Present Day Insight into Asset Allocation

Few people have heard the name Harry Markowitz, even fewer know the contribution he made to the world. However, every investor has heard and used his theory over and over again.

If you ever seen a pie-chart of your investments, you should know Markowitz. If you’ve ever been told that it is a long-term investment, you should know Markowitz. If you have ever used a buy-and-hold strategy, you should know Markowitz.

Harry Markowitz is a finance professor and Nobel Prize winner who in 1952 wrote a research paper that gave birth to buy and hold investing. He is also known as the Father of Modern Portfolio Theory, from which asset allocation was derived. These theories have been at the base for all financial institutions and professionals for decades.

The financial industry has used his teachings as a crutch and for years, we have been beating against it. Have you ever called your financial professional about a poorly performing stock or mutual fund? Have you ever gotten the answer that you need to understand that it is a long-term investment? When is there a good time to own a bad investment? The answer you receive is a lazy excuse because there is no management on your account. However, we have seen many retirees and widows lose fortunes due to owning unsuitable investments based on this advice.

It has then always been us against the Nobel Prize winning Markowitz. That is until a January 2010 Chicago Tribune interview was published. Harry Markowitz gave some very interesting insight into his own theory and the way the financial industry has applied it.

Markowitz said in the interview “I’ve never been a buy and hold guy…” and continued on that his ‘Modern Portfolio Theory’ has been misapplied in staying the course when deeper analysis is warranted. The article continues on that he did NOT hold onto all of his investments during the market crash in 2008. He did this not because of some certainty he knew, but made adjustments on what he perceive as increasing risks.

He goes onto say that there are times when portfolios should be adjusted if risks appear outside the norm, periods such as the technology bubble and the recent financial crisis. Markowitz thinks some fail to understand that part of modern portfolio theory.

So what does this all mean to you, the investor? It means you need to take the steps to understand your investments. You should know the strengths and weaknesses and whether or not it is suitable for you.

Don’t let buy and hold keep you from not having sound management for your assets. These times are still outside the norm.

To hear the Smart Money Radio Show segment focused on this topic, Please Click Here! (about 7 minutes long)


To hear the full Smart Money Radio Show where Bruce discusses this topic and more, Please Click Here! (about 25 minutes long)

OUR Financial Roadmap

Let’s plan a trip. Make that a road trip. You and your spouse or three of your best friends are going to San Diego by car! What all do you need to pack? Beach clothes, check. Sun tan lotion, check. A few snacks for the drive, check. You get to the end of the driveway and then realize that none of you know how to get there.

What do you do now? One possibility is to stop at the local convenience, buy a map, and figure it out from there. There are several “What if” questions that come from this situation. What if the map was done before the new construction in Kansas? What about the bridge that got washed away last week in Illinois?

The thought of buying a map to travel somewhere so far away may seem silly, especially given all of the technological advances. Yet, almost everyone does the same thing when they look at their finances. We go through a financial planning process, where essentially a map is drawn for our drive to San Diego.

Through the years of being in business, we have met some of the nicest financial planners. In no way is this conversation an attack on them. The problem with financial planning is the process. You have hundreds of software packages to choose from, thousands of strategies to fill in problems and answer questions, and tens of thousands of investment choices and products to answer the needs of the client. The possible combinations are endless and we haven’t even added in what all of your needs could be!

Financial planners set a roadmap for you, but the journey and the risks are on your shoulders only. The biggest problem is that there is NO MANAGEMENT that continues along. There is something inherently wrong when a plan allows you to lose 30% or more of your money and the only explanation is that this is a long term strategy.

The financial planning process has become a sales tool. It allows an agent to point out problems and offer you solutions from a limited pool of choices. These choices never answer the question of “what if the bridge is out”.

To hear the Smart Money Radio Show segment focused on this topic, Please Click Here! (about 7 minutes long)


To hear the full Smart Money Radio Show where Bruce discusses this topic and more, Please Click Here! (about 25 minutes long)

How Safe is Your Bond Fund?

