Paul is guest on Mr. Happy USA Radio Show

July 15, 2009

This afternoon at 5:20PM EST I will be a guest on the JP Godsey Show on WPMH AM 670 radio in Portsmouth, Virginia. This show is broadcast from Virginia Beach to Richmond, but if you’re not in the area, or not near a radio, you can also listen live on your computer by clicking Mr. Happy. Read about Mr. Happy and his background at his website, MrHappyUSA.

I don’t know how he does it, but he gets great guests on his show from 4-6PM EST weekdays. On today’s show, Samuel L. Jackson, yes, the real one, will be interviewed! Nice to be in good company!

Remember, Money is not your life! It is simply the means to the life that you want!


New Investiphobia Introductory Video

July 14, 2009

I’ve now joined the YouTube crowd and have uploaded my first video introducing Investiphobia. To view the new video, just click Investiphobia which will take you to the Media page of the Investiphobia website. Click play and let me know what you think by emailing me at or commenting here.

Finra’s ETF notice angers ICI, firms – Investment News

July 13, 2009

Finra’s ETF notice angers ICI, firms – Investment News

I recently read and reviewed Martin Weiss’s bestselling investment book, The Ultimate Depression Survival guide on Amazon. To read the review, click the link in the blogroll entitled, Paul’s Reviews of Books on Amazon.

My concern with the investment advice offered in this book is the use of leveraged ETF’s, which FINRA recently deemed unsuitable for individual investors. This article from Investment News describes FINRA’s decision and the reaction of brokers, leveraged ETF providers, and advisors. These ETF’s appear to offer a simple solution to a falling market, but they are actually very complex and require continuous monitoring. By necessity, any discussion of leveraged ETF’s is technical.

My main point is that the DIY, do it yourself, investor should avoid leveraged ETF’s and, quite frankly, I’m not sure most advisors should utilize these funds either.

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The End of Common Sense

July 13, 2009

Almost every financial publication, tv and radio show, has now declared the process of asset allocation dead. Amazing what happens when academics, investment guru’s, and investment sales people try to explain why they didn’t see 2008 in advance. And today, no less than the Wall Street Journal, has added to the mix with the following article entitled, “Failure of a Fail Safe Strategy Sends Investors Scrambling“, which I dugg (a net term meaning “uploaded to Digg”). Anyway, I do think that the Journal does produce some of the best titles and news reporting in journalism and the article is very well written. The reporter is not editorializing and doesn’t really indicate his opinion of the facts gathered. What is striking is the wide acceptance of the “death” of asset allocation.

Now is evidently the time for stock traders, short sellers, sector rotation, market timers, pick a strategy, because this time their previously debunked strategies will work. Now, understand I’m not against active management. But you can actively manage within a predetermined asset allocation, and based on the experts this active method of asset allocation is also dead. So, let’s apply a little commonsense.

A phrase that all of us have heard, and which is already in a previous post of this blog, describes in easy to understand terms the process of asset allocation.

Don’t put all of your eggs in one basket!

Everyone thinks that advice is no longer valid, it’s dead. Investment management is not a short-term venture. Ignore the noise and the naysayers, it is times like these when the snake oil salesmen make a very good living.

Speaking of “ignoring the noise”, try Mike Piper’s excellent blog and book, The Oblivious Investor. He advocates indexing more aggressively than I do, but his blog and book are both well-written and you might enjoy them.

As always, remember that:

Money is not your life. It is simply the means to the life that you want!

Asset Allocation

July 9, 2009

In the book, Investiphobia – You Can Invest Without Fear, you will not find any complicated investment terms or any guidance on how to invest your money. You will learn how to “invest without fear”. The book is helpful regardless of the method of money management you use. It does not recommend a particular investment approach or any particular type of investment.

I am in the process of writing the second book, tentatively titled; The Investiphobic Portfolio – What to Expect from your Advisor. This book will be in the format of a cookbook with chapters on individual ingredients (stocks, bonds, cd’s, etc.), prepackaged ingredients (mutual funds, ETF’s, variable annuities) and basic recipes that you could expect an advisor to choose based on their money management method and your investment objectives. It will contain specific guidance on the management of money and the types of investments that your advisor will most likely use in the management of your investments.

