Stay Calm And Focus On Your Plan

Volatility and Anxiety

As of today, December 7, 2018, the US market (as measured by the S&P 500 Index) has fallen about 6% over the last three months, resulting in many investors wondering what the future holds and if they should make changes to their portfolios. While the S&P 500 Index may still be in positive territory for the year-to-date, it may be difficult to remain calm during a substantial market decline, it is important to remember that volatility is a normal part of investing. Additionally, for long-term investors, reacting emotionally to volatile markets may be more detrimental to portfolio performance than the drawdown itself.

Reacting Impacts Performance

If one was to try and time the market in order to avoid the potential losses associated with periods of increased volatility, would this help or hinder long-term performance? If current market prices aggregate the information and expectations of market participants, stock mispricing cannot be systematically exploited through market timing.

Translation: It is unlikely that investors can successfully time the market, and if they do manage it, it may be a result of luck rather than skill.

Further complicating the prospect of market timing being additive to portfolio performance is the fact that a substantial proportion of the total return of stocks over long periods comes from just a handful of days. Since investors are unlikely to be able to identify in advance which days will have strong returns and which will not, the prudent course is likely to remain invested during periods of volatility rather than jump in and out of stocks. Otherwise, an investor runs the risk of being on the sidelines on days when returns happen to be strongly positive.

The following chart helps illustrate this point. It shows the annualized compound return of the S&P 500 Index going back to 1990 and illustrates the impact of missing out on just a few days of strong returns. The bars represent the hypothetical growth of $1,000 over the period and show what happened if you missed the best single day during the period and what happened if you missed a handful of the best single days. The data shows that being on the sidelines for only a few of the best single days in the market would have resulted in substantially lower returns than the total period had to offer.

Market Declines and Volatility - Unbranded.jpg

The Takeaway

While market volatility can be nerve-racking for investors, reacting emotionally and changing long-term investment strategies in response to short-term declines could prove more harmful than helpful. By adhering to a well-thought-out investment plan, ideally agreed upon in advance of periods of volatility, investors may be better able to remain calm during periods of short-term uncertainty.

In other words, stay calm and stick to your plan.

Diversification: The Avengers of Investing

This week, the creator of Marvel Comics, Stan Lee, passed away. In case you aren't familiar with Lee's work, he created or co-created some of the world's most popular comic book characters: Iron Man, The Incredible Hulk, Thor, Spider-Man, Dr. Strange, and Black Panther are just some of his creations. In honor of Lee's work, it seemed appropriate to revisit a basic principle investing, diversification.

You're probably wondering what comic book characters have to do with investing. Consider The Avengers, a team of superheroes who work together to save the day (most of the time). Individually, they can't succeed because each of them has strengths and weaknesses. Put them together and they are nearly unstoppable. Will there be ups and downs? Yes, but in the end everyone is better off working together.

When you invest, the concept of diversification works the same way.

What is diversification?
The short answer is that diversification means not putting all of your eggs in one basket. Iron Man is great. Seriously, who wouldn't want Tony Stark's brains, money, and sweet armor? However, when the fate of the world is at stake, as it always is, the odds of saving the day are vastly improved when Iron Man is assisted by Captain America, Thor, Hulk, Black Widow, and Hawkeye. If Iron Man gets knocked down another member of the team can step up and get the job done.

So how does this relate to investing?
Let's use Apple as an example of how diversification works in the world of personal finance. Apple is a highly profitable tech company. However, owning a portfolio comprised only of Apple stock is not a good long-term strategy. Let's say Apple's stock falls 20% because consumers stop buying iPhones. You won't be a happy camper if Apple is your only investment!

The solution
You need to create your own team of superheroes! Unfortunately, the team you'll create won't feature a giant green rage monster or a Norse god wielding a magic hammer. Instead, your team will be comprised of companies in different categories, such as Wells Fargo (financial services), Exxon Mobile (oil & gas), Pfizer (pharmaceutical), and Proctor & Gamble (consumer products). Why companies in different categories? Because it's impossible to predict which categories will be best from year to year. The following chart shows returns for different investment categories from 1998 - 2017.

  I know it's difficult to see exactly what's going in this chart. The different colors represent different categories of assets. For each year, the best-performing assets are at the top of the page and the worst-performing assets are at the bottom. As you can see, it's rare for the same category to consistently be number one - or two.

I know it's difficult to see exactly what's going in this chart. The different colors represent different categories of assets. For each year, the best-performing assets are at the top of the page and the worst-performing assets are at the bottom. As you can see, it's rare for the same category to consistently be number one - or two.

Superhero portfolio assemble!
Okay, we've established why having one superhero (stock) isn't ideal. The following chart shows a hypothetical portfolio comprised of five superheroes (stocks). Please note the stocks referenced here provides a highly simplified illustration of how diversification works.
 
Spoiler: Instead of a 20% loss, you have a 3% gain.

Screen Shot 2018-11-16 at 9.02.59 AM.png

Congratulations, your superhero stocks have saved the day! Instead of a 20% loss, you have a 3% gain!!

Simplify!
For the average investor, owning a portfolio of individual stocks, such as the one in the example above, isn't practical. Fortunately, mutual funds and exchange-traded funds (ETFs) provide investors with an efficient, cost-effective means of holding large baskets of stocks and bonds.

Key takeaways

  1. Owning one stock (or having Iron Man on your side) is great, but it's risky and could lead to losses (or the end of the world). On the other hand, owning multiple stocks in different categories (or multiple superheroes) typically reduces risk and leads to better long-term returns (or the world not ending).

  2. I've just proven that reading comic books or watching movies based on comic books is not a waste of time. Thanks, Stan Lee!

  Image credit goes to my awesome cousin, Bryan Lenning. You can (and should) see more of his work at    instagram.com/bryanlenning

Image credit goes to my awesome cousin, Bryan Lenning. You can (and should) see more of his work at instagram.com/bryanlenning

Best 529 College Savings Plans, 2018 Edition

Every year, Morningstar rates the country's best and worst 529 college savings plans. The ratings are based primarily on the same five key pillars that Morningstar uses to rank all investments: Process, People, Parent, Price, and Performance. Basically, Morningstar looks for plans with low fees, good investments, a decent selection of investment options, an asset allocation approach based on the most up-to-date research and solid management by the state and program manager.

In addition to the five categories listed above, the ratings also take into consideration any state tax breaks provided by the plans. This is important when deciding which plan to invest in because while every state has a 529 plan, not every plan provides a deduction for contributions to the plan.

