What are some of the lessons that investors can take from the year 2018? We think there are several, but perhaps the biggest lesson that we’ve learned this year is to temper your expectations and accept that no one can say with 100% certainty where the Market will end up at the end of any given year.
As we go to press, the S&P 500 has a year-to-date return of five percent. Now think about that for a moment. If this return holds by the 31st of the month we would have made 0.4 percent per month on average in 2018.
This year we experienced 2 significant corrections (as a matter of fact, we believe the second is still ongoing), trade wars with Canada, Mexico, China, and Europe to name a few. We also had a midterm election that will usher in a divided Congress next year. And we also watched as Facebook, Apple, Amazon, Netflix, and Google shed more than a trillion dollars of market cap! OUCH!
We had an inkling that dark clouds were on the horizon near the beginning of this year. The Federal Reserve has been hiking interest rates and we felt that these rate increases would have a detrimental effect on stock prices, and we were right, painfully right.
Still, we will take whatever the Market return is for 2018 because we believe that the Stock Market is the best long-term investment that retail investors can have a chance to become financially secure. We are investors, not gamblers or lottery ticket holders. We have portfolios that we allocated our money in, and we are confident that over the long term, years if not decades, the Market will reward our discipline. It is really that simple.
Does anyone reading this remember what the return was for 2017? No? You should look it up and you’ll see why the Market will humble you before you’ll ever humble it. Just keep your expectations reasonable and that way you won’t lose your temper!
Public schools get an F for Financial Education
Mon, 5th November, 2018
We recently attended a local school board meeting and the district was introducing its students to a new lesson; financial education. The district budgeted about $10,000 to purchase 30 new textbooks on the subject of financial education. The book was 670 pages long and had 18 chapters that covered everything from opening up a bank account, to how to take out an auto loan.
Although we admire the district for attempting to cover this important subject, something tells us, that when all is said and done, the students that take this course will use little, if any of the books financial subjects.
Why do we say this? For several reasons. Students today do not learn the way students of previous generations learn things. Ask yourself a simple question; How many students are going to be able to grasp the concepts of financial literacy in a book of 670 pages? And think about the other subjects that they have to master like English, science, math, history. Those are also 600 plus paged books. Here at Boodle, we have been in the financial markets for more than 20 years, and we think we know something about this subject and how best to approach students about it so that they can develop a keen interest in how money works.
Let us leave you with an analogy. If you need a car for traveling from point A to point B, and that is basically all you need from the car, do you really need to read the 670-page owner's manual? Have you ever read your owner's manual cover to cover? Do you need to read that entire manual, or do you just need to know how to start the car, turn on the lights and wipers, how to blow the horn, and how to fill it up with gas? Do you see the point we are making? You learn how to drive a car by getting behind the wheel and driving it! The district just spent $10,000 of tax payer's dollars on these books. We wonder if there may have been a wiser, dare we say it, a more “boodle-esque” way to spend those dollars? Time will tell. So what does that ‘F’ stand for in our headline? Foolish? Frivolous? Failure? We’ll let you be the judge.
The Green Wave
Mon, 3rd September, 2018
Now that summer is coming to an end, and students are starting to return to class, politicians and the news media are sounding the alarm, “the Blue Wave is coming!” What is the blue wave? According to political prognosticators, it is a wave of Democrat politicians sweeping Republicans out of office. We understand why politicians are so focused on this "blue wave”, but we’d like to tell you about another wave that has been crashing against the U.S. economy for years, and has barely gotten a tenth of the press that the blue wave has gotten.
That wave is the “Green Wave”, and it can do a lot more for you than a blue, or red wave ever could. The green wave is the return in the stock market, over say, the last ten years. If you add the returns of the previous 10 years together, you’d see a return of over 118%! Think about that for a second. A double-digit return on average for 10 years!
Did you get that type of return in a pay raise? Probably not. Did you get that type of return on a savings account? No way! Did you get that type of return on a Certificate of Deposit? Absolutely not. And yet, by investing in something as simple as a broad-based mutual fund that mimics the return of a benchmark index, you could have more than doubled your money by just taking on the risk of the Market.
The Green Wave isn’t political, it doesn’t require you to choose sides or put out a lawn sign. All that is required of you is to choose a fund family, invest in an index fund, and then go out and live your life.
Politicians love to take our money and give us little in return. The Green Wave of the Market takes our money and gives us even more money.
It almost sounds too good to believe, but it’s true. We are in the longest Bull Market in U.S. history, and yet, too few people understand the impact of such a wonderful money-making tool. So when the politicians talk about their waves, remember that the wave that can financially impact you in the most positive way is a Green Wave, not a blue one.
Student Loans & Moans
Sat, 4th August, 2018
August is here and summer is humming along. Graduation is over, and for many students college is just a few short weeks away. A word that is now universally mentioned with college is the word “loan”, as in “student loan”. Many students are taking on student loan debt at an incredible rate. How much student loan debt is out standing? Take a deep breath and repeat after me; one trillion, five hundred billion dollars! That amount of debt is staggering and it will hobble the future of many of our youngest and brightest for decades to come. We have read stories of students with $100,000 - $200,000 – even $1 million dollars of student loan debt and they are paralyzed with fear as to how to pay that off while trying to start a life.
A recent story said that many young couples divorce over the amount of student loan debt that they brought into their marriage! Imagine starting your life with a student loan of $30,000 and wanting a house ($150,000), and buying a new car ($32,000), and having a modest wedding ($20,000).
We think that education is one of the best things to spend your money on, and we think it is money well spent. However, we urge everyone seeking higher education to look into alternatives such as community colleges, trade schools and working as you go to school as a way of decreasing your debt burden.
The last thing you’d want to do is go through life with a debt that you can’t pay off and has been with you for decades. Keep your debts managable and you will be able to live a life that is free of worry and doesn’t feel like a burden. If you want to minimize your debt, you’re find a way. And if you don’t, you’ll find an excuse.
Wed, 4th July, 2018
In 2008, during the financial meltdown, markets such as the housing and stock market were sent teetering on the brink of collapse as the Federal Reserve acted to keep the U.S. from falling into a Great Depression. The Fed deployed a number fiscal stimulus tools to right the economy and save the nation from a financially destructive death kneel.
We saw quantitative easing, which was the Fed pumping trillions of dollars into the economy. We saw President Obama create a nearly one trillion dollar economic spending bill. And we also saw a slashing of the interest rates to nearly zero. Any one of these acts would be considered an incredible intervention, so all of these and more were unprecedented.
By slashing rates, the Fed was in effect, punishing savers because they were getting next to zero, due to the rate cuts. And when you think about it, the savers were the prudent, cautious, disciplined individuals with their money. Why would the Fed “punish” these hard saving people?
Well, one of the main reasons lies in all of the money that savers managed to sock away. The Fed had a goal of getting folks to trust that the markets would improve and that their money was needed in markets such as equities (think stocks) and fixed income (think bonds).
So when a saver placed their money into a savings account, or a money market account, they were rewarded with a near zero interest rate, meaning that they got no reward for taking no risk! This went on for years. But about a year and a half ago, or so, the Federal Reserve started to hike interest rates, once it saw a sustained growth pattern in the economy.
These rate hikes have found their way into savings accounts and money market accounts. Now, for the first time in years you can place cash into a money market account and actually get a tiny amount paid to you in the form of a higher interest rate! We think it’s a good deal that the people who are disciplined savers can no start to get some reward for their money and will no longer have to be angry, frustrated, or Fed up!
LOST and Found
Tue, 5th June, 2018
The month of June marks my 20th year of being in the stock market as an investor, and I have to say that the time flew by! Before I became an investor, I never much thought about stocks, bonds and mutual funds. It wasn’t until I suffered a major financial hit as an investor that I decided that I had better learn more about how the stock market works.
My knowledge about investing was weak, had no sound principals and was dependent on the trusting relationship that I had with my financial advisor…someone who I had only recently met at my local bank branch.
I handed him my inheritance check from my deceased mother’s estate that was in the amount of $25,000.00. Up until that point, I had never had a check that large in my life. I told my advisor I wanted to invest and he had me choose from 5 mutual funds to invest my money with.
Within 3 months I received my brokerage statement in the mail and it should a loss of close to 50 percent! Suddenly I felt light-headed and weak-kneed, and soon I felt anger. My initial anger was directed at my professional financial advisor. How could he lose that much of my money? It was days later that I accused the right person for what I lost… I accused myself.
Thinking about it without the emotion I found the right person to blame for my nearly $12,000 loss.
It was me and me alone, by not knowing anything about investing; I was the person to blame. So as the fall started to approach, I had a difficult decision to make. Would I take the balance of my money out of the market, and cut my losses, or would I do something much more radical, and nearly unheard of? Would I keep my money in the market, and educate myself about investing? I decided to try the latter.
So in the fall of 1998, I went to my local library and started to read about investing. This was very difficult and very time-consuming. I literally had to force myself to adjust my schedule and make financial education a priority.
My financial education started in a local library and I learned a great deal! Soon after, I started to make money with my investments. I fired my financial advisor and I never looked back! Once I accepted what I had “lost”, and took action, I “found” my money, my calling and my confidence in the investment world. I enjoy investing and it will always be a part of my life. Here’s to the next 20 years!
A Message to the Class of 2018
Sat, 5th May, 2018
It is hard to believe, but the babies born in 2000 are now 18 years old and graduating High School this month. These young adults represent the future of our nation and they deserve a future as bright as we can possibly make it for them.
I would tell all students that education is a life-long pursuit and that they should always learn something new each and every day. I would also stress to them the importance of financial education and why it could make a positive influence in being able to live a life free of debt and money worries. I look back on my own public education and I can tell you that I was never taught anything about stocks, bonds or mutual funds while in school.
Learning about financial securities is fun, educational and financially rewarding! By learning how to select a stock or a mutual fund, you would be on your way to living the life you’ve always dreamed about and not have to worry about how you can afford to buy something you want.
Speaking of buying something you want; the average cost of a 2018 new vehicle is $35,000 (according to Kelly Blue Book)! Imagine being 18 and having a new car loan, college debt, and wanting to buy your own place! Young adults should not be burdened with this much debt.
I believe that the class of 2000 should follow these 4 steps in order to be able to fulfill their life-long dreams:
• Once you secure a job, place 10% of what you earn in a company sponsored 401k plan. Choose a low cost fund that tracks an index, such as the S&P 500. If your company doesn’t offer a 401k plan, then contact a financial institution such as Charles Schwab to open up a brokerage account.
• Never purchase a brand new car. These vehicles worth declines the minute you drive it off the lot. Purchase a vehicle that is safe and affordable.
• Take out as small of a student loan as possible. This way, when you graduate you will not enter full adulthood with a lot of debt. Keep your expenses as low as possible!
• Lastly, read a good book that covers the subject of investing. I recommend you start with “The Automatic Millionaire”, by David Bach.
So there you have it! The Class of 2018 is young and gifted and has a lot to offer the world. Never stop learning and never stop growing.
Sat, 7th April, 2018
Now that winter is (hopefully) behind us, many people are starting to gather their tax documents and prepare their 2017 income tax returns. It is estimated that more than 90% of returns will be prepared with tax software, and that many people will receive a tax refund this year.
These refunds can be in the thousands of dollars. Many people brag to their friends and co-workers about the big tax-refund check that they are expecting and boast about how "smart" they are to be receiving such a substantial amount.
But should they really be pleased with receiving, say a $3,000.00 check in the mail from Uncle Sam?! Hmm…let's examine that refund check and see if it makes us look cool or more like a fool. This example of receiving a $3,000.00 refund check should serve as a wakeup call for anyone who got is expecting a refund check in the mail.
The $3,000.00 refund was money that you "loaned" to the Federal Government interest free for 12 months or more! They are only giving you back the amount that you over paid in taxes! You're being used by providing a tax free loan for a year to a government that is $21 trillion dollars in debt!
If that $3,000.00 had been invested in the market, in something like a low cost index fund, you would have made more than $630.00 on your money (based on the 21% return last year of the S&P 500 Index). Think about that for a moment. What you should do is take that $3,000.00 and divide it by 12 ($250.00) and change your withholding to reflect that amount of money.
Next, contact a mutual fund company, and direct that $250.00 into a low cost fund, such as an index fund, and VOILA! You have now created a portfolio, and a way to fund it, without breaking a sweat!
How many people will find this example cool? How many people will remain April fools?
The Miseducation of Lisa Marie
Sat, 3rd March, 2018
Elvis Presley was the undisputed King of Rock-N-Roll and an idol to millions all over the world. In his lifetime, Elvis sold millions of records and made millions of dollars. He also was generous to both friends and strangers. There were stories about Elvis giving people brand new Cadillac's, jewelry, and cash. Apparently he gave away too much because upon his death in 1977, it was revealed that his estate was only worth about $50,000!
It was the hard work of his wife Priscilla who took the name, Elvis and his home, Graceland and turned it into a fortune worth tens of millions of dollars. Elvis was a poor manager of his fortune.
Elvis had one child named Lisa Marie. Lisa was born in 1968, and would grow into a beautiful young woman who bore a striking resemblance to her famous father, and we’re not just talking about features.
Lisa Marie has been married four times; perhaps the most famous of her marriages was to Michael Jackson, the King of Pop. She has released albums, recorded songs, etc. and yet, no mention of any financial literacy course that she ever attended.
Today, Lisa Marie finds herself embroiled in a lawsuit with her former money manager and she claims that her inherited fortune of $100 million dollars is gone!
How do you lose $100 million dollars? By not financially educating yourself, that's how!
Having money is one thing, knowing how to manage it is something totally different. We wish Lisa Marie well, and hope that she can recover from this financial catastrophe like her mother did with Elvis' estate, but for now her finances are all shook up.
The SPY Who Loved Me
Mon, 5th February, 2018
Last year was very good if you happened to be an investor in the stock market. We think one of the best ways to invest in U.S. stocks is threw a broad based mutual fund, or an ETF. One of our favorite ETFs is the Standard & Poor's Depository Receipt, better known by its acronym: SPY. The SPY ETF is a proxy financial security that mimics the movement of the S&P 500 index, but it trades like a stock!
You receive broad exposure to the 500 largest publicly traded U.S. companies, and you also have a security that has characteristics of a stock and a mutual fund at the same time! All ETFs (exchange traded funds), are broad based investments that have many different securities (usually stocks or bonds) wrapped inside. This is something that they share in common with open-end mutual funds. The main difference is the ETF can be bought and sold throughout the trading day. A mutual fund is priced at the end of the closing day of trading.
Last year the SPDR (SPY) ETF gained just under 22% for the year! This closely mirrored the performance of the S&P 500 Index (less fees). You would choose a SPDR (SPY) ETF over a mutual fund basically if you could envision trading it on a given day when the market is open. Think about the strategy; if the market is up in the morning and you sell, then if the market goes down in the afternoon, you would reap the higher price because that's when you sold the security!
Perhaps a negative for ETFs would be that you have to purchase an entire share. The mutual that mimics the SPY ETF can be purchased in fractional amounts; 0.652 shares, as an example.
Of course there are other features to consider, but just take this information as a starting point. We think that once you understand the ETF world, the SPY is one ETF that you could fall love with!
