Why is money important to you? What is it for?

My wife, Michelle, and I had a great little weekend getaway this past weekend. I can’t tell you how many years it’s been since we took a weekend just for ourselves. Last thing I can think of was seven years ago for Michelle’s 30th birthday.

It came about because my wife planned a weekend for us at The American Club in Kohler, WI as a Christmas gift, which is not something I’d normally do. It was incredible. We ate and drank well, enjoyed the spa and the beautiful grounds and generally had a very relaxing, luxurious time together.

Most importantly, the trip gave us the opportunity to talk about our lives, our past, our future, and generally strengthen our connection (thank you, Mom, for coming from Indianapolis to watch our three kids and dog this weekend). Continue reading “Why is money important to you? What is it for?”

Brief Public Service Announcement: Common Misconception of Diversification

Executive Summary

Diversification has very little to do with how many stocks, mutual funds and ETFs are in your portfolio. Rather, diversification is about the correlations between assets in your portfolio.

​Common Misconception

I’ve had prospects come in to our intro meeting with statements in hand. Those statements show a plethora of various funds, individual stocks and/or individual bonds…usually with relatively small dollar amounts allocated to each.

Because there are so many securities listed on the statement the potential client thinks the investment strategy provided by their current advisor (or that they’ve built themselves) is complex, sophisticated and diversified.

Most often, the strategy is not sophisticated or diversified but just unnecessarily complex, redundant, expensive and directionless. Continue reading “Brief Public Service Announcement: Common Misconception of Diversification”

How Your Financial Plan Drives Investment Strategy

In my recent commentary, I showed that if an investor couldn’t handle a 12% drawdown in stocks then they really have no business investing heavily in stocks at all since 12% is quite unremarkable and common for stocks. That was essentially scratching the surface of what I mean by emotional capacity for risk.

I also mentioned that we don’t often know our true risk tolerance until it is tested, which is why I also make sure to identify clients’ financial capacity for risk using stress tests within their financial projections.

So, I wanted to briefly provide a real-world example of this exercise. Continue reading “How Your Financial Plan Drives Investment Strategy”

This Quality Drives My Wife Nuts

I admit it. I’m not perfect. It’s possible I possess a quality or two that occasionally drive my wife crazy (not in a good way). I’m really curious to hear her response upon reading this, btw.

One of those qualities is that I’m annoyingly, obsessively rational. Sometimes this may make me come off as “cold” or blunt, which isn’t always ideal, but it does make me extremely well-suited to manage money.

The reason this quality is an advantage in investing is because markets are not always rational precisely because market participants aren’t always rational. In fact, people become quite emotional when it comes to their money…understandably so. But that means people who can leave emotions out of it and remain objective have an advantage over time. Continue reading “This Quality Drives My Wife Nuts”

Unstoppable Tesla

As just one illustration of what’s taking place in this market, Tesla stock gained over $115 billion today (yes, billion with a “B”) on the news that Hertz has placed an order for 100,000 vehicles over the next 14 months totaling about $4 billion in revenue. That’s almost 30x the one-time sale! Not earnings but SALES!

Put another way, Tesla added two entire Ford Motor Company’s in a single day (based on $60+ billion market cap)! Ford sells over 4 million vehicles worldwide each year and, yet, Tesla stock increased by two Ford Motor Company’s (equivalent to 8 million cars annually) in a single day on the news of a 100,000 one-time fleet sale over 14 months.

Christopher Bloomstran points out, “As of today, $TSLA is valued above the entire global auto industry, PLUS Uber, Lyft, Progressive, GEICO (if public), Allstate, Duke Energy & Dominion Energy.”

To put that in perspective, understand that there are about 74 – 78 million cars sold globally and Tesla sells about 1 million of those yet Tesla is valued more than the rest of the entire global auto industry combined. Continue reading “Unstoppable Tesla”