In all, Morningstar rated 62 plans. Unfortunately, the DC College Savings Plan was not included in the ratings. This isn't unusual; Morningstar hasn't rated the DC plan in previous years. I've contacted Morningstar numerous times to request the inclusion of the DC plan, but I haven't had any success.

Without further ado, here are the best and worst plans for 2018 along with some commentary on the plans relevant to residents of DC, MD, and VA.

The Best

  1. Bright Start College Savings (Illinois).

  2. Invest529 (Virginia)This plan features age-based portfolios, passively managed portfolios (index funds), and actively managed portfolios (investments selected by a human). Residents of Virginia can deduct their contributions up to $4,000 per account, per year, with unlimited carryover to future tax years.

  3. Vanguard 529 College Savings (Nevada).

  4. My 529/Utah Educational Savings Plan (Utah).

Honorable Mentions

  1. CollegeAmerica (Virginia)Unlike the Invest529 plan mentioned above, this Virginia 529 savings plan is only available through investment advisors. It's managed by American Funds, which means the only investment options are actively-managed funds. Residents of Virginia can deduct their contributions up to $4,000 per account, per year, with unlimited carryover to future tax years.

  2. Maryland College Investment (Maryland)This plan is managed by Baltimore-based investment company T. Rowe Price. It features enrolment-based portfolios and fixed portfolios. Residents of Maryland can deduct contributions up to $2,500 per year per beneficiary (child) from their state income taxes.

The Worst

  1. College SAVE (North Dakota).

  2. Florida 529 Savings Plan (Florida).

  3. Franklin Templeton 529 College Savings Plan (New Jersey).

  4. GIFT College Investing Plan (Arkansas).

  5. TD Ameritrade 529 College Savings (Nebraska).

What About DC's 529 Plan?

In case you missed it, a couple of years ago I exchanged several emails with the department tasked with overseeing the DC plan. As a frugal financial planner, resident of DC, and saver in the DC plan, I was unhappy with then-manager Calvert Investments. The investment options were lousy and the fees were outrageous.

The DC College Savings Plan, now managed by Ascensus, is a huge improvement over the plan as managed by Calvert. I feel much better about recommending the DC plan to clients and friends.

Savers can choose from individual portfolios or year-of-college enrollment portfolios. In both cases, the underlying investments are mutual funds and ETFs from Vanguard, iShares, and Schwab.

Residents of DC can deduct up to $8,000 for married couples filing jointly, who have separate accounts, ($4,000 for individuals) when they contribute to their DC College Savings Plan account.

Which Plan Is Best For Me?

The answer to this question, like many other questions in personal finance, is: It depends.

If you live in a state that has a decent plan and where you'll receive a tax deduction, then, by all means, use that plan. If, on the other hand, your home state's plan is lousy, perhaps because of high fees or poor investment options, then you should opt for a plan in another state.

Investing Is Hard

When I say "investing is hard", what I really mean is that staying invested is hard. Especially when the year's gains are wiped out in one day, which happened earlier this week. Or when you are bombarded by non-stop financial information, much of it negative, from many sources. Or when you can log in to your financial accounts anytime you want and watch the value decrease.

For investors of all ages, 2018 has been a difficult year. It has been a long time since investors have seen such wild swings in financial markets. Since 2009, staying invested has been easy. Sure, there have been ups and downs, but mostly ups. And the market always goes up, right? Wrong, but after 10 years we've become accustomed to positive returns.

Check out this chart:

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The chart shows the total annual return for the S&P 500 since 2009. Obviously, 2018 isn't over yet, so there's time for the bar to go in either direction.

The takeaway from the chart is that we've had a great run over the 10-year period shown above.

I could tell you to stop checking the value of your investments, but you won't do that. Technology has made it easy for us to quickly log in to our accounts or receive automated notifications of the balance, performance, etc.

I could tell you to ignore the daily news about the financial markets, but you won't do that. There's information everywhere and it's nearly impossible to avoid.

I could tell you not to listen to talking heads make predictions about what the markets will do, but you won't do that. Like daily news about financial markets, it's almost impossible to avoid hearing from someone who knows what's going to happen in the financial markets today, tomorrow, or next year. Here's a secret: No one can predict, at least not consistently, what's going to happen.
  

You're human, at least I think most of you are, which means you will worry about your investments, you will be curious about the day-to-day changes in your account, and you will want to know what's going to happen to your accounts in the future.

Do one more thing, the hard thing: Stay invested.

Listening / Reading / Watching

Here's what has my attention right now:

  • Red Dead Redemption 2 by Rockstar Games. It's like Westworld minus the violent, bloody robot uprising! The original Red Dead Redemption is one of my favorite games of all-time, which means I've been eagerly anticipating the sequel. If you're unfamiliar with the Red Dead games, check out the trailer by clicking on the link above. Games have come a long way since Space Invaders and Pac-Man.

Third Quarter 2018 In Review

Stock Market Summary

Looking at broad market indices, the US outperformed non-US developed and emerging markets during the quarter.  

Small caps underperformed large caps in the US, non-US developed, and emerging markets. The value effect was positive in emerging markets but negative in the US and non-US developed markets. 

Real estate (REIT) indices underperformed equity market indices in both the US and non-US developed markets.

US Stocks

The US equity market posted a positive return, outperforming both non-US developed and emerging markets. 

Value underperformed growth in the US across large and small cap stocks.

Small caps underperformed large caps in the US.

International Developed Stocks

In US dollar terms, developed markets outside the US underperformed the US but outperformed emerging markets during the quarter.

Large-cap value stocks underperformed large-cap growth stocks in non-US developed markets; however, small-cap value outperformed small-cap growth.

Small caps underperformed large caps in non-US developed markets.

Emerging Markets Stocks

In US dollar terms, emerging markets posted negative returns for the quarter, underperforming developed markets including the US.   

The value effect was positive, particularly in large-caps in emerging markets. 

Small-caps underperformed large-caps.

Fixed Income

Interest rates increased in the US during the third quarter. The yield on the 5-year Treasury note rose 21 basis points (bps), ending at 2.94%. The yield on the 10-year Treasury note increased 20 bps to 3.05%. The 30-year Treasury bond yield rose 21 bps to 3.19%.

On the short end of the yield curve, the 1-month Treasury bill yield increased 35 bps to 2.12%, while the 1-year Treasury bill yield rose 26 bps to 2.59%. The 2-year Treasury note yield finished at 2.81% after an increase of 29 bps.