Sat, 6th January, 2018
2017 turned out to be a very good year if you were an investor in the stock market. The total return (including dividends) on many S&P 500 Index funds was nearly 22 percent! Just think about that for a moment… when bank C.D.'s were paying next-to-nothing, and money market accounts probably paid less than one percent (after expenses), a plain vanilla type of investment was paying 22 percent to anyone who purchased this type of mutual fund! The Index fund is an excellent way to get broad diversification, low cost, and market-matching returns without the worry of "underperformance" concerns.
A return of 22 percent is double the historical norms of the average return in the market. And yet, with all of these great features many people still don't invest in the stock market. The reasons that people give as to why don't invest varies from "I don't have any money" to "I don't trust the stock market”! These reasons (or excuses) fly in the face of this inconvenient truth: Americans spent $800 Billion on Christmas shopping this year! Think about that for a moment…let it sink in. Now, of all the toys, clothes and video games that were purchased for gifts this year…where do you think those gifts will end up 5,10,15 years from now?
Here's another interesting stat: the U.S. economy consists of seventy percent consumer spending! This spending helps corporations, and corporations in turn reward their shareholders with cash. Everyone wants more money and greater financial security. But when the average person ignores the stock market and its 22 percent return we have to wonder why more people aren't invested? The best thing for people to do is to start investing in Index funds. That's the best way to Catch 22!
Santa Claus is coming…to Wall Street!
Sat, 9th December, 2017
With Christmas fast approaching and only several weeks left till December 25, many stores and malls are packed with shoppers and websites are doing brisk online business. Everyone is hoping to get that one gift that they have been looking forward to all year long.
Maybe it's a pair of skis, or perhaps a new Smartphone, or maybe it's a festive sweater that will fulfill your Christmas wish list. Yes there are thousands of different gifts that people are looking forward to receiving this holiday season. However there is one gift that we have been looking forward to and in our opinion it is perhaps the best gift of the season.
This gift is known by anyone who has been a long term stock market investor. That gift is known as the "Santa Claus rally", and like clockwork, it is right on time! What is a Santa Claus rally? It is a financial phenomenon that occurs in December and is triggered by corporations paying out their profits to shareholders in the form of dividends.
For example, if you own a mutual fund through you're a brokerage account or perhaps a company 401(k) plan, the fund (usually) pays a big dividend in December. This payout, in addition to the recent federal tax cut has practically guaranteed that the stock market will rise in the final few weeks left in the year.
The Santa Claus rally increases the amount of mutual fund shares you own (as long as you’re reinvesting the gains), and higher corporate earnings help to increase the value of your stocks or funds. With the DOW perched at 24,000 and the S&P 500 and NASDAQ near record highs, Santa will have his work cut out for him to improve on those numbers! From our family to yours, Merry Christmas, and Happy New Year!
Industrial Strength DOW!
Tue, 7th November, 2017
The oldest Index tracker of stocks is the Dow Jones Industrial Average, or DOW. The DOW was created in 1885 and originally contained just 12 company stocks. The only company still around from the original 12 stocks is General Electric.
Today, the DOW contains 30 companies such as Boeing, Coca Cola, Microsoft, and Disney to name a few. Previous DOW components were GM, Sears, and International Paper. Noticeably absent from the DOW are companies like Google, Berkshire Hathaway, and Amazon. This leads some in the investment world to look at the DOW as kind of “stodgy”, “creaky”, and frankly, out of step.
However, if you look at the year to date performance of the DOW you’d see nothing “stodgy” about its performance. The DOW is up over 19 percent as of November 4, and it is out-performing the broad based S&P 500 Index! Although we do prefer the S&P 500 as a proxy of the Market due to its broader diversification, we can’t help but give kudos to the grand-daddy of all Indices, the DOW 30! We think that any investor who would like to capture the performance in those 30 DOW stocks could purchase the ETF (exchange traded fund) DIA. You’d get the performance of the DOW 30 in a single security.
So, we salute the amazing performance of the DOW and hope that it remains a viable option for many investors in the decades to come. Now that’s industrial strength!
Sat, 7th October, 2017
A recent financial article about Harvard University appeared online at Bloomberg.com
(https://www.bloomberg.com/news/articles/2017-09-19/harvard-ceo-says-8-1-return-signals-deep-structural-problems). This article took a look at the gigantic endowment of Harvard.
This endowment, the largest of any private college, has more than $37 billion dollars under management. Blessed (or cursed) with a team of more than 200 financial “experts”, this endowment should be the best run, best-performing endowment of any school!
Right?! After all, we are talking about Harvard folks; surely they have the smartest financial brains running this $37 billion behemoth.
Well…not so fast. According to this Bloomberg article, the endowment is a chronic underperformer. For example, in 2016 the Harvard endowment lost 2 percent. In stark contrast, the S&P 500 Index returned 12.93 percent!
Think about this for a moment… one of the nation’s most prestigious universities, known for its education superiority lost money in a year where the market grew by more than 12 percent!
The significance of this fact is that a person with limited education could purchase a Mutual Fund that tracks the performance of the S&P 500 Index, and outperform the endowment of Harvard!
This person could be a single mom, or a senior citizen, or a high school teen!
The people who run the Harvard endowment are so close to the problem, that they cannot see the solution.
The reason the Harvard endowment is such a chronic underperformer is because it cost money to pay those high-priced financial professionals. Cost will always eat into returns.. Returns will therefore underperform.
The solution is to fire that bloated staff, and create a portfolio that mimics the performance of the Stock Market (Wilshire 5000), and that’s all you need to do!
This is why a teen, or a mom, or a senior citizen could outperform the financial performance of the $36 billion dollar Harvard endowment!
Legends of the fall
Mon, 4th September, 2017
When it comes to investing many wanna-be prognosticators have written reams of articles on the possibilities of something “bad” happening to investors in any given month of the year. We have heard several such warnings like “Sale in May and go away” (as a way to avoid a known downturn in the summer months of investing), or “September is the worst month to be in stocks”.
Visit any financial website, and you will find an article that espouses these points of view. We think that negativity is one way to prey on investors emotions. Of course, negativity appeals to the emotion of fear. This emotion, along with greed represents the 2 emotions that hold total sway in the minds of investors.
Now let’s take a look at where we are, right now in the Market now. We are up 12.1 percent (as measured by the S&P 500). An all-time high. Imagine an investor who decided to “sell in May and go away”. Where would that investor be today?
Making irrational decisions based on the past performance of the Stock Market is, in our opinion, a fool’s errand. We think the Market is a “forward looking, discounting mechanism”. This is why we are students of the Market, and only make decisions based on a 19 year history of research and hands-on experience in both bull and bear Markets.
The Stock Market is full of “financial proverbs” and sayings. We think having a plan trumps having a financial proverb. By having a long-term strategy, we are afforded the luxury of being able to tune out the “legends” and avoid the “falls”.
Talkin' 'Bout My Generation
Sun, 6th August, 2017
A recent article on the site Market Watch (http://www.marketwatch.com/story/where-did-baby-boomers-go-wrong-this-generation-isnt-financially-prepared-for-retirement-2017-07-05) talked about how ill-prepared Baby Boomers are when it comes to having enough money in their retirement accounts.
The article states that these folks will need more than $600,000 to retire, and many have way less than that in their retirement accounts. We agree that many people need to sock more money away, but it’s not just the Baby Boomers who should heed these words. Try talking to any Millennial about 401(k) plans or mutual funds, and all you’re likely to get is a blank expression.
Most generations just don’t understand, or perhaps were never taught the importance of putting money away for their future needs. We live in a consumption society, and most folks would rather consume their way through life, than save.
When you were in school, did anyone teach you how to set up a brokerage account? Did anyone teach you how to choose a fund for your 403(b) plan? No? Same here. We literally had to teach ourselves how to invest for ourselves.
Just recently, it was announced that the government savings vehicle “my RA”, implemented by the Obama administration was being mothballed. This retirement account was designed to assist Americans who were struggling economically and needed a way to save a few dollars.
Sadly, this program never really took off, and now it is going away for good. What can you do to help yourself put dollars away for your future? We suggest a visit to your local library, and check out some of the wonderful books they should have on investing.
Start reading about investing, and learn how to do it smartly. Start with a small amount of money, say $100 and put that money in a low-cost broad based mutual fund. Go with an index fund that tracks a benchmark like the S&P 500.
Before you know it, you’re be on your way to having one less thing to worry about! Continue to read, and self-educate yourself. We think this is one of the best things that you could ever do to secure a sound retirement for yourself, and hopefully a loved one.
(Financial) Freedom Quotes!
Wed, 5th July, 2017
As Americans gather with friends & family to celebrate the nation’s birthday, we thought it would be a good idea to remember the importance of freedom. Of course at boodle, we are all about financial freedom for all. So here are 10 quotes on the importance of financial freedom, enjoy!
1.”Making money is a hobby that will compliment any other hobbies you have, beautifully” – Scott Alexander
2.”The only point in making money is you can tell some big shot where to go” - Humphrey Bogart
3. "We don't need new taxes. We need new taxpayers, people that are gainfully employed, making money and paying into the tax system. And then we need a government that has the discipline to take that additional revenue and use it to pay down the debt and never grow it again” – Marco Rubio
4. "The real key to making money in stocks is not to get scared out of them” - Peter Lynch
5. “You can make EXCUSES and earn SYMPATHY, or you can make MONEY and earn ADMIRATION. The choice is yours” – Manoj Arora
6. “An investment in knowledge pays the best interest” – Benjamin Franklin
7. “Be greedy when others are fearful. And be fearful when others are greedy” - Warren Buffet
8. “How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case” – Robert G. Allen
9. “You must gain control over your money or the lack of it will forever control you” - Dave Ramsey
10.” The best thing money can buy is financial freedom” – Rob Berger
Word Swap June 2017
Mon, 5th June, 2017
When it comes to being a successful investor, we’ve noticed over the years how certain traits can be indicators of how successful you will be if you would just “word swap” three words in how you think and how you act.
What are those 3 words that can help you become a better investor if you take the steps to eliminate them out of your mind and vocabulary? We think those 3 words are; Fear, Greed, & Ignorance.
These 3 words have done more to destroy investor’s wealth than perhaps anything else you could imagine. The sooner you acknowledge and eliminate them, the sooner you’ll be a successful investor!
Fear – This word will keep you on the financial sidelines when it comes to investing. Don’t let fear of investing stand in your way. Conquer fear and your job as an investor is made a lot easier.
Greed – I once heard a saying that “Pigs get fat, hogs get slaughtered”. This is true when it comes to investing. Don’t be greedy; always seek a fair return for the risk you are taking in investing.
Ignorance – Think for a moment of all the schools in America. Now imagine all of the students that attended these schools. Very few, if any got a financial education. Ignorance will destroy a nation when it comes to acquiring wealth. Find an investment book, and read it!
Now let’s replace those 3 words with words that can help you financially. Master these, and you will master your financial future.
Discipline – Can a poor person with modest means possess discipline? Yes! Can a person who makes a very good living, lack discipline? Yes! The stock market rewards the disciplined investor.
Patience – The best way to make your fortune in the stock market is slowly over time. Don’t attempt to get rich quick. Remember, easy come, easy go!
Knowledge – Knowing what you own, and why you own it is key to your success as an investor. You should seek “financial knowledge” and depend on yourself when it comes to your decisions about your money. Knowledge is power.
There you have it. Swap those words, and you will find yourself master of your financial domain!
Fee, Fi, Foe, Fum, is active investing just plain dumb?
Sun, 30th April, 2017
A recent column in an April edition of BARRON'S financial newspaper caught the attention of our financial researcher. The article was by Sarah Max and it was titled: 'How fees hurt active funds'. The article looked at the performance of actively invested mutual funds and the numbers were startling to say the least!
But, before we get to those numbers, we at Boodle have always been proponents of passive investing. We believe that the return generated by the market alone was enough for the average investor, and that an active manager, who would pick stocks and sectors wasn't worth the higher fees or risk. We often site financial books, newspapers and magazines that state only 30 percent of active managers are able to beat their benchmark (index).
However, after reading Ms. Max's column, we think we may have to amend what we say when we speak to individuals and groups. According to the columnist, over a 15 year period, 92% of Large-Cap active funds failed to beat their benchmark! In the Mid-Cap category, the percentage who failed to beat their index was 95%! In the Small-Cap category the number was 93%.
The reason for such poor performance is painfully obvious...it's the fees! When funds charge 1.5% for an active fund, and a better-performing low cost alternative is available, doesn't it make commonsense to choose the low cost alternative? Why aren't more people making this choice?
We think a possible answer may lie in how funds are sold to the (unsuspecting) public. You see, most funds are active and need financial sales people to sale them, and once they do, the sales person receives a commission.
One of the best ways to spot a bad fund is when you see an alpha letter in the name of the fund. For instance, if a fund has a name like, 'Hyper-Growth A' fund, you should automatically steer clear, and look for a better alternative.
Investing can be fun and financially rewarding, just remember to find out the true cost of a fund, before you purchase it and end up paying a small ransom in fees, cause that's just plain dumb!
The Taxman Cometh!
Sun, 2nd April, 2017
Here we are in April, and millions of Americans have either filed their taxes or will be filing them shortly. Many are expecting a sizable tax refund and are happy to receive this refund check from the treasury.
They feel pretty good about that money and most have already made plans on how it should be spent.
Some are planning on buying some new item of clothing, or an appliance for their home, and others may decide to pay off some bills or take a trip. We think what many people should do before they spend that money is think about something even more important than buying a new gadget.
People should ask themselves a simple question, "Why do I give the government an interest free loan every year?" The money that you get refunded is an over-payment of your taxes from the previous year! Think about that for a moment…you just gave an interest free loan to an entity that is 20 trillion dollars in debt! Why would you continue to do this?
Now, since we say this money was an interest free loan, let us show you why we’ve made such a bold statement. Let's say that you were getting $1000.00 refund back from the IRS. Had you ask your HR depart to withhold that $1000 and then in January of 2016 placed that money in a low cost index fund you would have an additional $125! How do we know this? Easy, because the S&P 500 index had a return of 12.5 percent! Yes, you passed up the opportunity to make 12.5 percent on your money!
Are you kicking yourself? Don’t do that, instead do this; change your withholding, divide an estimate amount of money you expect to save by 12 months, and then put that money in a no-load, low cost fund! You’ll be glad you did…Uncle Sam…not so much!
Happy Bull Market Birthday!
Sat, 4th March, 2017
On March 9, 2009 the great recession was coming to an end as newly elected President Barack Obama was just starting his presidency. Americans had just gone through a bruising recession and investors had lost, in some cases more than fifty percent of their stock market portfolio. Few if any people felt that March 9 was a great day to start investing in stocks again. However, when being interviewed on network television, President Obama said that it was actually the perfect time to invest in stocks. Guess what?! He was one hundred percent correct!
The stock market had bottomed at 676.53 (using the S&P 500 Index) on March 9, 2009 eight years ago, and since then has climbed an astonishing 248 percent! To put it another way, that is a compound annual return of 31 percent!
Today the market sits at an all-time high, and this current bull market is 8 years old. Are there more gains to be had by investors? History tells us that this bull market is long in the tooth, and at the very least, may need to rest a bit before heading higher.
