I meet with clients every week who have been devastated by losses, frustrated by lack of returns and feel anxious by the lack of knowledge they have about their investments. I often tell my clients “what good is a great estate plan if you are financially bleeding to death while you are alive?” Often these clients feeling victimized have started to make their now investment decisions.  Many news articles and television ads today make it sound as if this may be a prudent strategy.

When we meet I tell them that they are trapped in the Investors’ Dilemma and they need to get basic financial education to protect themselves not only from the army of financial sales people who are pushing product solutions but also to understand their own behavior and not be victimized by their own human decisions that lead into traps of investing and frustration.

I often refer them to one of the best (and easy to read) books on investing. I tell anyone that has money to invest for their estate or retirement planning should add this book to their reading list. They will not regret it.

It was co-authored by Gordon Murray and Daniel Goldie. In less than 100 pages, it clearly tells everyday investors nearly everything they need to know about investing in the stock and bond markets to beat 95% of Wall Street’s best money managers.

Murray had a 25-year career on Wall Street that included stints at Lehman Brothers, Goldman Sachs and Credit Suisse First Boston. His career, like those of many in the investment community, was built around beating the markets–which many claim to do but few pull off.

Murray retired in 2001. He later met Daniel Goldie, a former professional tennis player and financial adviser, who taught him the virtues of passive investments.

While active investors try to beat the markets, passive investors are content to tie them. The irony, however, is that passive investors over time do better than the vast majority of active investors, due in large part to the excessive fees and taxes faced by people who try in vain to beat the market.

As The New York Times reported in a great article last month called “A Dying Banker’s Last Instructions,” (NY Times article) , Murray was diagnosed with terminal brain cancer in 2008. He has ceased treatment and doesn’t expect to live past his 61st birthday in March of 2011.

Murray decided to use his last days on earth to write about his new investment epiphany. His friend Goldie co-authored the concise paperback “The Investment Answer,” which was published in August, 2010. It is easy to read and anyone who invests  should read this book. You can click to go to a web site for more information about the book:  The Investment Answer.

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Thanks again.

Dennis D. Duffy

Duffy Law Office

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

A really timeless article that explains why active portfolio managment is a mistake for any investor.

Click here to read active vs. passive investing

We appreciate you following us and value your comments and input. Please provide your thoughts by using the comments section on our blog page.

You Can Also Find Us Online: Facebook | Twitter | LinkedIn

Thanks again.

Dennis D. Duffy

Duffy Law Office

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

1. Fear of the Future

The cycle begins with a sense of uncertainty about the future, characterized by questions like: “Will there be enough money to maintain my standard of living? How much do I need to save? How do I know what is the best investment?” The media and advertisers prey upon this fear of the future in an effort to sell products.

2. Forecast and Predict

Because of this fear of the future, investors have a strong desire to comprehend and predict future events. If someone could tell what is going to happen with inflation, long-term interest rates, share prices, overseas markets, then there would be less to fear about the future from an investment perspective. Along these lines, investors are frequently convinced that someone has the information, power and insight to forecast the future.

3. Track Record Investing

The primary method investors employ to convince themselves that the future can be foretold is through track record investing. This means they look for stock managers who have performed better than the market in the past with the hope that they will continue to have superior performance in the future.

4. Information Overload

In the past, gathering information was the best way to guide prudent investment decisions. However, the current Information Age has created access to so much information that it is easy to become overloaded. Investors feel compelled to understand all of the information: the Internet, books, newpapers, magazines, TV talk shows, advertisements, friends’ experiences, etc. Indeed, instead of reducing fears, this deluge of information often intensifies doubts about investing.

5. Emotion-Based Decisions

As investors, we never overcome our own humanity. Even though most investors prefer to think that they make investment decisions based upon logic; typically emotions, such as trust, loyalty, hope, greed and fear drive our investment decisions.

6. Breaking the Rules

There are three commonly accepted rules of investing: 1) Own equities 2) Diversify and 3) Rebalance. And, the golden rule of investing is: Buy when prices are low and sell when prices are high. It sounds simple. However, when investors make decisions based on emotions, they wind up breaking these seemingly simple rules, thereby sabotaging their portfolios.

