Advising and Investing Excellence
Firm, Investment Advisor, Stockbroker investment Advising and investment Selection
health, the productivity, the success, and the duration of both business and personal
relationships are determined by the quality, the integrity, and the consistency
of knowledgeable and respectful discussions, equally beneficial conclusions, and
honorable, skillful, and timely execution of mutual understandings and agreements.
Absent these vital considerations, the soul and the substance of both business
and personal relationships are doomed; merely selfish, empty, wasteful, meaningless,
and ultimately destructive trivialities.
investment advisors must first ask themselves:
I do business with me?'
I build a financial future with me?'
I entrust my life savings with me?'
an investor, Warren Buffett for that matter, agree that I know what I am doing
if he were present while I went through the investment selection and investment
portfolio creation and management processes in preparation for proposing his investing
course of action?'
I invest my capital as proposed if I were to receive one of the investment plans
I recommend to others?
may not be satisfied or successful while investing because they may not deserve
to be satisfied or successful based on the way they manage (don't manage) the
business, their business, of seeking investment advice from others or personally
investing their capital in the financial markets; to build and to protect capital.
monthly statements and their investment portfolios most often look much like the
'Winchester Mystery House' without consistency, discipline, direction,
continuity, control, or theme.
are often exposed to 'hit and run' investment advice being sold
random, isolated, sometimes frequent investment transactions with no clear investing
goal in mind adrift, results more by chance than by design.
is no theory modern or otherwise that can be ordained, no computer
that can be programmed, no software that can be designed, no investing tool that
can be 'imagineered,' no technical analysis voodoo methodology that can
be contrived, and no equation that can be divined to quantify, evaluate, and predict
the primary forces that drive the sublime chaos of the financial markets and investment
prices; human consensus, mood, and behavior; intelligent and not, knowledgeable
and not, reasoned and not, rational and not, and logical and not.
premise of Modern Portfolio Theory depends heavily on one's blind, unconditional
acceptance of a grossly invalid assumption; if it happened yesterday or if it
happened sometime in the past, then it will probably, more likely than
not happen today or it will probably, more likely than not
happen sometime in the future much in the same way that it did in the past.The
error in the reasoning and the math of Modern Portfolio Theory is the failure
to distinguish between 'connected and causal' variable relationships and 'contrived
and coincidental' variable relationships; the 'connected and causal' variables,
for example, that must be in place to cause rain or the 'connected and causal'
variables that must be in place to cause investment prices to rise such as fundamentals
and earnings growth verses 'contrived and coincidental' variable relationships,
for example, between
two investment variables such as the current or projected prices of an investment
and a selected index to project the current or future value of one variable when
given the current or future value of the other variable and the 'contrived and
coincidental' historical relationship between the two variables; Beta; the current
or projected value of an index is 'X;' therefore, because of the given historical
relationship between variables 'X' and 'Y,' the current or projected price of
'Y' is/will be 'Z.' Absurd, as anyone who has spent more than a nanosecond in
the financial markets would, should know.
Strategies, and ToolsThere
are many types of investments, investing strategies, and investing tools that
are profoundly flawed, fictitious, treacherous, and often predatory. (Continue
top next column)
the techniques, tools, and theories surgeons trusted and used were of the same
quality and integrity in their specific fields of medical expertise as those used
by Wall Street, many investment firms, and most investment advisors Investing
Fools' Tools : Modern
Ratio, and a distant
Apple-A-Day would be a wonder drug, Ouija Boards and Crystal Balls would be considered
advanced medical tools, and Voodoo, Séances, and Witchcraft would be Pulitzer
Prize winning Modern Medical Theories.
surgeons were as undisciplined in their professions as Wall Street, many investment
firms, and most investment advisors are in their respective areas of advertised
expertise as they advise individual investors, a few lucky patients would succeed,
most patients would have surgical complications, and, many, regrettably, would
appeal of Modern Portfolio Theory is that neither investing judgment nor investment
selection and portfolio management skills are required; just search historical
investment databases based on past investment performance, retrieve investments
based on past investment performance, sort investments based on past investment
performance, pick investments based on past investment performance and then view,
print, and present and then hope that the investing past will somehow be the investing
investments are 'packaged' into 'new and improved' investments or 'unpackaged'
as derivatives by Wall Street's marketing 'imagineers' to contrive and fabricate
entirely new classes of turbocharged toxic investments linked to high fee investing
strategies, the value added most often accrues directly and immediately to investment
firms and investment advisors in the form of increased revenues for the former
and increased commissions for the later; but, without adding substantive investment
value for investors at any time while, in most cases, masking added investment
Advisors have generally devolved from being fiercely independent, self reliant,
skilled investment advising practitioners to being investment advising generalists
who are merely superficially and conversationally competent in many wealth management
related issues and masters of none; relying on profoundly flawed investing theories,
strategies, and tools and trained to focus more on the marketing, gathering, and
moving of capital than on the advising, building, and protecting of capital -
products and transactions rather than portfolios and processes.