We don’t know about that, but we do see signs that more gains could, and we stress could, be heading our way. Perhaps the biggest sign that the bull will run in 2017 is the news coming out of the current occupant in the White House.
President Trump and his party control the Congress and the White House. Republicans have said that they will cut corporate taxes, remove some regulations, and repeal and replace the ACA (Affordable Care Act). Also they are talking about a Trillion dollar infrastructure spending bill. We think these ideas are tilting the scales towards more gains for stock investors.
We will know if we are correct in December. In the meantime, we’ll keep watching the economy and geo-political events, not to mention the Federal Reserve, for any signs that the run is over.
For now, we wish this Bull Market Happy Birthday from your friends at Boodle!
Wed, 1st February, 2017
Last year Warren Buffett, founder and CEO of Berkshire Hathaway made $12 Billion dollars. That breaks down to $1 Billion dollars a month! Not a bad salary for an 86 year old! What is it about folks like Warren Buffett and others who can create that type of wealth, seemingly effortlessly? Why does money seem to follow certain people around, while leaving others with little in savings?
We believe that people like Mr. Buffett have mastered the key to attracting money, and it would behoove all of us to study these “Money Magnets” for clues that we can use in our own lives. One big clue to the success of wealthy people is that money flows to them, because they don’t really need it! Money also likes to be with people, or institutions who respect money! Think about it. Banks love to lend money to individuals and businesses that don’t really need it! The person or business (think startup) that really needs the money can’t get a loan because the money doesn’t find them attractive.
Money magnets are people who can practice delayed gratification in the short term, so that they can reap a much larger benefit in the long term. Money loves disciplined people who have a proven track record. Check out the athletes who make tens of millions of dollars playing professional sports, only to declare bankruptcy a few years after leaving their sport. People turn into Money Magnets when they respect money, not abuse it.
What can you do to become a Money Magnet? Start by educating yourself on how top financial professionals like Bill Gates, formerly of Microsoft, or Jack Bogle, founder of Vanguard made it to the top of their respective industries.
Watch financial stations like CNBC or, if you don’t have cable, watch Nightly Business Report on PBS. Pick up a book from your local library about investing and read it. Pretty soon before you know it, you will start to attract cash, and be on your way to becoming a Money Magnet and start living the life that you’ve always dreamed of living.
A New Beginning January 2017
Tue, 3rd January, 2017
Now that 2017 is finally here, and all of the Christmas presents and gifts have been broken, or have run out of batteries, maybe it’s time you turn your attention to something that will really lift your spirits.
Every January many people resolve to exercise, quit smoking, or start saving for the future. We don’t drink or smoke, but we can help you with that third resolution…saving for the future. The best way to start is to ask yourself what financial goal you’d like to accomplish.
It could be paying off debt, saving for a child’s (or your) college education, or even starting a business.
We think the first step is to write down your goal and then figure out how much money it will take to make it happen.
Next, figure out how much time you’ll need to accomplish this project. We think that putting money away while using the stock market is a great way to meet your long term goals. Choose a good mutual fund that is No-Load (no sales charge), and has low fees.
Our opinion is that the best type of mutual fund for this task is a low-cost Index Fund. You would need to contact accompany that sells Index Mutual Funds directly to the public. This way, you bypass the middlemen.
Next, have them set up your account, and make sure that money comes directly out of your checking, savings, or Money Market account and flows into your Mutual Fund account.
This account should be for a financial goal that isn’t going to be needed until five to ten years from now.
Once you open up the account, start reading and learning about financial markets and stock and bonds.
Overtime your money should accumulate nicely. Markets do have inherently more risk than say, a C.D. or Money Market, but the potential for return is greater. Make financial educations a part of your daily routine and before you know it, your goal will be accomplished and you will have learned a great deal about financial education!
Courage Trumps Fear
Fri, 2nd December, 2016
As we go to press in early December, many Americans are still in shock over the election of Donald Trump as our 45th President. Many political pundits had (wrongly) predicted a massive landslide loss to Hillary Clinton, the Democratic nominee.
The mainstream media predicted that if, on the outside chance Donald Trump were to win the election, the Stock Market would collapse, and investors would lose billions! Media stories were dominating the headlines with gloom and doom scenarios from so-called financial experts stating world leaders would reject the U.S. should the Republican nominee win the election.
The fear machine was so strong, that rioting broke out in many major cities throughout the nation. After the election we attended a town meeting here in Illinois where the citizens gathered to mourn the outcome of the general election. It was quite a spectacle to see small children expressing fear and dread. Teenage girls sobbing and adults expressing that their worst possible fears had materialized.
We, here at Boodle, looked at the election through a different lens. Our lens was the lens of courage - rational courage. With over 18 years of Stock Market experience, we rely on logic, not emotion. Many people don’t realize it, but they live in a bubble. Their friends, family, and many co-workers think like them.
These people never understand why “bad” things like a Trump election happen, and they think it portends bad times ahead. We think history has proven that adversity, if you look at it that way, brings opportunity. The month of January saw the market get off to its worst start in history. Many people fled the market in fear. We showed courage and stood our ground. What did we get for showing courage under fire? So far, we have gotten a ten percent return on our equity portfolio.
We view fear as a paralyzing emotion. It is hard to think clearly when you are fearful. Courage allows you to think clearly and logically.
Is your courage trumping your fear?
The Exploding Galaxy
Sun, 6th November, 2016
Astronomers often look to the heavens for clues about the universe and how it might have formed billions of years ago. Oftentimes, the telescopes that they use can detect the origins of solar systems many light years away.
Through these incredible instruments, galaxies can be seen forming, expanding, and also exploding. However, most of us aren't scientist and we don't have access to these multi-million dollar scientific instruments.
Still, for millions of people, watching a galaxy explode was something that they witnessed and they didn’t need a telescope or science degree to see it occur. How did this phenomenon happen? Instead of looking at galaxies, millions of people all over the world went out and purchased the Samsung Galaxy 7 Smartphone and watch their galaxy explode and catch on fire!
This Samsung phone was launched with great fanfare and touted as an “iPhone killer”. Imagine the millions of dollars that went into R&D to bring this phone to market?!
The initial reports were small, with just a few complaints. Soon however many consumers started to complain that their Galaxy 7 phones were catching on fire, and melting through cases, and burning through clothing!
Samsung, the maker of the Galaxy 7 initially tried to offer a quick fix, but more and more serious complaints started to cascade until governmental agencies started to take notice. It wasn't long before a full recall was issued, and consumers were told to not use the devices and to turn them back in to Samsung.
For Samsung, the timing of the exploding phone couldn't have come at a worst time. Apple, the major rival to Samsung, released their product, the iPhone 7 and their sales were brisk and substantial. This is the first time that we are able to recall a Smart Phone being pulled from the market shortly after its release. We are okay with the galaxy, but not the one that catches fire in your pocket or purse!
All's Not Wells Fargo
Mon, 3rd October, 2016
At Boodle we are often asked by clients & prospects if they should do financial business at their banks. We often tell them that in our opinion, banks are fine for checking and savings accounts, and perhaps a mortgage, but when it comes to investing with a bank using their financial advisors and securities, we decline the offer.
One of our core beliefs at Boodle is that there should be no one between you and your money. A bank is a “for profit” institution, and there is no greater example of this fact than the media storm surrounding one of the nation’s biggest banks, Wells Fargo.
In case you didn’t hear, or weren’t following the story, Wells Fargo was accused of opening millions of accounts for its customers without their knowledge or consent! It has been alleged that Wells Fargo pressured its bankers to sale financial service products to their clients, or risk punishment including demotion and firing.
When the scandal broke, what was the reaction of Wells Fargo? The bank fired more than 5,000 employees! Wells Fargo blamed the employees, and took no responsibility for its own reckless policies. The stock is down 18.50 percent, year to date. Billions of dollars has been lost by shareholders and it doesn’t look like the red ink will stop anytime soon.
The CEO was summoned to Capitol Hill, and in true “leadership” fashion, tried to deflect the blame. Meanwhile, local governments all over the country are pulling assets out of Wells Fargo as a way of protesting their business practices.
When we started our company five years ago, one of our main pillars engraved into our culture is that when we discover a company that mistreats its clients and employees, we will never recommend them, or do business with that company.
Wells Fargo spent decades building its reputation, only to squander its good name to make a quick buck.
This is a perfect case that begs for criminal prosecution, but we won’t hold our breath waiting to see perp walks. No one is perfect, but do we expect higher ethics out of our multi-billion dollar companies, be they banks, healthcare companies, or any company that wants to service our citizens.
Shame on Wells Fargo!
Happy Birthday to the Index Fund!
Mon, 5th September, 2016
It was 40 years ago this week that a fledgling, tiny mutual fund company decided to invent a mutual fund that was low cost, no load( sales charge), and would match the return of a broad-based index of stocks (the S&P 500 Index).
The fund industry was highly skeptical of this fund, and didn't give it much of a chance for success. Indeed many financial insiders felt that no sane investor would be happy just matching a benchmarks performance. These "experts" felt and wrote about the eventual demise of this (at the time), tiny mutual fund.
Well, we now have 40 years of hard data at our disposal, and the results are in; the Vanguard 500 Index fund is arguably, the greatest mutual fund ever created! How can we make such a bold statement when there are more than 15,000 mutual funds out there to choose from?
The numbers speak for themselves and are indisputable by all but the most stubborn (or ignorant) observer:
• Investors have invested more than $350 billion dollars in the Vanguard S&P 500 Index fund
• Fees as low as 0.05 percent
• Performance that out-performs more than 70 percent of professional money managers
• A portfolio turnover of just 3 percent, making this fund extremely tax-efficient
The Index fund was created by the founder of Vanguard, Mr. Jack Bogle. Mr. Bogle is perhaps the best friend that a small investor could ever have in an industry where it seems like everyone wants a piece of your money.
Mr. Bogle wrote the definitive financial investing book called "Common Sense on Mutual Funds". Although retired, he still makes appearances on financial news shows, and can be found in print, and on financial websites. So today, we celebrate the birthday of a mutual fund that has created more millionaires than perhaps any person or fund in history.
Here's to the next 40 years!
The basket and the eggs: A financial fable
Tue, 2nd August, 2016
Anyone familiar with the basic tenets of investing has heard that old bromide, “don’t put all your eggs in one basket”! We agree that this is sage advice, but let’s examine this a little bit closer and give you a better perspective on how boodle looks at this advice.
The basket: What is a “basket” when it comes to investing? We believe it consist of several investing components that make up your portfolio. The first component is the financial institution that you choose to invest your money with. Some people choose banks, and others choose insurance companies.
In our opinion, these are poor choices. You are more likely to be talked into putting your money, or your eggs, if you will into an annuity at these institutions. Resist the sales pressure to do so. Individuals do not buy annuities, they are sold annuities! Big difference!
What’s a proper basket? We prefer dealing directly with reputable mutual fund companies, like those mentioned on our member’s only pages.
The eggs: Your eggs are basically your money inside investment vehicles such as stocks, mutual funds, bonds, C.D.’s, etc. Now, the mistake many people make with their money, or eggs if you will, is they choose poor performing funds and don’t understand how to construct the proper basket, with the proper eggs!
Follow some basic guidelines and you can save yourself a lot of financial pain and heartache. Your money should work for you, not against you.
· Choose a reputable fund company as your way into the financial world. Stay away from banks and insurance companies.
· Do some homework and read a financial book or two. Don’t leave this important task of investing to “the experts” in that field.
· Ask for info on No-Load funds only! Index funds that mimic a benchmark, like the S&P 500 make fine choices.
· Limit your financial institution (basket) to just one. This will simplify your financial life!
· Limit your fund choices (eggs) to 2 or 3 funds! A stock, bond, and International fund are enough!
Keep your paperwork to a minimum, or better still, go paperless! If you follow these basic guidelines you will experience a pretty stress-free financial life, and your eggs will be safe in the basket you placed them in!
Exit the Brexit!
Tue, 5th July, 2016
Recent headlines on world events have left many people anxious, fearful, and worried about their portfolios. It wasn’t the latest Trump gaffe, or Clinton email foible. No, the news that had investors in panic mode was something from Britain called the “Brexit”!
Up until about 6 weeks ago, many of us had never heard the term “Brexit” or what it meant. However, in the month of June, we found out how something as far away as Great Britain can affect our portfolios here in the states.
In Europe, many countries belong to the European Union, or E.U. This alliance that is headquartered in Brussels has certain economic, political and social powers over sovereign nations. This power extends to immigration, taxation, and other important issues.
Well British citizens over the years were getting fed up with E.U. policies, and last year while in a tough campaign, British Prime Minister, David Cameron decided to let the British citizen’s vote on if they wanted to remain in the E.U.
As the vote neared, many people and organizations were sure that the Brits would vote to remain in the E.U. The investment markets were watching the polls and up until the vote, financial experts predicted that Britain would vote to “remain” and not “exit”, hence the term “Brexit”.
Well, the British citizens did vote to leave the E.U. and the markets went into a tailspin! The DOW lost hundreds of points for days. International banks plummeted in value. Was this a sign of another recession?
Well, no. Now that the dust has settled, the markets, and we are speaking of the U.S. markets, have regained more than 80% of their Brexit losses.
The moral of this blog can be found in that timeless piece of financial advice: Never invest out of fear, or greed. Words to live by.
Medical (Financial) Malpractice?
Mon, 30th May, 2016
Recently, I had to visit a local hospital for a medical checkup. My test came back negative and I felt great after the visit. Later that month, I received my bill and contacted the hospital’s billing department to see if I could negotiate a lower price (which I did).
So after negotiating my bill, I was asked what I did for a living. I told the head of billing that I worked for a financial education company. It was at this point that I gave her a 45 second elevator pitch about goBoodle.
She listened politely and suggested that I go speak to the head of HR and that I should tell her my goBoodle story. I marched down to the HR department, a little nervous, but confident in goBoodle and my persuasive abilities.
I stood at her desk, introduced myself, and proceeded to share my 18 years of financial knowledge and insight with her. A minute into my story, I could read her body language, and it wasn’t very positive.
After listening to me, she told me that her hospital had a financial rep from a well-known insurance company who was allowed to come in and speak to the hospital employees, but that goBoodle wasn’t a financial source that they would use because the hospital was being bought by a larger institution and there was so much going on that blah, blah, blah. You get the idea.
Well I thanked her for listening and proceeded to head to my office to research this insurance company that was selling the employees of the hospital financial products and services. This is what I discovered:
• High commissioned Annuities!
• Funds with Sales charges, high fees, high expense ratios!
• Mutual funds that were perennial under-performers!
The healthcare industry controls about 17.2% of the GDP of this country. If ever there were an industry that needed cost controls, this is the industry!
By not caring how much they are paying in fees, expenses, and performance, this hospital is committing nothing short of financial malpractice and society, as a whole, is paying the price in higher healthcare cost!
Discipline Trumps Money!
Sun, 1st May, 2016
As the 2016 election draws closer, we thought we’d use the Presidential race as an example of the importance of being a disciplined investor. What does politics have to do with investing? On first glance not much, but as you will see, there may be more to this connection than meets the eye.
