal spending and working longer hours to help pay for college.

One action many families aren’t undertaking, however, is developing a plan to pay for college. Even though nine in 10 surveyed said they anticipated college attendance since their child was in pre-school, less than half (42%) said they made a plan to pay for it.

The survey covered families across the U.S. and found that those in the Northeast stood out from families in other regions of the country. Families in the Northeast spend about 70% more on college, and finance that with more borrowing and a larger contribution from parents. Enrollment in private school and on a full-time basis higher among those families as is academic programs as a key reason for college choice.

Article from Think Advisor , July 18, 2017


Want more information? Ready to get on the right path to success?


Starting the FAFSA Process

Starting the FAFSA Process


You should consider starting the FAFSA process sooner rather than later if someone in your family going to college in Fall of 2017. As of October 1st you can fill out the FAFSA instead of waiting until January. Even if your darling son/daughter hasn’t picked a school you can list potential schools to get the process started as the U.S. Department of Education expects aid awards to get back to students earlier from Colleges and Universities.  It’s easier this year as families can use a new tool that retrieves your tax information directly from the IRS.  There are also new rules and deadlines for which tax return year parents should use.  Check to see what the new state deadlines are for your area as that may have changed too.

Use this link to submit your FREE application for Federal Student aid

Check out this article for great tips on starting the FAFSA process sooner rather than later.

Passive vs Active Investment Management

passive vs. active investment management I think this is a great article below on the flow of money into passive vs active investment management. It’s nice to see that investors are starting to realize the power of passive investing vs active investment management.

The article also illustrates, that unfortunately the problem of investor’s destructive behavior continues. It’s a shame to see all those investors who panicked and moved out of foreign stock funds now miss out on the post-Brexit comeback.


Rebalancing 101

Click below and watch our two minute video about the power of rebalancing your portfolio. Learn what it means to rebalance and why it’s important.

Should You Be Rebalancing Your Portfolio?


Of the three rules of investing, rebalancing your portfolio may be the most unknown. You are probably asking yourself  ”What does rebalancing mean and how does it apply to me?”  The reason for rebalancing can be summed up into one word… RISK.  Rebalancing is all about maintaining the level of risk you signed up for when you chose your portfolio’s mix of stocks and bonds.

Mixing It Up

Historically stocks have outperformed bonds, so left unchecked we would expect stocks to start encompassing your portfolio as they outperform bonds.  For example, if your portfolio started as a 75% stock and 25% bond mix, you could eventually end up having 85% in stocks.  If stocks are doing really well your “overexposure” to stocks (more than the 75% you signed up for) might make your portfolio grow more than you expected possible.  But when stocks are getting beat up you have more stocks than you originally signed up for and then you might experience a greater loss than you’d expected.

Guidance in rebalancing your portfolio

It would be great if we knew when those turns in the market were going to happen, but we don’t – no one does.  So if we don’t know when it’s coming, investors need to remain disciplined and regularly rebalance your portfolio back to your original mix and the risk you DID sign up for. In our portfolios, we look at your mix quarterly  and see if we need to sell some of what has done well (as an example, stocks) and buy some of what has done poorly (bonds in this example).

The Take Away

The golden rule of investing is…Buy low and sell high. While it’s almost impossible to do that consistently rebalancing your portfolio is a systematic approach to selling off your winners, while buying more of those stocks that have underperformed. This keeps your portfolio aligned wih your goals and risk tolerance and takes the guesswork out of investing.

Now that you understand rebalancing on the portfolio level, watch our video to learn about rebalancing on the FUND level


How do free markets work?


Have you asked yourself: How do free markets work? The stock market works much the same as any other market. Just like cars, food, houses, stocks, etc, the market exists when two parties come together to buy and sell goods or services. The buyers have a need and the sellers supply it to them.

The stock market is no different, except that those buys and sales happen by the millions all day long and the “goods or services” they buy and sell is ownership shares of companies. As such the law of supply and demand applies and tells us that as demand increases, prices go up and as demand decreases, prices drop.

Information Drives Free Markets

Just like positive information could increase demand for a stock and push the price up, negative information could do the opposite.

With our “free markets work” investing philosophy, we know that all buyers and sellers have access to all available information at any given time. That readily available information is always at work influencing (or as we would say “priced in” to) their decisions to buy and sell at different prices.

Because market participants are not being forced or coerced to agree on a price, they all interpret the available information differently and then make decisions based on their free will.  This creates the “free” market we believe in so passionately.

Don’t Be Confused

Since all available information is already “priced in,” the only thing that will change prices (or demand) for a stock is new and unknowable information.

So, how can anyone predict it?  But the talking heads on cable business news or mutual fund managers still try to do it. Time and time again we see many of those stock pickers and gurus proven wrong through academic research that reveals, this “attempting to beat the market” approach to investing is basically betting against the combined wisdom of millions of market participants (buyers and sellers).

Imagine how hard that is for even the pro’s to get right consistently as evidenced in this latest study by Standard & Poors:

If information dictates demand and demand dictates price, then those day-to-day movements in stock prices are just the combined human reactions to new and unknowable information.

These traders who often make their buying and selling decisions based not just on data, but emotion or “gut feeling” are not immune to the same human instincts and behaviors we coach you to avoid.

How do free markets work? – The Take Away

The market prices moving up and down really has less to do with the fundamental value of the companies and more to do with how the market participants feel about and react to some new information.  This is why short term fluctuations matter very little to your long term investing success.

JP Morgan said it best in 1924. When asked about what he thought the market would do he replied, “I believe it will fluctuate.” The tip is still good!

Want to learn more? Watch this video about how the markets work (13 minutes).

Investing is SIMPLE!

There are three simple rules to follow.  They are 1.) Own Equities 2.) Rebalance 3.) Globally Diversify. The rules are easily understood,  but following them is a different story. That is where coaching from your Advisor is most important. You need to understand and execute these rules even when the market is down and your emotions are telling you to make a change. So no matter how sophisticated your portfolio has been built, if you don’t consistently follow the rules your results could be dire. These rules are not glamorous but they are compelling and effective.

The Importance of Having an Investment Philosophy

Happy New Year! Here is our first Insight in our year-long campaign for our growing Community of Educated Investors.

During times of high volatility with the current stock market and throughout the year our goal for our community is to have a higher level of investing Peace of Mind gained through education and be able to ignore the hype and noise of the media and stay steadfast and disciplined to your investing goals. Throughout 2016 we will reveal the Top 12 Insights into becoming an Educated Investor.
Drumroll Please …Insight #1
The Importance of Having an Investment Philosophy

Check out this 60 second video interview with Michael Pallozzi and learn why you need one.