1) The expenses of the mutual funds I’m recommending to you are really, really high. What they tell you is “You don’t have to pay me. Let the industry pay me,” which is to say, he gets a commission for selling you a mutual fund. That works fine in real estate so why not for your investments? Well, here’s why not: The mutual fund recuperates the commission they pay the broker by charging you a fee. Some charge fees up front (front load), some when you sell the fund (back load), and many charge a fee every year. But all your broker will point out is that you aren’t paying him anything.

2) Your portfolio has more risk in it than you think. Many broker clients assume their broker is creating a portfolio that fits with their individual risk tolerance, and maximizes expected return based on that risk level. But that isn’t typically the case. A stock broker’s principle business is selling you products and collecting commissions. Furthermore, the broker’s duty is to his employer, not you. Because commissioned products charge high fees, they need to take more risk to compensate for those higher fees to net you the same return you would have in a fund with lower fees.

3) I didn’t pick your stocks… someone else did. Typically, a broker buys stocks, bonds and funds from a list provided to all brokers at the company. Those are often the products that company management stands to make the most profit by selling, and they change from week to week or from day to day. So what you end up with is a hodge-podge of items that don’t follow a logical investment plan.

4) I get a trip to Tahiti because of all the stuff I sold you! The industry is coming down harder on this one than just a few years ago. But the reality remains that brokers compete with each other and are given sales rewards, perks and benefits from management upstairs.

5) Your 22% return was 6% below market. Now maybe you think a 22% return is fine, and anyone who is unhappy at not getting 28% is just being greedy. Well, maybe so if you could get that 22% return every year. But you can’t. You will also have 5% return years, and flat years, and years with small and large losses. Your investment goal should be to capture a high average annual return over many years. That’s why it’s vital that you capture all of the returns in the good years, to offset mediocre and down years.

6) The interests of my employer come first. Brokers do not have to act as fiduciaries, which means they don’t have to put your best interests ahead of their own. They only need to sell you investments that are “suitable.” That says nothing about costs. They take your life savings and invest it according to someone else’s interest? Does that seem crazy? They do, and it is.

7) Your account is not diversified. Your broker will point to the 57 stocks he bought for you, or the 20 different mutual funds and tell you that you’re diversified. From what I’ve seen most brokerage accounts are not well diversified.

That’s because almost all of the stocks your broker will buy for you are U.S large cap stocks. And most of the funds they buy, the ones that pay those commissions, have managers who chase returns by overbuying U.S. large cap stocks. You may have 20 mutual funds, and 15 of them may own Apple. Is that diversification? Of course not. A portfolio filled with different stocks that tend to move together isn’t diversified, no matter how many stocks are in there.

A truly diversified portfolio is built on various asset classes that have as little correlation to each other as possible. That way, when one goes south it doesn’t necessarily mean they all go south. That’s diversification.

The solution is simple. Seek out a competent fee-only financial advisor who has no affiliation with any broker dealer. A financial advisor will charge you a fee based on assets managed, and will then create a portfolio specifically designed to help you reach your lifelong financial objectives. They receive no compensation for selling particular investments, and are therefore unlikely to fill your portfolio with high cost or overly risky products. They also have a legal fiduciary obligation to put your best interest ahead of their own. The Financial Coaching Center, LLC, is proud to be a fee-only registered investment advisor firm.

Much of what you think you know about investing is wrong, but if all you do is read the financial press or watch financial media, you’ll never know it. Learn the truth about investing, and discover the secrets savvy investors already know.

Money will always flow toward opportunity, and there is an abundance of that in America…Commentators often talk of ‘great uncertainty.’ But think back, for example, to December 6, 1941, October 18, 1987, and September 10, 2001. No matter how serene today may be, tomorrow is always uncertain.

Don’t let that reality spook you. Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born. The prophets of doom have overlooked the all-important factor that is certain; human potential is far from exhausted, and the American system for unleashing that potential – a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a civil war – remains alive and effective.

