How products, people, or ideas move from unknown to “cool” and back again was explored by Malcolm Gladwell, in his book The Tipping Point: How Little Things Can Make A Big Difference.  He offers a unique premise whereby people he calls Connectors define what is cool for Mavens who in turn popularize the new fad with Salesmen, who take the message to the world.  By this process, products, services, or fads can suddenly be thrust from obscurity to cool.

Take, for example, Crocs sandals that became the rage with pro-athletes and movie stars. These cultural icons shamelessly donned these strange pink rubber slippers. In the blink of an eye, Crocs were strangely hip. Croc kiosks offering a wide array of colors and sizes became ubiquitous in airports, malls and retail outlets to cater to kids, moms and businessmen alike.

Then one day someone ran into George, their profoundly “uncool” neighbor, wearing his neon green Crocs. For some reason, they just didn’t look the same on George — who was pale and out-of-shape, wearing shorts several dreadful inches above his knees — as they did on Kobe Bryant. Crocs were done. The complete uncool to cool and then back to uncool cycle had transpired before our eyes.

Unfortunately, investment strategies have waves of cool and uncool as well.  When we started MarketRiders, we knew that our biggest marketing challenge would be its lack of cool.  How could an investment philosophy that replaces the casino-like thrill investing with a sane, buttoned-up institutional method, ever compete with the daily fun and excitement of a Jim Cramer?

But Gladwell’s process seems to be taking hold and low-cost investing seems to suddenly be getting, well, cool.  New websites are launching every month to tout the merits of the MarketRiders approach.  Schwab, Fidelity, and Vanguard are actively swapping investors out of expensive mutual funds and into ETFs.

Cool or uncool, we’ll keep wearing our version of pink Crocs not because Kobe wears them or that our neighbor George does not. No, we stay faithful to our approach because we simply love how this pair of sandals fits.

How Mutual Fund Managers Are Like Cigarette Makers

Investors who have decided to enter this tournament via day trading, market timing, technical analysis or even tactical asset allocation, need to pay close attention. You are playing a game that is very difficult to win, especially if you have fewer resources, knowledge and technology than your competition. Oh, sure, you might be lucky enough to win a few early hands but the long-term outcome is fairly predictable. Such investors live with a prevailing sense of unrest knowing that they have shown up to a shotgun duel carrying a pocketknife.

Wealthy families, endowments and elite institutions practice a different investment approach. These investors are wise enough to avoid, paying fees to managers trying to “beat” the averages in public stock markets. Sure, they may invest in private equity and venture capital where they enjoy an advantage via access to the best deals and terms. But when it comes to public markets, these investors commit a large portion of their portfolio to passive indexed strategies – the MarketRiders approach. The only bet such investors are making is that the world is in fact not coming to an end any time soon and that its markets, companies and their portfolio will continue to grow over long periods of time.

This approach provides amazing freedom from having to stare at your portfolio several times a day. Unconcerned about the daily gyrations of Jim Cramer and the rest of the bobble-headed finance media, long-term and disciplined MarketRiders can go about their daily lives with peace of mind. Sure, the market is down May and your portfolio probably dropped with it, but with a retirement time-horizon that is years away, your portfolio will not only recover, but grow quite nicely.  And by rebalancing you are taking advantage of these swings.  This knowledge frees you from staring at a computer monitor and gives you time to go about the real business of living your life.  In the end, isn’t that what the money is actually for?

1.  Sign up for a MarketRiders 30 day Free Trial.  There is a “sign-up” link on the top right of www.marketriders.com.

2.  You will be asked to create your first portfolio and you’ll have 2 options:  “Build It For Me” and “Let Me Build It.”  Choose “Let Me Build It.”

3.  In Step 1 of 5, you’ll see a list of templates that you can use in a pull-down menu.  The CNBC model portfolios are listed in these templates.  Select the portfolio that you’d like to use.

4.  In Steps 2 and 3 of 5, you’ll be able to alter the asset allocations and ETFs in the CNBC portfolios.   If you don’t want to change anything in the CNBC portfolios, click “Next” at these steps and go to Step 4 of 5.

5.  In Step 4 of 5, name your portfolio and enter the amount you want to invest so MarketRiders can calculate the number of shares you need to purchase of each ETF and email you a list.

6.  Once you’ve purchased the ETFs, enter the costs into MarketRiders and you’ll receive an email notification when the actual allocations stray from the CNBC targets so you can then rebalance portfolio.  On the dashboard, you can “Change Alert Settings” to make these alerts more or less frequent.

Read more about the CNBC portfolios here:

www.cnbc.com/id/34726386

Sadly, it was no surprise to learn the Goldman Sachs threw their clients “under the bus” by deceitfully selling them mortgage securities while at the same time making a killing on shorting the housing market.  Their slogan, “Helping clients build and preserve their financial wealth” needs a minor adjustment. “Helping clients build and preserve OUR financial wealth.” This is a paragon of the Wall Street ethic – make money (hmmm – a lot of money) even if you must trample your client under foot. When you manage your own diversified portfolio of ETFs through a MarketRiders account, you truly get Wall Street out of your pocketbook by removing the intermediaries.

