Are you informed or inundated?
Dimensional's Jim Parker illustrates the folly of trying to keep up with market sentiment based on the news of the day - a quick, easy to understand article worth reading. Read more here
Rick Maggi Westmount Financial
18/01/15: Designing Your Future: Goal Setting
Are you ready?
Deep down, we all know that New Year's resolutions just don't work. Consider the empirical data…
* 25% of people abandon their resolutions after just one week. * 60% of people abandon them within 6 months. * The average person makes the same resolutions 10 times without success. * Even after a heart attack, only 14% of patients make any meaningful change around eating or exercise.
Clearly, change is really hard.
Resolutions don't work, but goal setting does, provided you do it in the right way. Here are a set of 4 practices for setting effective goals that do work…
1. Write your goals down. Written goals have huge power, but you've got to to get them down on paper to get the clarity you need. 2. Make your goals 'SMARTER'. This is an acronym - Specific, Measurable, Actionable, Realistic, Time-Bound, Exciting & Relevant. 3. Share your goals with others, but do it selectively. Share your goals with people who are supportive but will also hold you accountable. 4. Review your goals regularly (at least weekly) so they stay top of mind. Diarise your reviews - remember, if you don't stay focused on your goals, they're guaranteed to fall by the wayside.
Whether you are just starting out, building your wealth or looking to retirement, goal setting (not vague resolutions) should be part of your DNA. Written goals are essentially 'dreams with a deadline', so go on, put pen to paper, be specific, be descriptive, and have fun with it.
Rick Maggi Westmount Financial
8/12/14: Lessons from 2014
Plus 3 themes to watch going forward…
This edition of AMP's Market Watch is a quick, simple read, but I think the most important reminder relates 'market seasonality' and the usual 'Santa Claus' share market rally phenomenon. Read Market Watch here
Rick Maggi Westmount Financial
30/10/14: Punchbowl removed: The end of 'Quantitative Easing'
End of an era…
After a year long phasing down period, last night the US Federal Reserve finally ended its quantitative easing (QE) program, introduced at the height of the Global Financial Crisis back in 2008.
Since the worst days of the GFC, unemployment has fallen, consumers are spending again, businesses are investing and banks are lending. So after all is said and done, QE seems to have actually worked - the US economy is now well and truly into expansion mode and looking a lot stronger than Europe and Japan that have taken longer to adopt QE.
It would be fair to say that, while the US economy isn't exactly booming, the Fed Reserve's decision to take the economy off life-support was, at least for now, an important sign that the US may now be able to finally stand on its own two feet.
While the punch-bowl may have been removed from the table, the music continues to play. Consistent with the Fed Reserve's softly, softly approach, they've also indicated that interest rates won't be going up in a hurry, even as the US economy continues to recover - an encouraging signal to the US (and the rest of the world) that concrete evidence of a sustainable recovery will be needed before interest rates are finally raised in earnest.
The ending of US QE is also a positive for Australia and removes a source of upwards pressure on the Australian dollar (great for exporters).
Rick Maggi
Westmount I Financial Solutions
Since the worst days of the GFC, unemployment has fallen, consumers are spending again, businesses are investing and banks are lending. So after all is said and done, QE seems to have actually worked - the US economy is now well and truly into expansion mode and looking a lot stronger than Europe and Japan that have taken longer to adopt QE.
It would be fair to say that, while the US economy isn't exactly booming, the Fed Reserve's decision to take the economy off life-support was, at least for now, an important sign that the US may now be able to finally stand on its own two feet.
While the punch-bowl may have been removed from the table, the music continues to play. Consistent with the Fed Reserve's softly, softly approach, they've also indicated that interest rates won't be going up in a hurry, even as the US economy continues to recover - an encouraging signal to the US (and the rest of the world) that concrete evidence of a sustainable recovery will be needed before interest rates are finally raised in earnest.
The ending of US QE is also a positive for Australia and removes a source of upwards pressure on the Australian dollar (great for exporters).
Rick Maggi Westmount I Financial Solutions
19/10/14: Comment: FOFA amendments disallowed
Should you care?
Back in July, the government negotiated a deal with Clive Palmer to save the 'FOFA' (Future of Financial Advice) amendments. However this morning two cross benchers (Senators Lambie and Muir) did an about-face and joined Labor senators opposing the government's FOFA agenda. We can only assume that we will now see the return of FOFA (the'full-strength' version) unless a compromise can be found.
Considering Senator Lambie's recent clashes with PUP leader Clive Palmer, this seems more like a personal grudge, along with a good helping of political naivety. But for better or worse, that's the system we now have.
So exactly what does this mean for you, as a client of a financial adviser? Hysteria and vested interests aside, probably very little.