Many pundits are looking at the republican front runner, Donald Trump as inarticulate, crude, and undisciplined. However, if you take a closer look at his candidacy, perhaps you’ll see him in a different light. To his devoted followers Mr. Trump is extremely articulate, well-mannered and very much disciplined.
This discipline can be seen in his simple, yet powerful message, “Make America Great Again!” The front running candidate has not strayed from the message since he announced his candidacy back in June of last year.
Now take a look at his competitors in the race, both past and present. They didn’t stick to their message and when it became necessary, many abandoned their message. This shows a lack of discipline on their part.
This lack of discipline is the reason why many people fail as investors. They tell themselves that they will create a financial plan and stick to it no matter what. However, over time, they soon abandon their plan, not for lack of money, but for lack of discipline.
The market rewards the investor who demonstrates patience and discipline. It punishes the person who starts a plan and then breaks it. Are you a Donald Trump when it comes to investing or is your investment plan on your to-do list?
The lessons of disciplined investing are timeless and they do not change…do you?
Who is your BFF?
Mon, 28th March, 2016
In the world of texting and instant messaging getting your point across using acronyms is the main way of expressing your thoughts. LOL, OMG and LMAO are just a few of the shorthand terms used in the world of text communication.
There is one abbreviation that investors can borrow from texters, and we think it’s quite relevant. BFF is shorthand for “Best Friend Forever”. However in the world of investing, a more appropriate meaning is “Best Fund Family”, which begs the question, “who is your BFF?
Best Fund Families are mutual fund families that have the following characteristics in common:
Low fees – Fees are a drag on performance. BFF’s keep their fees low.
No Loads – BFF’s do not charge commissions or “Loads”. This means more money for you.
Good fund performance – The funds of BFF’s perform well over a long period of time.
Great customer service – BFF’s offer superior customer service that is friendly & knowledgeable
User friendly website – BFF’s have websites that are easy to navigate and make it easy to access your account with them.
There are more than 300 fund families in existence and you can choose one that is ideally suited for you if you follow the criteria posted above. Always keep in mind that your cost structure will have a direct impact on how successful you will become when it comes to investing in the Stock Market.
Now that you have some good tips on investing, make sure to give plenty of thought on who will be your BFF!
Do you have a Target on your back?
Wed, 2nd March, 2016
In the Investment World you often hear people referred to in terms of different animals. Bulls, Bears, Wolves, Pigs, and Sheep, to name a few. Sometimes it feels like financial advisors are the hunters and the investors are the hunted. This statement can really be used when applied to a relatively recent investment product called “Target-Dated-Funds”.
T.D.F.’s are mutual funds that you invest in and your money will be automatically allocated between stocks, bonds, & cash based on a year in which you plan to retire. Example,a young worker entering the work force, may choose a T.D.F. that has a date of 2045. Someone who is close to retiring may choose a T.D.F. that has a date of 2020.The closer you are to retiring, the more conservative (think bonds) this fund becomes.
The Mutual Fund Company selects the mix so you don’t have to worry! Isn’t that wonderful?! Well…maybe not. We think T.D.F.’s are not something we would feel comfortable recommending, nor would we invest our money in these types of investment vehicles.
Our concerns with these funds are backed by our research and actual individuals who have purchased T.D.F.’s:
· T.D.F. sellers invest your money into funds that they are selling in-house! Huh?! In other words, your money goes in the fund companies’ pockets before it goes into the Market!
· The expense ratio (cost of the fund) is hidden from public view. Mutual Fund families can charge different groups a different fee based on their own criteria, even though it's the same fund. No transparency!
· If you research T.D.F.’s you’ll discover that their performance is lackluster. We don’t see a performance advantage in T.D.F.’s.
There are other reasons that, in our opinion make T.D.F.’s a bad choice when selecting funds for your portfolio. Investing is hard enough, but when you are treated like prey in the financial jungle, it helps to explain why many individuals refuse to invest in the Stock Market. Education is the best way to remove the “Target” from your back!
Sun, 31st January, 2016
Back in 1993, comedic actor Bill Murray starred in the comedy classic, Groundhog Day. For those of you who haven’t see the film, the plot is centered around a weatherman named Phil who is assigned to report on the annual Groundhog Day event in Punxsutawney, Pennsylvania. On Groundhog Day, if a groundhog sees his shadow that means there will be six more weeks of winter.
Well in the movie, February 2 happens over, and over for Phil and he must figure out a way to escape the paradox. The reason we mention this movie is because many investors are feeling like Phil on Groundhog Day as we go through another stock market correction in less than three months.
A Stock Market correction occurs when markets fall 10%, or more, from a recent high. We haven’t had a correction for years prior to the first one in late 2015. We had been warning readers that a correction was due and that they could expect a decline in their stocks and mutual fund. We also told them that the correction wouldn't last and did not view this as a reason to pull out of the market. The 2015 correction created a lot of volatility in everyone's portfolio and it wiped away trillions of investor money.
Still, even going through the correction, we managed a small, fractional gain for 2015 (in the equity portion of our portfolios), compared to the losses of 73% of professional money managers!
Fast-forward to 2016. A second correction occurred in the first week of January. How bad was it? We saw the Market have its worst opening in history! We also saw the Market go down by double-digits! This is a classic and painful stock market correction.
This correction went undetected by many and most professionals were caught off guard. How long will this 2016 correction last? We can't say, but we do know that at some point the market will hit a new all-time high. Until then, it looks like we may have six more weeks of financial winter, brrrr!
Extra! Extra! Read all about it: Boodle beats Buffett!
Sun, 3rd January, 2016
Happy New Year everyone! 2015 is officially in the record books, and for many investors it was a brutal year. Due to the plummeting price of oil and geo-political unrest, investors found the investing landscape unstable and highly volatile.
One of these investors just happens to be legendary stock picker, Warren Buffett. Buffett is CEO of one of the largest companies in the world, Berkshire Hathaway (BRKA). Berkshire Hathaway is a conglomerate of various companies encompassing many industries such as railroads, jet planes, and newspapers, and has a market-cap north of 160 billion.
Buffett is considered, by many in the financial world, the greatest investor ever. His numbers speak for themselves. At goBoodle we have the upmost respect for Mr. Buffett, not only as a successful CEO, but also for his incredible skill as an investor. He is peerless. That being said, 2015 will go down as one of his worst years running Berkshire Hathaway. Against a backdrop of terrorism, an underperforming economy, and falling gas prices, Mr. Buffett just couldn’t keep up.
As this time, Berkshire Hathaway looks to end 2015 off by about -12%. Our recommended U.S. equity funds will finish 2015 with a slight gain of about 0.7 percent. It is not a huge gain as compared to previous years, but it sure does beat a 12 percent loss!
Why aren’t we down 12 percent in our portfolio? Easy! We have a simple approach to investing. We do not try to beat the market by picking hot stocks or mutual funds. We don’t try to guess whether tech stocks will perform better than financial stocks.
What we do quite simply is align our interest with the markets! We don’t hire a lot of people with fancy degrees and big sounding titles. We keep our expenses low and our expectations in line with the market; a simple, yet effective, strategy.
Will we always beat Mr. Buffett when it comes to investing? Maybe not, but what we can do is reward our members with low cost, market matching performance. This is Boodle.
Happy 2016 everyone!
Mutual Funds: The perfect stocking stuffer?
Wed, 2nd December, 2015
December is here and many of us are trying to decide on the perfect gift for our loved ones, and even ourselves. We thought we’d take this moment and pitch the perfect gift that will never go out of fashion, and could last a lifetime: Give the gift of a mutual fund!
Turn on the television and you will see many consumers lining up at midnight to wait 3 or 4 hours (often longer) at their local brick and mortar store to purchase that toy gift for a child or that hideous sweater for a nephew.
People become almost fanatical in their pursuit of a holiday gift that 6 months later will be forgotten and discarded.
Billions will be spent, and credit cards will be maxed out! Little girls will receive dolls costing as much as $100 and needing accessories that cost 100 more.
And let’s not forget the millions that will be spent on gaming systems and video games.
It’s enough to make you wonder if the spirit of the season has been forgotten.
We believe a really unique gift that few will receive, but should is… a diverse mutual fund! Imagine a give that will grow and be financially rewarding for years to come? Think about it…grandparents could open up a custodial mutual fund account for their grandkids!
Parents can open up a mutual fund account for children, nieces, cousins, or any relative. These accounts can be opened for as little as $100! Think about that for a moment…a child can have a diversified portfolio that contains hundreds of different companies, has low expenses and can be continuously funded for very little.
So before you buy that light saber, toy drone, or violent video game, look into purchasing shares of a diversified mutual fund for someone you care about. Years from now, you’ll be glad that you did!
May the Force not be with you
Sun, 1st November, 2015
In seven weeks or so, the latest installment of the Star Wars franchise will hit multiplexes all over the country and movie goers have already plunked down their $10 or more to be first in line to see this sci-fi extravaganza.
One of the classic lines from the original 1977 film was “May the force be with you”. That is a great memorable line for a film, but we learned recently that Congress has its own unique (expensive) spin on that line.
With 18 Trillion in debt, and deficits of $400 billion, our government is looking at new ways to raise revenue (taxes), and they are toying with several possibilities that may affect all of us hard working citizens.
We have been following printed stories that say Congress may concoct a plan to tax our retirement accounts due to their over-spending, incompetence, and greed to force us to fund their debt and deficit spending.
One of the greatest investment vehicles that is currently available to us is the Roth IRA. This retirement account was created by deceased Delaware Senator William Roth. It was designed to let individuals put away money for retirement with the stipulation that there would be no immediate tax savings, but when you withdraw the money, it comes out of the account tax free! We endorse Roth IRA’s (and Roth 401k plans) and have always thought that they were a great way to save for average investors.
Now Congress is toying with the idea of figuring out how to get their grubby mitts on our retirement money by using taxation. Rather than focus on reducing spending, they want to continue to consume more money and grow our debt and deficits by trillions of dollars.
In Chicago, political leaders just passed a nearly $700 million dollar property tax hike, and after doing so they announced that it “still wasn’t enough”! We are in a battle to hold onto our money and government officials seem to have more in common with Darth Vader than Luke Skywalker when it comes to looking out for the average citizen.
The Green Light Special
Sat, 10th October, 2015
The U.S. economy is seventy-percent consumer driven. Everywhere you turn some company or business is offering a discount on their product or service. The fall season is when automobile manufacturers start to roll out their brand new models and offer big discounts on last year’s models in order to move the unsold inventory.
There is a huge sale going on right now at this very minute, but very few people know about it. This sale is not being advertised and you won’t see any pop-up ads on your smart-phone screen. As a matter of fact, to the untrained eye, this particular sale doesn’t look like a sale at all. What industry would put its products on sale; make it sound like a disaster is occurring, and that no one should purchase its products?
This is the financial industry!
Stocks are one of the few products that when on sale, nobody wants to buy them, but when they are over-priced, everybody wants them!
Today, the Stock Market is down about seven percent year-to-date. The news that surrounds stocks currently is fearful and scary. As stocks continue to fall, the news about stocks becomes more bleak and pessimistic. This negative news reinforces the view of many, that stocks are full of risk -- thus not worth owning. Many people believe this, and many people are wrong.
Here is the amazing truth…stocks have always retraced their previous highs and have always gone on to new highs. That is a fact. The Stock Market is the only Market that can’t find buyers when its product is on sale.
When the latest electronic product goes on sale, people will line up for a week to be first in line to purchase. When a sport teams makes the playoffs many fans pay more than list price to secure a ticket to the big game.
With stocks, this doesn’t happen. People don’t want to buy when stocks are on sale. They would rather buy when stocks are at record highs.
At goBoodle, we believe the green light is flashing “BUY” the moment stocks are on sale! Today’s stocks are down about 14 percent from their most recent high and almost anyone would argue that stocks are on sale for 14% off. This is your green-light Special!
The Chinese Correction
Sat, 5th September, 2015
If you’ve been paying attention to the Stock Market this month you have no doubt heard about the recent plunge in stock prices and may be worried about your IRA, 401K or 403b retirement plan. If you turn on the T.V. or the radio for financial news, you’ll hear the terms “market crash”, "bear market”, or “correction”.
Most people are not familiar with these terms, so we thought we’d share their meanings with you and also give you our opinion on what happened in the Stock Market this August. If you step back and take a look, you can develop a pretty good idea on what is really going on with stocks.
The Stock Market hit a bottom in March of 2009. Since that time the market has more than doubled. This bottom occurred six years ago. Since that time, the market has not experienced a fall of ten percent or more in four years! So, this leads to the questions: Are we in a bear market, or a correction? Worst yet, has the Stock Market crashed?
Let’s take a look at each scenario and see if we can answer this very important question for you and other readers.
Q: Is this a Stock Market crash?
A: We don’t think this is a crash. How can we know this? Because we have researched previous “crashes” and the economic indicators are telling us that this isn’t a crash. For example,one indicator that we look at is the P/E Ratio (Price/Earnings) on the S&P 500.This indicator is currently at 15.5 or so. Back in 2000, the P/E was at 30! Twice the historical high!
Q: Is this a bear market?
A: Bear markets are defined as a 20% drop from a recent high. The market’s are down, but nowhere near 20%. You will always see some individual stocks down more than 20%, but when the market is not down 20%, then there is no bear market present.
Q: Is this a correction?
A: Yes, we believe this is a classic stock market correction. Many pundits point to China as the cause, but we think China is just a symptom. Stock market corrections are defined as a 10% (or greater) drop in the indexes (DOW, S&P 500, NASDAQ) and we definitely have a 10% drop.
Q: What should I do now?
A: Our opinion is that you can use moments of weakness (a falling market) to purchase shares of equities that align with your overall investment strategy. Also, don’t try to time a bottom; this is a very difficult task to perform. Instead stay focused on your long term objectives. Always remember that corrections in the stock market are buying opportunities and shouldn't be feared.This is how the market regulates itself, keep that in mind when faced with a correction.
Life’s a Glitch, and Then You Buy!
Mon, 3rd August, 2015
On Wednesday July 8, the stock market suffered a major technology software glitch and had to shut down trading for more than three and a half hours. The interruption spooked investors with many thinking that the Stock Market had been hacked, or worse that it was under a terrorist cyber-attack.
The NYSE assigned fault to a software glitch, but this was of little comfort to nervous investors. Many folks remember the market plunge of about 3 years ago, and they concluded at that time, that the game was rigged and they sold their stocks and moved to “safer” investments.
Boodle took a look at these two interruptions and we discovered an amazing fact that we want to share with you on what happened after the more recent failure in stock trading.
When the market closed on July 8, stocks, as measured by the DOW, were down 261.49 points, or 1.47%. As a matter of fact, stocks were down all over the globe, leading our researchers to conclude that there was a lot of irrational selling on the part of investors.
Since we have researchers at Boodle with more than 17 years of investing experience, we decided to trust our instincts and our research and not issue a sell signal on the market. We knew that markets do not typically turn “bearish” just because of a glitch. Earnings drive stocks higher, just as a lack of earnings will drive them lower.
So we stuck to our long term view of economic conditions and we stayed invested in our portfolios. Did we make the right call? Well, on July 8, the DOW closed at 17515.42. As of close on July 22, the market as measured by the DOW closed at 17689.86. This shows a gain of 1 percent! Also keep in mind, we didn’t just have the software glitch that day, but we also had dire headlines coming out of Greece and China.