7. Performance Losses

Performance loss means investors fail to capture the returns they expected. Unfortunately, because investors so frequently break the golden rule of investing, they do not receive the rate of return they expected. Investor performance does not equal investment performance. When this effect is compounded over a period of years, an investor’s potential for reaching financial goals is significantly decreased. Such loss creates additional frustrations and fears about the future, once again initiating the cycle.

THE RESULT: Not Enough Money and No Peace of Mind

The end result of the Investors’ Dilemma is not having enough money combined with worry, frustration and anxiety about the inability to accomplish meaningful life goals.

We appreciate you following us and value your comments and input. Please provide your thoughts by using the comments section on our blog page.

You Can Also Find Us Online: Facebook | Twitter | LinkedIn

Thanks again.

Dennis D. Duffy

Duffy Law Office

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

The stock market has been on a dramatic up trend the last few months.  Is it time to invest?  

Here are some Tips on How To Make Money in the Stock Market

Step 1 Buy whatever stock or asset class or country or mutual fund or fund manager or hedge fund that has done really well for the last year [or last month]. Investments only go in one direction, right?

Step 2 Watch Cramer’s MAD MONEY and do whatever he recommends.

Step 3 Time the market: watch MSNBC and FOX NEWS 24-7, so you know when to buy and sell.

Step 4 Completely ignore the true costs of buying and selling. Do not calculate the bid – ask spread that is being skimmed from your accounts.

Step 5 Ignore tax consequences and focus on buying and selling as much as possible, since that is how Wall Street gets wealthy… from the transaction costs. And if Wall Street makes money… of course you will too.

Step 6 Make sure you take advantage of every stock tip.

Step 7 Invest in what you know, since you are obviously smarter than the millions of other participants in the global markets.

Step 8 “Back-test” your trading strategy, since we all know that the stock market is completely predictable.

Step 9 Tell everyone you know if you make money, but not when you lose it. That way when you are penniless, at least you will have a great reputation.

Step 10 If you see a hot company on the cover of Fortune magazine, be sure to buy it as soon as possible, since you are the only one who reads the cover of magazines.

Step 11 Never calculate the return of your investment strategy for the last 1, 5, 10 and 20 years and compare it to an appropriate index. Remember, if you don’t know it is broken, you don’t have to worry about fixing it.

Step 12 When your broker wants to sell you a municipal bond, never ask about the hidden costs [bid /ask spread] implicit in the illiquid bond market. Just buy whatever he wants to sell, since of course your broker is putting your interests first.

Step 13 If your hot stock has gone down 95%, make sure you hold onto it forever, since it just HAS to go up eventually, right?

Step 14 Buy as many stock-picking newsletters and online analysis tools as possible, since what you spend does not “count” as a true cost, right?

Step 15 Under no circumstance should you look to see how banks and financial institutions invest their own money, since they don’t work with a financial advisor. Only listen to the financial advisors.

Step 16 Buy as many different stocks and bonds and mutual funds as possible, since you will obviously be more diversified. Mutual funds never hold the same stocks, right?

Step 17 If your broker or advisor wears a very expensive suit, his advice is obviously “golden”, and you must do everything he advises you to do. Also, do not listen to academic researchers, since their clothes are not fashionable.

Step 18  April Fool!   Follow none of the above tips!  Instead, determine your market view and then construct your portfolio to eliminate stock picking, market timing and any effort to forecast or predict market moves.  Use broad globally diversified passive investing techniques to capture the market return and then rebalance from time to time to keep your asset allocation disciplined to your time horizon.  Do this for the rest of your life to achieve great results.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

At first, it may sound odd for an Iowa resident to consider investing in a West Virginia 529 Plan.  But, we’ve investigated college saving and investment plans and the West Virginia SMART 529 Select Plan is a winner, even for out of state residents.

The primary attraction is the portfolio construction.  It uses low fee and low turnover (stock trading) institutional funds to create global diversification that has asset allocation to reduce risk but capture market rates of return.  This passive investing technique is preferred over many of the retail mutual funds that use stock picking or market timing which have been shown to add risk and reduce returns in portfolios.

Many 529 plan use only fixed rate or bonds  that will not capture all the market reruns.  As a  result these 529 plans will not keep up with the rising cost of education and this erosion of purchasing power should be an important consideration when funding future educational plans.  Market risk is reduced by broad diversification in the West Virginia plan.

