Insights

Second Quarter 2019|Jim Williams| It is common, particularly in publications directed toward seniors, to see many advertisements of various financial institutions proclaiming the need for "income" from your investment portfolio. While the need for income as broadly defined is fundamental to most retirees, the "income” implied in these ads is usually pretty specific and narrowly defined. Usually these ads contain promotional material for things like fixed income strategies (bonds) or annuities.

Fourth Quarter 2018|Jim Williams| I recall in a televised interview several years ago, (I think it was Ed Bradley on 60 minutes interviewing George Burns), that Burns told Bradley he found money on the ground every day. Bradley wasn't exactly incredulous but asked the aging and aged actor how that rather unusual personal attribute came to be. Burns with only a slight pause, replied "I look for it." I've scoured the internet without success for corroboration of the exchange. I may have the wrong identities but hang with me; it makes a nice point.

First Quarter 2018|Jim Williams| We've been publishing some pieces on behavioral finance and cognitive biases in recent weeks. This is a look at a laundry list of known biases and priors that affect the financial decisions that individuals make. This is an area of inquiry that has become more prominent in recent years. A recent book, The Undoing Project by Michael Lewis tells the story of two of the pioneers in this research. Daniel Kahneman and Amos Tversky, two Israeli psychologists, who started some 40-odd years ago to identify, evaluate, and document behavioral biases that show up in decision-making. Their work was the inception of Behavioral Finance. Another source in this area is Kahneman’s own book Thinking Fast and Slow. In his book, Kahneman describes much of research that forms the basis of his life’s work. Most interesting, I think, is the tour of the two decision-making systems we all operate with as a part of our original equipment.

First Quarter 2017|Jim Williams| Throughout the life of this firm, we have as a part of our investment policy discussions, cautioned our clients about the futility of attempting to time the market. There are a number of compelling arguments against the idea of market timing including: the lack of evidence that anyone can do it consistently and regularly, the need to make two decisions in a row correctly (when to buy/sell and when to sell/buy), increased tax drag and trading costs, and the fact that being out of the market on the good days will be devastating to long term returns. There are many more, but we tend to emphasize this last one since it is objective and verifiable and gets to the heart of the matter.

Third Quarter 2015|Jim Williams| We have always used an individually designed Investment Policy Statement (IPS) to govern the management of each client’s investment portfolios. The IPS documents and formalizes a meeting of the minds between you the client, and us the investment advisor. Why is an Investment Policy so important? When markets turn down, the advertisers come out of the woodwork screaming and braying that the only way to make the pain of the downturn go away is to subscribe to their high cost solution. This taps into the normal fear reaction which carries with it the urge to “do something”. We are serious skeptics regarding those who sell or promote market-beating strategies. Most of the strategies are no more than kabuki; designed to make you believe your advisor is really working hard for you. In reality, most of the kabuki works against you.

First Quarter 2015|Jim Williams| Whether your personal goal is to expend all your funds in retirement, leaving nothing, or to continue to grow the portfolio to accumulate funds for your heirs, or something in between, the withdrawal rate is the only one that we can directly and affirmatively control. The question is how much and where from?