Are we there yet?

A good question - Are we at the bottom?

Looking for the Bottom is a Holy Grail quest that will bamboozle investors without a long term strategic horizon.

Before the markets open today, just a word on market bottoms. 

Some of the most interesting questions in investing are especially appropriate today: “Since you expect more bad news and feel the markets may fall further, isn’t it premature to do any buying? Shouldn’t you wait for the bottom?”

To me, the answer is “no.” We never know when we’re at the bottom. We can pour over past stock charts, and there are a deep pit of these,  and we still will not know what will happen today in the markets. A bottom can only be recognized in retrospect: it was the day before the market started to go up. By definition, we can’t know today whether it’s been reached, since that’s a function of what will happen tomorrow. Thus, “I’m going to wait for the bottom” is an irrational statement.

If you want, you might choose to say, “I’m going to wait until the bottom has been passed and the market has started upward.” That’s more rational. However, number one, you’re saying you’re willing to miss the bottom. And number two, one of the reasons for a market to start to rise is that the sellers’ sense of urgency has abated, and along with it the selling pressure. 

That, in turn, means
 (a) the supply for sale shrinks and 
(b) the buyers’ very buying forces the market upward, as it’s now they who are highly motivated. 

These are the things that make markets rise. So if investors want to buy, they should buy on the way down. That’s when the sellers are feeling the most urgency and the buyers’ buying won’t arrest the downward cascade of security prices.

The old saying goes, “The perfect is the enemy of the good.” Likewise, waiting for the bottom can keep investors from making good purchases. The investor’s goal should be to make a large number of good buys, not just a few perfect ones. 

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3 Tips to reduce your portfolio risk

How much do you think about the degree of risk in your portfolio? It's probably not enough. Here's how to think about risk and make portfolio adjustments to increase your odds of success? Here’s a good article on risk and your portfolio. 

If you have an investment adviser, you’ve probably been asked to rate your risk tolerance from one to 10. Or maybe you’ve been questioned about what your actions will be during the next market crash: Will you panic and sell or buy more? 

I don’t know many investors self-aware enough to admit they will indeed engage in panic selling. Likewise, most investors don’t sit around with a pile of cash waiting for a market crash — the last crash was in 2008, so those investors have been waiting a long time. Besides, what did you do during the depths of 2008? Regardless, you’re now 11 years older and in a different place. Evaluating risk tolerance with simple abstract questions is not useful. 

Risk is powerful, but most of us are more accustomed to thinking about returns. Of course returns matter. But we can’t judge our returns without understanding the risk we have taken. Unfortunately, most people don’t have the slightest understanding of risk.

To Test Yourself, Flip a Coin

Here’s my test to start thinking about risk. Imagine all of your money stacked in bills on the desk in front of you. Now you are now looking at the largest stack of bills you have ever seen. We will play a game to determine how your money does over the next 12 months. Your job is to choose between picking up one of two coins: a nickel and a quarter. 

If you choose the nickel, go ahead and flip it in the air. If it lands on heads you will be up 5%. However you will be down 5% if it lands on tails. 

The stakes change if you choose the quarter. If it lands on heads, you will be up an impressive 25%. And tails? Well, you’ll be down 25%. 

With all of your money on the line, which coin do you pick up? And more importantly, what does this tell us?

Read the rest here. 

Cash out of the market now?

Timing the market seems like a good idea but is difficult to execute. I have a close friend who was one of the few people in my network to successfully predict 2008–2009.

However, even during March 2009, the lows for markets at 7.300, he wanted to wait until `further falls`.

Then markets hit 10,000 in 2010. He thought it was a dead cat bounce.

By 2013 or so, he was even more worried. Markets were at 14,000. Record highs! Higher than during 2007–2008.

Surely this was a bubble! Then 16,000, then 18,000. But now Trump was running for election.

Then Trump won!

Surely, now markets would fall incredibly? Then markets hit new highs.

When markets fell 20% or so in December, he finally bought in, but suddenly the reality downed on him.

He got in at 21,000–22,000, a discount of 20%+ compared to where prices were a few months previously, and yes he has made 20%+ in the space of 6 months or so.

Yet he realized something. `I should just have invested from day 1`. He missed out on all those gains, and dividends.

People forget that point as well. Even stagnant markets, give dividends.

Many Seniors Fail This Retirement Income Quiz — Would You?

Senior women are planning their retirement better - Alainnah Robertson

Basic finance is a tough topic that many people fail to learn.  I had a recent conversation with an entrepreneur who sold his trucking company last year for over $20 million.  Despite having spent decades negotiating contracts and also selling his company to a publically traded company, he did not know how to manage his new found wealth.  When he was running his trucking business, it was all about re-investing his money to his business, which was a ravenous fire for cash.

