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6.30.2011

Too Many Financial Advisers

I was reminded of the old joke about there being more lawyers than people in the state of New York when I read this article from The White Coat Investor. The fact of the matter is, there are plenty of financial advisers in this country who have no idea what they're doing. While this is presumably true for every profession, it is particularly dangerous to have sophomoric financial advisers because the average American looks to them to guard and grow their life savings throughout their life and into retirement. It is in your best interest to become at least passably knowledge about key investment concepts--mutual funds, index funds, expense ratios, asset allocation, expected passive income generated, etc. so that your financial adviser doesn't even consider trying to pull one over on you. Generally speaking, you can't go wrong opening an account with a Fidelity, Vanguard, T Rowe Price, etc. and regularly contributing money to diversified assets--large cap, small cap, domestic, international, etc. If you can put $100 a month into a large cap index fund, $100 a month in a small cap index fund, $100 a month into a bond fund, and $100 a month into an international stock fund, and repeat this for multiple decades, you'll most likely come out ahead.

To get White Coat Investor's take on the matter, visit the link here: http://whitecoatinvestor.com/there-are-too-many-financial-advisers/.

Working & Social Security Benefits

The Oblivious Investor offered a thoughtful and detailed post on the benefits and drawbacks of working during the early years of social security eligibility. Most people of the elderly ladies and gentlemen that I speak with on this issue have the opinion that social security could be gone tomorrow, and it's best to grab the regular annuity stream while you can. That's certainly not bad advice--although I believe that fears of social security's demise are generally overblown. Yes, our workforce is aging and the program will soon be paying out more in benefits than it receives, but social security would not be the first bankrupt federal program to continue indefinitely. There is one thing every politician knows about the elderly--the vote like it's nobody's business. They've got election day circled on their calendar, and nothing short of a tsunami is going to keep them at home. Nothing jeopardizes a politician's future like taking away benefits from the elderly. The most cowardly way for our elected officials to combat our staggering deficits would be to inflate our way out of it by revving up the printing press, and I believe that is exactly what they'll do.

But I digress. Here's a link to the Oblivious Investor article that discusses how you should go about balancing semi-retirement--that is, working while collecting social security benefits. Link here: http://www.obliviousinvestor.com/social-security-while-working-the-earnings-test/

Why Care About The Long Term?

Trent Hamm at the The Simple Dollar recently put out an insightful post about the blessings and difficulties of maintaining a long-term perspective. Generally speaking, there are two effects of self-deprivation in the present moment. Some of it is intelligent if it leads to long-term happiness (i.e. skip bowling with friends to save money for a down payment on a house, skip buying that six pack of Coca-Cola so that you can invest in Coke stock for dividend income later in life, etc). But to be sure, there is a limit to the benefits of delayed gratification. As Warren Buffett has said, 'You can't save sex for old age.' I recently read an article in the Philadelphia Inquirer about a father who died at the age of 52, and the son lamented that his dad always dedicated himself to making more money, poignantly noting how little father/son time they got to spend together before his untimely death. That was absolutely heart-breaking to read. The balance is hard to reach, but essentially, you should ask yourself this question before making any purchase, 'Would my long-term happiness be maximized by spending money now, or by saving it for something greater?' And one of the tests of life is trying to answer that question correctly.

To read Trent Hamm's view on the matter, click here: http://www.thesimpledollar.com/2011/06/21/some-thoughts-on-the-long-term/

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