Investing for retirement

The Anti Free Lunch

The Bad and The Ugly

Broker Conflict Annuities Churning Pushing under writings Pump and dump Not fiduciaries

Inflation Free lunch Manipulation Black Pools Ponzi

Mutual fund Analysis by Forbes

Non-Taxable Account Taxable Account

Expense Ratio .90% Expense Ratio .90%

Transaction Costs 1.44% Transaction Costs 1.44%

Cash Drag .83% Cash Drag .83%–

Tax Cost 1.00%

Total Costs 3.17% Total Costs 4.17%

The Bad and the Ugly 2

Mutual fund success 30%How clients drive bad outcomesHow funds come and goMutual fund survivorship ( Review of Finance )

20% Lower when dropped funds are includedMutual fund broker commission

4.5 % – 5.75%Stock picking letters ( Like a tout at the track )

Advisor and Broker Knowledge

Advisors Asset Allocation Style – Sector rotation

Brokers www.finra.org/Brokercheck The company line What makes money for them Why are they dealing with you?

Who are the Lions?

Treasury Federal Reserve Pension Funds Mutual Funds Insurance Companies Hedge Funds Brokers Banks

Being a Mouse with Lions

Real interest rates

 

Interest and inflation(1970 to 1980 105.8%)

Inflation in Weimar Republic

Stable Interest chart

Fixed Income Securities

Banks - Checking, CDs, Safety Box TIPS – Insurance not a good

investment Everbank Foreign Currency CD

everbank.com

Foreign Bonds Corporate Bonds in IRA

(zionsdirect.com) Tax Free Municipal Bonds or Funds

Bond Fundamentals

Maturity date

Yield to maturity

Discount / Premium

Callable

Taxable

Revenue source

http://screener.finance.yahoo.com/bonds.html

Alternate fixed Income

• Closed End Funds cefa.com

• Royalty Trusts• Utility stocks• REITs• MLPs• Diversify and Ladder

REITs

It represents ownership of property Depreciation Tax advantage Use all of the stock tools to pick Look at their properties

Royalty Trusts

99% Oil and Gas SDT,CRT,SBR,SJT,BPT,CHKR,PER,ROYT

Not actively managed Earnings distributed Depletion tax advantage Will run out Think of it as an energy cost

insurance policy

LPs

Nearly all oil related Use deprecation to show little incomePay a good dividendBasis is reduced by: dividend-income Usually mid stream pipelineTax deferredMust be inherited to avoid big tax hit

Why buy stocks?

Company Fundamentals - Stocks

Income year and quarter – Sustainable? GS&A Growth

Balance Sheet Inventory - Square root rule Debt Sneaky debt items Quick ratio

Company Fundamentals – Stocks 2

Other Yahoo items In depth at www.sec.gov

Litigation Pension liability Auditor Qualification of opinion Derivatives Capital leases Related party transactions

Company Technical Analysis

Moving average Look at 50 day and 200 day Breakout of 50 above 200 is a buy

signal MACD and RSI

Positive are buy signals Volume Stock Technical Analysis web site

www.stockta.com

Buying stocks

Check the market for direction Find candidates

Things you like Graham Variations Candidates from ETFs Low P/S, P/E, P/B

Do Fundamental analysis Use Technical Analysis for timing Diversify

Indirect ways to own stocks

Mutual funds Good Managed

Bad Lower outcomes, tax

Closed end funds (Also works for bonds)Good Managed

Buy at a discount

Not driven by their owners

Tax Efficient

Bad Sell at a discount

Indirect ways to own stocks 2ETFs Good Tax Efficient

Low costDo as well as the market

Bad Not managed

Smart Beta ETFsGood Tax Efficient

Low costMay do better than the market

Bad Added risk of the model

AAII Recommended ETF Portfolio

As of June 30, 2014 Weight YTD 2013 Expense

Guggenheim S&P equal weight 500 RSP 40% 8.4 35.6 .40

Guggenheim MidCap 400 Pure value RFV 20% 6.5 38.3 .35

Guggenheim SmallCap 600 Pure Value RZV 20% 2.9 45.1 .35

iShares MSCI Frontier 100 FM 10% 9.9 25.6 .79

Vanguard REIT index VNQ 10% 17.7 2.4 .10

Performance 100% 7.7 33.7

For Comparison S&P 500 SPY 100% 7.1 32.2 .09

Options Put is an option to sell

Use Puts as a way of buying Never sell a put if you do not want to own

the stock Buy puts on sinking ships

Call is an option to buy Sell covered call for income Buy a call in place of stock for short term

gains Use both for Pending major disruption Opportunistic

FOREX www.forex.com

Fastest way to make and loose money

Trillions change hands every day Can be irrational both good and

bad Use Vegas money not Investment

money

Gold

• Does not keep up with inflation

• Costs to own

• Not productive

• Is insurance against rapid inflation

Assent Allocation

No debt: House, car etc. Emergency Fund – Three months 20-40% Fixed when rates are market

rates 50-70% Equities 5-10% Specialties

REITs, Closed end Funds, Royalty Trusts 0-2% Gambles Do not have blinders

Risk

Civilization Collapses -Guns, ammunition and food

Inflation – Commodities, foreign stocks and bonds, manufacture of things that will appreciate and short term securities

Deflation - Longer term bonds, money and not Commodities

Expropriation – Investments outside of the US Formerly only a risk in third world countries

Rules

Understand it or don’t do it Know the source of the money Be bold when others are fearful

and be fearful when others are bold

Never give a Broker control Use only FINRA Brokers and SEC

Advisors Do not buy Annuities