In terms of total return, short-term corporate bonds gained 0.71%, while intermediate-term corporates returned 0.80%.

Impact of Diversification

Remember how I'm always reminding you that the rate of return in your portfolio probably won't look like that of the S&P 500 or Dow? Well, I'm going to remind you again.

These portfolios illustrate the performance of different global stock & bond mixes and highlight the benefits of diversification. Mixes with larger allocations to stocks are considered riskier but have higher expected returns over time.

That's all for this week. Next week I'm planning to start a series of posts that explain my approach to investing. Fun!

Second Quarter 2018 In Review

One, Two, Three, Four, I Declare a Trade War

The primary question on investors' minds during the second had to be how far the trade war would go between the U.S. and its trading partners. During most of the quarter, it seemed one could reasonably expect markets to be down one day and then up the next. It got to the point that I often tried to predict the day-to-day headlines of The Wall Street Journal. My idea of fun is probably different from yours.

If the scope of the trade war was the primary question on investors' minds, the second was whether or not the Federal Reserve would raise interest rates. Spoiler: It did - and the Fed indicated there would be two additional rate hikes in 2018.

Let's look at the numbers.

Q2 2018 Numbers

The average diversified U.S. stock fund, which is a better measure of how we invest than the S&P 500 or the Dow, gained 3.7% during the second quarter, which brings the year-to-date return to 3.4%. Investors, still jittery about the long bull market and an escalating trade war with China couldn't get out of stocks fast enough. Nearly $59 billion flowed out of stock funds during the quarter.

International markets didn't fare well: The average diversified international stock fund declined by 2.1% in the second quarter, which brings the year-to-date loss to 2.7%. Investors were more optimistic about foreign stocks because $89 billion flowed into international stock funds during the quarter. Of course, international stocks will be affected by a trade war, so the shift to foreign markets may not help all that much in the long run.

The average intermediate-term bond fund lost 0.3% during the second, which brings the year-to-date loss to 1.7%. A whopping $128 billion flowed into bond funds during the quarter, again over concerns about the long bull market and trade war.

Expectations For The Third Quarter

When it comes to financial markets and investments, I honestly don't know what to expect. No one does. The best I can do is make a few educated guesses:

  1. The U.S. and its trade partners will continue to talk about tariffs, which will lead to retaliatory actions or threats of actions.
  2. Consumers and the global economy will be the casualties of a trade war.
  3. In the event of a trade war, investors should look to small-cap stocks, which are less likely to be vulnerable to trade spats.
  4. Since the Federal Reserve has already tipped its hand, and unless anything unanticipated happens, I believe it's safe to say there will be a rate increase during the third quarter.


As always, you should focus on what you can control. Make a financial plan that's right for your goals and financial situation. And stick to it.

Listening / Reading / Watching

Here's what has my attention right now:

  • The Three-Body Problem by Cixin Liu. Since I was going to spend two weeks in China, I decided to reread this excellent novel by China's most famous science fiction author. Go read it. Now.
  • The Dark Forest by Cixin Liu. And then I promptly started reading book two in the trilogy. Again, go read it. Now.
  • On to book three, Death's End.

The Ins and Outs of the DC Tuition Assistance Grant (DCTAG)

  Fact: No one seems to know exactly when people started giving apples to teachers, but it may have started long ago when food was used to pay teachers for their services.  Another Fact: I don't know any teachers who want to be paid with apples (or food in general).

Fact: No one seems to know exactly when people started giving apples to teachers, but it may have started long ago when food was used to pay teachers for their services.

Another Fact: I don't know any teachers who want to be paid with apples (or food in general).

What Options Do College-Bound Residents of DC Have When Applying to Out-of-State Schools?

Unless you're a resident of Washington, DC, this week's post may be of limited interest to you, but feel free to share if you know someone that can benefit from the information!

I'm often asked if residents of DC can receive in-state tuition when attending an out-of-state school. While the actual benefit may not equate to in-state prices, it's still worth it. Here are the details.

The DC Tuition Assistance Grant (DCTAG)

  • What is it? The DCTAG was created by Congress in 1999 for the purpose of expanding higher education choices for college-bound residents of DC.
  • What schools are eligible? The DCTAG treats public and private schools differently:
    • Public: DC residents may use the DCTAG to attend one of the more than 2,500 colleges and universities in the nation.
    • Private: DC residents may use the DCTAG to attend any private HIstorically Black College or University (HBCU) or private not-for-profit college or university in the DC metro area.
  • What is the benefit? Again, the DCTAG has slightly different benefits based on the type of school:
    • Public: Up to $10,000 per academic year (a maximum of $5,000 per semester) toward the difference between in-state and out-of-state tuition, for a lifetime maximum of $50,000. The award is disbursed directly to the institution.
    • Private: Up to $2,500 per academic year (a maximum of $1,250 per semester), for a lifetime maximum of $12,500. The award is disbursed directly to the institution.
  • What are the eligibility requirements? Students must be enrolled on at least a half-time basis and be in good academic standing. Awards do not cover mini-terms or non-accredited online classes.
  • How do I apply for the DCTAG? There are three requirements:
  • Is funding for the DCTAG in danger? Between late 2017 and early 2018, the Senate and the Trump Administration attempted to cut funding for the program. Congresswoman Eleanor Holmes Norton (D-DC) negotiated to maintain $40 million for DCTAG. For now, the program will remain in place.
  • Where can I learn more? Check out the Office of the State Superintendent of Education.

Listening / Reading / Watching

Here's what has my attention right now:

  • The Outsider by Stephen King. To say I'm a longtime fan of King's work is an understatement. This week marks the release of his new book and I can't wait to dive in.

The sad state of financial literacy in the U.S.

Working The Phones

To celebrate Financial Literacy Month I, along with eight other advisors, volunteered to spend two hours answering personal finance questions in the Help Center at Channel 7. We fielded 110 calls during the two-hour event. Here's what I learned:

  1. People cannot answer basic personal finance questions. Based on the calls I fielded it's obvious our education system is not preparing people to manage their finances.
  2. Women are more likely to ask for help. Of the 12 calls I took, 11 of them were from women. Some of my colleagues had a more balanced experience, but overall the majority of calls were from women. This shouldn't surprise anyone because most men, myself included, don't like asking for directions even when we're hopelessly lost.
  3. Many people just want to talk to someone who will listen to them. Several of the callers continued to chat with me even after I answered their financial questions. I think they just wanted someone who would listen to them vent about the stress caused by their financial problems.
  4. Answering basic personal finance questions for a couple hours is a great way to sharpen one's skills. During the two-hour shift, I covered a wide array of topics, some of which I don't always to address with my existing clients. It was a good refresher course.
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I had the opportunity to spend the day teaching these young ladies about financial planning and investing.