Yet, today we are higher than we were on July 8, and so far the only losers are the investors who bailed out of their stocks on July 8. If you entered a buy order that day, life is looking good!
Swimming with Sharks
Wed, 1st July, 2015
Summer is officially here and vacation season will be in full swing. Many people who live on the coast will spend their time at the beach swimming in the ocean. This can be a fun way to spend your summer, but recent shark attacks point to the danger that may lurk right below the surface.
The investment world is pretty much like the ocean.
Investors get to swim in a “financial ocean” that can be both beautiful and dangerous. What are some of the dangers in the financial waters? Well perhaps the biggest danger in the financial ocean is the dreaded financial shark!
What’s a financial shark, you ask? Well a financial shark is a person who works for a financial institution and he (or she) is basically a salesman who has been trained to sell you all sorts of financial products and services, regardless if the products can really help you as you navigate the financial currents.
Financial sharks love to take a bite out of your hard earned savings. Here are just a few of the ways that financial sharks feast on the savings of investors causing them to lose money & faith in the integrity of the markets.
Load funds – Financial sharks love to sell investor’s funds that have Loads attached to them. A load is a sales charge that is paid to the financial advisor. These load charges can be as high as 5.75%! Before your money has even gotten into the market, 5.75% went to feed the financial shark. That is a big bite taken out of your assets.
High expense ratios – Financial sharks rarely will mention to their clients what the expense ratio is on a mutual fund that they are pushing. All mutual funds have expenses, and this fee is calculated as an expense ratio. Any expense ratio that is one percent or higher is too expensive.
Underperformance – Financial sharks love to tout mutual funds that their firms promote. Could it be that the reason they do this is to garner a larger commission for themselves? We don’t know the answer to this, but we do know the result; chronic underperformance for you.
What is the best “Financial shark repellant” an investor can have? We think the best repellant is financial knowledge. You should learn about no-load funds, index funds that mirror a benchmark, like the S&P 500.You should read books on investing and watch shows about the stock markets.
We believe that if you do these things you will create financial shark repellants that will keep the financial sharks at bay and you’ll be able to enjoy your swim in the financial waters without fear of an attack!
5 Money Rules for 2015 Grads
Tue, 2nd June, 2015
June is the month High School students go off to college, and college grads start their careers. This is a stressful time in the lives of many young people, and at Boodle, we thought we’d impart some words of wisdom to these students to help them start their life’s journey on the right path.
Rule #1 – Maintain good spending habits. Seventy percent of the U.S. economy is driven by consumers. Companies realize this and they target you with endless pitches for their products and services. You should control your spending and keep your debts to an absolute minimum. Save at least 10% of your earnings. Put that 10% in to a low-cost, low-fee mutual fund. This will help you down the road when you need to purchase a house or start a business.
Rule #2 – Do not purchase a new car. Today, the average new car costs $32,000! When you factor in insurance, maintenance, depreciation, registration, etc., that new car can end up costing you a bundle. Purchase a used vehicle and invest the money that you would have spent on a new vehicle in the Stock Market. Do not fear investing over the long term.
Rule #3 – Stay away from credit cards! Credit is somewhat easy to obtain today. Pay cash whenever possible. When you buy food or clothing with a credit card the interest rate is in the double digits. When you buy a home at today’s rate, the interest rate is a single digit. Why such a big difference? Because clothes and food are “unsecured debt”, no one wants your clothes or your half-eaten food! A house is tangible asset, or “secured debt” it can be repossessed and sold to a new buyer. So stay away from credit card debt.
Rule #4 – Pay yourself first. When you land your first job be sure to start saving money from your very first paycheck. Take advantage of any retirement accounts your company offers. If they don’t offer a retirement plan, then start your own! Open up your own IRA, or Roth IRA account.
Rule #5 – Learn how money works. New grads need to know how money works. Observe how your company manages money. If you work for a publicly traded company, follow the stock reports. Learn all you can about your company’s financial history. One of the best ways to learn how money works is to read a good book on economics or money. We recommend “Common sense on mutual funds” by John Bogle.
These 5 tips are starting points and you should seek out other sources to grow your financial knowledge so that in time your money works for you and not the other way around.
Sun, 3rd May, 2015
In the spring, many people start the task of house hunting, while others decide to do some needed repairs on their current home.
Very few people do any kind of spring cleaning on their financial house, and it may be costing them a pretty penny. Home inspectors are hired to inspect the condition of a home to help determine its fair market value.
Sometimes these inspectors uncover the one insect that can drive fear & panic into the most confident homeowner. That powerful insect is none other than the termite! It is a tiny bug, but a huge nest could destroy your home, and by the time you are made aware of the damage, it could be too late!
Now what do termites have to do with investing? Plenty, because if you have a financial investment, financial termites may already be at work destroying your portfolio and exposing you to a bleak future.
What is a “financial termite”? It is usually a fee or an expense that you have paid or are currently paying that contributes nothing to your bottom line, and actually is a detriment to your retirement nest egg.
Here are some examples of financial termites that you need to be on the lookout for. Keep in mind that this isn’t a complete list, but it should alert you to some major problems in your portfolio. Also, just like insect termites, financial termites may seem small and benign, but the damage that they can inflict is extremely painful, and hard to fix.
• Expense Ratios – Every mutual fund charges an expense ratio. The best rule of thumb is to find out what yours charges and make sure that there is a “zero” in the first column! Look for something like this: 0.50.
• Loads – These are sales charges, or commissions that a financial advisor is charging you when you purchase a mutual fund. Stay away from any fund that has A, B, C, D or any alphabet!
• 12b-1 Fee- This is a fee that Mutual Fund companies charge existing shareholders to cover its marketing material to potential new clients! Why should you pay for that?!
Those are some of the fees that you should avoid to keep financial termites out of your financial home! If you follow these guidelines, it could literally save you tens of thousands of dollars over your investing life.
The Three Strike Rule
Thu, 2nd April, 2015
The 2015 Baseball season kicked off this week and it will be fun to head off to the ballpark and watch our favorite teams battle on the diamond.
Baseball is a game of rules just like investing. One rule that baseball shares with wise investors is the Three Strike Rule. When a batter steps into the batter’s box, if he swings at the pitch three times and misses, then the umpire calls him out.
The umpire will yell, “Strike one, strike two, strike three - you’re out!" There are no umpires in the Stock Market, so here at goBoodle, we’ve decided to play that role, because investors need to know how to avoid striking out.
Think of mutual funds as pitches thrown to you. Make sure you never take the following strikes:
Strike one - The mutual fund has a load, or sales charge. Right off the top you could lose as much as six percent of your money.
Strike two - High expense ratio. Remember, every mutual fund has an expense ratio. When you buy a fund make sure that there is a zero in the first spot. Example: 0.2 percent expense ratio.
Strike three - The mutual fund has a 12b1 fee. This fee is a charge that you pay so that the mutual fund company can market their products to unsuspecting clients and have you foot the bill. Make sure that when you purchase a fund, that it is a No Load fund, and has an expense ratio that begins with a zero, and that there are no 12b1 fees attached to this fund.
If you can apply the Three Strike Rule on your mutual fund purchase, then you stand a very good chance of hitting a financial triple, or better yet, a home run! Enjoy the baseball season and when you’re standing in the “financial batter’s box”, make sure no strikes get past you!
A Tale of Two Kittys
Mon, 2nd March, 2015
When it comes to investing one thing is true--cost matter tremendously. You should always do everything within your power to minimize them. Here is an example of two women, each named Kitty. In addition to sharing a name, they also have identical portfolios. They own the same mutual funds, in the same percentages and they each put in the exact same amount of money. They also got the exact same returns.
When they were ready to withdraw their money, they were both surprised. One Kitty had a very pleasant surprise. The other Kitty was shocked and saddened.
Each investor managed to invest regularly and both portfolios grew to one million dollars! Kitty A. invested her money in a Traditional IRA account. She was able to write off her contribution amount each year that she added money.
Kitty B. had decided to choose a Roth IRA account. She did not get to write off her contribution in the years that she made them. Although her portfolio grew at the same rate as Kitty A., in all those years Kitty B. never saw a tax break on her contributions.
Years later when it was time to start taking the money out, Kitty A. was shocked at what was about to happen to her nest egg. Because Kitty A. got her tax breaks over the years, the government was now going to tax her nest egg at ordinary income tax rates! This means that Kitty A. could pay as much as 37 percent ($370,000) in taxes!
Meanwhile, Kitty B. gets her own surprise, but it is much more pleasant than Kitty A. When Kitty B. chose a Roth IRA as her investment vehicle, she didn’t get a tax break, but guess what! After following the rules spelled out in the tax code, Kitty B. can make tax-free withdrawals forever!
She will never be taxed on this money. This fact puts $370k in her purse while Kitty A. has to pay. In addition, by law Kitty A. must take required minimum distributions, whether she wants to or not. Kitty B. can decide to not touch that money and let it keep growing tax free for as long as she wants.
The moral of the story is simple: you should always pay close attention to cost and expenses, ignore them at your peril.
The January Effect
Mon, 2nd February, 2015
For a second-straight year, the Stock Market suffered losses in the month of January. Many people in the world of investing have a name for this phenomenon…they call it the 'January Effect'. What is the January Effect and should you be worried?
There are those in the investment community who believe that as January goes, so goes the rest of the year. For example, if January is a month that closes with a loss, then this portends that investors will suffer a yearly loss in their portfolio.
We sent our researchers out to see if there was any truth to the January Effect, and what they discovered was pretty amazing.
According to our researchers, there isn't much substance to this stock market indicator. Looking over historical data, we have found that there is little evidence that a down January signals a down year.
Looking back over 100 years on the DOW JONES average if the market is up in January it will may be up 75% of the time, based on that data.
If the DOW is down in January, the market rises 52% of the time. Now if you look at all of the years, the market will go up about 66% of the time.
Now what does all of this mean when taken in total? Well, we think it doesn't tell us much. Remember, in 2009 the market had a down January, but went on to have a huge year!
2010 the market was down in January and it ended up with gains. 2014 the market was down in January, and it ended the year with a 12.56% gain!
If you focused on the months from February through December, you will see that a down January doesn't mean a down year.
We believe in watching other indicators such as employment stats, interest rates. Inflation and housing starts to name a few.
You should accept this down January for what it is…one month in a twelve-month year.
We predict good gains by the end of 2015!
2015: Resolutions Rock!
Fri, 2nd January, 2015
Now that the holidays are over, the relatives have gone, and the bills are piling up in the mailbox, let's talk about the scariest of subjects—investing.
January is a great time to take stock of your finances, or lack thereof, and create a plan with the end goal being financial freedom! Every great plan needs action; otherwise you will never get it done. The subject of investing is immense, but if you start small, there is no telling how far your financial dreams can take you. Truly, the sky is the limit!
We think if you take these 3 simple steps you will be on your way to having the type of life you've always wanted. These steps are not difficult, but they do require you to take action and to commit yourself to gaining the knowledge about investing that is the foundation for anyone seeking a more profitable 2015.
Step 1: Read a book on investing. One of our favorites is "The Richest Man in Babylon" by George S. Clason. This book is set more than 2000 years ago in Babylon and the story is told in timeless parables with a backdrop of acquiring wealth. It is a quick read, and a great foundational financial book.
Step 2: If you are working make sure that you are taking advantage of any tax-deferred accounts such as 401k and 403b plans that your employer offers. Also, make sure to take advantage of any matching plan.
If there is no plan being offered at your company, then you can set up an IRA account on your own as long as you follow the I.R.S. rules and have earned income.
Step 3: Cut back on any unnecessary expense such as buying DVDs, magazine subscriptions, and dining out to name just a few. Figure out how you can save money, and then take that money and invest it in a good low cost mutual fund, $99 can get you started.
Resolve to take these 3 steps and before you know it you will become your own personal money manager, and you will never be dependent on anyone else when it comes to your financial peace of mind. Have a prosperous 2015!
2014: A look back
Tue, 23rd December, 2014
The year 2014 is nearly in the record books. At Boodle, we thought we would take a look back at some of the highlights and share them with you.
We predicted in January 2014 that gains would be modest for investors in equities (stocks). We knew that it would be unrealistic to expect the parabolic performance that we saw in 2013.
We called it correctly! We had a 33.5% gain in 2013 and a nearly 15% gain this year.
February saw the appointment of Janet Yellen, who succeeded Ben Bernanke, as head of the Federal Reserve. Stocks made modest gains, but we were cautious in our view and felt that a correction might be in the cards.
March was a volatile month as news between Russia and Ukraine threatened the economies of Europe and the U.S.
We did spot an interesting economic trend. The jobs report was looking pretty good, in spite of the professional naysayers and their gloomy predictions.
April saw more conflict in Russia and Ukraine and the volatile news was a reason for many people to cash out of their stocks seeking safety.
Boodle reiterated to members that the Fed was the place to watch and that we saw no hint of a rate increase. We did get a sell-off in social media stocks such as Twitter and Facebook, but we continued to stick to our allocations.
In May, June and July we saw continued instability and some scary headlines like the plane crash in Ukraine, and the Ebola scare out of Africa.
By the fourth quarter of the year, a true correction occurred in the Market. Stocks were hammered in October and many felt that we were about to enter a bear market.
Our view, as it had been all year long, is that a correction is a healthy part of a bull market and our members should treat a correction as a buying opportunity. Just check out our blog from October 17. We were spot-on with our call on the market.
With less than five trading days left in the year, we would like to thank our members and our staff for making this a financially rewarding year.
Have a merry Christmas and a prosperous New Year. Go Boodle!
The Importance of Transparency
Sun, 16th November, 2014
Recent events in the news highlight the importance of transparency and why knowing the motives of individuals and institutions can help you make an informed decision when dealing with others who may not have your best interest in mind.
There are various news reports that MIT Professor Jonathan Gruber lied to the Nation when the Affordable Care Act, better known as "Obamacare", was touted to be in the best interest of the American people. Videos have surfaced last week showing Mr. Gruber calling the American people "stupid", and "ill-informed".
Mr. Gruber is also heard saying in a video that a lack of transparency is a huge political advantage. These statements and videos offer proof to skeptics that politicians and their cronies cannot be trusted to tell people the truth. Mr. Gruber now has a sullied reputation, and his name is a pejorative for telling a lie, i.e. "That story is a complete Gruber"!
Now in the world of investing transparency is sometimes just as difficult to come by. There is a ritual in the mutual fund industry called "Window Dressing". This is a phenomenon where a mutual fund manager will purchase a stock in the fourth quarter that is on a hot streak. The fund manager purchases this stock to make it seem like his fund only owns high performing securities. The fund manager will then sell the poor performers in his portfolio.
The result is that an investor will look at the holdings in that fund and think that they must be good money managers because they have all of the top performing stocks in their fund! Sadly, this is not the case. The fund’s shareholders that held positions in the fund at the start of the year did not share the performance of that hot stock.
The fund company will then print up a glossy, impressive looking brochure touting the hot performing stocks in the fund. You then pluck down your hard-earned money, only to discover late in the following year that that hot-performing mutual fund really wasn't a good investment.