In the market fallout of 2008 and early 2009, we watched as many investors moved away from their stock and equity funds into bonds and bond funds. They then missed the subsequent run up in the stock market in 2009.

Bond funds have swelled in huge proportions over the last years for two main reasons. First, people moved into bond funds away from their money markets due to the low returns. Other people were tired to the stock market's downward spiral and ran to the bond funds for a safe haven.

Missed in the safe haven is the inherit risks involved with bond funds. This risk is interest rate risk. The price of a bond falls as interest rates rise. As of this writing interest rates are near 0%. The only possibility is for them to rise. So how much is at risk? Generally a 1% rise in interest rates leads to a 7% drop in the price of bonds. Therefore, a 4% rise in interest rates would lead to a 28% DROP in your bond values.

Other "safe" spots for your money also have inherit risks you should be aware of. First are CDs. We have seen people deposit an amount in a CD equal to the amount of the FDIC protection (currently $250,000). This would leave no coverage on any interest you earn if the bank should go bankrupt. Don't think it can't happen to you, 59 banks went out of business last year.

Money markets dropped below the $1 mark in September 2008. As Lehman Brothers failed their commercial paper caused people to lose principal dollars. By chasing yield in your money market account, you are putting your principal at risk. Look for money markets that are based on US treasury notes. They may yield less, but are much more stable.

To hear the Smart Money Radio Show segment focused on this topic, Please Click Here! (about 7 minutes long)


To hear the full Smart Money Radio Show where Bruce discusses this topic and more, Please Click Here! (about 25 minutes long)

Oil Changes & Investing

Everyone who drives a car knows that there are periodic maintenance items that are required. The most basic one everyone thinks of is an oil change. You have several choices when it comes to getting your oil changed.

First, you do not have to do anything. You can drive your car for as long as you want and watch it breakdown someday.

Second, you can do it yourself. There is not one part of an oil change you cannot do or learn to do (don't let a mechanic know I told you that!). You must realize how much time it will take you to learn how to do it and how much time it will take you to actually do it. What tools will you need? Do you know how to use those tools? And the most important question you should ask yourself is what happens if you make a mistake.

Third, you can hire someone to teach you to do it. They will work along with you and then get in the car and drive around with you. If your car breaks down on that trip, they are stuck on the side of the road with you.

Finally, you can take it to a garage and buy a one-time solution to your product. They will change your oil for a specific fee and you can drive home in 25 minutes. The next time you need an oil change, they will gladly charge you and change it again.

So, how does this relate to investing? Well, you have the same choices. Many people are starting to work with these online discount brokers they see on TV and we have started to get many questions about what we think about them.

The basic tools are there for you to use or misuse. You can do this investing yourself. But you need to realize how much time it takes, if you know how to use the tools, and what will happen if you make a mistake.

For over 25 years, we have gained the experience and knowledge from every client and prospect that has walked through our doors. That experience of knowing where the potholes are goes a long way to achieving a smooth ride.


To hear the Smart Money Radio Show segment focused on this topic, Please Click Here! (about 7 minutes long)



To hear the full Smart Money Radio Show where Bruce discusses this topic and more, Please Click Here! (about 25 minutes long)

Hot Stock Tip!

We have helped people for over 25 years. We have seen people make money in individual stocks. Unfortunately, we have seen many people lose fortunes by owning one stock. Very small groups of people inside companies know what is going on there. For every report about why a company is a good buy, there is a report about it for the negative. Stockbrokers learn an art of talking from whichever report they want, whether you are looking to buy or sell a particular stock.

Buying an individual stock means you are making a BIG bet based on the success or failure of one company. We have seen many retirees, widows, and families lose a majority of their personal wealth betting on large companies that didn't work out. We advocate using low cost exchange traded funds and institutional mutual funds that spread your risks over thousands of companies throughout the world.