Every day, I meet with entrepreneurs who were terrific at inventory and counting their costs and cash flow needs for the business, but do not have apply this thinking to retirement.

Another former business owner, Alainnah Robertson, says that she ran a business yet did not have the first idea about retirement and managing wealth.  Since she has learnt the concept of not touching her capital, and living off the interest and dividends, her views of retirement have changed to the positive.

Here is a fun quiz to check up on your financial literacy and how to retire at the top of the class!

Link - click here


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What job do you want your money to do?

Business Transition Forum and speaker, Jacoline Loewen

When an owner of a business sells, it is a challenging time as they go from being the smartest guy in the room in their business, to being a money manager.

These owners find it tough to trust a wealth management expert, even if they are asking the most important question:

What job you want your money to do?

To have that fancy car, that new home with the best furniture, that golf club membership, that cottage in Muskoka,, that home in Costa Rica?
Or is to educate your kids, support a charity, gift to your alma mater or for scholarships? Or to invest into the VC community?

One question I do not hear being discussed with enthusiasm is how can the wealth take you to retirement and beyond?  The latter question is rarely examined early in the sale of business process. It can be more appealing to have to go to the dentist, it seems.

Sudden wealth does happen for business owners, people inheriting wealth and the notorious lottery winners. There are popular strategies used by those gaining this sudden wealth.

Fire Hose Strategy

One of my top prospects sold his trucking company a few years ago and has been all over the place with managing his cash outflows. Probably managing his wife and grown up offspring was the hardest. as they were spending money using the fire hose strategy. He just called me all excited because he had just figured out that he only needs dividend strategy.

"So I don't touch the capital, live off the dividend and if you get 5% interest, you are fine.  The market is going up 90% of the time, and I get a check every month."

I was frustrated that my conversations with him had not unearthed that central and very core point about managing wealth.  Needless to say, he has not become my client.

We are actually doing a highly complex business of wealth management and along the way, this entrepreneur had got the message from his own networking because that is what he trusts.

Pin the Tail on the Donkey Strategy 

What seems blindingly obvious to you, often is not the full answer or even close to the possibilities. If you are relying on your golf buddies or YPO Forum to figure out your wealth management, you will not be getting a full picture of what your could really achieve for you. Your strategy is to go forward blindly and put the tail where you hear your friends telling you to press that pin.  When you take off the blindfold, you discover your buddies did not do a good job of guiding your guesses and also, they don't need to care.  You need to care.

What job do you want your money to do?   What is your money for? It can be difficult to get going and it is helpful to think about these questions to prod, push and poke your thoughts. there is no correct answer.

1. What gets you out of bed in the morning,  What would get you out of bed?
2. Do you think globally or locally?
3. Are you concerned with making a difference? Where? With your family?  Or with the community or with a large internet audience?
4. Are you impulsive or considered?
5. How much control do you have over your time?
6. How much money do you need monthly?

Use my coupon to get a discount to the Business Transition Forum. 20% discount  you can share with your network using the code jloewen20

   

The Business Transitions Forum<https://businesstransitionsforum.com/> (BTF) is a multi-city conference for business owners seeking expert insights for how to approach the most monumental decision in their company’s journey. Whether their objective is to grow, sell or buy, BTF will give them the tools to enhance the value of their business. Our 2019 Spring line-up includes BTF Atlantic (April 2-3), BTF Edmonton (April 15-16) and BTF Toronto (May 28-29).

   

The #1 threat to a client by their financial adviser

In managing a client's wealth, the threat of a client outliving their wealth is a far more serious failure than failing to grow the client's wealth at a maximum pace.

However, clients bring their many personal biases to the portfolio asset allocation recommended by the investment adviser. In fact, there are approximately 20 types of biases and even the genders tend to favour the same sets of biases. Each of these biases can seriously compromise a portfolio.

Going back to the question, what is the number one threat to a client by their advisor? The answer is if you are likely to run out of cash and have a hit on your life style.

For your Client Adviser, their challenge is to understand the client's biases and to be able to make sure they are not compromising the performancae of the portfolio.  For example, men tend to be over confident and load up on a stock that is sure to hit it out of the ball park - such as a crypto-currency or marijuana company. An excellent Client Adviser is paid to help you understand your biases and how your behavioural biases impact on the pace of growth of your wealth.  Your biases, if unchecked, could also seriously compromise your retirement money.

