"We had a bad ten years, so now we're going to have another bad
ten years? I'm overwhelmed by the emptiness of that idea.
The history of the market is precisely the opposite. If you
have a bad ten years, you're likely to have a good ten years."
~Jeremy Siegel
Submit your own questions or comments through the form on the Risk
Profile
page. Include
your email address when submitting.
-
How long does it take for my account to transfer to Schwab?
-
Can I access my accounts on the Internet?
-
I forgot my Schwab Alliance password. How do I reset
it?
-
How does online access to my financial
plan work?
-
What is the average return of the average Bowers Capital
asset management client?
-
My bank said they would manage my
portfolio for less than what you charge. May I assume
that you will compete with their price?
-
The last 15 months
or so you haven't changed a thing in my portfolio. I
have a hard time seeing why I would pay anyone one percent if
my portfolio's composition didn't change at all. Why
didn't you 'do something' with my holdings?
-
The market is down
35% over the last 12 months. Shouldn't I just get on the
sidelines for a while and wait 'to see what happens'?
-
What is your
incentive for my portfolio to do well?
-
Is it a good time to get into the
stock market, or should we wait until it goes lower?
-
I want you to pick for me the very
best of 5-star mutual funds. I want only the
top investment managers. You'll do this, correct?
-
I don't need
a plan. I just want you to manage the assets. Will
you do that?
-
I'm thinking about
investing in solar and wind power. My neighbor's broker
says there's plenty of money to be made in alternative energy
sources. Since I don't retire for another 20 years, I
can afford to gamble with risky stocks with very high
potential growth potential, correct?
-
I don't want any
risk. I've had it with this stock market. I'm
thinking about moving all of my money into bonds and
guaranteed bank CDs. Doesn't that sound like a good idea
considering the recession and all that's going on with the
economy and the world?
-
So when you manage
my portfolio, you're going to just buy a lot of stocks and
bonds, and hope for the best, right?
-
What is the best family of
mutual funds on earth? I want to diversify my portfolio
within that family of funds.
-
Should I invest some money into an
'alternative investment' like a hedge fund? They seem
very popular and I've read numerous articles about how they
compliment a portfolio.
-
Why shouldn't I just put all of my money
into Warren Buffett's company?
1.
How long does it take for my account to transfer to Schwab?
From the day that Schwab receives your transfer form, it
usually takes about 10 business days or less for your assets to
arrive in your Schwab account. We audit the account after
the transfer for completeness.
2.
Can I access my accounts on the Internet?
You will have your own personal Schwab Alliance website encrypted with a user I.D. and password. Your site offers,
among other features:
- Live updates of your accounts;
- balances
- positions
- market value
- gain/loss report
- transaction history, including transfers & payments
- eDocuments:
- monthly statements & trade confirmations are
archived for 10 years on your site, ready for viewing,
printing, and saving to your computer.
- quarterly portfolio profile allocation report
- Quotes & Research
- markets
- industries
- stocks
- mutual funds
- fixed income
- watch list
3.
I forgot my Schwab Alliance password to access my S.A. website.
How do I reset the password?
A Schwab
representative will reset your password over the phone at (800)
515-2157.
4. How does
online access to my financial plan work?
With your User I.D. and password you can access your plan 24/7.
You can run 'what if' scenarios, the Goal Wizard, and tweak your
plan with new assumptions and scenarios at your leisure.
top
5. What is the
average return of the average Bowers Capital client?
We do not publish or quote an average
return of our average client. Even if we did, it would tell
you nothing of value. Since the goals, investment objectives,
and risk profile of a 34-year old surgeon are quite different than
those of a retired couple in their early 60s, quoting even an
approximate average return would be meaningless. When you
focus on short-term performance you almost guarantee
below-average performance in the long haul.
In fact, when performance--even long-term performance--becomes
your focus, you're setting up yourself for failure.