Many advisors use some form of asset allocation. The concept was created by economists who were studying various money management methods with the hope of reducing the risks associated with investing. Asset allocation is simply spreading your money across different types of investments so that a substantial fall in one might be offset by a rise in another. A common phrase that supports the concept of asset allocation is; “Don’t put your eggs in one basket”. The theory is based on using investments that tend to move differently when compared to each other. A simple example is putting a portion in stocks and a portion in bonds. Over long time periods, stocks tend to perform differently than bonds. Your advisor may break the stock portion down into large, middle, and small companies and add international and emerging markets to the mix. You might also add a small portion in commodities. Bonds may include short, intermediate, and long-term bonds, high yield bonds, and foreign bonds. The different types of bonds and stocks also have different performance over time. What your advisor recommends, as always, should be based on your individual goals.

In Michele Singletary’s July 5th column, she covers asset allocation and recommends a very good introductory book, Asset Allocation for Dummies. Like me, she doesn’t like the word “Dummies” but likes the series. I actually just bought Web Marketing for Dummies because I am a novice at blogging and creating “buzz” on the internet, so should you buy any book in the series, please don’t call yourself a “dummie”! Here is a link to her article, The ins and outs of asset allocation.

In the article, she writes, “I know a lot of people have pulled back from investing. I understand why. The stock market has been so frightful and the losses so great. Some investors have even declared that asset allocation failed them in the recent market downturn.” Her observations are shared by many and my book, Investiphobia, was written specifically to help investors avoid making decisions based on short-term time periods. Her article is very well worth your time. Asset allocation did not fully shield investors during 2008 because almost all broad investment categories fell. She points out, over the long run, asset allocation is a very good technique that is still valid for most investors.

Michele Singletary is a well-known, nationally syndicated, personal finance columnist and her column is carried by over 120 newspapers. She is also the author of several books and I recommend them to you. On my website,, you will find her book, Spend Well, Live Rich, and my review under the Recommended Reading tab. You can subscribe to her newsletter by a free online subscription to the Washington Post. I recommend her column to anyone interested in learning more about personal finance.

As always, remember that money is not your life. It is simply the means to the life that you want!

Fear or Phobia

July 8, 2009

First, a few thoughts on the world of blogging, podcasts, and internet news. I discovered a neat feature available through Google at This feature allows you to enter keywords that might appear in news stories that you are following so that Google can email you when any new story appears that relates to your keyword. As an example, like many, I have been following the Madoff story. By entering “Madoff” as a keyword, any new story that Google finds regarding Madoff is sent to me by email. And there is no charge for this service! It is a great time saver, but it’s not perfect.

One of my alerts is “SEC” or Securities Exchange Commission. Unfortunately, SEC often means the South Eastern Conference for NCAA sports. As football season approaches, most of the stories for the SEC are not exactly what I am looking for, as I graduated from an ACC school. Another alert has “fear” as a keyword. Any story produced by Cape Fear Business News makes it to my inbox. But you still find many stories that you might not otherwise find.

One of my alerts is for the keywords, “fear”+”invest” and I discovered a story in the Chicago Tribune written by Gail Marks Jarvis. Gail is a very well known nationally syndicated columnist and in the July 5 issue of the Tribune she wrote a very good column entitled, “Fear can force more planning, smart investing”. Here is a link to the article,,0,3774957.column?obref=obinsite

The article provides tips for investors from young to old and points out in a very direct manner the possibility that Social Security and Medicare may be weakened by the time the younger generation becomes eligible. Obviously, the burden and responsibility for our retirement is up to each of us. The more concerned we are about our retirement, the more motivated we are to save and invest to prepare for it.

If you look at the future, and specifically at your retirement, it is reasonable to experience fear when you think of Social Security and Medicare. What will they be when you become eligible? Fear, based on knowledge, is a helpful motivator. But, what if it becomes a phobia?

Investiphobia is caused by fear that becomes irrational and persistent. Where fear can be a motivator for the good, phobias discourage us from finding a solution. At, “motivate” has four antonyms. For those of you who haven’t heard the word “antonym” recently, you might recall that it describes words that have the opposite meaning. The four antonyms of motivate are: Depress, Disconcert, Discourage, and Dissuade. None of these antonyms help an investor handle their portfolio! When fear becomes a phobia, the investment process is disrupted. Depression, disconcerting, discouraging, and dissuading demotivators are extremely destructive to an investment portfolio. When you suffer from Investiphobia, you will find it difficult to make a sound investment decision.
Fear can be a good motivator, but not if it develops into investiphobia! If you think you suffer from investiphobia, you need to get the help of a qualified fee-based advisor or planner.

