How to travel like (this) financial advisor

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Nick Foy, CFP®

Just about everybody we meet with talks about travel being one of their most important financial goals; the ability to see and share a journey with loved ones is high on the priority list for most of our clients.

I like to include travel expenses in just about every client’s financial plan, as both an acknowledgement and a reminder that experiences are more valuable than things.

My kids are now 7 and 4 ½, and they’ve already been all over the U.S., and have traveled internationally to Europe and Africa. We’ve made travel a priority, and they’re starting to get old enough to appreciate it (although my daughter claimed her favorite part of our spring break trip to Italy was the “yummy Cheerios” [Froot Loops] at the airport hotel in Boston).

Here are some tips to make your journeys as memorable as possible: Continue reading “How to travel like (this) financial advisor”

When markets go haywire

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Nick Foy, CFP®

Every once in awhile, and sometimes more often than that, markets go nuts. Investors (over)react to some random news, in an attempt to predict an inherently unknowable future, and everyone pays.

We call the market gyrations “volatility,” especially when the market goes down. I’ve noticed that when the market goes up, we don’t call it anything; we just go on about our lives as if markets going up is normal and to be expected, like Mr. Market owes us something.

But, how should investors handle the trepidation associated with markets and headlines that cause discomfort? Here are a few tips: Continue reading “When markets go haywire”

We bought Crocs for all of our clients (sorta)

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Nick Foy, CFP®

Since 2002, Crocs (CROX) has sold over 300 million pairs of some of the ugliest shoes on the planet. Their strategy, it seems, is to embrace the ugliness, and design what many consider to be the most comfortable shoe they’ve ever worn, fashion sense be damned.

This approach has led to a bit of an online backlash over the years, as this (one of my personal favorites) Facebook group shows. The group has existed since long before Facebook became the web’s number one destination for middle aged women to sell essential oils and other various multi-level marketing products, and they do nothing to shield Crocs and Croc-wearers from their disdain.

Crocs - Shoe Continue reading “We bought Crocs for all of our clients (sorta)”

Ten years later – Three lessons from the front line

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Nick Foy, CFP®

Last week marked the tenth anniversary of the collapse of Lehman Brothers, which, along with the forced sale of Merrill Lynch to Bank of America, and the federal takeover of Fannie Mae and Freddie Mac, triggered the Dow Jones Industrial Average to plunge almost 4.5% that day. Two weeks later, an even bigger 7% drop signaled the spread of the financial crisis, as Lehman’s $613 billion in debt reverberated throughout the financial market. Their bankruptcy remains the largest in history.

Shortly thereafter, Washington Mutual was seized by the FDIC, and their assets were sold to JP Morgan Chase, and Wachovia was acquired by Wells Fargo.

Debt markets froze up, housing prices plunged, and individual investors faced countless sleepless nights as they watched the value of their portfolios deteriorate over then next five months, until the market bottomed out in early 2009. Continue reading “Ten years later – Three lessons from the front line”

You’re probably doing banking all wrong

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Nick Foy, CFP®

The traditional brick-and-mortar bank is a relic of days gone by, like cable TV and Myspace. If you’re still using one, it might be time to reconsider your life choices, at least as it relates to the location of your checking and savings accounts.

Most of the people I meet with have accounts at either Bank of America or Wells Fargo. In Charlotte, I suspect a significant majority of people bank at one of those two behemoths. I’m assuming most people who have accounts there maintain them out of convenience: They think it’s too difficult to make a change, or they don’t understand how significant the advantages are to banking elsewhere.

Here are two reasons to consider switching to an alternative banking option: Continue reading “You’re probably doing banking all wrong”

Advisors Behaving Badly: Three Ways to Avoid Getting Scammed

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Nick Foy, CFP®

Sometimes, investors are their own worst enemy. But too often, their “advisor” takes the cake.

Last week, the New York Times ran a story about an advisor at JP Morgan who rang up over $128,000 in commissions in a year, on an account worth just over $1 million:

“After about six months, she learned that the account, worth roughly $1.3 million at the start of 2017, had been charged $128,000 in commissions that year — nearly 10 percent of its value, and about 10 times what many financial planners would charge to manage accounts that size (emphasis mine).