If you are still looking for the tip, find another website. You will not see us recommending you to make any big bet with your dollars. If a stock tip works out, people tout their ability to see the future or feed you another tip. If it doesn't work out, you are out of money but receive plenty of excuses.

To hear the Smart Money Radio Show segment focused on this topic, Please Click Here! (about 7 minutes long)


To hear the full Smart Money Radio Show where Bruce discusses this topic and more, Please Click Here! (about 25 minutes long)

Market Prediction!!!

Listeners have been beating down our doors with one question. What will the market do in 6 months? How about a year?

Earnings reports are coming out and the market doesn't like what it sees. All sorts of debates on Capital Hill are raging. Unemployment is still high. Should we batten down the hatches? Not just yet …

There are plenty of places to go on the Internet and see what people think the market is going to do. Turn your TV to Fox News, CNN, Bloomberg, or MSNBC. You will see analysts of all backgrounds telling you what to buy, what to hold, and what to sell immediately.

You want the true prediction….

In 2 words, the market in 6 months will be…

Nobody Knows!

All the fortune tellers you see on TV and read on the Internet are making their (educated?) predictions for entertainment value. They keep you glued to their channel by making you fear financial Armageddon or to make you feel good with greed about the current bull market.

To hear the Smart Money Radio Show segment focused on this topic, Please Click Here! (about 7 minutes long)


To hear the full Smart Money Radio Show where Bruce discusses this topic and more, Please Click Here! (about 25 minutes long)

Too Much Risk or Not Enough Safety?

If you have been reading along with us (and if you haven't, you can easily catch up by checking the archives along the right side of the page), you would probably imagine that we think people have too much risk in their portfolio. 

Unfortunately, this is not from what we think but rather what we know from many of the new clients that come to our firm looking for added safety. We get the idea from the factory worker in Lewistown who planned to retire at the age of 60, but is no longer able to. It comes from the 75 year old widow in Mifflintown who lost 40% of her money after her broker told her that her money was safe (it was only invested in 85% stocks). It comes from the retired couple in McAlisterville living on their investments and social security that now have 35% less income.

We can all benefit by having more safety in our portfolios. We have learned that the average person (and many financial professionals) lacks the ability to talk intelligently about risk. Instead, we counsel on what degree of safety is wanted in their retirement. Brokers tend to avoid the word safety because of their products' lack of it.

To hear the Smart Money Radio Show segment focused on this topic, Please Click Here! (about 7 minutes long)


To hear the full Smart Money Radio Show where Bruce discusses this topic and more, Please Click Here! (about 25 minutes long)

Too Far Back in the Market?

Big returns numbers, and your desperation to get back to "even", lure many investors back into the market.

As investors (and also as humans), we have a short-term memory about what happen to cause us to lose money. We are all certain that this time will be different. We'll be more prepared when the market falls (notice we said when). Looking back the last 10 years though, many investors have not made a dime on their accounts.

From a recent Wall Street magazine, "Many advisors assured their clients to stay the course with their current portfolios. Now they are reporting that many of them are back to 2007 asset levels and ready to take on more risk. At least one advisor says that his clients are taking on too much risk."

In the article, the advisors condoning riskier behavior where either younger in age or experience, while the more experienced advisor was cautious about the risk. After 25 + years experience in the business, we know that there our too many factors that can upset a fragile market and the costs associated to fix your account. The needs for a higher degree of safety and additional guarantees are greater than ever before.

To hear the Smart Money Radio Show segment focused on this topic, Please Click Here! (about 7 minutes long)


To hear the full Smart Money Radio Show where Bruce discusses this topic and more, Please Click Here! (about 25 minutes long)

Death of Modern Portfolio Theory

Modern Portfolio Theory is an investment theory in which you try to maximize return and minimize risk by diversifying among several different asset classes. It has long been held as the key theory in creating portfolios for every broker and planner since it's creation.

