Month: September 2021

A 100% Chance of Weather
photo shows a misty landscape, partly in light rain, partly in blue sky

Understanding the risks involved is an important part of decision-making. Most would agree, I think, because how can we make informed decisions without weighing the consequences?

What makes it tough, however, is that a lot of financial planning literature uses the word “risk” when they’re actually talking about volatility. It’s about as helpful as the local news personality letting us know that weather is ahead: “There’s a risk of weather today! Heads up, everyone.”

How would that possibly help us make informed decisions?

Instead of railing against the presence of weather—or gravity, or any other to-be-expected force!—we like to spend our energy paying attention to risks that can actually affect our long-term goals.

Recall that in our shop, risk assessment takes place with a long time horizon in mind. We believe that you should have the money you’ll require for the next 3–5 years invested outside of the market. (Short-term volatility is a risk during the short term.) If you’re parking your money with us for a longer time horizon (3+ years), here are some risks you can expect we will factor into our strategy:

  • Concentration risk. Too many eggs in one basket could spell trouble if the basket upsets.
  • Inflation risk. Over time, what’s the likelihood this investment can outpace inflation? Put another way, what’s the risk of losing purchasing power over time?
  • Investment risk. What’s the likelihood that this investment will substantially change for the worse as time goes on or that the players could go out of business?

How much risk a portfolio might endure depends on a number of factors—your investing time horizon being just about the biggest one. There are other types of course, but these are some of the main examples of the risks we’re attuned to.

Volatility isn’t one of them. We don’t “mitigate” weather by hiding in a burrow forever; we don’t react to short-term swings by pulling out. As if we could spell it out any plainer, here’s our periodic reminder: we live with volatility in the pursuit of long-term gains.

Clients, when you want to talk risks, time horizons, and goals, email or call.

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A 100% Chance of Weather – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.

Flashy Clues and Second Opinions
photo shows one hand with white skin pointing to a piece of paper that another hand with white skin is signing with a pen

If you’ll forgive my language, I believe the way to “revolutionize” the financial services industry is quite simple: you just cut the crap.

The pushy peddlers of old aren’t entirely gone, and it reminds me to come back to the basics. Clients first. If you’re better off, I’m better off. Grow the buckets.

I recently met a person, well into the retirement years, who escaped some real damage by listening to their guts on a financial proposition. The peddler who almost got to them reminded me of the antics of a character I met as a young man starting out in the life insurance business, long ago.

This classic peddler fit every stereotype of the master salesman of the last century. Big pinkie ring, Cadillac, flashy suits. His motto? “Dazzle them with diamonds, baffle them with bull….”

It didn’t matter if you needed what he was selling or not. The question was, could he make a buck by tricking you into buying it?

The sales abuses are just as real today. Can you imagine tying up money for 10 years when you are retired, facing a huge penalty if you do want your money out, and getting mediocre returns just so a peddler can get a big insurance commission? It happens.

The bad news is, the obvious signs like pinkie rings and flashy suits are gone, replaced by a sea of nice websites with family pictures and flowery talk about your best interests and the peddler’s degrees and designations. The good news: you can always get a second opinion.

I’m in business to talk all day. If someone you know needs a second opinion, I’d love to talk to them. Here to help as I can.

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Flashy Clues and Second Opinions – 228Main.com Presents: The Best of Leibman Financial Services

This text can be found at https://www.228Main.com/.

Resilient Parents, Resilient Wallets?
photo shows two silhouetted individuals

You’ve heard us talk before about the long run. We are all about the long run at 228 Main! Goals with their longest reasonable time horizon benefit from the space to flourish, in our opinion.

The way we and our families weather challenges might say something about our resilience—the capacity for “getting back up again.”

In fact, some research suggests that approaches to parenting may be related to future financial benefits for families and communities. It seems life costs more later for children who don’t have a chance to learn resilience.

How can parents help? The research suggests that the factors that matter most are how parents respond to their children and how parents set expectations and make demands. Together, these two forces help people learn and grow in a safe way.

Consider relationships you’ve witnessed in your life. Maybe you’ve met folks who “had every advantage” but were never challenged as children, or maybe people who had demands put on them as children but didn’t receive the feedback to feel safe enough to stretch themselves.

It turns out “sensitivity”—that is, responsiveness—in relationships can contribute to a person’s sense of stability. No matter one’s financial standing, a sense of stability can have impacts on our financial success: we may make very different decisions when we feel less confident about the future.