Your financial plan is what results in being able to fund your
goals. The performance of your assets is only one component of
the plan that will help you fund your goals.
top
6. My bank said
they would manage my portfolio for less than what you charge.
May I assume that you will compete with their price?
If great advice were a commodity, that might be a valid comparison.
I'm confident that your bank doesn't offer what I do. Advice varies wildly in quality, as do advisors. Most
advisors will not take the time that I will to understand your needs
and goals.
Importantly, most advisors render advice based
on market and economic predications and try to guess which funds and
stocks
will outperform the other thousands of funds and stocks. Such an approach I
believe is thoroughly discredited. Your fee is the purchase price of a larger net benefit.
The extra few basis points I cost when compared
with your bank must be returned many times over to you in better
long-term returns that progress from my behavioral advice at
dangerous moments. If you believe that great advice is a commodity,
you have no other choice but to go with your bank.
top
7.
The last 15 months or so you haven't changed a thing in my
portfolio. I have a hard time seeing why I would pay anyone one
percent/year if my portfolio's composition didn't change at all.
Why didn't you 'do something' with my holdings?
Over the last 15 months 'doing nothing' was precisely in
your best interests. At critical junctures in the market,
'nothing' is near impossible for most people to do. You need
an outstanding advisor to convince you to do nothing when it really
counts. Inside every tortoise there is a hare wanting to hop
out, and I try to prevent that from happening.
You have a magnificently diversified portfolio, well-suited for
your long-term goals. Sometimes 'doing nothing' is
doing something...the right something.
top
8.
The market is down 35% over the last 12 months. Shouldn't I
just get on the sidelines for a while and wait 'to see what
happens'?
Your feelings are normal but they are
not facts. During the late stages of a
bear market many investors like yourself want to get completely out
of equities and into cash equivalents. It 'feels' safe.
Since my advice is given with your best interests in mind, I say
again:
- Your portfolio is magnificently allocated.
- The U.S. economy is not facing Armageddon.
- This time is never different.
- Do nothing.
It is
important for you to know that this
is precisely what you are paying me to do for you.
top
9.
What is your incentive for my portfolio to do
well?
The
financial incentive is that as the value of your account
rises, so will the fee. When the account value falls--as it
certainly will again in the next bear market--the fee will fall
proportionately, which is my attempt at walking the walk.
10. Is it a good time
to get into the stock market, or should we wait until it goes lower?
The premise of your question is that
it is possible to time the market. The fact that you think
that market timing works, or thus makes sense, is not uncommon so
I'm not surprised.
First, let me set the record straight: It
is not possible to time the market with
any semblance of consistency.
With market timing, you have to guess
right TWICE--the first guess is when to
sell, the second guess is when to buy back in--; and 100% of the
time your emotions won't tell you to buy back in until the market
has already run up higher than where it was when you sold in the
first place. We do this because the top of the market is the
where we feel the safest. The net result is usually similar to
selling out at $50 then buying back in at $70; not a move that
Warren Buffett recommends.
Bear markets, with the help of the media, make
some investors feel like they are trapped in a hole. The media
makes us feel like we should always be 'doing something'
because 'doing something' is
what they sell. But when you're in a hole, 'digging' is not usually the
wisest activity, especially when it's raining!
Market timing efforts are guesses.
Emotional factors cause investors to make precisely the wrong
guesses at precisely the wrong times, just about every time.
Once an investor guesses right, he or she are hooked for life on
guessing, and seem to have great misunderstandings about what really
makes equity prices go up and down. The investor who guesses
wrong--and goes into cash at the bottom and then watches the market
soar high above where he sold at--will wait until everybody he knows
in the world is back into the market before he gets back into the
market. That investor's eventual entry point is usually at the
top--when it 'feels' safe--, right before prices adjust downward
again. Some of the brightest investors I've known make this
big mistake.
Besides, your financial goals are what you should
be focusing upon. Your goals run the plan and the plan runs
the portfolio in an efficient allocation.