The "pie" or asset allocation model that so many investors have seen was designed to make your portfolio meet a risk level. Many brokers sold the pie as increasing safety to their clients. The theory was put to the last beginning in the fall of 2008 and failed miserably at the expense of investors.

All of the assurance of you being properly diversified came crashing down over the last two years. Many of our listeners, and investors like you, watched as your portfolio crashed 30, 40, or 50%. The worse part was there was nowhere to hide (not even cash as we saw one of the largest money market funds break the $1/share mark).

Since you can't diversify your assets to save your future, what can you do? The problem with the theory is just that. It is a theory. People today are aware that they have very little safety in their accounts when they were told (or sold) as being reasonably safe.

After extensive research, we found that over 90% of retirement and investment accounts lack a guarantee of principal. By making safety a cornerstone of our portfolios, we saved our clients millions in wealth during the market slide.

To hear the Smart Money Radio Show segment focused on this topic, Please Click Here! (about 7 minutes long)


To hear the full Smart Money Radio Show where Bruce discusses this topic and more, Please Click Here! (about 25 minutes long)

A Different Look at Safety

All investments have real risk associated with them. Some have more, some have less, but they all have some. In good times, no one stops to ask what if. What if the market falls? What if the economy falters? What if my needs become greater? What if the unexpected happens?

At WealthKare, we don't look at how much risk you can tolerate. We look at how much SAFETY you NEED. Only through understanding this, can you be properly prepared for the what if's of life. Understanding of a clients' needs cannot be assessed through a 15 question quiz, but can be determined over time through conversations about the dangers of risk and having realistic goals.

Because of the time involved, your portfolio cannot and should not be stuck in a rigid mold, but be able to allow the flexibility needed to make the changes as they are learned.

To hear the Smart Money Radio Show segment focused on this topic, Please Click Here! (about 7 minutes long)


To hear the full Smart Money Radio Show where Bruce discusses this topic and more, Please Click Here! (about 25 minutes long)

The Playoffs

As we are breezing through January, the thought on many men's (and even most women's) mind is the Super Bowl. We watch the game and cheer for the team we want to win. Some people still even have hope it will be their team that makes the big game (sorry Steelers and Eagles fans).

But no matter how hard we cheer and agonize over each game, we are just spectators.

Most of the people we have talked to over the past 25 years are the same for their finances. The "game" is their retirement and their money. Unfortunately, they are letting their broker play it for them. What makes it worse, the brokers, planners, and even the do-it-yourselfer's are really just on the sidelines. 


The real players that control your retirement and investment accounts are the fund managers. They are executing the plays that will determine the game. To make the playoffs, your retirement needs to have the best players on the field.


Today, more than ever, people need to become active participants in making sure they have the right players on the field. 


To hear the Smart Money Radio Show segment focused on this topic, Please Click Here! (about 7 minutes long)



To hear the full Smart Money Radio Show where Bruce discusses this topic and more, Please Click Here! (about 25 minutes long)

Can You Be Too Safe?

If you have been reading along with us so far (and if you haven't, we highly recommend you go back and catch up), you probably think we would answer "no" to that question.

While it is true that many Americans do not have a sufficient amount of safety, you ABSOLUTELY can be too safe. If you have kept your money out of the market the last 18 months because of the risk of another crash, you missed a lot of growth in 2009. This is just one example of having too much safety.

Because of ignoring safety when your portfolio was created, many people panicked, got out, and stayed out of the market because of fear. Brokers and planners usually ignore the safety discussion because the products and programs they sell have risks.

When building (or rebuilding) your portfolio, safety needs to be balanced to suit YOUR needs and REALISTIC goals.

To hear the Smart Money Radio Show segment focused on this topic, Please Click Here! (about 7 minutes long)


To hear the full Smart Money Radio Show where Bruce discusses this topic and more, Please Click Here! (about 25 minutes long)

90% of Your Lifetime Return Comes from One Big Decision

Most of you have taken a risk tolerance quiz. You know how they go, 'If your account drops 10%, what would your reaction be?' These have been long used by stockbrokers and financial advisors and have lately been added to most self-help investment websites.