Back to Gail Marks Jarvis. She wrote another excellent column back in 2007. Here is a link, and I highly recommend this article!,0,1720366.column I particularly like the cockroach analogy, although it isn’t as appealing as my little squirrel! Gail’s column is now on my reading list and I have also ordered her book. I will let you know what I think in a few weeks. She maintains a website, and I recommend it to you. It is at

What is the price of worrying?

July 5, 2009

I found this article interesting. It was written by Caryn Colgan, the Denver Karma Examiner for Worrying can lead to investiphobia and Caryn does an excellent job of presenting the costs of worrying.

For some of you, this article may be a bit beyond your comfort zone, but her points are very valid. Besides, when was the last time you read something from a Karma Examiner? Enjoy, Paul

What is the price of worrying?

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Fear still here?

June 16, 2009

Radio Show Coming Soon!
Investiphobia Radio

A few days ago, Investment News had the following headline,

Headline on June 15, 2009

Headline on June 15, 2009

Click here for full article.

Barclay Wealth, a division of Barclays Capital based in London recently completed a survey of 2,100 wealthy investors and found that although 88% believe that there are good investment opportunities available, 68% are not investing because “they believe the risks of further price declines is too high”.

This is worth repeating, 68% of “wealthy investors” are too fearful to invest in the markets. This group of investors has more experience investing than the average retail investor and many are very knowledgeable. But, they also have more to lose and most haven’t lived through a market like 2008 and 2009. In some ways, this confirms an April article also in Investment News that had the following headline,

A Lost Generation of Investors

A Lost Generation of Investors

Click here for the full article, A Lost Generation of Investors.

Over the course of my career, I have encountered many people who were not alive during the Great Depression but were still emotionally impacted by it. Having heard about it from their parents, they learned wealth destroying principles like, “Never buy Stock” or “If it’s not guaranteed, don’t buy it”. These investors zealously protected their principal, but unfortunately missed out on the tremendous growth of the stock market. They fell behind those that approached investing rationally.

Stock market investors understand that measuring returns over one year is far too short. Jim Cramer, of Mad Money, said last fall that you should pull your money out of the stock market if you need it within the next five years. He was criticized for saying this because he supposedly caused a panic. In reality, you shouldn’t invest in the market if you need the money within at least five years, preferably more like 10. There have been very few ten year periods in the US Stock Market’s history where the return was negative. There have been no fifteen year periods with a negative return. The shorter the time period, the more likely it is that you could experience a loss. Savvy investors remain invested regardless of market conditions, but they do not invest money that they may need in the short term.

Based on what we see happening today, investors may leave the market permanently and another generation may suffer as a result. The purpose of my book, Investiphobia, is to help prevent this from happening. It was written specifically to address the fears that become Investiphobia, a condition that paralyzes and prevents sound investment decisions. It really isn’t hard to invest successfully, but it is impossible if your fears prevent you from investing.

Avoiding “Fund Poisoning”!

June 3, 2009

This post may make you miss the cute squirrel and the hard-shelled curmudgeon as it will be a little more technical, but still understandable. I am committed to the KISS principle, which stands for Keeping Investing Simple and Straightforward. I’m also working on my second book, tentatively titled: The Investiphobic Portfolio – What To Expect From Your Advisor. It should be available before year-end, perfect for Christmas, Birthdays, of any day ending in “Y”(sorry, couldn’t resist)!

In some ways, this book is the missing middle section of Investiphobia. The middle section became too large and I, as you know if you read the book, became uncomfortable providing detailed investment information that could be used by the “do-it-yourselfer”. This is because I strongly recommend readers, who suffer from investiphobia, to avoid the “do-it-yourself” approach and hire an advisor. Because I strongly made that point in the first book, I am comfortable getting into investment details and philosophy in the new book. The Investiphobic Portfolio will still be easy to read and understand, hopefully not boring, and it will contain an overview of individual and packaged investments, asset allocation, and investment objectives. I think it will be in a “cookbook” format, since I don’t know anyone who hasn’t used a recipe at some point in their lives. So individual investments, like stocks and bonds will be in the chapter on Individual Ingredients and mutual funds will be in the chapter on Prepackaged Ingredients. Recipes for Income, Growth, or Balanced portfolios will be in the Recipe Chapter. Feel free to comment if you either love or hate this idea.