 It is how the allocation across your portfolio impacts the day-to-day living if there is a market crash.  Since the market volatility is increasing, this is an important question for anyone working with a Client Adviser to manage their wealth.

Do you really know and understand your own biases?

Your Client Advisor knows the 20 biases and have seen them in many combinations over the years of their career. This natural human behaviour - to follow your own bias - is exactly why you pay your Client Adviser. They are there to save you from your own human imperfections.

If an asset allocation performs poorly due to a client's bias, what will be the impact on their lifestyle? For the investors with $2M and under, the consequences could be dire.  For those with higher levels of wealth, the bias will not have the same consequences.

Every client brings their set of behavioral biases to the investment relationship with their Client Adviser (CA). Pompian and Longo recommend to CAs that they first determine how much they need to adapt to client bias which can be" irrational". As a suggestion, they advise weighing the rewards of sustaining a calculated, profit-maximizing allocation of assets against the possibility of upsetting the client if they try to educate the client about their biases and end up upsetting them instead. If the client is very wealthy, and insists on irrational decision making, there is far less risk for serious damage to lifestyle and retirement plans.

Clients are human and have their natural biases and may be wanting a completely different portfolio. When does the CA try to educate and to modify the client bias and when to let it go?

The key is to look at the worst case scenarios of the investments. If the worst markets happened, would the client run out of money? Would they outlive their cash supply?

If the answer is yes, the client would suffer, then the CA needs to do their job which is to protect the client from their behavioral biases. The CA needs to moderate the client's views on the asset allocation. It takes courage, but the CA needs to step up and explain the potential outcome to the client. Equally, a client needs to realize they are not seeing the whole picture and their Client Adviser may be making sense. Then, together, they can moderate their expectations for the portfolio.

If the client has substantial wealth and their day-to-day living would not be impacted by a market crash, then their biases could be accommodated. Overcoming sub-optimal impact of behavioral bias on portfolio returns becomes a lessor consideration. Adapting to, rather than moderating, the client's behavioural bias is then possible.

Why the wealthy are not satisfied with their money

Jacoline Loewen

A business owner and her husband recently sold her family business for $50 million. When we met a few months after the sale, we talked about how her life was unfolding. Keep in mind that she and her husband had worked together for thirty years in their business.  Their favourite saying was, "When the client says JUMP, we say, how high?" You can gather that this couple were A type personalities and the level of adrenaline they created in their business had been enjoyable to them as a couple.  Now that pressure was completely removed. They could also now afford anything they wanted. All those trips they had postponed to keep their business humming were now available and they had the time.

The family went on a high-end cruise which sounds wonderful, but there was not a business for them with its pressures and its processes and people to great them after a relaxation period.  They had not replaced their busy and high pressured lives yet. Hopefully, they will find a new journey to challenge them.

This dissatisfaction with the new wealth and the freedom it brings can also amplify boredom and lack of purpose in people's lives. It is common with people who make sudden wealth. Money magnifies who they are.  If they were workoholics, it will be a while to find new ventures and challenges.

At a certain point, another million dollars doesn’t make anything newly affordable. That’s when other motivations take over.

This article in The Atlantic sums up this man's issue perfectly.

Excerpt:

As the number of millionaires and billionaires in the world climbs ever higher, there are a growing number of people who possess more money than they could ever reasonably spend on even the lushest goods.

But at a certain level of wealth, the next million isn’t going to suddenly revolutionize their lifestyle. What drives people, once they’ve reached that point, to keep pursuing more?

There are some good explanations, I found, after talking to a few people who’ve spent significant amounts of time in the presence of and/or researching the really, really rich. Michael Norton, a Harvard Business School professor who has studied the connections between happiness and wealth, had a particularly elegant model for understanding this pattern of behavior.


This article in The Atlantic

These 29 Retirement Tips May Surprise You

Tip #12: Beware of Annuities

My clients do not to have annuities in their portfolios, and with good reason. These complicated, lengthy contracts favour the companies that write them, not you. Annuity sales people get high commissions that come straight off the top of your investment savings. You can manage your retirement-income security needs in ways that'll cost you less. Said simply, if someone's going to guarantee you an income in an uncertain world, they're going to charge you enough to ensure the odds are in their favor - not yours.

Jacoline Loewen and Team

Annuities are for those who do not have a clue about how to manage their wealth and do not have a client advisor to assist them.  

If you would like a copy of the 29 Retirement Tips book, send me an email and I will forward you a copy.

