David Rae In the News
 David Rae is truly honored to have just been name 2011 Compete Magazine "Athlete of the Year" for his work as a financial planner, as well as his dedication to the the Aids/Cycle and the sport of cycling. Read Full Article. "Selection of David Rae for this award were based on commitment to personal achievement, active participation in an individual or team sport, commitment to supporting and encouraging other in sports specifically commitment to the LGBT communtiy"
David Rae latest Financial Planning Advice column for Echelon Business magazine is available here. "Roller Coaster Retirement Ride" David Rae recently had an article published in August/September Issue Echelon Business Magazine titled "Be Wealthy, Dont Just Fake it" CLICK HERE TO READ FULL ARTICLE David Rae was recently honored by Registered Rep magazine as an "Advisor with Heart" at their 31st Annual Altruism Awards. Click here to read their article about David's Philanthropy "David Rae: Racing Against AIDS" The Financial Planning Column penned by David for Echelon Magazine Continues with "Be Advised or Beware" containing many tips in regards to working with a Fee-Based Certified Financial Planner. David was recently featured on the Cover of Compete Sports Magazine as well as a featured Article about growing with an NFL Quarterback Father. David's Father Mike was a quarterback for USC, the Raiders, Redskins, and Bucanneers. During his career he won both a National Championship as well as Superbowl. Read complete article Here. Full Article "The Great Recession Happened: Now What?" from the Feb/March Issue of Echelon Business Magazine. For the December/January issue of Echelong Magazine I wrote a piece :"8 Great ways to Sabotage your financial plan" 8 Great Ways to Sabotage your Financial Plan.
“It won’t be the economy that will do in investors: it will be investors themselves.” Warren Buffett
In the past decade, the challenges of successfully investing in the stock market have become all too clear. Research has shown that investors often buy and sell at inappropriate times. While most investors understand that they should “buy low and sell high” according to the old adage, in reality people very often do just the opposite. Below, I will walk you through 8 common but Great Mistakes that keep people from reaching their financial goals.
-OVERDIVERSIFICATION: This is really more of an individual thing than a phenomenon: person buys the new “top performing product” every time they buy an investment. 15 years later they own 15 random investments. By having neither a plan nor a strategy for investing, our friend is now the proud owner of a large, inefficient, expensive “portfolio”- with gaps, redundancies and extra fees that would drive you crazy if you had any idea of how much money they were wasting. Not to mention they are probably chasing returns, which is not a great way to get where you want to be.
-UNDERDIVERSIFICATION: This is basically taking one investment idea and pretending it’s a portfolio. You will often see a large group of the investing public trying to invest in the one idea at the same time. And the more people who basically own just that one idea, the sooner all the lights go out. Think owning tech stocks in the late 90’s. In the great bear market which inevitably followed the broad equity market went down almost 50%. A lot of that money went into next “hot” sector bonds, and you got killed again: they sold equities at the bottom to buy bonds at or near their peak, just before stocks began to make a comeback. For this is the killing power of just one idea.
-EUPHORIA-The complete loss of sense of danger. When Euphoria hits, you totally forget the risks and fears of principal loss. You are much more concerned that someone somewhere might be making more in the stock market than you are. These new eras generally aren’t sustainable, because technological (and even financial) innovations follow a similar downward arc, from amazingly new to commodity. (Think cell phones, pc’s, and GPS) This time is never different. The business cycle and the market cycle have never been repealed. In euphoric times, it is important to maintain a disciplined investment strategy.
-PANIC: One could say the biggest bear markets are simply correcting the biggest bull markets: think 1982-2000 followed by 2000-2002. There is usually a consistent relationship between the height of the mob’s euphoria at the peak of a big bull market and the depth of their panic-induced capitulation at the bottom of the bear market. Why does this seem obvious? Because it is obvious. It also explains why the people who drank gallons of the “new era” KOOL-AID became convinced beyond a doubt, at or near epochal bottoms, that the world is coming to an end.
I can’t predict the future, but the world did not end; although sometimes it may appear to be ending. Although past performance is not indicative of future results: market declines have been temporary, because historically the market-driven by the economy it reflects- overall has been rising.
-LEVERAGE: This could be one of the most dangerous of the Eight Great mistakes, because one can pretend that there is an intellectual case for it, when done right, whereas the other seven are unthinkable on their faces.