Speaking of recipes and eating, what’s your favorite meal? An all-American cheeseburger with fries? Fried Chicken with Cole Slaw? Lo Mein? Spaghetti Carbonara? We all must eat for the same basic reason but we each have our own preferred styles. A friend of mine has never eaten anything other than oatmeal for breakfast. It works for him. Whenever you dine out, there is always the small risk of food poisoning but it rarely happens in the US and, for some adventurous diners, there are meals that are simply worth the risk. Sushi comes to mind, but not for breakfast. With food, there are different cuisines and, with investing, there are different approaches. The new book will contain a section about the debate professionals and regular investors have between active management and passive indexing.

Let’s start with passive indexing. There are many, many, stock indexes but most people are familiar with the Standard and Poors 500, or S&P500. If you watch, listen, or read the news, this is one of the most common US Stock indexes reported each day. The S&P500 Index represents larger companies in the US Stock market, minimum company size is $3Billion, and the 500 stocks that it contains change periodically based on criteria established by the index provider, Standard & Poors. Although you cannot invest directly in the index, there are several ways to invest passively in funds that are designed to “mirror” the performance of this index. These funds come in different formats and examples include, Spyders, Vanguard S&P500, IShares S&P 500, Schwab Index 500, etc. Investors who buy this type of fund are not attempting to “beat the index” or “outperform” it. Rather, they simply want to participate in the performance of the index.

Active investors believe that it is possible to beat the index. They either buy specific stocks themselves or invest in funds whose managers buy specific stocks. Specific, in this case, just means that the manager isn’t attempting to match the index. They are attempting to beat it by investing only in the stocks that they believe will outperform the index. So, an active fund might only invest in 20-100 of the 500 stocks in this index. If they are right, they outperform and, obviously, if they are wrong they underperform. Sometimes this under-performance is severe and gives the investor a bad case of “fund poisoning”!

So, to avoid fund poisoning, you could avoid active investing altogether and invest only in index funds. This is actually a valid solution, keeping in mind that you would still need to invest in other index funds for midcap, smallcap, international, and emerging markets. Not to mention other asset classes like cash, fixed income, etc. But that will require more space and more explanation and I committed to keeping this post simple and straightforward. Index funds typically have very low expenses in comparison to active funds, so this approach is also less expensive.

My approach is to combine active and index methods. By using the index funds as the primary ingredient, the chance of fund poisoning is reduced. The effect is certainly less than it would be with no indexing. The decision to only invest in active or passive funds, or to combine them, requires much more information than I am offering in this post. But, it is a decision that should be consciously made. Active fans and index devotees would both be disappointed in my lack of a decision, but for me, it is the best compromise.

For those that would like to investigate the indexing approach, I am adding a new book to my recommended list. Actually the book isn’t new, The Boglehead’s Guide to Investing came out in 2007. The authors make a compelling case for investing in index funds, provide guidance in designing investment plans, and they also started a forum,, where investors can discuss issues relating to investing and investment management. All of the books authors, Taylor Larimore, Mel Lindauer, Michael LeBoeuf, and John Bogle, will probably be reading and writing with you should you visit their blog. It’s free, but you will need to create a screen name and a password to access it. Of the investment websites I have visited, and it’s quite a few, this forum consistently educates and entertains. Keep an eye out for several great authors with books that are also on my recommended reading list!

I’m still looking for a forum of active investors that provides consistent advice. The discussion area at Morningstar’s website is currently in the lead, but few websites are able to prevent the occasional member from giving incorrect, or sometimes bad, advice. When discussing active investment management approaches, the risk of fund poisoning is increased. However, Morningstar is the leader in information on mutual funds and exchange traded funds and I use their software regularly. The discussion group at Morningstar is available at, just click “Discuss” on the far right. You can browse the discussions without an ID or password. There is also some excellent educational material on this website that you might find helpful.

The only difficult part of writing the new book is that I am absolutely committed to presenting investments and investment management without recommending any particular approach. Investors, both active and passive, can experience investiphobia and my goal is to offer all who experience this condition a cure. If you felt during this post that either active or passive were favored, it was unintentional. It is not my goal to teach investing or investment management but to help you find the sources that can help you regardless of the method you prefer.

