Are Warren Buffett’s Vanguard funds right for you?
Warren Buffett, one of the greatest investors, recommends we
invest in only 2 funds: Vanguard funds. There are over 9,000 mutual funds and
over 5,000 ETFs (index funds) to buy. Why did he pick just 2? He
beat 5 Wall Street guru strategies with Vanguard’s 500 Index. It is low
cost and diversified across many industries. The Vanguard 500
Index has returned about 11% per year since 1976. Buffett notes that
compounding has made him wealthy. He recommends Vanguard because it provides
high returns at low cost. His holding period is “forever.” His mantra is “we
make more money when snoring than when active.” Why don’t all investors follow
his advice: hubris
and greed! People think they or their advisor can beat the market even
though they can’t year after year. The average
investor’s managed account earns just 3.79%. Trading reduces the benefits
of compounding. Market timing is never perfect. Buffett says just ignore market
gyrations.
Social Security benefits rise in 2020
Wealthy
people receive even higher benefits in 2020: $3,011 per month. That extra
$1,800 a year comes from higher pay but a cap on their tax: incomes
over $137,700 are not taxed at all! Those who need SS benefits the
least don’t have to pay 6.2% of their income like we do. This is ‘Socialism
for the Rich’: From
the poor by law to the very rich by design. The wealthy folks’ benefits
rise but they stop paying the 6.2% tax when their income rises above $137,700.
We always pay 6.2%--they stop at the cap. The average benefit is $1,485: an
increase of $24. Most of us fear GOP
will reduce benefits to pay for their tax breaks. SS trustees
estimate a benefit CUT in 2034. GOP has called SS benefits “socialism;”
yes, Socialism
for the Rich. Plan for the cuts now!
Create your own SS supplement: https://www.amazon.com/Pay-No-Taxes-Retirement-legally/dp/1507527977
Is equity rebalancing right for you?
Rebalancing means buying and selling securities to maintain
the proportion you feel comfortable with. Example: you want to keep 60% of your
money in equities for the foreseeable future. Equities grow to 70% of your
total portfolio in a year so you sell 10% and buy the other securities to
maintain the ‘balance’ overall. But if you do this, you may have higher taxes
and a lower return over time. The tradeoff is you can sleep at night despite
the market volatility. However, it you don’t look at your account, you can
ignore the market gyrations and earn a higher return. Vanguard has provided an
analysis of different rebalancing strategies (timing and portfolios) to
illustrate the relationships. However, John Bogle, the founder of Vanguard,
advises: “I
don't think you need to do it. And sometimes rebalancing improves your
returns. Sometimes it makes them worse.” “There is a comfort level …. So it's
a behavioral problem.” If it makes you feel better, rebalance. However,
don’t expect the market
returns of 11% over time: $250 a month compounded at 11%
provides about $1 million in 34 years vs $500,000 at 8%. Big deal!
Take Bogle’s advice: https://www.amazon.com/Dont-Re-balance-Your-Portfolio-Research/dp/1508802386
Is a balanced fund right for you?
Instead of rebalancing (selling and buying for fees) on your
advisor’s orders, maybe a better plan is keeping a balanced fund fully funded. Take
the Wellesley
Income Fund. This 40 year-old, income-oriented balanced fund offers
exposure to stocks and investment-grade bonds. This fund is unique in
allocating about one-third to stocks and two-thirds to bonds. The fund’s stock
holdings are focused on companies that have historically paid a
larger-than-average dividend or that have expectations of increasing dividends.
This focus may provide a higher quarterly income distribution. As a result, you
earn a consistent 8-10% return over time without wild market swings.
One of Vanguard’s Top Ten: https://www.amazon.com/Vanguards-Top-Ten-mutual-funds/dp/150073909X
Why compounding your earnings is considered a ‘miracle’
Compounding is a miracle because you can accumulate over $1 million by
investing just $3,000 during your working years. You can expect to earn the market
returns of 11% over time: $250 a month compounded at 11%
provides about $1 million in 34 years vs $500,000 at 8%. That is a quite a
difference! Of course you must invest in a
low-cost stock market index fund and avoid trading and advisor fees.
Actually, this is exactly what Warren
Buffett, a successful investor, recommends: "A very low-cost index is
going to beat
a majority of the amateur-managed money or professionally-managed money."