Therefore, there is no wrong time to invest in
equities for the long-term investor. Take a look at the chart
below, which shows the percentage of time stocks had positive
returns, 1926-2006.
If one of your financial
goals needs funding over the short-term, you shouldn't be invested in
equities with that piece of money in the first place. Your
long-term investment horizon is the rest of your life. Invest
in equities every time you have the money, and invest even more
money when equity prices are down. It's a great time to pour
money into the market.
top
11. I want you to
pick for me the very best of the 5-star mutual funds. I want only
the top investment managers. You'll do this, correct?
Usually that's impossible to do because many
mutual funds
with the top managers are currently rated 1-stars, 2-stars, 3-stars
or 4-stars.
In fact, a 2007 study of the top quartile large
cap managers for the 10 years ending 2006 revealed:
The prime example is a manager who ran a string
of 15 straight years of beating the S&P 500; something nobody had
ever done before. His next 3 years averaged a loss of 10% per
year in a flat market. Afterward, his fund--the most
consistently successful fund ever--was assigned a 1-star
rating by Morningstar. This manager, the only manager in
history to have achieved that string of market beating performances,
was also fired in 2008 by one of the largest pension plans in the
country.
5-star funds do not necessarily have 5-star
managers, and funds with less than 5-star ratings often have top
notch managers. The stars rating system helps Morningstar a
lot more than investors.
I have a group of what I view as 'top managers'
that I use upon occasions to complete a
specific allocation requirement. In fact, most of the time I'd
prefer an index ETF over most mutual funds when either is
appropriate.
top
12. I don't need a
plan. I just want you to manage the assets. Will you do that?
I begin my answer with a question of my own:
Why would you want anyone to manage your assets without a
financial plan?
People who think they don't need a plan usually
only have misconceptions about plans instead of no need.
You do need a plan, even if your only financial
goal is to carry your current standard of living into the future. Donald Trump
and Bill Gates need plans--and I suspect they have them--, and the farther below Trump you are in net worth,
usually the greater
is the importance to have a plan. You need to plan to not
outlive your money.
I wouldn't know how to efficiently manage your
assets without a properly built asset allocation plan, knowledge of
your financial goals and time horizons for each goal.
Your goals run the plan, and the plan runs your
portfolio. I will prepare your financial plan without managing
your assets, but won't manage your assets without preparing a
financial plan.
13. I'm thinking about
investing in solar and wind power. My neighbor's broker says there's
plenty of money to be made in alternative energy sources. Since I
don't retire for another 20 years, I can afford to gamble with risky
stocks with very high potential growth potential, correct?
(Note: The answer applies to any hot, trendy investment idea.)
Well, you may have a point when you say you 'have
time to gamble' and I suspect there is a ton of money to be made by
somebody in alternative energy sources, although I haven't a clue
which companies will thrive and doubt that I ever will know how to
pick the very best of the industry.
But consider this: For every dollar you
lose today from high-return stocks with low success rates, you're
giving up $4.93 in 20 years; and that's when compounded at a rate of only 8%.
So a $20,000 investment--in what you hope is the next Microsoft or
Wal-Mart but almost always isn't--really costs you about $98,536 by
the time you retire in 20 years.
There is a hare that resides in us all wanting to
get out, but we already know who wins that race. For patient investors
it's not
just that they can't pick the next Microsoft, it's that they don't
have to.
top
14. I don't want any
risk. I've had it with this stock market. I'm thinking about
moving all of my money into bonds and 'guaranteed' bank CDs. Doesn't
that sound like a good idea considering the recession and all that's
going on with the economy and the world?
I would never recommend abandoning a beautifully
constructed financial plan, which includes an asset allocation plan. Your allocation plan is an
efficient mix of assets designed to give maximum risk-adjusted
returns. Changing an efficient plan usually results in an inefficient
plan.
I would no more recommend that you 'load the
boat' with bonds and bank products anymore than I would recommend
you 'load the boat' with oceanfront property in Arizona.