Like eating sushi or other raw or undercooked foods, some diners think the risk of food poisoning is worth the taste and flavor of more exciting food experiences. Some investors believe that the risk of fund poisoning is worth the excitement of beating the market. But, make no mistake, fund poisoning can be as irritating and painful as food poisoning. The decision is up to you, and possibly, your advisor.

And remember, Money is not your life. It is simply the means to the life that you want!

WARNING: Another Nature Related Post

May 24, 2009

Transfers can be tedious

Transfers can be tedious

OK, I know the squirrel post might have been pushing the analogy envelope, but this little alligator snapper wanted to help us learn about investing as well, seriously.  I got a call this morning from my talented and able operations/marketing manager and significant other, neither title is enough to describe all that she does to help me.  Evidently, while taking her mom to the airport, she saw a turtle attempting to go from one lake to another on a busy highway near her house.  To avoid missing the plane, Kim got her mom to the airport safely and came back to find the turtle unharmed, but still in the right lane.  Knowing that I was from Florida and experienced with odd creatures, she called me and I rushed over to help.  She kept the turtle safe, directing traffic to another lane.  He wouldn’t give up and was still attempting to cross the road when I arrived.
OK, I'll let you help me...

OK, I'll let you help me...

To make it, the turtle would have to cross six lanes of traffic and scale a concrete barrier in the median.  Clearly the turtle did not think things through.  He wasn’t suffering from any fear, actually he might have caused fear, given that his head was the same size as my fist.  But, there was no way he could change lakes without help.  Shortly after I arrived, a Virginia Beach Police Officer noticed us, and subsequently the turtle, and blocked the lane until we could help the turtle into the back of Kim’s Outback.  In very little time at all, we transferred the turtle to a new lake where he immediately swam out to find some fish.  Happy to have helped, Kim and I went back to a normal Memorial Day weekend.
Almost There!

Almost There!

So why, you might rightfully ask, is this story appearing in an investment related blog.  Here’s a retelling of the same story that, hopefully, might be helpful to you.

I got a call this morning from my talented and able operations/marketing manager and significant other, neither title is enough to describe all that she does to help me.  Evidently, while taking her mom to the airport, she saw an investor attempting to make a major change without considering the potential dangers. To avoid missing the plane, Kim got her mom to the airport safely and came back to find the investor unharmed, but still in between markets.  Knowing that I was an investment advisor and experienced in working with all sorts of investors, she called me and I rushed over to help.  She kept the investor safe, directing other investors around him.  He wouldn’t give up and was still attempting to make a major change, heedless of the danger, when I arrived.

To make it, the investor would have to beat several obstacles before completing their plans.  Clearly this investor did not think things through.  He wasn’t suffering from any fear, actually he might have caused fear, given that he was pretty scary.  Even though he was confident to do it himself, there was no way he could make this big a change without help.  Shortly after I arrived, a regulator noticed us  and blocked everything until we could help the investor try a new route.  In very little time at all, we transferred the investor to the new portfolio where he immediately began to look for some dividends to harvest.  Happy to have helped, Kim and I went back to a normal Memorial Day weekend.

Even when you are experienced, and fearless, sometimes it helps to ask a professional for help.  In this case, it was even free, but when it comes to investing you will probably have to pay for professional help.  Experienced and secure investors, like our friend the alligator snapper, may be fine handling things on their own the vast majority of the time.  But when making major changes, a conversation with your attorney, CPA, financial planner, or advisor, can help you plan for unexpected obstacles.  Investors like these, may benefit from an hourly charge just to get them through unusual situations like transitioning to retirement, selling a business, handling an inheritance, etc.  Even if you are fearless, the second half of my new book, Investiphobia – You Can Invest Without Fear, may still be helpful to you. The second half provides a detailed look at brokers, advisors, financial planners, accountants and attorneys and also guidance to help you find the right one for you. Don’t hesitate to ask a professional if they can help.  And, if your more scary than scared, try not to scare that professional away!

The book is available at Amazon for $13.99

PS. For those that really want to find flaws in the analogy, yes, if it had been a real investor with a real investing issue, I would have provided the Form ADV and Schedule F that regulators require Registered Investment Advisors give to all prospects and clients. But, the regulator/policeman that oversaw our help with the turtle was happy somebody else grabbed it by the tail!

Happy Memorial Day Weekend!