Take Our Daughters To Work Day 2018

Thursday, April 26th was Take Our Daughters and Sons to Work Day. In addition to my two little girls, I was fortunate to have two of their friends, who are basically like daughters, join the fun.

We started the day with a lesson about what financial planning is. The girls really got into it once I created a hypothetical plan for one of them using my planning software. It quickly became clear that they think a weekly allowance will be enough to allow them to live comfortably.

Next, I had them pair up and work on entrepreneurial projects while I got some of my own work done. Hopefully, one day they will start their own businesses.

We wrapped up the day with a lesson about investing, which covered topics such as company stock, dividends, mutual funds, exchange-traded funds, inflation, and diversification. I'm sure it wasn't the most exciting day for them, but they all asked good questions.

Maybe days like this will ensure they don't have to call a television station help center for financial advice.

Listening / Reading / Watching

Here's what has my attention right now:

  • Head On by John Scalzi. I had the pleasure of meeting Scalzi this week when he visited D.C. for a reading and book signing. He's one of my favorite sci-fi writers and you should definitely check out his books. I recommend starting with Lock In (Head Onis the sequel). If you prefer listening to audiobooks check out The Dispatcher, which is extremely fun and features a great performance by Zachary Quinto.
  • Westworld on HBO. Season two started last week and the robopocalypse continues!

Here We Go Again

Fiduciary Rule, Take #2

This week, the Securities and Exchange Commission (SEC) voted to create a rule requiring brokers to act in their clients' best interest.

If, after reading that sentence, you said, "But Chuck, didn't the Department of Labor (DOL) enact a similar rule in June of 2017?" you would be correct. Unfortunately, the DOL's rule, which applied only to retirement accounts, was recently struck down in a U.S. circuit court. While the DOL could appeal the ruling, it will probably wait and see what the SEC comes up with.

Back to the SEC's take on the fiduciary rule. Here are some highlights (with my commentary in parentheses):

  • The new rule would apply to both non-retirement and retirement accounts (This makes sense. I never understood why the DOL rule was limited to retirement accounts).
  • Brokers would be required to disclose conflicts of interest such as bonuses or commissions received for selling certain products, but no specific conflicts of interest would actually be banned. For example, financial services companies could still use incentives such as sales contests (Why not get to the root of the problem and ban the incentives?).
  • Brokers and advisors would be required to produce a brochure outlining their legal duties and the fees they charge (I support full transparency, but this will end up being another confusing document that most consumers are unlikely to read).
  • Brokers would be barred from using the title "financial advisor" (I love this...and I'm pretty sure it won't make it into the final rule because the financial services industry will fight hard to kill this provision).

Next Step: Public Comments

The SEC rule entered a 90-day public comment period, which you can read about here. If you feel strongly about this issue, I encourage you to post a comment. Unfortunately, I had to run multiple searches just to find the comment area. Frustrating!

Listening / Reading / Watching

Here's what has my attention right now:

  • Lost in Space on Netflix. I remember watching the original TV series when I was a child. Sadly, the reboot isn't as campy, but it's still fun.
  • Legion on F/X. Season two started a couple weeks ago and I'm happy to report it's still wonderfully weird.

First Quarter 2018 In Review

V is for Volatility

Spring has arrived! Unfortunately, volatility is back with a vengeance, too.

It's difficult to believe the U.S. bull market is more than nine (!) years old. Nine years ago my wife and I hadn't even welcomed our second child into the world. 

What's causing the volatility? Worries about inflation, the threat of a trade war with China, privacy concerns related to the mismanagement of consumer data by big tech companies, daily tweets from He-Who-Must-Not-Be-Named, and concerns that the actor playing young Han Solo doesn't really look or sound like everyone's favorite smuggler.

Okay, maybe that last one's a stretch. Let's look at the numbers.

Q1 2018 Numbers

Remember all the way back in 2017 when financial markets were posting strong returns? Sadly, that hasn't carried over into 2018. The most commonly used benchmark, the S&P 500 Index, posted a decline of 1.17%.

The average diversified U.S. stock fund, which is a better measure of how we invest than the S&P 500 by itself, lost 0.4%. Investors, wary of, among other things, a long bull market and a potential trade war with China, are exercising caution, with nearly $53 billion flowing out of stock funds during the quarter.

Losses weren't confined to domestic markets: The average diversified international stock fund declined by 0.6% in the first quarter. In a sign of investors' preference for foreign markets, $80 billion flowed into international stock funds during the quarter.

The average intermediate-term bond fund lost 1.4% during the first quarter. Nearly $75 billion flowed into bond funds during the quarter, likely due to concerns about volatility in stocks.

Expectations For The Second Quarter And Beyond

When it comes to financial markets and investments, I honestly don't know what to expect. I can make educated guesses, but anyone who tells you they know what is going to happen tomorrow, next month, or next year is lying.

The markets have come a long way since March of 2009, which has been wonderful for investors. I know there will be a correction at some point, but I cannot predict when it will happen or what will cause it.

In the meantime, you should focus on what you can control. Make a financial plan that's right for your goals and financial situation. And stick to it.

Listening / Reading / Watching

Here's what has my attention right now:

  • The Gone World by Tom Sweterlitsch. What if the United States managed to reverse engineer extremely advanced technology? And then started exploring the galaxy? And also mastered time travel? This book manages to answer all of those questions while keeping the focus on a murder investigation. Did I mention there are also alternate universes? It's great fun and I highly recommend it.
  • The Stone Sky by N.K. Jemisin. I don't even know how to describe this without spoiling anything. This is book three in a series called The Broken Earth. And you should read it. I'm sure you're thinking, "Great, another trilogy". Trust me, it's worth it. Jemisin is an amazing storyteller.

Mr. Market's Wild Ride

The Short Version

Greetings! I know you're busy, so I'm going to summarize this post for you:

  1. Calm down.
  2. Markets go up and down. It's normal.
  3. Stop watching and/or listening to what passes for financial news on networks such as Bloomberg, CNBC, Fox Business, etc.
  4. No one knows why markets rise and fall. Anyone who claims to know is a liar.
  5. Stick to your financial plan. Don't have one? Get one. You don't have to be rich to work with a financial planner.