This window dressing pattern will repeat the next year, and most shareholders will be none the wiser. They were "Grubered" and didn't even know it; don’t let this happen to you.
The W.O.W. Factor
Fri, 17th October, 2014
Have you ever seen a great looking car or a 100-inch flat panel television and exclaimed, 'WOW!' Well, on Wall Street, there is a wow factor, but it is a little bit different from fancy cars and plasma TVs.
The 'wow' factor in the stock market is an acronym, which stands for 'Wall of Worry'.
If you have been following the news recently, you may have seen headlines like 'Ebola could kill millions' or 'Isis is coming to the U.S.' which causes fear in many. Let’s not forget economic bad news like rising interest rates, social unrest, and so on.
These events grab headlines and they create a lot of fear and worry in people. Sometimes these worries scare investors into selling their stocks. It is like a psychological wall that is built for the sole purpose to instill fear and uncertainty in the minds of investors. We think this is a real phenomenon, but rather than react with fear and panic, we welcome it. In order for stocks to move higher, the market must overcome the risk inherent in investing and cleanse out any weakness or froth that comes from investor speculation.
The W.O.W. factor rewards the patient investor, while punishing shortsighted investors. Shortsighted investors sell into fear and buy out of greed.
Today, the market is down more than 8 percent as measured by the S&P 500. When the market hits 10 percent off the 52-week high, we’d be in an official correction. We believe the Stock Market is 'on sale'. Now is the perfect time to invest if you have the cash. Take advantage of the W.O.W. factor.
Sun, 14th September, 2014
At Boodle, we often hear many reasons why people don't invest in the stock market. These reasons run the gamut of 'the stock market is rigged 'you need a lot of money to invest' and on and on.
Now we can sympathize with people who think along these lines, but after investing for more than 16 years, we believe these are nothing more than excuses. People tell themselves these excuses to avoid having to learn how invest and to avoid taking on the responsibility of becoming a successful investor.
In the course of our research we often run across stories about average people who learn how to invest and along the way, they manage to amass a fortune.
Take the story featured in the September 15 edition of Barron's about Mrs. Stephanie T. Mucha, age 97.
Mrs. Mucha was a High School dropout and, with a limited education, went to work to help her family keep from losing their home during the Great Depression.
She worked as a maid and eventually went to work at the VA Center where she was employed for 44 years earning a salary of $23,000.
She did marry and in 1985, her husband passed away, but not before the two of them accumulated a portfolio of $300,000. Mrs. Mucha became a student of the stock market and has now accumulated a portfolio that is worth more than six million dollars!
Mrs. Mucha credits frugality, hard work, and the intense passion for financial education for her financial success. Mrs. Mucha reads financial books, such as 'Stocks for the long run', by Professor Jeremy Siegel. She also reads the Wall Street Journal, New York Times, and Barron’s among other financial publications.
At 97, Mrs. Mucha is living proof that successful investing requires more discipline, than money. She has since given away three million dollars and hopes to give away more.
We think her story provides a financial blueprint for anyone willing to follow her extraordinary example.
Your Assets…are they appreciating or depreciating?
Sun, 10th August, 2014
When most people make a purchase, they usually buy a hard asset such as a house or car. Sometimes, people take trips, plan weddings, or spend money on a hobby.
We thought that we would take a look at assets and try to apply the boodle lens to see if we’re buying an asset that will appreciate over time, or one that may depreciate over time.
Here at boodle, our favorite assets gain value, or appreciate, over time. This phenomenon gives us the opportunity to do more with our money than people who only purchase depreciating assets.
So let’s take a look at a few assets, and you be the judge; do these assets appreciate, or depreciate over time?
• Automobiles – In 2009 a Mercedes Benz S500 cost around $87,000. This figure does not include taxes, insurance, maintenance, etc.
• Weddings – The average cost of a wedding in 2009 was $22,000. This figure doesn’t include the honeymoon, bar service, and the cost of a band.
• A Hermes Birkin Handbag cost $120,000 and is very exclusive, to say the least.
Now over time, these things will show wear and tear, they will also lose value (hopefully memories of the wedding will last!). But what about stocks? Aren’t stocks a depreciating asset? Wasn’t WorldCom a depreciating stock? Indeed, it was. WorldCom went to zero on its way to bankruptcy. But, what about the Stock Market? The Stock Market is still around, and it didn’t go to zero. As a matter of fact, the Stock Market as measured by the S&P 500 Index is near an all-time record high!
If you had purchased that Mercedes Benz in 2009, today it would be worth around $48,000…not bad. However, if you had taken that same $87,000 and purchased that S&P 500 Index fund, you’d have nearly $185,000!
We aren’t advocating that people don’t plan weddings, buy cars, or fine things. We just know that the Market has a bias to the upside and over time it can help you purchase some of life’s creature comforts.
Your retirement portfolio… do you know what’s in it?
Thu, 10th July, 2014
It's summertime and today many people are focused on vacations and yard work. What could be better than planning that trip, or pruning those flowers? How about taking a look at your 401(k) plan?
A recent survey by a company called Hearts &amp; Wallets found that most people have no clue about what is in their retirement portfolio and how to maximize their returns.
Today, companies can offer dozens of choices in employee retirement plans, but few of us know how to put this puzzle together so that it is growing, as it should.
Here are some real world examples that we encountered during our 16 years as investors in the market:
• a gentleman who purchased a high-risk mutual fund in his 401(k) fund, and then he purchased more shares of the same fund in his IRA account! Where is his diversification?
• a woman who bought an Annuity with a 13% guarantee. Last year the market returned 32%. Where did the 19% difference go? We think whoever sold her that Annuity can answer that question.
• a man who purchased Chrysler corporation bonds… in his 401(k). This was before Chrysler declared bankruptcy. Can you guess what happened to his investment?
These are just three examples of the many mistakes that people make when it comes to investing. We think that these mistakes can be avoided if you follow a few simple steps:
1. Take a few minutes to read and learn about your investment choices. This will help you to make informed decisions.
2. If you don't know anything about your choices, then place your money in a money market account until you can educate yourself about investing.
3. Many company investment plans offer more than a dozen choices. Try to keep your choices down to 3 things: Stocks (funds), Bonds, and a tiny bit in international stocks.
Remember, investing works best when things are simple and easy to understand. By knowing this fact, you should do pretty well over the course of your investing life
Five Million reasons why cost matters
Thu, 19th June, 2014
Last week a political earthquake shook the halls of Congress to its very foundation. For the first time in America's history, a sitting congressional majority leader lost his seat during a primary race.
House majority leader, Eric Cantor lost to a political novice named Dave Brat. Mr. Brat, a college economics professor who had never run for office before handily defeated multi-termed majority leader Eric Cantor.
Politics aside, what really caught our attention was the fact that Mr. Brat had only $231,000 to Mr. Cantor's $5,700,000! How could someone with that much money at his disposal lose to someone with so little money?
We think we know the answer to this question. People often think that the more something cost, the greater the value it is that they will receive from their purchase.
Mr. Cantor thought that by spending more than five million dollars he would secure his victory. In reality, what he did was purchase his own defeat.
If spending more money on something guaranteed a win, then the movie, The Lone Ranger, would have been a big hit for Disney studios. If throwing money at a problem were a way to achieve a positive result, then Iraq would be the jewel of the Middle East.
Many investors figure that by paying exorbitant amounts of money for a stock, mutual fund or an annuity that they are sure to reap huge gains on their investment.
If this were the case, stocks such as Twitter, Radio Shack, and Whole Foods would not be down -41%, -55%, -26% respectively (as of 06/12).
Dave Brat, the winner of the congressional race in VA had some characteristics that many successful investors display in their beliefs and their portfolio. Successful investors are passionate about financial education (Mr. Brat is an economics professor), passionate about controlling cost (he spent less than $150k), and they understand that defeating a Goliath takes skill, smarts, and a well thought-out plan.
Do you have such a plan for your investment success?
Thu, 15th May, 2014
Recently, Bankrate.com reported that more than 70% of all U.S. households do not want to invest in the stock market. Americans remain leery of Wall Street and have stayed out of what has been a 5-year bull market run!
The stock market, as measured by the S&P500 index is up more than 177% since its March 9, 2009 low. Investors who pulled out in 2007 and 2008 surely must be kicking themselves.
All of the losses that were suffered in those two years have been recovered and then some! People who bailed out now know the meaning of buying at the top and selling at the bottom.
We speak to many people from all walks of life and we have come across very few who have an understanding of how the stock market works. Most people seek to minimize their risk by putting their money in Certificates of Deposit (CDs) or money market accounts.
What they failed to take into account, while forming this strategy, is the effect that interest rates would have on their money.
Talk to anyone that you know who has money in the bank, or in a money market. Ask them if they are making any money.
Last year, while banks were paying less than 1-percent interest, the stock market returned over 30 percent! So, we end with an impassioned plea to the small investor…come back to the market and learn how to make your money grow, so that it will last you a lifetime. #bringbackoursmallinvestors!
Target dated funds. Are they right for you?
Sun, 27th April, 2014
If you invest in your work's 401(k) plan, there is a good chance that some of the choices offered may be "target dated funds". These funds offer asset allocation across stocks, bonds, and cash and are tied closely to the year when you expect to retire.
For some people this is a simple way to invest without doing any investment research on their own. Investors in these funds trust the fund managers to allocate the money correctly based on a person's age and tolerance for risk.
Target-dated-funds have grown in use over the past decades, and although we can understand the promise and concept behind these funds, we aren't big fans, for several important reasons.
• If you examine these target funds, you'll discover that these funds invest in the actual mutual funds of the company that is selling them! By selling their own funds inside a mutual fund, are you really getting the best fund for you or what is the best fund for them?
• These funds allocate money between stocks, bonds, and cash. What if they are holding an allocation mix that isn't right for you?
• Some target-dated-funds have expenses that are higher than if you were to buy, say, the equity portion of their holding outside of the target-dated-fund.
All of the above points really serve to illustrate the importance of knowing what you own in your portfolio and keeping your strategy simple and easy to understand. The mutual fund industry is a "sales and marketing" industry. There are over 8000 mutual funds being sold and marketed to a public that has little understanding on how to invest for the long term.
We think everyone should learn the proper way to evaluate the choices in their 401(k) plans so that their financial future is bright and not cloudy.
April Investment Tips!
Sun, 6th April, 2014
As April 15 quickly approaches, Boodle thinks it’s a good time for you to take a look at your finances and make sure that you are putting money away for your future, and doing what you can to minimize the taxes that you pay.
Now we are not tax professionals, so you should always consult with your own tax advisor to make sure you are fully compliant with state and federal tax laws.
Tax bracket -One of the most important things to know is your tax bracket.
The government has established how much tax individuals and couples will pay based on a host of factors that include, but are not limited to, earned income and marital status. You should know your tax bracket so that you can better plan the allocation of the money that you earn.
We’ve included this this filing seasons and next years as well. Knowing where you fall in the Tax bracket is important especially when you fall on the cusp.
Investment money – You should know how your money is invested and what type of accounts you own.
How is your money allocated? Do you have money in individual stocks, savings accounts, or certificates of deposit?
Taxable and non-taxable accounts – There are two types of investment accounts: Taxable and Non-taxable. Find out if you have money in either type of account, because these accounts could affect your tax filing status.
401(k) plans are non-taxable accounts, until you start to take the money out, usually at the age of 70½. Stock, bonds, and mutual funds in a brokerage account may be subject to taxes. Check with your tax advisor to be sure.
Deductions – Make sure that you are taking advantage of all the deductions to which you are entitled when preparing your taxes.
If you have a stock that made money last year, and another stock that lost money last year, there may be a way for you to minimize that lost. Check with your tax preparer.
Contributions – If you are able, contribute as much as you can to a retirement account such as a 401(k), 403(b), or an IRA account. Many of these accounts help to reduce your tax liability in the year that you contribute, and they help grow your money since you aren’t paying taxes on the contribution amount.
Roth IRA’s don’t offer a tax break in the year that you contribute, but if you follow the tax code rules, then the money can be withdrawn tax free.
Donations – Boodle believes in donating to a charity of your choice to help-out the less fortunate. Our goal is to help you grow your portfolio, and your generosity as well. We all benefit when we help each other and donations are one of the best things an individual and a corporation can do.
These are just a few of the many tips that can help you keep more of your hard-earned money, Share your thoughts or ideas with us; we’d love to hear from you!
Celebrities and Investing: A mixed blessing
Sat, 22nd March, 2014
Shirley Temple Black, the child star from the '30s who helped raise the spirits of Americans as the depression unfolded passed away last month at the age of 85. Many of us were not born during Shirley's reign as "America’s sweetheart", but we have seen her films and she was truly one of the finest child actors of all time.
Shirley Temple started her performing career at the age of three and during her time in front of the camera, she made millions of dollars. This is an amazing feat considering her age, and the fact that she earned her money during the great depression.
When Shirley Temple turned 22, she made the terrifying discovery that of the 3.2 million dollars she had earned, only $44,000 remained. Her father, who was a banker, had mismanaged her money.
Her dad was not evil, and did not steal her money. He simply was ill equipped to make wise investments and his decisions cost Shirley Temple her hard-earned fortune.
What lessons can we learn from the misfortune of Shirley Temple?
• Never invest in anything that you do not understand
• Educate yourself on all things financial.
• If necessary, seek a second opinion from a trusted source to look at your investments to offer unbiased guidance.
What happened to Shirley Temple continues to happen to celebrities and non-celebrities alike. The best advice you can ever receive is to learn how to make money and how to keep it. Financial ignorance has destroyed more wealth than just about any other way we can think of. Learn to respect money and it will last you your entire life.
A Raging Bull or an Aging Bull?
Sun, 9th March, 2014
Sunday, March 9, marks the fifth anniversary of the bull market that has propelled the Dow and S&P 500 to all-time highs. Since that day five years ago, the market has been on a tear, and investors who were brave enough to endure double-digit losses, are now sitting atop some incredible gains.
Some of you may not recall the financial crises of 2007-2008, but the stock market was in a free-fall, the housing market was in a tailspin, and we witnessed the collapse of Lehman Brothers, the biggest corporate bankruptcy in U.S. history!
Many people lost their nest egg and the Great Recession touched most Americans when the job market collapsed. Unemployment zoomed to double-digits and the nation voted for change with the election of Barack Obama. At its bottom, the S&P 500 touched 666 points leaving many to feel that the end was near.
Now, 5 years later, we can say "yes", the end was near...for the Bear market! On March 9, 2009, the stock market started to rise and today sits at lofty highs. How much did the index's rise? Well, the Dow is up an impressive 151.3% and the S&P 500 gained 177.6%. Although the NASDAQ has yet to make a new all-time high, it has still managed a gain of 241.8%!
The lessons of the stock market are there for all who care to learn.
· Stay diversified: Own a portfolio of mutual funds that has broad diversification and low expenses.
· Control your fear: Don't be afraid when bad news is in the headlines. Fear kept many people on the sidelines in March of 2009, look at the gains that they missed.
· Learn about investing: Try to devote 15 minutes a day, or an hour week logging in to www.goBoodle.com and learn about investing. You will be prepared when the next Bear market hits. You'll be glad that you did!