We don’t choose our first families, but I have a feeling we can help each other develop resilience at any point. Clear feedback and meaningful expectations? They may be tools to stronger relationships—and more resilient wallets.

Clients, we’re here for the long haul. Thank you for joining us.

Call or write, any time.

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Resilient Parents, Resilient Wallets? – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.

The Journey [video]

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TRANSCRIPT:

[MARK] They say the journey of a thousand miles begins with a single step. Really, the whole journey, every inch of it, happens one step at a time. Everything you can think of is made of tiny things, tiny actions, single steps. The secret to accomplishing anything is basically to put one foot in front of the other.

The training of an Olympic swimmer happens one stroke at a time. Our quaint quarters at 228 Main were built one brick at a time. Books get written one word at a time. The 25 year history of LFS happened one day at a time. A $1 million 401(k) account gets built one fraction of a paycheck at a time. Healthy eating habits are formed one bite at a time. Relationships blossom one conversation at a time. A portfolio gets put together one opportunity at a time.

Humble, common actions within the reach of anyone are what great stuff is made of. You do this simple thing. Then you do it again. Then you do it again.

The secret to accomplishing anything great is to put one foot in front of the other, while you are aimed in the general direction of something worthwhile.

The Funny Business of Fear-Based Peddlers
photo shows the dictionary entry for "fear"

Electricians deal with electricity. Plumbers work with pipes. The work of grocers is all about… yes, groceries.

One might think that investment advisors, therefore, advise about investments.

It is a funny business. The work of some investment advisors has virtually nothing to do with investments. They traffic in fear, not investments. Our clients know that investments and markets go up and down. It is an integral, inescapable part of striving to achieve investment returns: we learn to live with volatility. Some fear-based advisors portray normal market volatility as some kind of horrible risk that nobody should face.

The “solutions” they offer to cure the fears they hype often include “guaranteed” products whose returns will inevitably reflect the current relatively-low interest rates available. We recently saw a proposal of this type, offering a product with a surrender charge of up to 14% that lasted ten years. It was a bold suggestion for a 75-year-old, a ten-year surrender charge.

The proposal came from a supposed investment advisor. In cases like this, we’ve discovered from you that this sort of professional cannot answer your questions about the stock market, nor comment in detail about ownership in any particular company, nor communicate the long-term potential of long-term investments… because they do not actually do much work with investments.

They provoke fear of investing in order to sell high-commission, high-expense products. This is a sales tactic. It is not investment advice.

So what to do? When you come across an offer that’s attempting to scare you, we suggest you hold onto your money and get a second opinion before you proceed. Yes, the world has risks. We are all about sorting out the ones that we can reasonably live with.

But the risk of getting locked into a poor deal from a fear-based peddler? That’s one to be wary of, no matter what they call themselves.

Clients, if you would like to talk about this or anything else, please email us or call.

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The Funny Business of Fear-Based Peddlers – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.

That Unimaginable Future
photo shows silver pins interconnected in a network of black string on a white board

As humans, we sometimes have trouble visualizing that which is not yet in existence. Back at the dawn of personal computing, when some were predicting that most homes would eventually have a computer in them, a common question was, “Why would they?”

People just struggled to imagine all the uses that would emerge.

Later, after the wonders of cable television spread across the land, talk of a new kind of communication technology arose—sort of a two-way or interactive television. These earliest visions of the internet were also met with dismissal, as people wondered what good that would be.

The lesson in this history? It may be that we are only ever scratching the surface of the potential capabilities of emerging technologies. There are many things on the horizon: ubiquitous internet access across the globe from low Earth orbit satellites, 5G and 6G and ever-faster connectivity, cloud storage of software and data at ever-decreasing prices, the “internet of things,” virtual reality and augmented reality, electronics in more and more devices… and much more.

The possibilities thrill us.

In our research, we assume that it’s beyond our capacity to foresee all the applications on the way, but we also believe that perhaps their ramifications can be guessed at. For instance…

  • More semiconductors will be needed for more devices.
  • Screens will show up in many new places on many new things, we can reasonably suppose.
  • We can readily imagine that mobile devices will handle increasing amounts of data and apps.
  • Information storage and traffic on mobile could expand exponentially.