The Parable of Mr. Market

The recent ups and downs in financial markets have seriously rattled investors. Well, the downs rattled investors because no one likes the downs. It's not fun watching one's retirement savings or other investments drop in value. Unfortunately, we're stuck with declines because markets don't always go up. Markets are made by people and people are irrational, greedy, and prone to panic.

The market fluctuations and the subsequent flurry of news, analyses, and pundit-speak made me recall the parable of Mr. Market, which Waren Buffett shared with investors in his 1987 letter to shareholders of Berkshire Hathaway. Below, you'll find an excerpt of that letter, which includes the parable of Mr. Market. I used bold text to emphasize what I believe to be the most important takeaway of Mr. Buffet's story. Have at it.

"Ben Graham, my friend, and teacher, long ago described the mental attitude toward market fluctuations that I believe to be most conducive to investment success. He said that you should imagine market quotations as coming from a remarkably accommodating fellow named Mr. Market who is your partner in a private business. Without fail, Mr. Market appears daily and names a price at which he will either buy your interest or sell you his.

Even though the business that the two of you own may have economic characteristics that are stable, Mr. Market's quotations will be anything but. For, sad to say, the poor fellow has incurable emotional problems. At times he feels euphoric and can see only the favorable factors affecting the business. When in that mood, he names a very high buy-sell price because he fears that you will snap up his interest and rob him of imminent gains. At other times he is depressed and can see nothing but trouble ahead for both the business and the world. On these occasions, he will name a very low price, since he is terrified that you will unload your interest in him.

Mr. Market has another endearing characteristic: He doesn't mind being ignored. If his quotation is uninteresting to you today, he will be back with a new one tomorrow. Transactions are strictly at your option. Under these conditions, the more manic-depressive his behavior, the better for you.

But, like Cinderella at the ball, you must heed one warning or everything will turn into pumpkins and mice: Mr. Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom, that you will find useful. If he shows up some day in a particularly foolish mood, you are free to either ignore him or to take advantage of him, but it will be disastrous if you fall under his influence. Indeed, if you aren't certain that you understand and can value your business far better than Mr. Market, you don't belong in the game. As they say in poker, “If you've been in the game 30 minutes and you don't know who the patsy is, you're the patsy.”

Ben's Mr. Market allegory may seem out-of-date in today's investment world, in which most professionals and academicians talk of efficient markets, dynamic hedging, and betas. Their interest in such matters is understandable since techniques shrouded in mystery clearly have value to the purveyor of investment advice. After all, what witch doctor has ever achieved fame and fortune by simply advising “Take two aspirins”?

The value of market esoterica to the consumer of investment advice is a different story. In my opinion, investment success will not be produced by arcane formulae, computer programs or signals flashed by the price behavior of stocks and markets. Rather an investor will succeed by coupling good business judgment with an ability to insulate his thoughts and behavior from the super-contagious emotions that swirl about the marketplace. In my own efforts to stay insulated, I have found it highly useful to keep Ben's Mr. Market concept firmly in mind."

Perspective

Last week, after the markets started bouncing around, I shared a chart of the Dow Jones Industrial Average index on my personal Facebook feed. I believe it's worth sharing again.

Dow Jones 10 Year.png

The Dow Jones Industrial Average index over the last 10 years.

I don't want to come across as cold and uncaring. Fluctuations in markets can have serious financial consequences depending on how much you have saved as well as the stage of life you're in. The best thing you can do is create - and stick to - a financial plan because no one can predict why or when markets will rise and fall.

Listening / Playing / Reading / Watching

Here's what has my attention right now:

  1. Neverwhere, by Neil Gaiman. In a previous post, I mentioned how much I enjoyed listening to Gaiman's American Gods. I highly recommend Neverwhere, too. Bonus: Gaiman narrates the audiobook edition and his performance is fantastic. I would listen to him narrate the phone book. If phone books were still a thing.
  2. Morning Star, by Pierce Brown. I'm pretty sure Brown's series is considered YA (young adult) literature and I don't care. Morning Star, which is book three in the Red Rising trilogy, is just plain fun. If Greek mythology, The Hunger Games, the Harry Potter series, and Game of Thrones had a baby, it would be the Red Rising trilogy.

Fourth Quarter and Full-Year 2017 In Review

Goodbye, 2017!

Every year seems to pass more quickly than the one before it. 2017 was no exception. Let's take a look at what happened in the financial markets.

Q4 and Full-Year 2017 Numbers

The most commonly used benchmark, the S&P 500 Index, had another strong quarter, up 6.64%, which means the S&P 500 ended up 21.83% for the year. Not bad.

The average diversified U.S. stock fund, which is a better measure of how we invest than the S&P 500 by itself, gained 6.0% during Q4, putting domestic stock funds up 18.3% for the year. Investors, still wary of high valuations in U.S. stocks and a long bull market, are exercising caution, with $38 billion flowing out of stock funds during 2017.

The average diversified international stock fund gained 4.9% in the fourth quarter. This gain put international stock funds up 26.8% for the year. In a sign of investors' preference for foreign markets over domestic, $233 billion flowed into international stock funds during the year.

The average intermediate-term bond fund returned 0.4% during the fourth quarter, which put them up 3.6% for 2017. A whopping $379 billion flowed into bond funds during the year, likely due to concerns about the valuations of U.S. stocks.

Managing Expectations

The financial crisis may not have reached rock bottom until March of 2009, but it kicked into high gear in September of 2008. That means later this year it will have been ten years since the start of the crisis. We've experienced great returns since then. Well, I hate to be "that guy", but I'm going to remind you that markets don't always go up.

Those of you who read or watch Game of Thrones are familiar with the phrase "Winter is coming". For the non-nerds here this basically means one should always be prepared because the good times, or in this case, good returns, won't last forever.  Fortunately, we're only talking about investment returns, not White Walkers marching south with an army of the dead. And an undead dragon.

I wish I could tell you exactly when a correction will occur. I can't, but I'm bound to be right eventually. In the meantime, we can be thankful for years like 2017. In addition, we can "prepare for winter" by rebalancing our portfolios, maintaining a sufficient emergency fund, and sticking to our financial plans.

New Year's Goals

Goals, resolutions, or plans. I don't care what you call them; I think it's good to kick off the year with a few ways to challenge yourself. Here are my goals for 2018:

  1. I will draw and paint again. In fact, I just relaunched my videogame-themed art website, www.8bitart.com, where I'll post regular updates on my work.
  2. I will continue my Crossfit and yoga regimen. I started this routine in September of 2017 and I feel great. Bonus: No more back pain.
  3. I will pay less attention to social media sites like Facebook and Twitter. Social media is a vampire that sucks your time instead of your blood. I think we'd all be better off spending less time on those sites. Read a book. Play a board game. Paint a picture.