We are not natively smarter than we were when our country was founded nor do we work harder. But look around and you see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932, and 1941, America’s best days lie ahead.

Whatever you do this Labor Day, celebrate the American spirit of working hard for a better tomorrow.

http://www.businessinsider.com/david-swensen-mutual-funds-2011-8#ixzz1V6O4yxZV

Don’t let your friends and loved ones gamble or speculate with their financial futures. Invite them to attend Separating Myths From Truth; The Story Of Investing soon. We offer the program every month as part of our Investor Coaching Series, and it is essential for anyone hoping to begin to achieve peace-of-mind about money. Check under “Events and Classes” for the next scheduled class, and let us know how many will be attending. During these times of market volatility, learning about how markets actually work is more important than ever.

All of you know how adamant we are at The Financial Coaching Center about helping you understand the relationship between risk and reward. Most of you who have been to our classes know how markets actually work, and realize there is no free lunch. Yet you also know people who are hurting because of low interest rates, and who might be tempted by promises of high yields.

As usual, there are plenty of “advisors” anxious to capitalize on the fears of those who need fixed income. Regulators recently issued a warning about three products because of significant “recent high inflows.” Those three products are structured products, junk bonds, and floating-rate bank-loan funds.

“Investors should always look behind an investment’s yield, ensure that they understand how the investment works and carefully consider its fees and risks before investing,” Gerri Walsh, vice president for investor education, said in a statement.

Structured products “can have significant drawbacks such as credit risk, market risk, lack of liquidity and high hidden costs,” the alert said.

Ahh, yes. Lots of risk and high hidden costs, business as usual. Here’s the link if you want all the details:FINRA to investors: Watch out!  

By the way, when did you last attend one of our classes? There is no substitute for education. Trusting an “advisor” to do the right thing, when that person is selling products for a living, is not a great strategy.

Our next class is Thursday. If you’re planning to attend, just let us know. It will be a fun, informative session.

If not, why not?

http://online.wsj.com/article/SB10001424052702304259304576375323652341888.html?mod=WSJ_Opinion_LEADTop

A survey by Sun Life Financial, released Wednesday, found that 92% of workers said they don’t know how much their health care will cost in retirement.

40% said they have “no idea” what their health care costs are likely to be in retirement, and another 51% estimated less than $200,000 would be needed.

While no one knows for sure, a recent study released in March calculates a 65-year-old couple retiring this year will need $230,000 on average to cover medical expenses in retirement. That number does not include dental services or long-term care.

What can you do? Even though it’s difficult to estimate exactly what will be needed, there are things you can do now to prepare.

• Develop a retirement plan.  At The Financial Coaching Center, LLC, we can work with you to help you estimate your retirement costs and how much you should consider saving.
• Buy disability insurance, which will replace a portion of your income if you’re unable to work due to illness or injury, which can keep you from dipping into your retirement fund. 9% of workers have done just that, and most say they’ll never be able to replace the money. Check with your employer first and see if it offers group coverage. If not, give us a call and we can help.
• Get and stay healthy. Do all of those things all of us should do; stop smoking, maintain your ideal weight, and exercise regularly.
• Consider long-term-care insurance. Most people aren’t aware that if they need nursing home care (and about 70% of individuals over age 65 will require some type of long-term care) Medicare won’t pay for it. Costs vary depending upon where you live, but right now the cost of a skilled nursing facility for my 93-year-old mother is $5,500 a month. Those costs are rising at a rate of about 4.5% a year.

As a client of The Financial Coaching Center, LLC, you can do much more than the vast majority of Americans who are doing nothing. We’re ready to help you and your family tackle the issues surrounding retirement. And, as always, the sooner we get started, the better.

http://abcnews.go.com/Nightline/video/gordon-murray-hero-wall-street-12691101

http://www.investmentnews.com/article/20110102/REG/301029980