So instead of pretending we can predict that unimaginable future, we strive to understand the structure of related industries and how these relationships might develop. Then we determine which established companies may benefit, and we’ll try to identify emerging companies with key technologies.

Then, we sort this out into what is investable, and we manage portfolios in keeping with this background. We don’t predict the future; we imagine some probable possibilities.

Clients, if you have some insight that might help us, or want to talk about this, please email us or call.

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That Unimaginable Future – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.

Duck Season! Rabbit Season! Earnings Season!
photo shows a few ducks flying through a gray sky, tall grasses in the foreground

Maybe you’ve seen the classic cartoon that goes like this: Bugs Bunny and Daffy Duck, chased by the hunter Emler Fudd, start arguing over which animal Elmer is supposed to be hunting.

“Duck season!” Bugs yells.

“Rabbit season!” Daffy insists. And they continue back and forth until Bugs cleverly switches his response to “Rabbit season!” At this point Daffy Duck counters with the only logical response… “Duck season!”

And Elmer promptly shoots his foolish prey.

There is another, equally confounding (and sometimes comical season) you may have heard about: “Earnings season!”

Every company that issues publicly-traded stock is required by law to report about its financial wellbeing to investors and regulators, once every quarter. While every company has its own fiscal calendar and different companies report at different times, most companies stick to straightforward calendar quarters so major earnings reports tend to bunch together every three months.

In theory, the effects of this should be simple for investors: a company that posts a good performance should logically see stock gains, and a company that posts a poor performance should see stock losses.

But investors tend to view earnings reports through the lens of their expectations. A company that does well might be seen as a disappointment by investors who expected even better from it. And even when a company beats consensus expectations, some investors may second-guess the consensus and bet on an even bigger blowout.

All of this is to say that earnings season can be a very volatile time. Stock prices often swing wildly up and down in response to earnings reports, often in ways that are confusing or counterintuitive. If you listen to market commentary you may hear many different (often contradictory) explanations for why a company dropped on seemingly good earnings or rose on seemingly bad earnings.

It is a confusing experience, and trying to make sense of stock moves during earnings season might make you sympathize with Elmer Fudd.

While it can be alarming to witness stocks jump like this in the middle of earnings season, over the long run, much of that volatility will be forgotten. Ten years from now, do you think you will remember what one of your stock holdings did in response to one earnings report many years ago? The big investment news stories worth remembering will be about bigger news than a quarterly earnings report.

We already know stock investing involves volatility—and some of it comes around like clockwork every three months. Clients, if you are ever wondering about sudden market moves, give us a call before anybody goes daffy.

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Duck Season! Rabbit Season! Earnings Season! – 228Main.com Presents: The Best of Leibman Financial Services

This text can be found at https://www.228Main.com/.

Resolution, Two Ways
photo shows a camera in the background out of focus and a lens in the foreground in focus

Clients, among you there are amateur (and even some pro!) photogs. If you have worked with cameras or graphics, you are familiar with the term “resolution.” It refers to the clarity of an image, one of the classic definitions of the word.

Another has to do with a sense of purpose. In our financial plans and planning, we are thinking about the person we want to be and the life we want to lead in the future. We have to consider where to wake up every day, what to do, how to spend our days… These issues are integral to setting our goals. When we know what we want to do or who we want to be, we may resolve to get there.

Or, another way… We may become resolute.

Taken together, both these definitions of “resolution” become powerful characteristics in the planning process. We seek clarity for our vision of the future, to get a high-resolution image in mind. Then we resolve to shape our actions toward our goal; in other words, we make a resolution.

Of course, nothing as momentous as our life plans could be that simple. Never having been to the future, our vision of it will likely need adjusting along the way. And success is less a matter of grit and grim resolution than figuring out the systems that will get us where we want to go, in the most effective, least obnoxious manner.

Rather than clarity about a singular goal, we may work toward building options. Perhaps we cannot yet know whether we will prefer to retire in-place or as a snowbird—or to move to the mountains or the sea. We might end up preferring becoming a picture of leisure or maybe endeavoring in a pleasant encore career in an area of interest. The key to holding options is having the resources that can fund different paths.

No matter the picture you envision, with some clarity and resolve, we believe lots of possibilities might take shape before our eyes.

Clients, if you would like to gain greater resolution about your goals, or develop the resolution to make more options available, email us or call.

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Play the audio version of this text below:

Resolution, Two Ways – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.