In practice, some may do it the wrong way; borrowing at the wrong times and on the wrong terms, in order to buy the wrong things at the wrong times for all the wrong reasons. I hate to think how many people, as the year 2000 dawned, refinanced their homes to pull out equity with adjustable rate debt to buy tech stocks with borrowed money. Probably after reading some article somewhere, about the next great investment. (an example of buying with Euphoria) Wrong loan, wrong terms, wrong stock, wrong time, wrong rationale: 5 strikes you are out. Anyone who did this may have seen their accounts go to zero, when they couldn’t meet their debt obligations.
-SPECULATING WHILE PRETENDING YOU’RE INVESTING. And not seeing, until it’s far too late, that you’ve gone over to the dark side. Tech stocks at the turn of the millennium were good examples of this Great Mistake. People said “I’m investing in E-commerce,” and the tragedy is that they believed it, and they were in fact doing nothing remotely like investing.
They were buying shares in companies that had never made a profit-they raised money on the basis and stated intention of burning through it, as the businesses attempted to achieve scale. Moreover, the business model of E-commerce- had itself never made money. There was no assurance that the industry let alone any individual company would ever make money, much less achieve a return on capital which would justify the risk.
The above situation is not investing, it is best described as speculation. And one should never speculate with any part of the core capital one has committed to the achievement of their important financial goals. The distinction between speculating and investing become critical to financial success.
-INVESTING FOR CURRENT YIELD INSTEAD OF FOR TOTAL RETURN. This is a classic mistake of the average retiree. The mistake is based on the simple fact that investments with the highest current yield have the lowest total return, while investments with lower current yield- in an efficient market- compensate by offering the higher long-term total return. Since retirees’ income must a)last through your entire retirement and b)continually rise to offset the constantly rising cost of living, they need to focus not only on today’s yield but on long-term total return-that is, on both current payout and appreciation as potential sources of income.
-LETTING COST BASIS DICTATE YOUR INVESTMENT DECISIONS. People just naturally-and almost always fatally- get emotionally tangled up in the price they paid for their investment. Your investments do not know what you paid for them, and would not perform any differently if they did. While cost basis is an important consideration when it comes to filing and planning you taxes, but should not be the only factor in making investment decisions.
Make sure to look at the whole picture. There’s a whole new investing landscape out there. If you have already made some of the mistakes listed above, or could see yourself doing so when faced with future adversity, contact a Certified Financial Planner to help you get your financial house in order, and keep it that way. A Successful Financial Planner can help you develop a holistic approach to managing your wealth and retirement planning, in accordance with your goals, time horizons and risk tolerance. The key is to be cognizant of the emotions that play into your financial decisions and use the considerations to guide the investment planning process.
-David Rae, CFP is a Certified Financial Planner with Trilogy Financial Services, Specializing in the needs of the gay community, and can be reached at david.rae@trilogyfs.com or visit his website www.davidraefp.com
Securities and advisory services offered through National Planning Corporation(NPC), Member FINRA,SIPC, a Registered Investment Advisor. Trilogy and NPC are separate and unrelated entities. Examples used as illustration only, and are not indicative of any particular investment. Diversification helps you spread risk throughout your portfolio, so investments that do poorly may be balanced by others that do relatively better. Neither diversification nor rebalancing can ensure a profit or protect against loss.
This is my column for Echelon Business Magazine from the October/November 2010 issue. For a direct link to the article click on the Title below, or read feel free to read here.
You deserve to be financially independent but you just need to learn the few simple steps to help get you there. So many of these steps and simple and easy, you just never were taught to use them. This is not a piece on how to win the lottery, or become a Millionaire overnight, but it is a lot more likely to actually happen to you than one day waking up as Madonna (or just having a bank account like hers. ) It’s a simple, commonsense approach to becoming financially independent- growing your overall wealth
Some of you may have heard of the “Latte Factor” - basically saying that all those little “latte’s” can add up and really keep you from becoming rich, and keep you from reaching your important financial goals. Ok so in your case it might be a Venti-Soy-NonFat-Frapp-whipped-132.5degrees with 2 splendas (or the million other ways you spend all of your income each month) the same holds true, cutting back in a few small areas you won’t even notice is step one to get you on track to becoming financially independent . The next step is the most important of all: Get started: Start saving now, and make it automatic.
