How much you REALLY need to retire!

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See if you can answer these retirement questions (answers are at the bottom of this page):

  1. From 1926 to 2005, the S&P 500 returned an annual compound average of 10.4%, according to Ibbotson Associates. In how many of those 79 years did the stock market post a return between 10.0% and 10.9%?
  2. How much after-tax wealth can you add to your portfolio by knowing which assets to put in your retirement accounts and which to keep out? A) 5% B) 10% C) 15% D) 20% ?
  3. What percentage of workers have calculated how much they need to save for retirement?
  4. At the age of 65, males have a 5% chance of reaching age 95; females have a 13% chance. What chance is there that one member of a married couple will reach age 95?
  5. The average consumer in the 45-to-54 age group spends how much in relation to the average consumer in the 75-and-over age group? A) About two-thirds as much B) About the same C) About twice as much D) About three times as much?
  6. What is the average annual Social Security retirement benefit?
  7. Last year, a court ruled that a 61-year-old disabled man will not inherit his deceased wife's $1 million pension. Why not?
  8. What percentage of households headed by people age 45 or older have a net worth of less than $25,000, excluding home equity?

With a few adjustments to your investments, estate planning, and tax planning, you can greatly increase your capital in just five years.

  • You can reduce your taxes dramatically, whether you're retired now or just planning for retirement.
  • You can help ensure that you have extra money for vacations every year. Maybe a second home. Or early retirement with a comfortable, steady income.
  • Even if you haven't put away your first penny toward retirement but you're already dreaming of hanging up the business suit for good, you can still retire in comfort. in 11 years by following a simple plan we've devised.

Answers to Questions above

  1. Just once - In 2004, the stock market returned 10.8%.
  2. 15%
  3. 42%
  4. 18%
  5. About three times as much
  6. $11,508
  7. Because the wife completed the beneficiary form 27 years ago when she was single, designating her sister as the person who would receive the money, and she didn't update the form after she got married 19 years ago.
  8. About 40%

Wall Street's 'Weapons of Mass Manipulation'

From Fox News, read the entire article

Are you sitting down?
Sorry investors, but you're at a distinct disadvantage. You're one of America's 94 million Main Street investors and the odds are 100:1 against you given the enormous firepower of Wall Street. And thanks to behavioral finance, it's getting worse, the gap's widening.

Can you hear the laughing and snickering?
On cable, in ads and sales pitches The Street panders to your ego: You're "the man," a "rational man." You can beat the averages, the indexes. But behind your back, they laugh; they know you're irrational when it comes to investment decisions. Moreover, they actually prefer a market filled with irrational investors. That way, they can manipulate you easily without you ever really knowing it.

Can you beat the Street?
Oh, they'll let you make modest gains, enough to keep you in line, to prevent a full-scale rebellion. But the playing field's not level and they're backed by an elite force of roughly a million in the financial-services industry — brokers, salesmen, advisers, analysts, talking heads, slick admen, slicker lobbyists — "foot-soldiers" armed with superior tools, advance data, huge monetary incentives and the protection of friendly legislators and regulators.

Is hope an investing principle?
In Robert Shiller's 2000 classic "Irrational Exuberance," Shiller says irrationality is simply "unjustified optimism ... wishful thinking on the part of investors that blinds us to the truth of our situation." Irrationality makes us our own worst enemy, and prey for sophisticated market predators.

In the 1990s our irrational exuberance blew a huge bubble. Then irrational pessimism popped it. It'll happen again. Because investors are irrational, cycle after cycle, day in/day out. That will never change. We are irrational investors.

Do you control your behavior?
Wall Street knows this, and thanks to their new behavioral-finance allies, knows how to capitalize on this weakness in the investor's psyche, use our naiveté and weaknesses against us and beat us in the market. Moreover, they have no incentive to share what they know; worse yet, they prefer we stay irrational!

Wall Street pros need "investors who are ... irrational, woefully uninformed, endowed with strange preferences, or for some other reason willing to hold overpriced assets." Get it? In order to succeed, Wall Street needs "irrational investors," that's spooky!

Is anyone on your side?
Business Week is quick to warn: "You and I can no more hope to do what [Wall Street] does than we can hope to rival such famously heroic stock-picking personalities as Warren Buffett and Peter Lynch. You and me and the rest of America's Main Street investors are outgunned and outsmarted in this game. We can't even speak their language, and what they do is cloaked in secrecy.

What can you do?
Very simple: Since you can't beat them, don't play their game by their rules. Build a lazy portfolio. Then leave it alone. Let it do its job automatically. Build wealth doing something you love in a business or profession you enjoy, and spend as much time as you can with family and friends.

Forget the irrational markets. With the quants now beefing up Wall Street, you're just wasting your time anyway ... surrender!