He says: "My wealth has come from a combination of living in America
Use compound interest: https://www.amazon.com/Miracle-Compounding-Turn-day-into/dp/1470176513
Why do more investors go it alone?
You might have noticed the trend to investors going the Do
It Yourself right-of-way. First, everyone thinks they are above average
investors. Actually, the average investor earns
only 3.79% over time while a simple market index earns 11%. Second, dealing
with an advisor/broker can hurt you financially. Even top firms don’t control
their Reps well: JP Morgan was caught
not disclosing advisor fraud, stealing, lying, forging, etc etc. Reps are not
reported quickly if at all and no one at the firm goes to jail. The industry
considers bad
behavior just the cost of doing business. Morgan employs 26,000 Reps. They “prevented
or delayed regulators, other member firms, and the public from learning about
those events and, in certain instances, prevented the regulator FINRA from
pursuing potential disciplinary action.” Example: 12b-1 fees and
revenue-sharing from mutual funds to advisors are often not disclosed. SEC says
“investment
advisers have not appropriately addressed these conflicts of interest."
When I worked for a Wall Street firm and my advisor screwed up, my own
compliance department dismissed my complaint. Third, industry lobbyists got
Trump to cancel the Obama’s Fiduciary
Rule that held Reps to a higher standard of ‘give the client the best’. Avoid
industry Tricks of the Trade.
Earn more on your
own: https://www.amazon.com/Tricks-Trade-Mutual-Insurance-Annuities/dp/1535497289/
**********ACCOUNTABILITY**************
Like 1776, this period
is a test
of democracy—do we really want a mafia boss prez?
Trump’s lawyer says he
can shoot a person and not be prosecuted; above law?
How Govt wastes our money: Congress spends another 1.7 Trillion we don’t have!
million
military in 151 countries: After 60 years 55,000 are ‘defending’ Japan
SCAMS/SPINS:
Boeing pilots
knew "egregious" problems with 737 Max airplane 3 years ago: 346
dead!
20-day supply addictive
painkillers shipped for every man, woman and child in 2012-5
DNA test: where
some people in world share your DNA: Not necessarily your homeland
TurboTax
lobby tells our reps to keep it complicated and tax prep costs high: Reps
agree
Used
cars sold with recall still pending: danger ahead
Fake celeb health
miracle ads use Facebook: check internet reviews first
BEWARE: You can catch
malware at the App store and not know it.
James Booth caught
stealing $5 million from clients: 20 years prison
Steven Yellen caught
trading without permission: fine no jail
Allina Health caught
breaching fiduciary duty to employees: expensive funds
37 New Cars to
Avoid: Not the best deal for your money
JP Morgan caught
not disclosing advisor fraud, stealing, lying, forging, etc etc: no jail
Admissions ethics
changed: incentives
bend college recruiting rules: big money made
Charity
scams grow: Check them at CharityWatch, Charity Navigator or GuideStar.
J&J
CEO caught: lied about baby powder with asbestos—FDA found
asbestos—recalls.
EXXON
Sec of State Tillerson caught: lied about costs of climate change and oil
Most states NOT
giving driver data to Trump for immigration harassment: illegal
Trump’s
‘middle-class tax refund’: 2.7
million fewer people got tax refunds this year
GOP new
health care plan has No Details: Election counterpunch hype
GOP
storm troopers crash secure secret impeachment hearing to show fight for
Trump
Trump dis-awards
2020 G-7 to is own resort: our
taxes pay for resort $ million upgrades
Trump
claims Fed
prosecutors can identify mass shooters BEFORE: make them see shrink?
Trump wants a fair
hearing but wouldn’t
meet with Mueller; we can’t indict sitting prez!
“Lynching” people is
just an “unfortunate
choice of words” according to GOP.
Trump
never learned from Fred what ‘lynching’ means: Trumps
used “C” for “colored”
Jobs
Now
computers decides if you get the job at Hilton, Unilever, Goldman
Sachs. New
“C”
Accountants
at Ernst Young told how to walk/dress: “Don’t flaunt your body” 55 pages.
Who owns your account now?
Southwest
takes back senior discount account: CEO needed more pay!
Miracle:
Alaska
may never be the same: dead salmon need a miracle to return
ObamaCare
plans cost LESS: premiums drop 4%
Quantum computer
solves problem in seconds regular computer takes 10,000 years.
IAN
41 Watchung Plaza,
B242
973.746.2014
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