Moving your money into bank CDs is not escaping risk. It's
putting yourself in a situation that 'feels' warm and fuzzy but which
offers zero protection against loss of purchasing power. In
fact, reallocating a bank CD portfolio to a balanced
stock-and-bond portfolio actually lowers risk and increases
long-term growth potential. Building any portfolio around one
central idea--fixed rate bonds and CDs, in this case--is a
profoundly bad idea every time.
Being in the market during the next 25%
decline is not the risk; the risk is in being out of the market
during the next 100% move up.
Both will happen, this we
know; although I suspect the latter will occur before the former
since the market of 2008/2009 has presented us with prices many of
us may never see again.
Some great investment thinkers even see bonds as
the next bubble. As one of the great investors of all time, James
O'Shaughnessy, wrote in Yahoo Finance article dated March 17, 2009,
when talking about the 40-year real rates of returns for T-bills and
long-term government bonds:
"Note that, unlike stocks, both (T-Bills &
long-term government bonds) have had negative 40-year returns, and
long-term government bonds returned losses in 32 percent of the
40-year periods. Indeed, at current yields I believe that Treasuries
are the next bubble and that ten years from now, people will rue the
day they fled the volatility of the stock market for the "safety" of
government bills and bonds."
Bonds have their place in a balanced portfolio,
but loading the boat in anything only puts you more at risk.
Your are about to shoot yourself in the foot. Focus on goals, not
short-term market movements. Stick to your asset allocation
plan. Rebalance if your portfolio needs it, then 'let it
cook.'
top
15. So when you manage
my portfolio, you're going to just buy a lot of stocks and bonds,
and hope for the best, right?
Not exactly. I'm going to build a portfolio
of some of the world's greatest companies; and allocate them
efficiently, based upon your individual risk profile, financial
goals and related time horizons.
The intended result is a tailored portfolio that
offers the maximum return for the least amount of acceptable risk;
but more importantly keeps you on track to fund your goals.
16.
What is the best family of mutual funds on earth? I want to
diversify my portfolio within that family of funds.
I'm not sure what you mean by 'best' but it
doesn't matter. The best is the family of funds in which you
feel so comfortable with that your investing behavior remains the
same through all market environments. Since your most
important job is to keep your emotions out of the process--meaning,
to avoid the common killer mistakes--, focusing on the 'best' family
of funds, whatever that means, is wasted energy. Just being
efficiently allocated is at least 90% of the battle; selection and
timing is the last 10%.
The only mutual funds I will own are formulated
funds with specific market cap designations. Specific fund
families do not matter over the long haul. Your performance
should be many percentage points higher per year than those around
you as long as you allocate, diversify, rebalance, and avoid
mistakes.
I put my faith in the fund's strategy formula
much more than a fund manager. With a formula, even a bad
manager cannot adversely effect the return. I can provide a
short list of formulated funds (as opposed to 'actively managed' funds).
top
17. Should I invest some money into an
'alternative investment' like a hedge fund? They seem very popular
and I've read numerous articles about how they compliment a
portfolio.
Non-mainstream investments
like hedge funds, private-equity, managed commodities futures,
'might be' fine if they stand the test of two criteria:
(a) will such an investment
help the client's portfolio in the long run?, and (b)
does advisor and client alike understand the proposed 'alternative'
investment, which will or will not keep you from bolting when it
hits a performance 'speed bump.'
More times than not, both
of these criteria cannot be met. If both
criteria are met, then I'm all for allocating to such an investment,
with the intention of giving it 10 years or at least a full economic
cycle. You should stay married to those types of investments
a long time if you feel compelled to marry them in the first place. Past
performance absolutely does not even hint at future performance with
these type investments.
top
18. Why shouldn't I
just put all of my money into Warren Buffett's company?
Because you wouldn't be even close to properly
diversified and your asset allocation would be way off.
Buffett will have his share of disappointing years. Also,
Buffest would never recommend that you put all of your assets in his
company.
top
Login to Your Schwab Alliance Website