 

Gain unique insight on a range of retirement topics, from investing and financial planning to travel and lifestyle, based on decades of experience working with successful retirees. This entertaining 31-page guide is chock-full of information to help you get the most out of your retirement, including:

•Tips to help you maximize your nest egg and avoid running out of money in retirement

•Ideas for making the most of time with your family and friends

•Methods to generate income in retirement

•Activities to keep your mind sharp and your body active

•Estate-planning steps so you can relax and enjoy life

Created for investors with $2,000,000+ in investible assets 29 Retirement Tips from Jacoline Loewen are for retirees and those planning for retirement. In addition to the tip above, other tips include:

•Tip #11: Living abroad can be great

•Tip #16: How to discuss your asset allocation and plans with your family

•Tip #20: Consider new fields other than the career you retired from

•Tip #24: Be diversified, but not too diversified

 

How many of these tips do you already know? Don’t miss this informative and frequently requested guide!

Jacoline Loewen Can Help You Plan for a Successful Retirement

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Loyd Chalmers Prize for Excellence in Journalism 2018



Megan Honan and Jacoline Loewen, Loyd Chalmers Prize for Business Journalism

I was delighted to award the Loyd Chalmers Prize for Excellence in Business Journalism 2018 at Ryerson to Megan Honan, a recent graduate. Megan Honan chose the flower industry of Ontario and how it has developed into a leader in the world. The article, “Growing an industry, one seed at a time.”

The Ticker Club dedicates The Goldring and Chalmers annual award to the memory of one of its founding members in 1929, Floyd Chalmers, former publisher and editor-in-chief of the Financial Post. The prize is available to students in clear academic standing who are enrolled in the bachelor of journalism program in the School of Journalism.

This award celebrates the life and career of Floyd Chalmers and is presented by the Ticker Club. Chalmers became a reporter at the Toronto News when he was only 17. By the time he was 27, he was editor-in-chief of the Financial Post. He became president of Maclean Hunter, which published the Post and Maclean’s,  in 1952, and chairman in 1969. He and his wife Jean helped set up the Canadian Opera Company and the Stratford Festival, commissioned Harry Somers’ opera Louis Riel and set up the Floyd S. Chalmers Foundation in support of the arts.

@jacolineloewen

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How to put purpose in your portfolio with Michael Baldinger

Michael Baldinger, Sustainable Investing with Jacoline Loewen

We were fortunate enough to have Michael Baldinger, expert on Sustainable and Impact Investing, visit Toronto and speak in front of a wide variation of interest groups - ranging from MaRS Capital, the family offices and pension funds wanting to make an impact, ultra-high net worth investors during a private dinner, and finally, The Ticker Club whose members are the leaders of asset management in Canada.

"How to put purpose in your portfolio" was the theme Michael Baldinger tackled at MaRS, The Social Finance Forum, Canada’s leading event for people who believe profits should be paired with purpose.

Every day, billions of dollars are invested with the sole intention of making more dollars, while life-changing social programs and vital environmental initiatives struggle for funding. Impact investing is the fast-growing movement that’s closing that gap by promoting profitable investments in programs and ventures that power progress.

Now in its 11th year, the Social Finance Forum, organized and convened by the MaRS Centre for Impact Investing, attracted more than 600 investors, entrepreneurs, finance professionals, charity leaders and public service visionaries who are reshaping markets and ensuring that every dollar makes a difference.

Later, at a private dinner at The National Club, Michael addressed 40 investors. He made the case that by using new eyes, we can invest to make the world a better place. But what is sustainable? This word lacks a common definition which can make it less attractive for investors who think their charity should be donating to anything sustainable, not as a serious investment case.

Talking about the confusion around the word sustainable, Michael chose to not use green on the cover photos of the sustainable investing white papers.

" It is not just about 50 Shades of Green," quips Michael. "It is about going beyond the public numbers to non-material data. that shows which companies are operating with the best interests of society, but also making the returns our investors seek."

At the Ticker Club, Michael spoke about how to invest, but with the sustainable filter.

Michael Baldinger is a former Wall Street trader intent on making UBS' $800 billion in asset management money greener and more socially responsible.

Since 2016, Michael Baldinger has served as Global Head of Sustainable and Impact Investing at UBS Asset Management (UBS). There, Michael leads a team of investment professionals focused on research and stewardship, client solutions and business strategy. And he is responsible for establishing world-class social and environmental impact investing across asset classes.
With 30 years in the financial services industry and a decade as an investor in sustainability, Michael brings a wealth of experience to all projects. Before joining UBS, Michael served as Chairman and CEO of RobecoSAM’s executive committee.