No one knows when this Bull market will end, but you can rest assured that we will continue to closely monitor the economy, the Federal Reserve, and the markets for any signs that point to the next Bear market. Boodle members stay tuned! So for now, we wish this Bull a happy anniversary and hope there are many more to come!
MyRA savings account: Good for government, but is it good for you?
Fri, 14th February, 2014
On January 29, during the State of the Union address, President Obama announced his administration’s plan to address the problem facing millions of American adults: Saving money for retirement.
We decided to weigh in on this issue since it speaks to what Boodle is all about “helping people successfully invest for themselves”.
The main goals of the MyRA plan is to help workers who don’t have access to a 401k program, or pensions, be able to put aside as little as $25 a paycheck and invest the money “safely” in government bonds.
Of course, we think it is a good idea to get people to learn how to invest for themselves, and we applaud anyone who brings attention to the necessity of long-term investing. However, we do not feel this program is the ideal vehicle for many workers to start down the path of investing. No investment vehicle is perfect, but MyRA accounts may have consequences that could prove detrimental to “investors” in these accounts.
As we mentioned above, MyRA accounts will only allow investments in government bonds. The unintended effect will be that the workers investing in these accounts will be buying up the Federal debt, which so far totals more than 17 trillion dollars! By not taking risk, these accounts will psychologically impair workers from the risk, reward model that every successful investor has to learn to manage and master.
Employers will not provide a dollar-match, as they do in many 401(k) plans. We think that the lack of a company match is a big flaw in the MyRA strategy.
Finally, we believe that the Federal Government, with its massive trillions of dollars of debt, billion dollar deficits, and fiscal irresponsibility, is perhaps the last institution, which should be telling workers how to practice sound money management.
MyRA accounts are geared toward young workers who would be better served taking on more risk in traditional retirement accounts because that is where the reward is greater and the risk is more realistically managed. Investors need to experience the markets effects on equities, fixed income, and international investing.
MyRA accounts, in our opinion amount to little more than government savings accounts.
He had a dream, do you?
Mon, 20th January, 2014
Today is Martin Luther King Day, and as people around the country and the world reflect on Dr. King’s legacy, we thought we would use this opportunity to examine the impact of poverty on our fellow citizens, and offer our best solutions to lift people up economically.
According to a recent NBC report, more than 42 million women are experiencing financial hardship. Three out of four of these women now wish they had devoted more time to education.
Many reports today show that minority households have little in the way of savings, and the wealth gap between the rich and poor, continues to grow.
Even though the stock market returned 33 percent in 2013, the vast majority of people failed to see any appreciation because according to Money.com, the vast majority of Americans have no stock holdings.
The wealthy, on the other hand saw their net-worth increase substantially. This increase in wealth can be traced to two main factors: an increase in real estate appreciation, and an increase in the stock market.
Contrary to popular belief, the stock market isn’t just for the wealthy or the well connected. The stock market is for anyone, no matter their age, who wants to accumulate wealth over their lifetime.
Poor people can have financial discipline, and save small amounts, that can grow into large amounts over time. One of the biggest myths people can tell themselves is that they don’t have the money to invest and save.
With a little discipline, and a basic understanding of investing, anyone can become financially well off!
The best way to achieve financial freedom is to believe that you can actually do it, and then start the process. Read books on investing, watch financial shows, and educate yourself on all things financial. You can do all this by joining GoBoodle.com.
Before you know it, you will be on your way to financial freedom and enjoying the confidence and security that comes with making wise financial decisions.
The Top 10 Financial Events of 2013
Thu, 26th December, 2013
As we close out the year, we thought it would be a good time to look back at 10 events that for better or worse helped shape the financial world.
10. Twitter goes public - Perhaps the IPO of the year occurred in November with the debut launched of Twitter. The stock has a market-cap of 33 billion dollars.
9. All that glitters - Gold proved to be a terrible investment this year as it sank 29 percent. Investors flocked to gold, fearing a rise of inflation, and paid a very steep price for their decision.
8. General Motors names first woman CEO – GM became the first major car manufacturer to name a woman as CEO. Mary Barra, a 33-year GM employee, will lead the automaker.
7. Tesla motors, hot car, hotter stock - Tesla Motors stock is up a shocking 322 percent for the year! Credit must be given to their founder and CEO, Elon Musk. Anyone who shorted this stock lost big time.
6. JC Penney squeezed - The former retail giant continues to struggle as its stock price has fallen by more than 57 percent for the year. Time will tell if their management can stem the losses.
5. The fall of BlackBerry - The granddaddy of Smartphones, Blackberry, released its earnings in December and posted a Q3 loss of 4.4 billion. Blackberry is planning to move away from handheld devices and into software and services.
4.The great Caper Taper - In December, the Fed announced the start of its tapering process, and will ease up on its purchasing of bonds with a 10 billion dollar reduction starting in January.
3. Housing market rebound - The housing market will finish the year up double-digits in many regions of the country.
2. Janet Yellen named Chairman of the Federal Reserve - Ben Bernanke leaves the Fed after two 4-year terms. Janet Yellen, nominated by President Obama, is his successor.
1. Stock markets hit all-time record highs - With five trading days left in the year, the Dow and S&P 500 indexes are at all-time highs. The DOW stands at 16479.88 and the S&P 500 stands at 1842.02. For those of you who had the courage and discipline to stay fully invested and ignore the doomsayers, pundits, and “experts”, the markets are on track to reward you with an astounding 31 percent return, as measured by the Wilshire 5000 index.
Year-end Tips from Boodle
Sun, 1st December, 2013
As the calendar winds down to December 31, we thought it would be a good idea to offer tips and suggestions on maximizing your gains and minimizing your losses. With that in mind, here are a few year-end tips for you to consider as you manage your finances.
Always remember to consult your tax professional because Boodle does not offer tax advice.
Tax Bracket – There are 7 tax brackets for 2013, they range from 10% to 39.6%. Find out which tax bracket you’re in and keep this information for matters such as taxable income and taxable investment income.
Capital Gains Tax Rate – If you have investments in taxable accounts, or you are taking distributions from a tax-deferred account, find out what your capital gains tax rate will be for the year 2013.
Tax deferred investing – Make sure that whenever possible, you are maxing out any tax-deferred account that you are eligible to receive. This can include, but is not limited to 401(k), 403(b), Traditional IRA accounts, Roth IRA accounts, and 529 plans.
Mortgage – If you have a mortgage and you are able to claim deductibility on interest, try to make your January payment in December. Also, if you are financially able, pay a little bit extra each month in principal to shave off future interest payments.
Donate – With double-digit gains in the stock market, think about donating to your favorite charity.
Flexible Spending Accounts – Take advantage of any FSA accounts that might be available to you through your employer.
Stock losses – If you have lost money on any stock that you own, you might be able to sell the stock at a loss. You then may also be able to sell a stock where you have a gain and not have to pay taxes on the stock that performed well. Read up on this strategy and consult your tax professional before considering this tip.
Portfolios & Politics: Do not mix!
Sun, 10th November, 2013
When it comes to investing some people are tempted to do irrational things to their portfolios that can do long term damage to their investment success.
Back in the year 2000, when George Bush was elected President, many investors who happen to vote Republican saw his win as a confirmation that the 1999 double-digit returns would carry over since everyone knows that “Republicans are pro-business”.
In 2008, many investors saw the election of Barack Obama as a reason to stay out of the stock market since everyone knows that “Democrats are bad for big business”. Both points of view were wrong, and history bears this out. Had most investors lightened their stock holdings in 2000, their portfolios would have held up much better under the 2000-2003 bear market. Likewise, had people fully invested in the stock market on March 9, 2009, they would now be enjoying gains of more than 120 percent (as measured by the S&P 500)!
Some investors stay away from certain stocks and industries because they let their political leanings dictate their investment portfolio. When you make decisions like these, you are sabotaging your future gains to satisfy your political beliefs.
Corporate earnings, Federal Reserve policy, employment rates, and a host of other economic metrics drive the stock market. When we allow our political leanings to interfere then it is only a matter of time before we do great harm to our investments.
Some people have a negative view of Exxon Mobile; others have a positive view of Apple Computer. Some people hate the banking industry, while others love the automobile industry. If you harbor strong feelings that can affect your investments, then you need to take a look at your investment philosophy. By letting your decisions be influenced by politics you are setting yourself up for financial failure.
Stocks, mutual funds, and corporations do not know you, and they do not know if you own them or not. Capitalism will always be a force in this world, and your success will depend on if your financial decisions are driven by emotions or intelligence.
Boodle on Bonds
Sun, 20th October, 2013
For more than 30 years, Bonds have been a relatively safe harbor for investors who want stability in their portfolio.
We think that harbor is about to face a storm.
With interest rates at near historic lows, Boodle believes that rates can only go in one direction - up, which means that Bond fund NAV prices will tumble.
Because of the impending storm, we have taken a bearish position on Bond funds, which is reflected in the Bond funds that we currently list on our site.
There are so many different type of Bonds to choose from it is no wonder that investing is a mystery to most people.
Some investors buy individual Bonds, but in our opinion at Boodle we only invest in Bond funds for their convenience, liquidity, and diversification to name a few attributes of funds.
Bond Funds come in a variety of types, here are just a few:
• Short-term Bond funds – Bonds that mature in a matter of months or a couple of years
• Intermediate Bond funds – Funds that contain Bonds that have a maturity of 2 to 6 years
• Long-term Bond funds – Funds that have bonds that mature decades from the day they were issued
• GNMA Bond funds – Funds that invest in government backed-mortgage securities
• T.I.P.S. – Treasury inflation protected securities – Bonds that hedge against inflation risk
• High-yield Bond funds – Also known as “junk bonds”, these funds don’t have a AAA rating, but offer a higher yield or payout to the holder of the fund
• Municipal Bond funds –These “Munis” invest in Bonds issued by local governments
There are other types of Bond funds, but now you get the idea that investing in Bond funds requires a lot of due-diligence on your part.
Since we have changed our opinion on bond fund investing from bullish to cautious now may be a good time to give you an overview of our strategy.
At Boodle we look at several benchmarks when it comes to bond fund investing.
Bond fund duration – Fund duration tells you how long the bonds in the fund have until they mature. Now when interest rates rise, the longer the duration (number of years to maturity), the greater the financial loss you’ll experience in that fund.
You might want to keep this formula in mind when you are looking to purchase a Bond fund: If a fund has duration of 5, you can expect that fund to lose 5 percent for every 1 percent increase in interest rates.
This is why we recommend “short-term” funds that have a Bond duration of 2 years or shorter. This is our strategy going forward as we enter a period of potentially rising interest rates.
Sat, 5th October, 2013
Last month President Obama sat down for a television interview to discuss economic inequality among Americans. In the interview, the president admitted that in his five years in office the wealth gap between the very rich and the 99% of the rest of Americans has widened.
The President attributed the gap to globalization and technology that has robotized entire occupations such as bank tellers and travel agents.
The President may have a point, but we believe there is more to it than technology and globalization. The real answer may be found in a recent study by Forbes magazine on how wealthiest Americans grew their wealth.
The Forbes study stated that 9 out of 10 of the richest people grew their wealth by the appreciation of their real estate holdings and stock holdings.
The wealthy took advantage of the strengthening real estate and stock markets and now they have much more money than they had before the financial crises of 2008 struck.
We believe the wealthy in this country understand the importance of investing in America over the long term and that the middle class and the poor are not hearing the message.
By investing in diversified, low-cost mutual funds all Americans can increase their net worth substantially over their lifetime!
How many people don’t own stocks or mutual funds? How many people don’t read books on financial literacy? How many people feel intimated when it comes to the subject of investing?
The President concluded his remarks by pledging to spend the remainder of his Presidency trying to reverse the growing trend of income inequality.
We believe that the best way to achieve this worthwhile goal is to start a grassroots campaign to educate people on how to become their own financial money managers!
When people come to understand what it means to be an investor and how investing can increase their own net-worth, then you will see a chipping away of the chasm between the rich and the middle class. Our goal, at Boodle, is to create as many financially educated members as possible!
Financial education is a worthy goal that can benefit the very young and the very old. It is never too late to learn the habits of the 1% of people who achieve financial freedom.
What's in your 401(k)?
Sun, 15th September, 2013
According to financial news reports, a class-action law suit was filed against mutual fund giant, Fidelity Investments.
The lawsuit was filed on behalf of former and current employees of the company.
The lawsuit contends that Fidelity Investments offered mutual funds to its employees in their 401(k) plan that had relatively high fees, when lower fee funds were available.
Also listed in the suit was the fact that Fidelity Investments only offered Fidelity funds in the 401(k) plan.
This could be seen as Fidelity not having its employee’s best interest at heart by offering only Fidelity funds as 401(k) investments.
Boodle recently did an analysis of a 403(b) plan for a local public school district.
We spent two weeks looking at the 403(b) plan’s fund companies and funds. What we found was a plan riddled with mostly poor choices, under-performing funds, and high expenses.
These two examples should serve as vivid reminders that few companies or institutions will have your best interest at heart. Mutual fund investing requires a lot of research and knowledge about investing and most people cannot commit the time or resources to the task.
We believe that financial education is lacking within the investing world, and also lacking with the public at large.
Few people are willing to put in the long hours it takes to understand how to identify a sound investment.
We believe that these are just a few of the reasons why most people don’t trust Wall Street, nor do they trust their company to make sure that the investment choices being offered is the right choices for them.
We can’t speak for every financial company out there, or 401(k) providers, but we do know that here at boodle we watch the market five days a week, and we perform research seven days a week.
Having a sound investment strategy is crucial to anyone seeking long term appreciation in their investments. Keep your cost down, know what you are invested in, and diversify your holdings.
Investing should be simple, easy to understand, and financially rewarding. If this hasn’t been your experience, then maybe it’s time for you to Boodle!
Financial SHARK ATTACK!!
Mon, 19th August, 2013
A recent cable movie called "Sharknado" made news for its campiness and its ratings. The movie featured sharks swept up in some kind of tornado and the result is a raining down of sharks or "Sharknado" if you will.
Now for a silly movie plot, this can be mildly entertaining. However, in the financial world, the last thing you would ever want to experience is a financial shark attack.
"What is a financial shark attack", you may ask. Well, keep reading and we will explain. "Financial Shark Attack" may be a funny title, but it is no laughing matter.
Most people do not know how to get started in investing. Many of us are introduced to investing by a referral from a well-meaning friend or family member. They tell us how they have been long-term investors with a "friend" who happens to be their insurance agent or advisor.
You meet this "friend" who seems very nice and knowledgeable when it comes to investing and since you had just come into a financial windfall, you want to invest the money in something that is safe, secure and grows.
He suggests that you put the money in three funds: Funds X, and Z. You hand over your check and you leave his office feeling great. You now have a trusted advisor who has placed your money in funds that, according to the financial reports that he showed you, have had steady growth for decades.
Years may pass, and you notice that although you continue to put money into your funds, they do not seem to be growing as you thought they would...in fact, they don’t seem to be doing much of anything.
You ask your advisor about your account and he tells you that the market has been in a bit of a slump, but will soon turn around. Another year passes and your funds' performance don't improve.