If you already have a good relationship with a non-aligned financial adviser who provides an efficient and meaningful service to you at a fair price, you won't notice much (or any) change to the way he or she interacts with you.
Let's not forget that FOFA (Labor's full strength version) was introduced almost 18 months ago which, among other things, effectively banned investment commissions and ramped-up disclosure requirements, creating a more transparent, trusting environment for investors, retirees and professional financial advisors alike. And contrary to media reports, this law was welcomed by virtually all concerned, including financial advisors, and continues to this day.
The FOFA amendments or FOFA 'lite' (introduced by the Liberals) sought to reduce some of the new law's excessive 'red-tape' without jeopardising the lion's share of consumer protections. Personally, I thought a regulatory adjustment made some sense, but that's history now.
I've spent over 30 years in financial services and I believe that the vast majority of financial advisers I've known over this time are ethical, educated, well-meaning people who sincerely want the very best for their clients, and to also run profitable practices for themselves, their families, and their employees. That's just good business.
So naturally, it has been disappointing to see the reputations and motives of solid professionals being publicly denigrated during this lengthy, polarising process.
My advice is to ignore the cynics with obvious vested interests. If you're comfortable with your current financial adviser, hold on tight and follow your own instincts, chances are you're in very good hands.
Time to move forward.
Rick Maggi
25/09/14: Australian property - a little too hot?
...well that depends
A balanced analysis of the Australian property sector. Read more here
Rick Maggi Westmount I Financial Solutions
04/09/14: Profits and the Australian economy
Not bad!
The property reporting season that just finished was reasonably good with profit growth expectations affirmed. Read more here
Rick Maggi Westmount I Financial Solutions
04/09/14: How long can interest rates remain on hold?
…perhaps a little longer
An interesting read for a recurring theme out there. Read more here.
Rick Maggi Westmount I Financial Solutions
18/08/14: How does the world see you?
A fascinating exercise…
I think this is a must read for all of our clients and colleagues… Read here
Rick Maggi. Westmount. Financial Solutions.
24/06/14: The Seven-Day News Diet
Are you informed or inundated?
Having worked with investors and retirees for over 30 years, there is no doubt in my mind that anxiety levels are higher today than they were 10, 20 or 30 years ago, thanks largely to 24/7 news cycles. Personally, I'm utterly addicted to the news and would probably feel a little lost without my regular news 'fix'. But that's part of my job, to separate the daily background noise from what really matters most, and then communicate the facts to my clients, as simply as possible.
Sadly, 24/7 news is impacting on investor behaviour, but there is a way to build and protect your wealth without getting caught-up. Read more here
Rick Maggi, Westmount. Financial Solutions.
09/06/14: Abenomics
Good for Japan. Good for investors. Good for Australia.
Party politics aside, this is a big positive. Read Here
Rick Maggi. Westmount. Financial Solutions.
11/06/14: Europe getting its act together
…and what it means for investors
Dr Shane Oliver takes a close look at the European landscape. Very encouraging. Enjoy! Rick Maggi. Westmount. Financial Solutions.
11/06/14: The Certainty Principle
When investors wait for certainty...
A frequent complaint from would-be investors is that "uncertainty" is what keep them out of the financial markets. "I'll stay in cash until the direction becomes clearer," they will say. So when has there ever been total clarity? Rick Maggi. Westmount. Financial Solutions.
06/06/14: The structural challenges facing Australia...
…and what it means for investors.
A sobering, but balanced commentary from AMP Capital's Dr Shane Oliver. Worth a read in this blurry, politics laden post-budget environment. Enjoy! Rick Maggi, Westmount. Financial Solutions.
06/05/14: Bank Financial Planners: Tread carefully
80% of financial advisers now 'owned' by the banks
Last night's 'Four Corners' documentary on ABC (watch video here) primarily focused on the shameful behaviour of a particular Financial Planner within Commonwealth Bank's planning division. But more importantly, the documentary also highlights a broader 'conflict of interest' issue with bank advisors generally, and possibly other institutions.
While I suspect that 'bad advisers' (in all professions) will continue to lurk in the shadows forever and a day, the problem highlighted in last night's report goes beyond a single 'rogue' adviser. Rather than a one-off event, the flaw appears to be systemic, possibly stretching across the entire banking wealth management model.
So with over 80% of financial advisors in Australia now directly or indirectly owned by the banks, as a customer, it's now prudent to question the motives behind that humble bank teller who subtly offers to introduce you to their friendly financial planner for a 'second opinion', the next time you review your home loan or term deposit.