The Wall Street gurus seem to have a closet full of tricks to help investors outperform the market. Unfortunately, most of this advice is unproven and ineffective. In this MoneyWatch article, James Picerno points out one of the ONLY scientifically proven secrets to boost portfolio returns year-upon-year – disciplined rebalancing. Mr. Picerno underscores that rebalancing can deliver a 0.5 to 1.0 percentage point annual bonus compared to what you’d earn on the same portfolio that’s left alone. Our research shows that by using MarketRiders’ advanced rebalancing algorithms rather than a simple calendar based approach, investors add up to 2% additional growth in some portfolios and market conditions. We have more on this topic here: “How Often Do I Need to Rebalance?”.

When it comes to retirement investing, remember that you don’t have as many friends in the financial services industry as you think. By taking the time to learn the virtues of low cost indexing, global diversification and disciplined rebalancing, you will truly build and preserve YOUR wealth.

“Just how much are you going to need in order to retire comfortably?” the article challenges each of us to ask ourselves.  Surprisingly, “fewer than half workers surveyed, 46%, had tried to calculate how much they would need for a comfortable retirement.”  The article then takes you through the steps to help you determine how much is enough.  ”Based on assumptions made, you will need to save about 20 times the annual income you need your savings to generate.”  WOW!  And to be even more secure they recommend 25 times.  NOW WHAT?!?

A plan is what!!!  First take yourself through the article’s ’simple retirement planning worksheet’ then pick up your phone and schedule an appointment with an investment adviser to jump start investing for retirement. For those comfortable tackling this on your own, consider do-it-yourself investing tools. Make sure to have all your account information in front of you to get a clear picture of your financial landscape.  It might also be helpful for you to read up on investment options available today so you are informed of their plus and minuses.  Being educated will help you navigate through the conversation as they begin rattling off terms such as ‘diversification….asset allocation….rebalancing”.  Make sure you also understand the difference between ETFs, mutual funds and index funds.  With the goal to have as much money as possible at retirement, you will want to go the route with the lowest cost yet still provide you with diversification and returns.

Congratulations, you are one step closer to retiring comfortably!

“The turbulent economy of the last two years has left accounts across the nation like beaches after a coastal storm — severely eroded. Clients in their mid- to late 60s are asking, ‘Can I still afford to retire?’ The answer depends on a person or couple’s assets, lifestyle and retirement goals. While retirement may still be feasible for the affluent, those less well-off or younger people whose modest portfolios have been battered need time to rebuild.”

So as you decide on your IRA investment strategy, consider an investment portfolio that provides diversification with an asset allocation fit to your financial goals and risk tolerance.  To protect your nest egg from further erosion, also be certain to entertain low cost investment vehicles such as exchange traded funds (ETFs) and index funds.  This coupled with a warm glass of milk should help you sleep more soundly at night!

With the way things have played out on Wall Street in the last two years, now might be a great time to reconsider your investing strategy and turn to a buy and hold strategy that provides for diversification and less risk than individual stocks.   Look to index funds and exchange traded funds to build a low cost, globally diversified portfolio using asset allocation.  Just think of all the time you will have in your day for other things.  With all the time currently spent chasing the market, now you can quickly and easily buy and hold index funds and spend a fraction of the time rebalancing your portfolio.  Better yet, if you choose to utilize one of the on-line portfolio management tools out there, like one offered by marketriders.com, monitoring and rebalancing your portfolio, to keep it in check, is a breeze. 

Who better to trust with your own money than yourself!

“If it sounds too good to be true, it probably is.”  Instead, I encourage serious retirement investors to stick with the strategy used by the world’s best investors.  Focus on asset allocation, globally diversify, keep fees down with indexing, and rebalance to stay the course.  For many that have gotten caught up in a Ponzi scheme or know of friends that have, now might be the perfect time to take matters into your own hands and start to manage your own investments.  Many of the tools available today will guide you on how to invest your money with the goal of generating the most returns for retirement, accounting for risk and time frame, at a low cost.  Try reading several Investing 101 articles that are out there as they are loaded with lots of great tips on finding the best investment vehicle for you.

Well, of course it would. Fund companies, including PIMCO, Legg Mason, and Van Kampen, say they’ve got just the thing for you: They are called tactical asset allocation funds, and a new one seems to roll out daily. Don’t believe the pitch.  No manager can predict the future of one asset class let alone multiple ones. Yet terrible odds have not kept these new funds from becoming the trendy way to invest. So what is technical asset allocation and why is it dangerous?

How It Works

Tactical allocation requires managers to predict which asset classes will lead and which will lag, and then to own securities that will benefit. Needless to say, they don’t always get it right. But that doesn’t stop some of them from charging high expenses or keeping their investing strategies opaque or both.  This approach may sound like market timing, the discredited investment strategy of jumping in and out of a market to catch upswings and avoid downturns. But tactical fund managers prefer a more nuanced explanation of their approach. They typically hold a wide range of assets, overweighting classes they find most appealing and underweighting ones they consider overpriced or otherwise undesirable. Some choose allocations based on technical indicators, others on fundamentals. Sounds great, doesn’t it, but unfortunately it simply does not work over the long-haul. Portfolio diversification, however, is an investment strategy employed by leading institutions and endowments and is a great approach for retirement. Unlike tactical allocation, asset allocation focuses on using low-cost, tax-efficient index funds in specific target percentages that are rigorously maintained through rebalancing as markets shift.

Why It Is Dangerous

Research conclusively demonstrates that only a small percentage of managers will beat any one index in any given year. When you examine fund managers’ performance vs. the index out ten years, the winners drop into the low single digits. Now imagine asking a fund manager to not beat one, but four, five or six indexes all at the same time. Statistically, your likelihood of success drops into a fraction of one percent – probably not the best bet for your retirement.