I hope you set some goals for yourself!

Tax Reform: Things To Do Before December 31st

This week, House and Senate Republicans reached a deal on a final tax bill and it appears they will try to pass the bill before the end of the year. Don't worry, this isn't a lengthy summary of everything that's in the bill. I'm pretty sure you aren't interested in reading an article like that. That is, of course, unless you need a sleep-aid.

I want to focus on two provisions in the bill that could negatively impact you. In addition, I'll recommend actions you can take before December 31st to take advantage of tax breaks that are being reduced. Think of these as "use it or lose it" suggestions.

Let's get to it!

Mortgage Interest Deduction

Under current law, homeowners can deduct mortgage interest paid up to $1 million of mortgage debt. The original Senate bill retained the $1 million cap while the House bill lowered the deduction to $500,000. Capping the interest deduction to only $500,000 of mortgage debt would have negatively impacted homeowners in regions that have high-priced homes, such as Washington, D.C., New York, and California.

A compromise was reached on the final tax bill: It appears the deduction will be limited to the first $750,000 of mortgage debt.

Solution: If you have mortgage debt greater than $750,000 and less than $1 million, you should make your January 2018 mortgage payment before December 31st of this year. The interest paid will be allocated to your 2017 payments. You'll receive Form 1098 from your lender in early 2018. Check it to ensure the extra interest was captured in 2017. Unfortunately, only one extra payment is allowed. Any extra payments will have the interest allocated to 2018.

State and Local Tax Deductions

Currently, homeowners can deduct the full amount of property taxes paid. Both the Senate and House tax bills will limit the deduction to $10,000.

Solution: You can prepay some or all of your 2018 property taxes and the IRS will allow you to deduct that amount on the current year's taxes. If you decide to do this, I recommend contacting your local tax authority to ensure they credit your payment for 2017.

Listening / Playing / Reading / Watching

Here's what has my attention right now:

  • Persepolis Rising by James S.A. Corey. This is the seventh book in the seriously great Expanse series. If you're into science fiction and want a good space opera, I highly recommend starting with book one, Leviathan Wakes. Think of the Expanse series as Game of Thrones in space.

Happy Thanksgiving!

Earlier this year I read an article about the benefits of journaling. Since then, I've spent a few minutes nearly every day writing about my ideas, tasks, and goals. I even use a physical notebook made from dead trees!

Journaling has helped me clarify ideas, prioritize tasks, and ensure I accomplish specific goals. It's been a helpful and fun exercise; one I hope to continue every day.

In addition to the things listed above, I often use my journal to note the many things I'm thankful for. Below, you'll find a list of some of those things. 

I hope you have a Happy Thanksgiving! Eat lots of pie!!

  • My family and friends. I'm fortunate to be surrounded amazing people. My wife, who is also my best friend, our two awesome little girls, wonderful family members, and great friends.
  • My clients. I truly enjoy working with all of my clients. Thank you for your trust and for letting me do what I do.
  • The fantastic trainers at CrossFit PetworthIn May, I finally drank the CrossFit Kool-Aid and now I understand why CrossFit practitioners won't shut up about their obsession. The workouts are some of the most mentally and physically challenging I've ever done. I'm stronger and I feel great. And sore. Very sore. Thanks, CrossFit Petworth team, for kicking my ass.
  • Audiobooks and podcasts. Whether I'm commuting to my office or cooking dinner, I can continue to learn new and interesting things or just listen to a good story.

Listening / Playing / Reading / Watching

Here's what has my attention right now:

  • Shoe Dog: A Memoir by the Creator of Nike by Phil Knight. I'm a sucker for stories about how entrepreneurs started their companies. In this case, Nike shoes were popular by the time I was wearing athletic shoes, which meant I was unaware of the company's ups and downs. Highly recommended.
  • Artemis by Andy Weir. I loved Weir's first book, The Martian, so I was excited to see him this week at a Politics and Prose event. So far, the new book is fun and has some practical ideas about how a colony on the moon could function.
  • Uncharted: The Lost Legacy. Remember the game Pitfall! on the Atari 2600? Well, the Uncharted series is similar but with amazing graphics and fun gameplay. It's like playing an Indiana Jones movie.

The Old Versus the New

“There are new gods growing in America, clinging to growing knots of belief: gods of credit card and freeway, of Internet and telephone, of radio and hospital and television, gods of plastic and of beeper and of neon. Proud gods, fat and foolish creatures, puffed up with their own newness and importance. They are aware of us, they fear us, and they hate us," said Odin. "You are fooling yourselves if you believe otherwise.” - Neil Gaiman, American Gods

The Audiobook

Earlier this week, I finished an amazing audiobook that captured my imagination: American Gods: The Tenth Anniversary Edition (A Full Cast Production)*. The story takes place in modern America and features gods, both old and new, living among us mere mortals. The Old Gods, including Odin, Loki, and Easter, were brought to America centuries ago and are now weak, scraping by on the fringes of society. Their power and influence have faded because they have been forgotten - but that doesn't mean they are completely powerless. On the other side, the New Gods, such as Media, the Internet, and Television, have grown powerful as humanity places its faith in a new order. There's quite a bit more to the story, but I won't ruin it for anyone who decides to read it. And you really should.

*If you decide to listen to the audiobook I highly recommend this version because the cast does an excellent job bringing the story to life.

New

After finishing the audiobook I couldn't stop thinking about some of the ideas I had heard, especially the idea of the old, forgotten gods and the young, new gods.

As I was reading the Wall Street Journal, I took note of the companies making headlines: Amazon, Apple, Facebook, Netflix, Tesla, and Twitter, among others. What do these companies have in common? All were founded less than 45 years ago. Fun Facts: Founded in 1976, Apple is the oldest of the bunch, which makes it 41 years old - the same age as me.

My point is that these are relatively new companies and they garner quite a bit of attention from their customers/users, the media, and investors. I started to think of these companies as the New Gods.

Old

If the companies listed above are the New Gods, which companies are the Old Gods? I tried to come up with a list of companies that had been replaced or forgotten:

  • Amazon is where we buy books and pretty much everything else these days, so Barnes & Noble and Sears seemed like good choices.
  • Apple makes more than just computers now, but IBM seems like a good fit.
  • Despite its production problems, Tesla continues to be the carmaker everyone talks about. I think Ford and GM are the obvious choices.
  • Facebook and Twitter are social networking platforms as well as sources of news, both real and fake. All of the old media companies fit into this category.