Usually, you are asked 15-20 questions like the one above to help determine your risk tolerance. From there, they create an asset allocation plan or an "investment pie" to determine where your money should be invested and how risky it can be. You probably aren't aware how important those questions can be.

According to an independent Morningstar report, this one quiz determines where 90% of your investment return in your lifetime will come from. This is a pretty serious decision that most people see as a pop quiz making up part of your initial interview.

While this is important in the basis of modern portfolio theory and has created a lot of marketing material for the financial industry, the models often fail to display the true level of risk from these allocations and provide a false sense of security.

The idea that your risk tolerance can be measure by a questionnaire is at least debatable and it cannot and should not be used as the primary factor to expose you to risk in the biggest decision you have to make for your portfolio. Unfortunately the industry uses everyday and we have retirees that have lost 30% of their money justified by a 15 question pop quiz.

To hear the Smart Money Radio Show segment focused on this topic, Please Click Here! (about 7 minutes long)


To hear the full Smart Money Radio Show where Bruce discusses this topic and more, Please Click Here! (about 25 minutes long)

Why the Show and Blog?

One listener to our show asked why we are doing this. He wanted to know if, even though he enjoys the content and our discussions, this was really just an advertisement for our firm. We thought this was a fair question that deserved a full explanation. Bruce has written financial columns for several area newspapers over the years. Looking at the radio show and the blog, we had six basic goals.

First, the show and blog had to be purely educational. We weren't going to use our advertising dollars to push a product. We aren't salespeople, we are private wealth managers.

Second, we wanted to create a forum that shows our audience that we can have discussions about money that is not complicated. Finances can be easy to understand.

Third, we saw too many people leave their investing to chance and will not meet their needs into retirement. We wanted to empower you to get involved.

Fourth, the number one problem facing current and future retirees is that they will run out of money. No one is doing anything about it and we want to help you better understand it and deal with this issue.

Fifth, the show and blog will present a balanced answer to tough financial questions. Sales people will rarely bring up the downside to a plan and we want you to realize there is no such thing as a free lunch. You need to understand the positives and negatives to a plan so you can make a smart education choice about your finances.

And finally, this show corrects an issue we have had for years. In our practice, we have talked to hundreds of people just like you and over 95% of the people become clients because, just like the show and blog, our practice is unique, direct, and to the point. One of the most common comments we hear is that they never knew someone like us existed. Now, you know that there is a source of quality, sound financial advice without the pressure of a sales pitch.

To hear the Smart Money Radio Show segment focused on this topic, Please Click Here! (about 7 minutes long)


To hear the full Smart Money Radio Show where Bruce discusses this topic and more, Please Click Here! (about 25 minutes long)

New Year’s Resolutions; Have You Forgotten Already?

Almost everyone I know makes New Year's resolutions. Some people vow to get healthier. Some vow to change their personality. Some even choose to change their finances. Sadly, most people never carry their resolution through the whole year (or even January!) let alone their whole lives.

Your finances and the decision to improve your situation do not have to be tied to a tradition like New Year's. Whether you are saving for retirement, just retired and scared how long your money will last, or have been retired for a while and are looking for the best way to pass your assets onto the next generation, you need to start asking questions, getting complete answers you understand, and taking ACTION on those answers.

Your resolution does not get to stop there! You will need continue forward and get updated information as the world changes. As your goals evolve, so will the financial climate.

Most failed financial programs are the result of lack of maintenance and/or failures to update the account holder and manager.

Your financial resolution should become a tradition all of its own!

To hear the Smart Money Radio Show segment focused on this topic, Please Click Here! (about 7 minutes long)



To hear the full Smart Money Radio Show where Bruce discusses this topic and more, Please Click Here! (about 25 minutes long)