of the noble and important profession of investment advising, as we know it, is
a distinct possibility because all markets eventually close, are closing the inefficiency
gaps between value and price, competent and unqualified, skilled and unskilled,
serving and self-serving, and, most of all, good investment advising judgment
and management skills and bad investment advising judgment and management skills.
indicator of this increasing and expanding trend towards extinction is the exodus
of investors from traditional sources of investment advice to the ever expanding
'investment advising' Internet where, at worst, they will find for free what investment
advisors offer for fees and commissions as they seek what is so rare, very hard
to find, and priceless; mature investing judgment, sound investment advice, and
disciplined investment management.
out a step, proceed with greater, much greater investing and investment performance
risks; adrift results more by chance than by design.
you are trying to go:|
Cash Flow, Balance Sheet Analysis|
the savings and investing tasks at hand; just a bump in the road, a walk in the
park, or climb Mt. Everest.
you are going to get there:|
manage, modify, monitor, measure, process, and maintain suitable, structurally
sound, and competitive investment portfolios.
well you have done:|
Portfolio Performance Calculator|
it is measured, it will get done.
economic opinion and market forecasting will range from terrible, to close, to
a few lucky calls.
investors are exposed to advertisements, articles, CDs, Websites, and seminars
that use single investment incidences and exceptions to project incredible investment
in mind that those who even suggest or possibly promise annual investment returns
of 100%, 50%, and 30% cannot deliver.
the higher ranges of these investment rates of return were possible to achieve
on a consistent basis, if an investor started with just $10,000.00, a quick compound
capital growth calculation would show that it would not be too long before that
investor would have just about all of the money in the world.
these returns are commonly suggested to be in the realm of possibility, the purveyors,
or should I say predators, of these investment returns should not have to be promoting
their investment scams, each should have about all of the money in the world by
now, and there would not be any money left for either you or for me.
said back here on planet earth a $40.00 equity going to just $43.00
in a year equals a 7.5% return on capital, a $30.00 equity going to just $33.00
in a year generates a 10% return on capital, or a $20.00 equity going to just
$22.00 in a year and declaring a $1.00 dividend is a 15% return on capital; realistic
investment return expectations for an investor seeking primarily capital growth
and willing to assume moderate investing risks with occasional variances above
and below these investment returns in extreme and unusual investing circumstances
best of all, as an investment advisor, you can deliver.
standard investment plans presented in the eye-catching wizardry of colorful
pie chart, graph, and historical investment performance data-dump infested reports
offer considerable information about what investors already know about
themselves and general theoretical information about the basis, the form, and
the design of the investment plan; but, little about the details of the 'frame'
and the 'structure' that will give an investor an investing direction and really
nothing about the 'engine' that will actually drive the investor to his or her
investing performance destination; the 'when, why, how, and what ifs' of investing
Advisors' Performance Oxymoron
investment advisors and investors have succumbed to the latest inane investment
advising wisdom of the day; passive 'buy, hold, and forget,' untimed, unmanaged
index funds, exchange traded funds investing unknowledgeable, unskilled,
undisciplined, unmanaged, untimed investing, an investing performance oxymoron:
Investment advisors and investors, in effect, should concede that neither one
of them has the management skills nor the qualifications to manage investments
and time investing and that, therefore, the best solution is that investors should
buy unmanaged investments to eliminate investment management and timing; great
concept, take all of your hard earned capital and invest it for the future without
management or timing.
to do does not mean; therefore, don't even try.'
going to Warren Buffett and suggesting to him that to improve investment performance
he should no longer manage or time his investments, that, instead, he should invest
in index funds in which the best he could do would be to be average striking
out, bunting, and hitting singles most of the time while never really having the
opportunity to hit doubles, triples, and an occasional home run and, worst
of all, while actually assuming greater investing risks, not less, than most other
investments because index funds are missing the two critical investment performance
components that really matter, that actually determine investing outcomes; investment
management and investment timing.
