Has Warren Buffett Lost His Golden Touch?

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In this week’s show Brian and Bo analyze Warren Buffett’s annual Letter to Shareholders. It does not matter the market the conditions, he always has a simplistic view and understanding of investing and can relay that information in layman’s terms. Basically, Buffett has still got it. Brian and Bo spend the podcast looking into the highlights and giving you their thoughts on Warren’s words. Many of the things that are addressed in the letter are processes that we have always practiced and shared with you guys. Here are the key takeaways:

  • Keep it simple.
  • Have a plan and stick with it.
  • Do not let outside sources effect your game plan (See Above).
  • Stay away from investments you do not understand.
  • Remember your goals.

Warren went on to touch on a few of his ventures and why he still feels there is value outside of a portfolio of index funds. Being investment guys we threw this in as well:

  • Insurance – He touches on Geico’s Float amount and how it effects their balance sheet.
  • Regulated Capital – Why he feels Utilities and Freight work for him.
  • Manufacturing Service and Retail Outfits – Warren touches this topic but keeps things pretty generic do to competition.
  • Finance and Financial Products – He keeps this section short and, rightfully so because, he states it is their smallest sector.
  • Investments – He touches some of the investments that he has made and why they have been successful.

The guys had a great time recording this podcast even though Brian felt that he was reading too much. We find ourselves looking forward to Warren’s letter every year and hope that you continue to look forward to hearing from us every two weeks.

Active vs. Passive Investing: Which Works?

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In this episode Brian and Bo dig into the active vs passive argument. It seems like there is a constant battle among investors and advisors about their stance on active and passive management. Brian and Bo share their opinions and give a behind the scenes look of their investment philosophy.

It is no secret that the U.S. equities market “knocked the ball out of the park” in 2013. That is not to imply that it is time to dump all of your money back into the market. This week we are hopefully going to put this argument to rest (for now). While you are listening to this episode it is important to remember that, “there is more ways than one way to skin a cat.” The guys base the show around an article from Morningstar, Where It Pays to Be an Active Fund-Picker, by: Lee Davidson.

Investopedia defines Active, Passive, and Index Investing as follows:

- Active: An investment strategy involving ongoing buying and selling actions by the investor. Active investors purchase investments and continuously monitor their activity in order to exploit profitable conditions.

- Passive: An investment strategy involving limited ongoing buying and selling actions. Passive investors will purchase investments with the intention of long-term appreciation and limited maintenance.

- Index: A form of passive investing that aims to generate the same rate of return as an underlying market index. Investors that use index investing seek to replicate the performance of a specific index – generally an equity or fixed-income index – by investing in an investment vehicle such as index funds or exchange-traded funds that closely track the performance of these indexes.

Brian and Bo use this podcast to explain their thoughts on the different investing styles as well as when and where to put each of them to use. This week’s show is a great place to start when designing your portfolio and gives you a “peak-behind- the-curtain” at the guy’s view on the investment selection process.

Don’t forget to go check out our Twitter feed to get more frequent access to us as well as sneak peeks and behind the scenes looks at The Money-Guy Show.

Knowing When to Go Pro

Hiring a professional financial planner could possibly be the key that unlocks the door to your financial success.  At the same time, choosing the right advisor to work with is an important decision that can often seem overwhelming.  In today’s show, we discuss the services that planners will and will not provide as well as key things to look for when hiring a pro.

In the March edition of MoneyAdviser, Consumer Reports outlined what typical fee-only planners will and won’t do for their clients:

What they will do:

  • Help you figure your net worth:  Typically, a planner will have the client gather the necessary data and then create a statement to uncover other planning opportunities, such as insurance analysis or estate planning.  (Do-it-yourself tip:  Collect current statements for all assets and liabilities and use an online net worth calculator, such as Mint or Yodlee, to determine your net worth each year.)
  • Advise you on 401(k) investments:  Your planner should be looking at all the pieces of your financial puzzle, including your 401(k) to ensure that your saving and investing goals line up across the board.  (Do-it-yourself tip:  See if your 401(k) plan sponsor offers access to investment guidance or check out the online retirement-planning program, Financial Engines, for additional support.)
  • Help you invest a lump sum:  A planner should be able to offer tax-efficient investment advice to their clients, as this is a core activity of financial planning.  (Do-it-yourself tip:  Use Morningstar software to research mutual funds and stocks for your portfolio.  Also, check out Bo’s Money-Minute about investing in a lump sum vs. dollar cost averaging.)
  • Determine if you’re properly insured:  Your planner should be able to evaluate your insurance needs, as well as refer you to an agent that can provide the coverage.  (Do-it-yourself tip:  Do as much research as possible and shop around for the best rates.)
  • Assess if you’ve got enough to retire:  A planner can determine whether you are on track for retirement or if you need to explore other options, such as working longer or changing your lifestyle.  (Do-it-yourself tip:  Assess your potential income sources, including Social Security, and use an online tool to calculate where you stand.  Consumer Reports recommends T. Rowe Price’s Retirement Income Calculator and Analyze Now’s Free Retirement Planner.)
  • Coordinate your retirement income:  Planners can determine the best method for drawing funds from your various retirement accounts, while considering tax consequences.  (Do-it-yourself tip:  Consumer Reports advises that unless your retirements consists entirely of Social Security and a pension, you might want to consult a professional on this one.)
  • Help you plan for college funding:  A planner can guide you on the best ways to finance your child’s education.  (Do-it-yourself tip:  Visit www.collegeboard.com, www.savingforcollege.com, and www.finaid.com for additional resources.)

What they won’t do:

  • Help you pay down debt:  As a general rule, fee-only financial planners refer such clients to a debt counselor or a bankruptcy attorney.  (Do-it-yourself tip:  Contact the National Foundation for Credit Counseling if you need help with debt.)

The gray area:

  • Help you control your spending:  While many planners recommend following a budget, it’s not cost effective for you or the planner to spend hours together developing a detailed budget.  Most planners are interested in overall cash flow and will recommend cutting back if needed.  (Do-it-yourself tip:  Create a spreadsheet or utilize budgeting software like Quicken, Yodlee, or Mint.)
  • Create an estate plan for you:  Planners can help you decide the structure and tax efficiency of your estate, but an estate-planning attorney will be needed to draw up wills, trusts, and end-of-life documents.  (Do-it-yourself tip:  Contact an attorney to prepare or review your documents.)

If you decide that hiring a financial planning professional would be beneficial for you, the following credentials should stand out to you:

  • Certified Financial Planner (CFP):  holder has passed a 10-hour exam, has at least three years’ financial planning experience, and has completed an approved course of study.
  • Chartered Financial Consultant (ChFC):  requires eight college-level courses in financial planning and 30 hours of continuing education every two years.
  • Certified Public Accountant/Personal Financial Specialist (CPA/PFS):  CPA with specialized training in personal finance.
  • NAPFA – Registered Advisors:  holder meets strict education and professional requirements for membership in the National Association of Personal Financial Advisors, for fee-only planners.
  • Chartered Financial Analyst (CFA):  holder completes a series of three six hour exams and has four years of qualified work experience.

Hopefully this information will be helpful if you are considering hiring a professional to guide your finances.  Check us out on Facebook, YouTube, and please leave any questions or comments below!

 

Links to other things mentioned in today’s show:

Is This the End of Popping Vitamins?
On the Job, Beauty Is More Than Skin-Deep