When your investment firm or brokerage answers to Wall Street, whose interests do they have in mind when they place you into an investment?

Most of the big retail investment banks and brokerages are publicly-traded. This means that they have stockholders and a board members to answer to. This means that the company looking after your assets answers to Wall Street. What does Wall Street expect from publicly traded companies? The answer is PROFITS! Don’t get me wrong, there is nothing wrong with profit. However, when a firm’s stock is not meeting expectations and they need to generate profits, where do you think that money comes from? If you guessed FEES, sales charges and commissions, you are correct!

Can you say ‘Conflict of Interest’?
Large banks were forced to buy (or bailout) large investment firms by the Federal Government in 2008 without looking at their balance sheets. It’s like purchasing a fully furnished home in New Orleans sight-unseen on Craigslist for $500,000. Good idea? I think not. The Fed promised to cover any losses with your tax money. The Fed gets a little help from the firm’s account holders as they charge fees, trade excessively inside accounts, and receive commissions from mutual fund companies. (more…)

Do you remember your last vacation? Recall the planning and preparation it took to get you there? Kathryn and I just returned from a 6-day vacation to beautiful Manuel Antonio, Costa Rica.

We booked direct flights into San Jose. Then, we booked a one night’s stay at a hotel near the airport because we had to catch an early morning flight to Manuel Antonio. After several weeks of research, we found the perfect place to stay. Our private villa was perched in the trees on a hillside offering 180 degree views of a protected cove overlooking the azure waters of the Pacific Ocean in a small community called Tulemar. Our villa had a full kitchen, maid service, gas grill, shuttle transport and a private beach outfitted with kayaks, boogie boards, comfortable lounge chairs and a friendly wait staff.  One day, as I watched clouds drift by and the golden sun sink into the calm sea, I took a sip of my Pina Colada and reflected on the amount of effort and planning it took to park our butts on this beautiful patch of sand. (more…)

If you missed the Cashion Financial Webcast discussing the ’2 Stages of Financial Life’, there is no need to worry. Below is a link to watch the ’10 Minute Takeaway’. These short Webcasts are designed to teach you something you did not know about personal finance in about 10 Minutes.  In the ’2 Stages of Financial Life’ I discuss accumulation specialists vs income specialist and the difference. I also briefly discuss how you can avoid the next 2008-2009 market downturns in regard to your retirement accounts.  You can also visit my Webcasts page where all webcasts will be archived.

Play Video Below or Click on WMV Link below post. (more…)

There are retirement lessons from 2008 and 2009 that we need to discuss. Millions of retirement accounts and portfolios where decimated or seriously damaged in those years. I’m not going to discuss the mortgage crisis or politics. I’m going to focus on market performance and its relationship to the value of retirement accounts. Then, I’m going to give you some action steps to insulate yourself.

What happened?
The S&P 500 is the industry benchmark for performance for the majority of portfolio managers. In fact, most active large-cap fund managers try to beat the S&P 500. Sadly, over the last 3 years 64% of those managers have underperformed the benchmark.

In 2008, the S&P 500 lost over 13%. This means that if your accounts value was $1,000,000 at the beginning of 2008, it was worth $870,000 by the end of the year.

In 2009, the S&P 500 lost approximately 26%. This means that your $870,000 account would now be worth a whopping $640,380 at the close of 2009.

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401k plan Fees and Disclosures:
In May of 2012 there will be major regulatory changes occurring to employer sponsored retirement 401K-type plans. I’ve chosen two changes that will affect clients the most and I will cover them on a high level so, that you can act accordingly. I’m not going into great detail. However, I will provide you with resources to get more information.

For over a decade there has been a growing movement for more transparency on the part of the 401k industry particularly in regard to fees and expenses. While plans disclose some fees and sales charges, etc., other fees exist in a murky world of non-disclosure.

How much does it cost to own your retirement portfolio?
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Loss Aversion has a Hidden Cost

“In human decision-making, losses loom larger than gains.”
- Kahneman & Tversky (Prospect Theory)

In economics and decision theory, loss aversion refers to people’s tendency to strongly prefer avoiding losses to acquiring gains. Some studies suggest that losses are twice as powerful, psychologically, as gains. (Wikipedia).

Simply put, losses have the same psychological effect as pain and have twice the impact of gain (pleasure). Our brains are wired to avoid pain. This affects the decision making process without our being conscious of it. The ramifications can be devastating. It leads to risky behavior.

The loss averse person attempts to avoid loss at all costs. But what are those costs? (more…)

We have been brainwashed in regard to retirement, like retirement is some magical phenomena that happens when we reach our mid-60s. We deserve it, right?  Retirement is less about age and more about income.

Let’s think about it. If your living expenses are $42,000 per year and you want to retire at age 65, you’ll need $756,000 to support you to age 83. This does not take into consideration inflation, taxes, etc. The Consumer Price Index (CPI) as of July 2011 was 3.6%. This means that you’ll need a lot more than $42,000 in annual income. Every year we lose purchasing power.

What if you live to 85 or 90 years old? What if you need long term health care? What if you want to help fund education for your grand-children or plan travel during retirement?

If living expenses are $42,000 per year, your retirement accounts need to be kicking out more than $60,000 per year a decade from now.  Plus, you want to ensure that you don’t outlive your income. (more…)

I keep a fire extinguisher under the sink in my kitchen. My vehicles have airbags. I go to doctor for a physical exam every year. After all, what I don’t know CAN hurt me. The unexpected happens several times a day to each of us. Sometimes its ‘Unexpected’ with a big ‘U’ and other time its the ‘unexpected’ with a little ‘u’. Most times the unexpected is something small, like a traffic jam on the way to work or a call from my wife to pick up an item from the store. Less frequently, the Unexpected is something huge and life changing, like getting into a major car crash or finding out that your wife is pregnant.

What does this have to do with your finances? I’ll answer a question with a question. Why do I keep a fire extinguisher in the kitchen? Why do my cars have airbags? Why do I get a physical every year? The answer is PREVENTION! The same principles apply to our finances. (more…)