You start to suspect that something is not right and do a little research on your own. You discover that the nice advisor had put you in funds that have sales charges known as "Loads". Next, you discover that the performance of your funds has been awful...for years!
You soon discover that you have lost thousands of dollars due to under-performance. Well, you figure that if you’ve been during poorly in your funds that must mean that the advisor who sold you those funds must be doing poorly as well. You might think that, but you would be wrong. He got a commission of 5.75% on your initial investment! Any money that you invested with him since also paid him a commission. You find out that the fees on these funds are not just high, but that they are outrageously high! Those funds even charge you a fee (12b-1) that goes toward marketing the under-performing funds that you have your money invested in.
Suddenly, it dawns on you...you have been the victim of a financial shark attack! A rage starts to engulf you. Your mind can't function. You can’t recall a time when you've been more upset. You think about all of the money that you have lost. You think about all of the times you met with your advisor and how he kept telling you that things were fine.
You are sick thinking about all of the friends and family members you have steered to this advisor. What happened to their money?
You have become the latest victim of a financial shark attack. Don't let this happen to you. Always know what you’re investing in and how much it is really costing you. The truth may be shocking.
The Rising tide – Is it lifting your boat?
Sun, 4th August, 2013
There is an old saying that "a rising tide lifts all boats". This saying applies to the stock market and can work for you, providing you have a boat in the waters of the market. We ran across a stat, which reveals 53% of all Americans have no money in the stock market! Think about that for a second…the stock market finished the week in record territory and over half of eligible investors failed to capitalize on these record gains.
Where is their financial boat? Is their financial boat sitting in the safe harbor of a bank savings account? Banks are paying next to zero in interest rates these days. Maybe their boat is in a bank CD earning a paltry one percent (if they’re lucky). Or perhaps their boat is in the bond market and right now, at this very moment, they are taking on a lot of water.
Perhaps the scariest place to have your financial boat is not having a boat at all. There are many people who never learned how to manage money. Many of them are forced to work extra jobs and long hours just to keep their heads above water. The rising stock market tide has passed them by and they refuse to participate in a stock market, a market that is at all-time highs.
Some of the most educated people with degrees from the best Universities balk at putting a penny into the stock market. These people feel that a safe job and a government pension will be enough to carry them into retirement. If they believe this, then they need look no further than Detroit to see a "Titanic" disaster in the making.
So, where is your boat? What waters are you navigating? Who is steering you into safe waters? Is your boat dry-docked with no chance to take you on a high-seas adventure?
Maybe it’s time for you to become the Captain of your own financial ship.
S.A.C. Capital LLC – An inside job?
Sun, 28th July, 2013
This week the Federal Government indicted the Wall Street hedge fund, SAC Capital LLC for trading on insider information.
In its indictment, the Government said that the fraud had been going on for years. The founder of the company, Steven Cohen, hasn’t been named, but you can be sure that more shoes will drop in this case. SAC is innocent until proven guilty, of course, but billionaire founder Steven Cohen faces his company’s liquidation should the Government prove its allegations.
Hedge funds operate with a certain amount of secrecy and deem the wealthy as their members. They charge high fees and promise outstanding performance. There seems to be a culture of corruption on Wall Street and just when you think you’ve seen it all, something new is uncovered which shakes the confidence of people and fosters distrust when it comes to investing in the stock market.
We take away several lessons from stories like this and we hope you heed our wise words. If a fund constantly goes up, while the market goes down, then that is a red flag. If something sounds too good to be true, it may not make a good long-term investment.
You should never invest with the idea that you are entitled to earn more than the average investor does. Eventually, you will learn the lesson that investors in Enron, WorldCom, and Lehman Brothers had learned. Nobody can consistently beat the stock market over a sustained period over the long term.
Declare your financial independence!
Fri, 5th July, 2013
This July 4th marks the 237th birthday of the greatest nation on earth. As a nation, we have a lot to be thankful for on this special day. Americans are freedom-loving people and here at Boodle we can’t think of a better day than today to declare Financial Independence!
To gain your financial independence means having the knowledge and understanding of how to invest successfully for your future. Having a job that pays the bills is not financial independence. Many famous people have lost hundreds of millions of dollars that they earned over their lifetime, and yet they lost it all. This is something that happens to people who never took the time to understand the right way to invest. Here are some statistics that should get you attention:
• 80% of NFL players are bankrupt within five years of retirement
• 60% of NBA players are broke within five years of retirement
• 30% of professional educators save for retirement in many school districts
• Many lottery winners are broke within a few years
Ask yourself why these people, who have so much money, are going broke. The answer is simple. They know how to make money, but many never learned how to invest money. There is only one way and it works for everyone. Learn how to invest for yourself! You will never be at the mercy of another person who knows more about your money than you do. Declaring financial independence means that you are the person at the helm of your financial vessel. By educating yourself in all things financial, you eliminate the need to feel dependent on someone else to manage YOUR money. Stock markets reward knowledge and punish ignorance. When someone is at the mercy of another, he or she is no longer free to seek their fortune on their own terms.
At Boodle, we believe that the person best capable of managing your money is you and you alone. Members never have to worry about what is happening in the stock market or if they are paying too much for an investment with Boodle at their side.
We believe that everyone is entitled to declare financial independence, and experience freedom that can only come from being one’s own personal money manager.
Boodle on Bonds
Tue, 2nd July, 2013
Here at Boodle we believe that every member should have a percentage of their money in the bond market. On our build it page we offer our opinions on the bond funds that are recommended for each portfolio based on factors such as age, risk, and allocation.
We believe that members are much better served by buying shares of a bond fund, rather than going out themselves and purchasing individual bonds.
If members were to go out and purchase individual bonds just to get diversification they would have to buy treasury bonds (short term and intermediate term), corporate bonds (think Ford Motor Co.), Treasury Inflation Protection bonds (or T.I.P.S.) ,or even High-Yield (junk) bonds just for diversification.
Why not keep it simple and buy a bond fund that holds a variety of bonds and one that has a low expense ratio?
Bonds act to create stability in a portfolio especially if the stock market is being volatile.
Now here at Boodle we watch the equity (stocks) and fixed income (bond) markets very closely. Our research has led us to the following: We believe that over the next few years bonds and bond funds will not perform as well as they have in the past and we now take a neutral stance when it comes to investing in bonds.
The Federal Reserve is keeping interest rates low and this is having a negative effect on individuals who have a position in bonds and bond funds. These funds are either slightly negative for the year or they aren’t showing any gains. Bond funds will fall in value when interest rates rise.
Now, what is the opinion of Boodle.com? We have strategies to address the current bond market:
- Because you know (potentially) how much you are receiving, or will receive in Social Security benefits, then members can treat this Social Security money like a bond. A bond is "fixed income", meaning we know what portion is coming in monthly. By treating that portion of money as a "bond" then members can focus more on growing the total stock and total international portion of their portfolio.
- Will young people (18-30) get Social Security? Only time will tell, but take a look at the build it-allocation portion of Boodle. We stress those younger individuals with a longer time line should have a greater percentage in stocks anyway. We do not advocate putting 30-40 or 50% into the bond market at this time.
- If, for example you have $5000 to invest, we would say to put that money into your U.S. portion of your portfolio and the International portion of your portfolio, based on the percentages that you are comfortable with. Now, you can take new money that you were going to invest, and dollar-cost-average into the bond portion of your portfolio. This way if we see deterioration in the bond market, you will be buying more shares at a lower cost. The goal in investing is to always try and buy low and sell high.
- You could also establish your stock portion position and then at the end of the year instruct your chosen fund family to re-invest your dividends into your bond index fund. This way, you are taking your appreciated gains, and buying your bond fund shares at a lower cost. Any of these strategies can work for you, but always remember that you are in control of all your investing decisions.
We stand “corrected”
Sun, 16th June, 2013
The stock market took a tumble last week and the financial media couldn’t wait to dust off those scary headlines,”Worst week in 2 months! Fear grips investors! Are we heading for a crash?“
We think these headlines are a bit over-blown, to say the least. Yes, we did have some down days in the market last week, but the market is up 15.33%, as of June 14. Contrary to popular opinion, the market does not move in one direction for very long.
Since we have been researching the market and its movements for 15 years, we are able to say, with near certainty, that the market is in correction mode.
What is a stock market correction? A correction occurs when the market hits a new high, usually in a short amount of time, and then it trends down. Sometimes this down trend can result in a 3 to 18 percent move!
When a market rises quickly, we tend to become skeptics. If there is nothing but good news, we often find that something will come along to prove that ‘easy come’ gives way to ‘easy go’!
Earnings and dividends drive market gains. The volatility we experience is more a product of investor emotion (buying and selling) than sound financial judgment.
Boodle views market corrections as buying opportunities. Markets often go down short-term and long term on their way to up.
Your strategy during these corrective moments should focus on the long term. Corrections have several benefits. One benefit is that corrections allow people who are sitting on the sideline to put their money to work in the stock market. As the prices drop, these people take advantage of this brief opportunity to add money to their portfolios.
Corrections also allow our members to purchase shares at lower prices; this is called dollar cost averaging.
Our members should never look at a correction as a bad thing for their portfolio. As long as we can identify a correction and as long as we invest for the long term, corrections should be viewed as a healthy phenomenon that offers positive financial results over the long term.
Do all S&P 500 Index funds offer the same performance?
Mon, 10th June, 2013
One of the basic tenets of Boodle.com is that we believe in using index funds for our core holdings. Whether it’s in the stock market, bond market, or international investing, index funds offer benefits that can help the vast majority of investors.
You get broad diversification across stocks and industries when investing in index funds, all while keeping costs very low.
For Boodle members these costs are incredibly low. For example, in the Schwab Total Stock Market Index fund the expense ratio (cost) is 0.09%. What does that mean? It means that if you invested $10,000 in this fund it will cost you $9 per year!
Think about that for a moment. You get broad diversification across many different industries matching the performance of the entire U.S. stock market, less a tiny 0.09% fee!
So, do all S&P 500 Index funds offer equal performance? Well, let’s take a look at two different investors then ask yourself, which investor you would want to be. The funds in this comparison own the same stocks and the same weightings.
Investor A: Mary bought Sterling Capital Equity Index Fund from her financial advisor. He told Mary that she can get the performance of the S&P 500 Index and that the Sterling fund was the best way to capture those returns. Mary gave her financial advisor $10,000. This is what happened to her money over one year.
· Sterling S&P 500 symbol – BAEQX
· Amount Invested - $10,000
· Load (sales charge 5.75%) - $575.00
· Expense ratio – 1.12% ($133.00)
· Amount after 1 year - $11,790.00
Now let’s take a look at our Boodle member, Bella. Bella invested $10,000 in the Schwab S&P 500 Index Fund.
· Schwab S&P 500 symbol – SWPPX
· Amount invested - $10,000.00
· Load – none
· Expense ratio – 0.09% ($11)
· Amount after 1 year - $12,754.00.
Our Boodle member, Bella has $964 more in her account than Mary, who leans on the financial industry to “help” her invest. Mary lost $575 right off the top before her money was even invested! The difference in the expense ratios is very telling. The difference is more than 1100 percent!
Most investors never consider cost in their portfolios. They are ignorant to the impact of loads and expense ratios, and they never question their financial “advisors”.
At Boodle, we stress the impact of costs since it really makes a difference in your total return. We don’t want anyone to end up like Mary, oblivious to expenses and feeling as if she has no choice. If you know a “Mary” in your life share this article so she will know the true cost of having a financial advisor.
Spot the disciplined mutual fund!
Tue, 28th May, 2013
At Boodle.com, we adhere to strict guidelines when it comes to investing. We invest only in mutual funds. We stick with index funds because they offer near-market matching performance, less a tiny fee. We don’t have to pay an advisor a sales charge, a mutual fund manager, or a 12-b1 fee. A 12-b1 fee is a fee that mutual funds charge their current investors so that they can advertise for new investors!
Let’s take a look at a mutual fund gone wild and see how it compares to our Total Stock Market Index Fund.Now this is an apple to apples comparison because both funds are large cap funds and invest in big company stocks, like Google.
Vanguard Total Stock Market Index Fund vs. Neuberger - Bergman Large Cap Discipline Growth Fund.
The Total Stock Market Index fund does not have a manager or team of managers. The Neuberger fund has a team of managers.
Both funds own shares of large companies like Google, Apple, and Coca-Cola. The Index fund does not have a load (sales charge). The Neuberger fund has a sales charge of 5.75%. The Index fund has an expense ratio (or fee) of .17%. The Neuberger Fund has an expense ratio of 1.11%. The Index fund does not have a 12-b1 fee. The Neuberger Fund has a 12-b1 fee of .25%.
The year-to-date return, as of May 24, of the Index fund is 16.66%. The year-to-date return of the Neuberger is 14.90%.
Still not convinced that Index funds are superior investments? Check out these numbers:
$10,000 invested in the Neuberger fund will cost the investor the following amounts: $123 from the 1.11% expense ratio, $575 sales charge (for that broker who sold you this fund). The total cost you owe: $698 for a one-year gain of $11,033. Oh, and we didn’t even include the 12-b1 .25% fee that you pay to attract new investors.
Now, let’s look at a $10,000 investment in the Vanguard Total Stock Market Index Fund and see how it stacks up against its human competition. The Index fund doesn’t have a sales load: $575 in your pocket. The Index fund doesn’t charge you a 12-b1 fee, that’s .25% in your pocket. The Index fund has an expense ratio of .17%, which would cost an investor with $10,000…$21, and that is not a misprint! The total return of the Total Stock Market Index is $12,770! Compare that to the $11,033 total one-year return of the Neuberger fund.
The Neuberger fund is a consistent underperformer and yet, the fund has more than 67 million dollars of investor money. So, do you see any discipline in the Neuberger fund?
Boodle Member vs. Non-Member
Sun, 19th May, 2013
What do you know about your investments?
Millions of people invest their money in things that they don’t understand and with people they don’t know. Are you harming the future growth of your money? Take a look at the traits of a Boodle investor compared to a non-Boodle investor. Who do you resemble?
The Boodle.com Member
1. Knows exactly what he/she is invested in.
2. Understands the asset allocation that he/she chose herself.
3. Keeps cost extremely low because he/she understands the impact of high costs and fees.
4. Never chases fad investments.
5. Is confident in his/her financial knowledge.
6. Never stresses over fluctuation in the market.
7. His/Her portfolio is totally automated.
8. Never buys an investment that he/she doesn’t understand.
9. Educates himself/herself on all things financial.
10. Plans on being retired and well-off.
1. Has no clue as to what he/she is invested in.
2. Has all his/her money in a bank savings account.
3. Has no idea what his/her broker is charging.
4. Just put his/her IRA in a gold fund.
5. Feels intimidated when it comes to investing.
6. Tends to cash out at market bottoms and jump in at market tops.
7. Has a shoebox of paperwork and distrusts using technology.
8. Invests in an indexed-annuity.
9. Never has read a financial book in his/her life.
10. Worries about being penniless and unable to retire.
Coming soon, Boodle.com Launch Party!
Sun, 12th May, 2013
Join us on May 20, for the launch of our new website at www.goboodle.com! Sign our guestbook and tell us what you think. We'd love to hear from you.