of control investing,' what a great money management concept!
this investing strategy is tacit admission to clients that the investment advisor
is unknowledgeable, unskilled, and undisciplined, that the investment advisor
can't do what he/she was hired to do bring value added to the investing
performance equation and that he/she will most likely underperform.
but have you seen my pie charts?'
advisors, stockbrokers, and individual investors continuously seek the nonexistent
wellhead of the 'fountain of perfect investment recommendations, investing strategies,
and, investment timing sources' in the mistaken belief that 'best' investing performance
can only come from better investment ideas while being unwilling to acknowledge
the fact that they themselves are most often the weakest investing performance
five greatest obstacles to investing performance:
not a loss until it is sold.'
rely on unmanaged index fund investments.'
am a long-term investor.' translated, I can make a reasoned decision
to buy based on current and projected investment value and market conditions;
but, I refuse to make a reasoned decision to sell based on current and projected
investment value and market conditions.'
Fundamentals, and Value
price, fundamentals, and value are seldom aligned with one or two variables
being ahead of or behind the other(s) most of the time fundamentals and
value will always ultimately be reflected in price at some point in time; however,
the difficulty being that no one knows when, to what extent, or for how long.
it is imperative that one have a dynamic, forward-looking investing style and
proven investing strategies in place to help one evaluate the relative actual
and projected alignments of price, fundamentals, and value in an effort to buy
the best for the best price at the best time and to sell the best for the best
price at the best time.
investment advisors and investors must accept, understand, and agree that, on
occasion, they will be both right and wrong because investing has being both right
and wrong built into it.
investment decisions are not the primary reasons for investing failure:
is not having investment selection disciplines.
is not having portfolio management disciplines.
is not having portfolio design and construction disciplines that define right
is not having price management disciplines resulting in doing nothing when right
centerpiece of one's investment advising and investing performance skills must
be to build and to protect investors' investment capital by first creating unique,
structurally sound and competitive investment portfolios that match suitable,
hopefully timely investment sectors, investment categories, and individual, underlying
investments with different investor investment profiles different investor
investment risk tolerances, different income and capital growth objectives, and
different time horizons and then to keep investment portfolios competitive
by managing, modifying, monitoring, and measuring investment portfolios
one at a time, a few at a time, or all portfolios all at once as investors'
investment profiles, the current market conditions, the market outlook, and relative
investment values change as part of the ongoing decision making, action taking
investment advising and investment management, and investing performance processes:
convert rhetoric into results.
thoughtfully define, relentlessly apply, and rigidly enforce investment selection
and management disciplines, rules, and procedures and portfolio design, management,
processing, and performance disciplines, rules, and procedures
govern the dynamics of change.
take advantage of change rather than to be the possible victim of change.
amplify the impact of good/well timed investment decisions.
mute the effects of bad/poorly timed investment decisions.
an organized, efficient, and disciplined investment advising and investing environment
in which each investor, regardless of investment need, knowledge, experience,
and the amount of investment capital, will be honorably, properly, intelligently,
and efficiently served consistent with each investor's investment profile and
investment goals, the current market conditions, and the market outlook; nothing
learned the hard way, do it right the first time, suitable, hopefully timely investments,
suitable, structurally sound, and competitive investment portfolios, full disclosure,
and investor informed, economic best interests investing with specifics and in
Disciplines, Rules, and Procedures
disciplines, rules, and procedures are the investment advising and investing performance
selected at random and governed by the most basic user defined portfolio management
disciplines, rules, and procedures the weakest or completely missing investing
performance links for most investment advisors and almost all individual investors
to create, manage, modify, monitor, measure, and maintain unique, structurally
sound, and competitive investment portfolios and to process investment portfolios
as investor investment profiles (risk, income/capital growth objectives, investing
time horizon), the current market conditions, relative investment values, and
the market out look change will outperform carefully selected investments generally
selected and weighted sound and suitable investments placed in unique, structurally
sound, and competitive investment portfolios as determined by and governed by
thoughtfully defined, relentlessly applied, and rigidly enforced portfolio design
and management disciplines, rules, and procedures will outperform most market
indexes almost all of the time.
the extent that one's 'sense of the markets,' 'investment timing,'
and a 'vision of the future' can be improved, investing performance will
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Advisors Must Ask Themselves
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Modern Portfolio Theory
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