Bowers Capital Management
Can You Fund Your Goals?
What are your goals?

College funds? New or second home? Maintaining or increasing your standard of living in the future? How much do you want to travel each year? Do you want a new boat? How often can you afford a new car? Do you have enough life insurance? Will the surviving spouse have enough income?

The Retirement Lifestyle Book and online Goal Wizard helps you identify and manage your goals.

FAQ - Frequently Asked Questions

"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. 

  1. How long does it take for my account to transfer to Schwab? 

  2. Can I access my accounts on the Internet?

  3. I forgot my Schwab Alliance password.  How do I reset it?

  4. How does online access to my financial plan work?

  5. What is the average return of the average Bowers Capital asset management client?

  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?

  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 if my portfolio's composition didn't change at all.  Why didn't you 'do something' with my holdings?

  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'?

  9. What is your incentive for my portfolio to do well?

  10. Is it a good time to get into the stock market, or should we wait until it goes lower?

  11. 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?

  12.  I don't need a plan.  I just want you to manage the assets.  Will you do that?

  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?

  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?

  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?

  16. What is the best family of mutual funds on earth?  I want to diversify my portfolio within that family of funds.

  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.

  18. 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.

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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.

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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.

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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.

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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.

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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.

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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:

  • 92% had one 3-year rolling period in which they were in the bottom half in performance!

  • 58% spent at least one 3-year rolling period in the bottom quartile!

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.

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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.

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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.'

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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).

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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.

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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.

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