Make it automatic, and get started NOW. “But I don’t know where to put all the money I’m saving?” As you grow your wealth where you put it becomes more important, but now you just need to start saving. Whether you open a mutual fund account, contribute to your 401k, or just use a savings account at the bank you will end up much further ahead, by getting started, and making it automatic.
So many people spend months and years attempting to research/discover/find the perfect investment/CD/Mutual Fund/Stock only to have wasted month/years not getting the benefits on compounding interest and are no closer to having enough money to be financially independent. Don’t get me wrong, as you begin to accumulate wealth the allocation of investments will play a major role in reaching your financial goals. But at this point the big step is just to get started.
To illustrate the point of getting started now: In the following hypothetical example waiting just 10 years to start, can more than double the amount of money a person would need to save each month to help grow their 401k to $1 million dollars. For a 25 year old who works for a company with a 401k match they could have a million dollars in their account by retirement (age 67) by contributing just $100 per month (assuming a 9.15% average return and a $100/m company match). If they are in the 30% tax bracket they would feel just $70 per month out of their take home pay.** That’s just about $2.30 per day. Put down the super fancy coffee drink and instead order a Drip Coffee save the difference and you could be well on your way to building your 401k and getting yourself closer to financial independence.* If an individual is getting a later start they will need to save more. For example waiting until mid 30’s they will need to save closer to $160 in the above example (still roughly just $5.30 per day). You still can easily save $5.30/day, but don’t miss the major point- all things being equal, the amount you need to save to reach the same point more than doubles by waiting just 10 years to begin this process. Get started now.
*Examples used as illustration only, and are not indicative of any particular investment.** Assumes reinvestment of dividends with no consequence of fees. Past performance is not a guarantee of future results. Investment value may fluctuate and the value of the investments may fall against the interest of the investor.
There are several other great benefits to putting money in that 401k, even for those of you who think retirement is a long way off. You can have the money taken right out of your paycheck so you won’t even miss it. The money comes out pre-tax (so you won’t have to pay taxes on that income until you take it out of the account.) Many employers offer matching, which is like free money for you. 401k’s growth is tax deferred, so you don’t have to pay taxes on the growth until you take the money out. Now keep in mind a million dollars may or may not be enough for you to live off through retirement, considering you could easily be retired 30 years or more. Contact a Certified Financial Planner for help with figuring out how much you need to contribute to meet your specific retirement needs.
You may have other financial goals you wish to achieve, from fabulous vacations, to buying a first home or even second home. Most people can find many areas they can save money without even noticing. All those savings add up. Now take the next step now. Remember the simplest secrets are: find a few areas now that you can save some money each month and set up an automatic saving plan. You are on your way to that house on the hill. (and the bevy of boys in speedos surrounding it.)
Most likely, for most of you of you reading this article a million dollars will be enough to properly fund your retirement goals. For many of you this will provide just a portion of the funds needed to make your dreams a reality. But you can use these steps to help save for each of your financial goals. The same principals ring true to figure out the “number” you will need for each goal, make it simple and automatic and watch as you move closer every month to your financial goals.
A sound financial plan is a race of endurance, rather than a sprint. Save often, save early, and save regularly. You will be amazed when your financial house is order how much more you can afford, accomplish, and how much more of the Fabulous Gay Lifestyle you will be able to enjoy. Take a big step forward towards your financial independence contact a gay Certified Financial Planner (CFP), and have them help you develop a sound financial plan to reach your most important financial goals. For you business owners reading this set up a 401k for your employees, and for yourself.
-David Rae, CFP is a Certified Financial Planner with Trilogy Financial Services, Specializing in the needs of the gay community, and can be reached at 310 756 0600 david.rae@trilogyfs.com www.davidraefp.com
Securities and advisory services offered through National Planning Corporation(NPC), Member FINRA,SIPC, a Registered Investment Advisor. Trilogy and NPC are separate and unrelated entities. Plan distributions may be subject to a 10% penalty if withdrawn before 591/2)
Thanks for Reading. Feel free to email me if you would like to be added to my complimentary Investing and Financial Planning newsletter. david.rae@trilogyfs.com
|
