Your Unbiased Advisor: How long to hold stocks?

How long do we have to hold stocks to win with stocks?

Wall Street media gives the impression that we should sell just before they go down when an analyst thinks they will. But analysts can’t see the future. So we follow someone’s ‘advice’ or the crowd and we lose. Guess what happens? Advisor-managed equity accounts earn 5.19-3.79% vs 9-11% for a simple market index fund of stocks that remain for long periods. What does one of the most successful investors say: he says hold them “forever.” He bet $1 million against a Wall Street guru to prove it. He has owned Coke since the 1980s; Geico since 1996; Amex since the 1960s; and many more. How has Buffett done so far? His average return is 20.5% per year since 1965. Not bad.

Maybe we should follow his advice: https://www.amazon.com/Warren-Buffett-Your-Investment-Advisor/dp/1518690963

How do millionaires start their savings plan?

Unless you inherit your father’s $413 million you must start your $1,000,000 fund somehow. Survey says save 10% of income is how you begin. 80% of the self-made millionaires studied didn't get wealthy until after age 50 — but that almost all of them started the same way. They used ‘buckets’ to make their goals specific. Each bucket has a specific saving/investing vehicle. Short-term expenses are funded from savings and CDs while retirement expenses are funded with low-cost securities. The rich increased their savings as their income increased meaning that they learned to live within their means—80% of income for current expenses and 20% for the future. Millionaires understand the Miracle of Compounding. Stocks earn 11% a year: $1 million in 34-36 years; $2 million in 40. If Don had just used a stock index he would have $11 Billion by now, not $3 Bn.

Use compounding: https://www.amazon.com/Miracle-Compounding-Turn-day-into/dp/1470176513

Not all S&P 500 index funds give great returns

Unfortunately, not all S&P 500 index funds act the same. Some don’t follow the benchmark so they don’t produce 11% over time. DALBAR tracks the index and equity account returns over time. So we know some employers use an index fund in their 401k plan that actually doesn’t follow the benchmark they are supposed to track. Insurers in particular are providing expensive or poorly designed index funds to smaller employers. Employees are suing Community Health Systems since it uses Principal Large Cap S&P 500 index fund. This fund allegedly lagged its benchmark by an average 9.1 basis points between 2010 and 2018, while similar funds offered by BlackRock, Vanguard Group, State Street and Northern Trust lagged by roughly 1 to 2 basis points on average. This underperformance, plaintiffs claimed, led to poor performance that lost participants some of their retirement savings. Over long periods of poor tracking and or high fees, employers actually cut employee retirement packages by 63%. For some employees, it would be better to use a self-directed Roth IRA account instead of the company’s plan. A Roth IRA is tax-FREE after age 59.5. It can earn 11% over time.

Roth IRA with auto debit: https://www.amazon.com/401k-IRA-Tax-FREE-Tax-Deferred-retirement/dp/1475057938

Why do the most expensive cars have the most problems?

Land Rover, Mercedes-Benz, Volvo, Jaguar, Acura. These are some of the most expensive cars you can buy. So why did JD Power survey of owners find they have more than average problems? The annual J.D. Power study gauges dependability of 3-year-old vehicles over the last 12 months, meaning this year's survey assessed the 2016 model year. Let’s look at management/owners for the answer. Lexus and Toyota seem to be consistently near the top of the list of fewest problems. Who owns the bottom feeders? Fiat, the most problems, owns Alfa Romeo, Chrysler, Dodge, Ferrari, Jeep, Lancia, Maserati, and Ram. Tata owns Jaguar and Land Rover. Zhejiang Geely owns Volvo. Ford owns Lincoln. Honda has Acura which is usually high on the list. BMW owns Mini and Rolls Royce. Renault owns Nissan and Infiniti. VW owns Audi, Bentley, Bugatti, Lamborghini, Porsche, SEAT and Skoda. Management determines how well it’s built.

Use the best insurance owners too: https://www.amazon.com/Vehicle-Insurance-Beware-Double-Coverage/dp/1480027634

First time in US: $50K a year earners now pay higher tax rate than Billionaires

US is no longer a progressive tax country. Trump has given his class what they wanted. The TV celeb has reversed most progressive trends. As Warren Buffett illustrated, his assistants pay a higher rate than he does: they pay 32.9%; he pays 17.7% with no special tax shelter or overseas account like Apple, Google, Amazon, Boeing, GE, etc. 2/3rds of all businesses pay $0 tax. Plus we taxpayers must subsidize many profitable businesses like oil, gas, agribusiness, air carriers, etc, etc. Many aren’t even American.

Use your tax-free account: https://www.amazon.com/Tax-Shelter-Young-Americans/dp/1500426520

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This period is a test of democracy—do we really want it or not?

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