The client has Alzheimer’s, and her 58-year old daughter was assisting her with managing the account and her day-to-day finances. The money was invested with what she considered to be a reputable firm, and she thought she was dealing with a trustworthy advisor. It turns out he’s not actually an advisor; he’s a broker who took advantage of a woman who couldn’t look out for herself, and a daughter who was doing her best to make good decisions on her mom’s behalf. Continue reading “Advisors Behaving Badly: Three Ways to Avoid Getting Scammed”

Investors behaving badly – An Overview

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Nick Foy, CFP®

The biggest enemy to investor success is typically…investors themselves.

In today’s WSJ, Jason Zweig wrote an excellent overview of some of the most significant biases that investors struggle to overcome. I experienced it myself after working with thousands of self-directed Vanguard clients (and they’re among the best of the bunch!). It’s a big part of the reason I decided to get into this business to begin with: Without a guide to provide accountability, many fail to recognize and avoid their own biases, and end up much poorer as a result.

An example from the article:

“Behavioral economics teaches that people are overconfident: They believe they know more than they do, or they assume their knowledge is more precise than it is.

I’m 100% certain that’s true for everybody else, but there’s no way that applies to me.

If you’re paywall blocked but you want to dig in deeper, I recommend Zweig’s excellent book: Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich

Most people who darken my office door for the first time assume I get paid to invest people’s money. That’s technically true, but investing has become increasingly commoditized over the past decade. The modern, expert advisor creates value by helping people avoid costly mistakes. Without some understanding of what those mistakes could be, and someone to help them avoid the pitfalls, people limit their own potential success.

The world’s simplest financial plan – don’t buy stuff you can’t afford

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Nick Foy, CFP®

Last month, Marketwatch ran a story detailing people who take out a loan to pay for their vacation. Yes, it really is just as bad an idea as you’d think.

It turns out companies like Affirm are willing to lend people money for just about anything, sort of like a credit card. Of course, that money doesn’t come cheap: The interest rates range from 10-30%, sort of like a credit card.

Reading that story reminded me of this skit from circa 2006 SNL, wherein an expert shares the holy grail of personal finance: Don’t buy stuff you can’t afford.

Continue reading “The world’s simplest financial plan – don’t buy stuff you can’t afford”

Simplifying Complexity – applying the millennial mindset

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Nick Foy, CFP®

Millenials have earned a (perhaps well-deserved) reputation for being “entitled, lazy, and over-confident.” But their attitude toward money and things, paired with a penchant for simplicity, might produce better investors than ever before, if only they can develop the necessary patience.

Those 80 million Americans born between 1980 and 2000 have taken a different tact when it comes to spending their money. Assuming they can stick with a job long enough to earn something, their attitude is much more in line with what research has shown actually brings satisfaction:

Millennials are highly adept at using technology and social media influences many of their purchases. They prefer to spend on experiences rather than on stuff. Seventy-eight percent of millennials—compared to 59% of baby boomers—“would rather pay for an experience than material goods,” according to a survey from Harris Poll and Eventbrite cited on Bloomberg. Continue reading “Simplifying Complexity – applying the millennial mindset”

Three steps to teaching your kids about money

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Nick Foy, CFP®

Most kids aren’t great with money. But then again, neither are most parents.

When it comes to teaching kids about money, I find few know where, or when, to start. Not many of us had parents of our own who taught basic financial literacy lessons, and we all know that just about nobody ever receives information about personal finance in school.

A couple of weeks back, the Wall Street Journal ran an article providing some ideas on the topic, but for the most part, the story was focused on teens (and later). But, in order to truly have an impact, I think parents should start teaching basics at a younger age.

It’s tough to get 96% of people to agree on anything, but check this out:

“Some 96% of 128 college students in a recent study said they wished their parents taught them practical skills such as budgeting and saving (emphasis mine).”

I’ll assume the remaining 4% either learned practical skills about money as kids, or were recovering from a late night frat party and didn’t really understand the question.

So when, and how, should parents start teaching their kids about money, debt, and investing?

Continue reading “Three steps to teaching your kids about money”