And if you believe that your financial advisor is employed by an 'independent', non-bank aligned firm, you now have every right to ask whether that advisor's license is indeed owned by a bank - chances are it is.
Of course, following on from last night's Four Corners report it would be easy to conclude that you simply can't trust financial planners, or anyone else, to look after your hard earned money. That would be wrong (and sad). The reality is that there are more than enough high quality financial advisers out there, doing terrific work, helping clients achieve their dreams - I personally know many of them and wouldn't hesitate recommending these professionals to family and friends.
So expect the best, just ask plenty of questions and do your homework.
Rick Maggi
15/03/14: Why asset allocation is so important
…making a comeback
If we've learned anything since the GFC, it's that a well diversified portfolio of assets, including local and overseas shares, property, cash, bonds etc., is the smartest (and easiest) way to preserve and grow your capital, whether you are retired or accumulating assets. Even as the global economy recovers, thanks to the pain experienced by most of us during the GFC, its unlikely that a new found respect for asset allocation will fade anytime soon.
In this article, Dr Shane Oliver explains what asset allocation is, why it's important to you and how to manage the economic cycles. It should be liberating to know that about 90% of the gains (or losses) investors experience in a lifetime have to do with the amount of exposure they have to various sectors like shares, property, cash etc., and much less to do with micro-decisions such as stock selection or the specific managed fund they purchase.
In other words, managing your portfolio of assets can be much less time consuming, less stressful and less expensive, if structured and maintained properly, regardless of your personal objectives and style. (Rick Maggi, Westmount. Financial Solutions)
07/03/14: Australia: Looking beyond the gloom
Cheer-up, it's much better than you think!
In this article, AMP's Shane Oliver focuses on the Australian economy, which has been getting some depressing press lately. Read more here (Rick Maggi, Westmount. Financial Solutions.)
26/02/14: Warren Buffett on keeping investing simple
It doesn't need to be difficult or expensive
Warren Buffett's annual letter to shareholders is almost always a treat to read, even if you don't own any shares of Berkshire Hathaway. It's eminently readable, and he usually throws in some evergreen personal advice that anyone can use. This year is no exception, based on an exclusive excerpt just published by Forbes magazine.
In the letter, Buffett tells the story of two investments made more than two decades ago: a 400-acre farm outside Omaha and a commercial building in Manhattan. The farm is now worth more than five times what he paid. And he says the Manhattan investment produces annual income equal to more than a third of the initial investment.
His secret? He focused on the fundamentals of what the investments would produce, not on their fluctuating value. The real estate property, for instance, was adjacent to New York University, which he notes "wasn't going anywhere."
"Games are won by players who focus on the playing field -- not by those whose eyes are glued to the scoreboard," writes Buffett. "If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays."
Buffett says that for "the nonprofessional" (that's the rest of us), there's no need to be picking winners in the stock market, or hiring someone else to do it either. And you should definitely ignore people on TV who try to predict broader market conditions. A low-cost index fund, which captures a wide enough cross section of businesses, should be plenty. And he reveals that he's following his own advice in his will (emphasis added):
My money, I should add, is where my mouth is: What I advise here is essentially identical to certain instructions I've laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife's benefit. (I have to use cash for individual bequests, because all of my Berkshire Hathaway shares will be fully distributed to certain philanthropic organisations over the 10 years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors -- whether pension funds, institutions, or individuals.
So there it is. You don't need much more than a portfolio of well diversified index funds (like Vanguard's) along with the right exposure to various assets, which depends on your personal attitude towards risk, volatility and reward. Of course, the lesson from Buffett and others is that ordinary investing doesn't need to be complicated. In fact, if it's not simple, you're doing it wrong.
As most Westmount clients are already taking advantage of 'indexing' and have seen the results first hand, Buffett's comments should come as no surprise, but it's reassuring to know that you're in good company! Rick Maggi (Westmount. Financial Solutions.)
21/02/14: Fifty ideas that shaped business today
Can you guess them?
Produced by the Financial Times/BCG last year, this 60 page article is an interesting and beautifully presented read. Not exactly 'on-topic' for a financial planning blog, but hey, we all need a little inspiration from time to time! Enjoy. Download here Rick Maggi (Westmount. Financial Solutions.)
19/02/14: China debt worries and growth
Overdone?
Whether you have a superannuation, pension or managed fund, direct shares or property, what happens in China, the world's second largest economy, matters to your financial health. In this article AMP Capital's Dr Shane Oliver looks more closely at some of the 'noise' surrounding China these days, and whether this is something we should all be worried about. As usual, an easy to understand reader-friendly article from one of Australia's most respected Economists. Enjoy. Read article here Rick Maggi (Westmount. Financial Solutions.)