Why bother comparing all of these companies? Because it illustrates how investors behave. Naturally, we want to use, read about, and invest in the latest and greatest things/companies. This means we often forget about the old, yet still powerful, companies, sometimes with dire circumstances. Remember the 2000 - 2002 dot-com bubble? Pets.com, which was considered one of the Next Big Things, didn't survive.

Here's another good example of why it's important to focus less on the New: In 2010 Warren Buffett's Berkshire Hathaway completed the purchase of BNSF Railway, a nearly 160-year-old company. At the time, I remember reporters saying Buffett was crazy for buying a railroad. It's an old industry! How boring! Of course, once Buffett explained why he bought a railroad everyone thought he was a genius.

The Takeaway: Don't chase the latest and greatest things - especially when it comes to investing. Stick with boring, tried and true investments. Better yet, keep it simple and buy a low-cost index fund.

One More Thing

The day after I finished listening to the American Gods audiobook I started writing down ideas that would eventually become this post. As I fleshed out my ideas I turned to that all-knowing deity The Internet for more information. To my surprise, the search revealed a similar piece written by Josh Brown earlier this year. Curses!

Fortunately for me, Brown's piece goes in a different direction than mine. Anyway, please let the record show that:

  1. I swear I came up the idea for my post before I stumbled across Josh Brown's blog, and
  2. Brown's post is excellent and you should read it.

Listening / Playing / Reading / Watching

Here's what has my attention right now:

  • Leonardo da Vinci by Walter Isaacson. How can anyone pass up a biography of da Vinci??
  • Hash Power - A Documentary on Blockchains and Cryptocurrencies by Patrick O'Shaughnessy on his podcast, Invest Like the BestThe Invest Like the Best podcast quickly became one of my favorites after listening to just a couple episodes. The Hash Power series is a good place to start if you want to learn about cryptocurrencies.
  • Mindhunter on Netflix. Have you ever wondered how the FBI figured out how to profile and catch serial killers? If so, there might be something wrong with you.
  • Wolfenstein 2: The New Colossus. This game provides an alternate version of history, one where Germany won World War II and America is controlled by Nazis. The developer, MachineGames, released this game at a time when America actually has a real Nazi/white supremacist problem. The social commentary in the game is fantastic.

You Know You Need a Financial Advisor When...

There are a few sure-fire signs that you need a financial advisor in your life. Whether you are just starting out in your first job or on the other side of retirement, there are financial considerations at each stage of life that a financial advisor can help you understand and navigate.

If you haven’t hired a financial advisor, but are wondering if now is the right time, there are a few signs that may indicate now may be the right time to start.

·      You’re not sure you’re saving enough for retirement. Even if you are saving for retirement, it may not be enough to support your needs and lifestyle in retirement. You don’t want to be in retirement and then find out that you didn’t save enough. Better to consult with a financial advisor earlier in your life to put you on a plan that will provide you with enough income to support your retirement lifestyle.

·      You don’t know where all your money is going. If you wind up scratching your head every month wondering where all your hard earned income has gone, it’s time to work with a financial advisor. A financial advisor can help you understand your current spending habits and even help you adjust them to better align with your values and your goals.

·      You’re not sure how to make a big financial decision. Whether you’re getting married, buying a home, or considering long-term health care options, a financial advisor can help you navigate large financial decisions. There are large financial decisions we face at every stage of our life and you don’t need to make them in a vacuum. A financial advisor will help you understand your financial options so that you can make the best possible decision for you and your specific situation.

·      You don’t know what your finances are working toward. A financial advisor is going to help you set financial goals for your present and your future. He or she works with you so that you can align your money with your values and help you create the life you want to live.

·      You live beyond your means. Financial advisors are not just for people with a ton of investible assets anymore. Besides, even the highest wage earners can find themselves living beyond their means, too. If you find that you are regularly outspending your income each month, even when you have plenty of income coming in, it’s time to hire a financial advisor.

If you identified with any of these signs, I encourage you to consider working with a financial advisor. There is a lot of value a financial advisor can bring to your financial life beyond retirement planning and investment management. 

Third Quarter 2017 In Review

Heading Into the Homestretch

Fall is finally here, which means it's time for many of my favorite things: Cool weather in D.C., fall apples, Oktoberfest beers, Halloween, and scary movies.

Speaking of scary, October is usually thought of as a scary month for the stock market, but September actually has more historical down days in the markets. The good news is that I have nothing scary to report for September - or the third quarter.

Q3 2017 Numbers

The most commonly used benchmark, the S&P 500 Index, had another strong quarter, up 4.48%. That puts the S&P 500 up 14.24% through September 30th.

The average diversified U.S. stock fund, which is a better measure of how we invest than the S&P 500 by itself, gained 4.2%, which puts domestic stock funds up 12.3% through September 30th. Investors, still wary of high valuations in U.S. stocks and a long bull market, are exercising caution, with nearly $48 billion flowing out of stock funds during the quarter.

The average diversified international stock fund gained 5.9% in the third quarter. This gain puts international stock funds up an impressive 21.9% for the year. Emerging market funds are performing even better, up 26.5% so far. In a sign of investors' confidence in foreign markets, $48 billion flowed into international stock funds during the quarter.

The average intermediate-term bond fund returned 0.8% during the second quarter, which puts them up 3.2% from January 1st through September 30th. A whopping $95 billion flowed into bond funds during the quarter, likely due to concerns about the valuations of U.S. stocks.

Expectations for the Fourth Quarter

The President and Congress, having failed at two attempts to repeal and replace the Affordable Care Act, have moved on to tax reform. I assume we'll see more details about proposed changes to the tax code, but I'm not holding my breath.

When it comes to financial markets and investments, I honestly don't know what to expect. The markets have come a long way since March of 2009, which has been wonderful for investors. I know there will be a correction at some point, but I cannot predict when it will happen or what will cause it.

As we head into November - and prepare to celebrate Thanksgiving - let's be thankful for how our investments have performed over the past eight years. And let's also prepare mentally for things to change, because we know they will eventually.

Listening / Reading / Watching

Here's what has my attention right now:

My Answers to the 19 Questions You Should Ask Every Financial Advisor

In case you missed it, The Wall Street Journal's Jason Zweig recently wrote an article titled "The 19 Questions to Ask Your Financial Advisor". Zweig, who writes a fantastic weekly column titled "The Intelligent Investor", wants consumers to receive good financial advice. To him, that means financial advisors, stockbrokers, and insurance agents should always act as fiduciaries, which means they should act in their clients' best interests.

