Investing Caffeine

Investor Wake-Up Call

December 19, 2010 at 11:43 pm 2 comments

Source: Photobucket

The Pre Wake-Up Conversation

“Hey Milfred, did you see our brokerage statement? There must be a misprint. It says our portfolio of bonds is down.”

“Buford, how can that be, when our bond portfolio has been up for 30 consecutive years? I hear Jim Bernanke is trying to artificially inflate the economy by printing money and using it to buy bonds.”

“Sweetheart, you got it wrong…it’s Ben Jernanke.”

“Ohhh, yeah honey, you’re right. I never expected prices to go down after government bond yields were up almost 50% in a few months.”  

“Sweetie, maybe we should give our broker a call?”

“Oh you mean Skip? I think he wants us to call him a financial consultant or financial advisor now…not a broker.”  

“Well anyway, I just read the largest fund manager in the world, Bill Gross, is trying to convert his bond fund into a stock fund  (read article). I can’t imagine why Mr. Gross would want to do that (see PIMCO article), but maybe Skip knows?  You know, after Skip sold us that high commission annuity and Class-A mutual fund with that 6.25% load, he decided to take his wife, kids, parents, and in-laws to Tahiti for the holidays.”

“Oh I know, Skip is such a nice young man, and so thoughtful.”

“You’re right Pumpkin, I just wish we could hear from him more than once every two years.”

“That’s right Snookum, but at least we get to talk to him when he drops off the paperwork, and his secretary is sure nice.”

“What I really like about Skip is that he always makes so much common sense – he always tells us to buy investments that have already done really well like bonds and gold.”

“Exactly Buford. I just wonder how much longer it will take for stocks to become popular again, given the stock market is already up about 100% from the beginning of 2009? Perhaps with another +30% or so, maybe Skip will switch all our money out of bonds back into stocks?”

“What I love even more about Skip is that not only does he have us buy the popular investments, but he really protects us from buying the low-priced investments that are selling at bargain prices.”

“I hear you Muffin – come to think of it, maybe I should return that sweater I recently purchased at Marshall’s for 50% off – there may be an awful reason I do not know about.”

“Good idea Sweet Pea. The other thing I love about Skip is that he is so knowledgeable…he says the exact same thing I hear from those smart news people on TV. Good thing we have a reliable professional to protect our entire life savings.”

“You’re right as usual dear. He may only have a high school GED, but we’re lucky he has these fancy letters behind his name that I never heard of like PFS, AFC, and RFC… those must be some important credentials.”

“I feel better after our conversation. Maybe we’ll hear from Skip, and if not, I’m sure he’ll drop-off some paperwork for a new investment, if our portfolio goes down by another 10%.”

The Wake-Up Reality

I make some of these comments with tongue firmly in cheek, but the fact remains we live in a financial world with a structurally flawed system of loosely regulated, banks, brokerage firms, insurance companies, ratings agencies, hedge funds, mutual funds, and other financial institutions that continue to repeatedly place their interests ahead of clients. If the 2008-2009 financial crisis hasn’t taught you anything, then you should realize it behooves you to take control of your financial situation. At least ask tough questions that result in answers you can understand – not a lot of technical mumbo-jumbo that makes an advisor sound smart. Make life easier on yourself and have a blunt wake-up call conversation, otherwise grab a pen and get ready for Skip’s call – he’s about to come over with some more paperwork.

Related articles:

Beating off the Financial Sharks

Fees, Exploitation and Confusion Hammer Investors

Investment Credentials: The Letter Shell Game  

Wade W. Slome, CFA, CFP® 

Plan. Invest. Prosper. 

www.Sidoxia.com

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds, but at the time of publishing SCM had no direct position in TJX, or any security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

Entry filed under: Education. Tags: commissions, fees, Financial Planning, retirement planning, stock brokers.