Check out the plan highlights below.

West Virginia SMART 529 Plan Highlights

• This plan is a savings plan (not a prepaid tuition plan)
• This plan accepts contributions until all account balances in West Virginia’s 529 plans for the same beneficiary reach $265,620.
• You can enroll directly with the program.  In other words, you don’t need a financial advisor to open and invest in this plan.
• There is no enrollment fee.
• The $25 annual maintenance fee is waived if you enroll in the automatic investment plan, have a balance of at least $25,000, or are a West Virginia resident.
• The investment expenses range from 0.67% – 0.78% total.
• There is no state residency requirement.  In other words, you don’t need to reside in West Virginia to participate in this plan.
• The minimum contribution requirements are reasonable.  If you just want to contribute periodically, you need a lump sum of $250 for the first contribution.   After that only $25 is required per contribution.

If you set up an automatic investment plan and have contributions taken out of your bank account on a regular basis, the minimum contribution is $25.

• You get to choose among age based and static investment portfolios.

529 Plan Benefits

• All investments grow federal income tax deferred and are distributed tax free when used for qualified educational expenses.
• You can super fund a 529 Plan for children, grandchildren, or any loved one without paying gift tax or using your unified credit exemption.  This means that you can put five years with annual gifts into an account all at once ($13,000 x 5 = $65,000)

Click here to get to www.saving for college.com to compare various 529 plans.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

When it comes to getting appointed as guardian of a loved one, just how disabled does the person need to be before the court will decide that they need a guardian?

The rules concerning guardianship of an adult are stringent due to the fact that when a guardianship is appointed, it takes away many of the rights that someone has. Once there is a guardian they can control where a person lives, what they do, when they receive medical treatment, etc. Due to the seriousness of appointing a guardian over an adult citizen, the court must find that the person is mentally incapacitated.

The general guideline to determine if someone is mentally incapacitated they must be severely limited in their ability to process information and to communicate. This disability must bad enough that the person can no longer attend to what is required to ensure their safety and physical well being. This means that the person cannot perform the tasks that would be necessary to ensure that they got health care, food, shelter, clothing, personal grooming, etc.

The impairment usually has to be due to the person’s ability to think or communicate. What this means is that even if you are completely paralyzed, as long as you can think clear enough to make decisions and have a means of communicating those decisions, the court will not appoint a guardian.

Although the rules regarding a guardianship appointment are strict, it is essential to understand that the reason for guardianship in the first place to protect someone who is vulnerable. If a judge sees that someone is at risk for some type of injury, they may appoint a guardian, even if the person’s condition does not meet the exact rules according to the law books.

To best understand how guardianship works and if it may be a necessary step to protect a loved one, you will want to contact an attorney that specializes in elder law for advice. An attorney can advise you on what steps to take to gain guardianship over your loved one, or if it is even something that you should do at all.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

In some situations a person may not feel it appropriate to appoint someone in their family as the executor of their will. There are various reasons why someone might not want a family member to handle their estate after they are gone; possibly there are some problems between family members that could make it difficult to appoint a member of the family to be executor of a will. In some cases there are no family members and the person creating the will doesn’t feel comfortable asking a friend to be executor.

If you are faced with this type of situation, there are institutions that can act as executor of your will. In fact, many banks offer this service to their customers. Along with appointing a bank as the executor of your will, you can also appoint a bank as trustee of your estate.

When you appoint a financial institution as the executor of your will, there is usually a fee associated with this service, though the cost may be lower if you are already a customer. In most cases the amount of the fee you will be charged will range anywhere from 0.75% to 1.5% of your estate.

In the event that you are thinking about appointing a financial institution as executor of your will you should be aware that some banks may require that you include special language in your will. If this is the case with your bank, find out exactly what the language is and bring it to your attorney so that your will can be modified to include it.

While it may give you peace of mind knowing that your financial institution will be executor of your will, there are some things that you might want to consider. The first consideration being that your bank is an intuition and not a person. A lot of changes can take place and when it comes time for them to execute your will, the people actually taking care of this may be in some corporate office on the other side of the country. You might also want to ask yourself if an intuition can really take care of your estate’s unique situation.