Want to build a bullet-proof portfolio? Contact a Visible Investment Advisor for a FREE consultation.

How did your 2006 performance compare?

Did you get your 2006 investment statements?
Most investors have received their 2006 investment statements in the last couple of weeks. Do yourself the biggest favor - spend some time reviewing them.

Do you need help determining your portfolio performance?
You can do this yourself or ask your asset manager, stock broker or online discount broker for help quantifying your 2006 returns.

Did you match or beat the benchmark returns?
Determine you annal return by asset class (US equities, bonds, international, real estate, etc.) including capital appreciation and dividends, less all commissions and expenses.

How do you do compare?
Compare your returns to Visible Investor Performance (3, 5, 10 year returns):

US Equities: 15.5%
International Equities: 26.6%
Emerging Market Equities: 28.1%
Real Estate: 35.1%
US Bond: 4.3%
Blended Return (all asset classes): 17.0%

If you did not reach these returns or would like a Visible Investment Advisor to do a complimentary review of you year-end statement, contact us.

Excerpts from Vanguard's 2006 Year in Review

A strong and growing economy and low interest rates provided the foundation for 2006's excellent market performance

The value sector of the market (high dividends, low p/e, low price to book) outperformed the growth for the 7th year in a row.

Because the market grew at a rate consistent with the fundamentals in the economy, the market remains fairly valued.

While there are risks in the market (rising interest rates and lower growth trends), with diversification in appropriate asset classes, individual investors can prosper.

Past performance does not guarantee future results. Each investors risk tolerance and return objectives are different. Contact us to discuss your 2007 portfolio strategy.

Buying and selling on emotions

Warren Buffett is famous for reminding investors that their emotions are their worst enemy.

The safest way to make money is to buy an asset (i.e. stock, bond, real estate, or commodity) when its price is significantly below its real value and sell it when its price is significantly above... easier said then done.

Even in the bull market of the 1990's, both professional and individual investors significantly underperformed the market because their emotions made them take actions that were contrary to their own best interests.

While it's difficult to identify your own emotions, identifying their characteristics may prevent you from making some of the most common investor mistakes.

Love - asset price doesn't matter, valuation doesn't matter, recommendations don't matter, "I'll never sell."

Greed - asset price moving up rapidly, stock overvalued, on everyone's recommended list, buy at any price, "when the ducks are quacking, feed them."

Excited - asset price starts to rise, stock slightly overvalued, some positive some negative recommendations, planning to buy on a "pull-back."

Apathy - "dead money," asset price moving "sideways," fairly to slightly overvalued, no recommendations, looking for something else to buy.

Disgust - "cut your losses," asset price starts to move down after a period of apathy, fairly priced, some positive some negative recommendations, planning to sell when stock returns to predetermined price.

Fear - stock falling rapidly, lots of negative recommendations, sell at any price, "there's blood in the street."

Hate - stock price doesn't matter, valuation doesn't matter, recommendations don't matter, "I'll never buy."

Quoting Buffett, "you pay a high price for a cheery consensus."

Given the same asset, the time to buy is when everyone fears and hates it, and the time to sell is when everyone is in love with it. You can pick up on the emotions from the media, analyst recommendations, and, yes, blogs.

If you can't determine the value of an asset or if you can't control your emotions (buying when there is fear or selling when their is greed), get the help you need from an advisor that can.

Eddie Lampert is no Warren Buffett

Have you heard the comparison between Eddie Lampert and Warren Buffett. Well, let's take a look...

- Buffett doesn’t like retailers unless they have an economic moat - of which neither Sears nor Kmart has one (Buffett owns Wal-Mart, Target and his beloved Nebraska Furniture Mart - all of which have growing moats at the expense of Sears and Kmart).

- Unlike Lampert, Buffett doesn’t get directly involved in the management of his companies, he just allocates the capital they generate.

- I think Buffett would consider Sears/Kmart a “cigar butt” investment - trying to get one last puff before it goes out. While he does make those kind of investments, it is not his primary style.

- Lampert is generating cash by selling assets and intellectual property. Buffett never wants to sell assets and intellectual property - his holding period is forever.

- What is similar, is what Buffett would probably consider one of his failures. Lampert had a large investment before Kmart went into bankruptcy, and rather than seeing that investment go down the drain, he salvaged it by taking control and throwing more money at it. The best comparison to Buffett is the purchase of General Re, using additional capital to turn it around.

Eddie Lampert's Hedge Fund has a great track record with 29% annual returns. But, you can not compare Lampert (or any investor) to Buffett based on their returns alone, you have to compare them on style and their styles seem quite different.

If your hear of a manager that describes himself as a Buffett investor, let's talk.