I wholeheartedly agree. Honestly, I can't believe this is even up for debate.

Some background: Last year, the U.S. Department of Labor released a rule which, once implemented, will require all financial professionals who provide retirement planning advice to act as fiduciaries for their clients. In addition, financial professionals must disclose all conflicts of interest and clearly disclose all fees and commissions paid by the client. Financial professionals who work on commission, primarily brokers and insurance agents, will be impacted the most. In general, these are the professionals unhappy with the rule. Unfortunately, the deadline for compliance has been delayed from January 1, 2018 to July 1, 2019. In the meantime, changes to the rule may severely weaken the rule or kill it entirely.

So how do you determine whether or not a financial planner will act in your best interest? Ask an advisor the right questions and listen for the best answers. Below, you'll find 19 questions to ask an advisor. You'll also find the answers, in parenthesis, Jason Zweig suggests you listen for. I've also included my answers to the questions, which are in bold.

Use these questions when interviewing an advisor - and interview at least three. Good luck with your search!

1. Are you always a fiduciary, and will you state that in writing? (Yes.)

Yes.

2. Does anybody else ever pay you to advise me and, if so, do you earn more to recommend certain products or services? (No.)

No.

3. Do you participate in any sales contests or award programs creating incentives to favor particular vendors? (No.)

No.

4. Will you itemize all your fees and expenses in writing? (Yes.)

Yes.

5. Are your fees negotiable? (Yes.)

Yes.

6. Will you consider charging by the hour or retainer instead of an annual fee based on my assets? (Yes.)

Yes.

7. Can you tell me about your conflicts of interest, orally and in writing? (Yes, and no adviser should deny having any conflicts.)

Yes.

8. Do you earn fees as adviser to a private fund or other investments that you may recommend to clients? (No.)

No.

9. Do you pay referral fees to generate new clients? (No.)

No.

10. Do you focus solely on investment management, or do you also advise on taxes, estates and retirement, budgeting and debt management, and insurance? (Here the best answer depends on your needs as a client.)

Investment management is important, but I believe true financial planning means looking at all aspects of a client's financial life.

11. Do you earn fees for referring clients to specialists like estate attorneys or insurance agents? (No.)

No.

12. What is your investment philosophy?

I believe it is impossible to consistently beat the market. Therefore, I use passive investments, such as low-cost index funds, in client portfolios.

13. Do you believe in technical analysis or market timing? (No.)

No.

14. Do you believe you can beat the market? (No.)

No.

15. How often do you trade? (As seldom as possible, ideally once or twice a year at most.)

As seldom as possible, typically less than twice a year.

16. How do you report investment performance? (After all expenses, compared to an average of highly similar assets that includes dividends or interest income, over the short and long term.)

After all expenses on a quarterly, 1-year, 3-year, and 5-year basis. I can compare performance to a benchmark, such as the S&P 500 Index, but I prefer not to because it's not an apples-to-apples comparison.

17. Which professional credentials do you have, and what are their requirements? (Among the best are CFA [Chartered Financial Analyst], CPA [Certified Public Accountant] and CFP, which all require rigorous study, continuing education and adherence to high ethical standards. Many other financial certifications are marketing tools masquerading as fancy diplomas on an adviser’s wall.)

I hold the Certified Financial Planner designation (CFP®).

18. After inflation, taxes and fees, what is a reasonable estimated return on my portfolio over the long term? (If I told you anything over 3% to 4% annually, I’d be either naive or deceptive.)

I cannot guarantee a rate of return. Conservatively, 3% to 4% is realistic, but markets have their ups and downs.

19. Who manages your money? (I do, and I invest in the same assets I recommend to clients.)

I do and I use the same investments I recommend to my clients.

Equifax Data Breach - What You Should Do Next

What Happened?

  • Equifax, the credit-tracking and rating company, revealed it suffered a massive data breach on July 29th of this year
  • Approximately 143 million U.S. consumers were affected

Why Should I Be Upset?

  • Having your sensitive personal information leaked is bad enough, but Equifax failed to report the hack until Thursday, September 7th - more than a month after the breach actually occurred
  • To make matters worse, executives at Equifax sold millions of dollars in company shares in early August, which isn't at all shady
  • Equifax's response to the breach was laughable, and not in a good way:
    • Initially, the website www.equifaxsecurity2017.com/, which was created to notify consumers of the hack, had numerous problems, which made it appear as if the site was a phishing threat
    • Immediately following disclosure of the breach, security codes were displayed on the main Equifax site
    • The PIN generated when a consumer initiates a security freeze appeared not to be random but generated in such a way that hackers could still determine the consumer's identity (this has since been fixed)

What Can I Do?

  • Find out if your information was included in the breach by visiting this site created by Equifax and clicking "Potential Impact"
  • Sign up for the free 12-month credit file monitoring and identity theft protection provided by Equifax
    • Note 1: Initially, the terms and conditions of this service required anyone who enrolled to give up the right to sue the company, but Equifax has since stated that specific clause would not apply to the data breach)
    • Note 2: You do not have to sign up for the monitoring service, it's simply an option
  • Check your credit reports from the three main reporting agencies, Equifax, Experian, and TransUnion by visiting www.annualcreditreport.com.
    • You are allowed to obtain one free report annually from each of the three companies
    • There are numerous websites willing to charge you for a credit report, so make sure you use the one authorized by Federal law
  • Place a credit freeze on your files
    • You can find out more about this service by visiting the Federal Trade Commission website
    • Equifax is providing the credit freeze service free of charge, but Experian and TransUnion are charging consumers $10 - $15 for the privilege (I'll give you three guesses how I feel about paying for this service to a company that's managing my sensitive data)
  • If you don't want to lock-down your credit with a credit freeze, you can initiate a fraud alert, which allows creditors to get a copy of your credit report as long as they take steps to verify your identity
  • Review your bank and credit card statements for any transactions you don't recognize
  • Improve your passwords
    • I understand how difficult it is to remember dozens of passwords, so I recommend using a password manager, such as LastPass
    • Even better, enable two-factor authentication for your most important websites
  • When using public wi-fi networks don't visit websites that require sensitive information
    • If you must use a public network, use a virtual private network (VPN), such as VPN Unlimted, which will encrypt the traffic between you and the internet

Listening / Reading / Watching

Here's what has my attention right now:

  • I'm still working on last week's books!