There are other options aside from financial institution, such as trust companies if your estate has a trust, and even your attorney. Deciding who will be executor of your will or trustee of your estate is a serious decision, and one that you will want to consider carefully.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

If you’re an Iowa resident looking to begin saving for your child’s college expenses, contributing to a college savings plan can be a great option.  This makes it easy to save, no matter how old your child is.  If you’re looking for more information on your college savings plan options, read the information below.  If you have any questions about contributing to a college savings plan, meet with an estate planning attorney.

This is a two-part blog post that discusses Iowa college savings plans.  This first post will explain the College Savings Iowa 529 Plan.

What is the College Savings Iowa 529 Plan?

This plan makes it easier for Iowa residents and non-residents to take advantage of the opportunity to save for college expenses.  This plan makes it possible to save for anyone, even yourself!

Many people use this plan to save for their children and or grandchildren.  You’re able to contribute as little as $25 at a time.  There are also many convenient ways to make your contributions.  With this plan, you’re able to continue contributing until the account reaches a maximum of $320,000.  There are also many different investment options to fit your individual needs.

What are some of the benefits of the College Savings Iowa 529 Plan?

This college savings plan offers many benefits.  For one, it’s free to enroll and the fees are extremely low.  You’re also able to access your account online, whenever needed.

Additionally, there are many tax benefits to this plan.  Your assets will grow tax-deferred as you continue to invest.  You’re also able to withdrawal your account funds tax-free for education related purposes.

Another benefit is the ability to deduct some of your contributions from your state tax return.

If you’re looking to save money for your child or a loved one’s college expenses, you will want to consider an Iowa college savings plan.  If you have any questions about a specific college savings plan, consult with a qualified estate planning attorney.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

If you’re an Iowa parent, you may be thinking about contributing to an Iowa college savings plan in order to help fund the costs of your child’s college education.  This can be a great way to build up an investment over time so that your child is able to follow his or her educational goals.  Take a look at some of the information below to learn more.  If you have any questions about the use of college savings plans, meet with an attorney to discuss your specific needs.

This blog post discusses the Iowa Advisor 529 Plan.

What is the Iowa Advisor 529 Plan?

This is a plan that makes it possible to save for your child’s education.  An initial contribution of $50 must be made, and $50 a month or $150 a quarter must be contributed continuously. There is no income limit in place, so you’re able to take advantage of this plan no matter what.  You’re in full control of the account and are also able to change beneficiaries, if needed.   You’re able to continue contributing until the account reaches a maximum of $320,000.

What are some of the benefits of the Iowa Advisor 529 Plan?

There are many benefits to this plan.  This plan makes it easy for anyone to contribute to your child’s future investment, including friends and relatives.

The account also has a low maintenance fee.  Additionally, there are many tax benefits to this plan option.  Your earnings will be both federally and state tax deferred.

All of your education related expense withdrawals are free of state and federal taxes.  You can also can take a deduction from your state tax return, based on the contributions that you’ve made.

If you’re looking to save for your child’s education, now is the time to get started.  If you have any questions about your college savings plan options, consult with a qualified estate planning attorney.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

Asset protection planning is the process of reorganizing the way your property is owned so that it will be protected from lawsuits and creditors’ claims. If you’re sued, and the Plaintiff bringing the lawsuit wins a money judgment against you, then property you own in your individual name is fair game when it comes to collecting on that judgment.

Many people are under the mistaken belief that simply transferring property into a Revocable Living Trust will serve to shield that property from being collected in payment of a debt or judgment. This is not true. A Revocable Living Trust has a number of benefits, but it is not a tool for protecting your assets from judgment creditors.

Why not? Although property transferred into a Revocable Living Trust is no longer titled in your name, you retain control over the trust itself. So, you could change the terms of the trust, transfer property back to yourself, or even revoke the trust at any time. Since you are the one who ultimately controls your Revocable Living Trust, the assets held by the trust are considered yours for purposes of collecting money owed to someone who has sued you.

In order to truly protect your assets, you and your attorney need to review your entire financial picture and come up with a strategy for appropriately repositioning your assets so that they are out of reach of your creditors. If you are concerned about shielding your property from the possibility of a lawsuit, you’ll want to meet with your estate planning attorney as soon as possible. Once a lawsuit has been filed, it’s too late to protect yourself in this way.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.