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Want to Make More Money On Your Investments? Die.

Welcome back to the scary days of stock market turbulence! After a reasonably calm couple years with an escalating prices, we are back to huge swings in the stock market. Ebola, wars, political turmoil, foreign recessions, elections….. nothing is worse for the market than uncertainty and fear.

During big market swings, it is easy to panic and sell, or predict the market has bottomed out and buy. But panic and market timing are not valid investment strategies.  My friends that have done the worst with their investments tended to be reactionary, buying and selling based on the news of the day.

So what should you do? Recently Fidelity Investments undertook a major investigation of their best performing accounts. They wanted to find out the secrets of their best investors. And the common theme?  The owners were all dead. Pretty hard to fly into a panic when you aren’t breathing. The top performing accounts were estates, with minimal management and trading – the ultimate buy and hold strategy.

Luckily, you don’t need to be dead to invest this way.  For most people, an age-based investment allocation with low-cost index funds, periodically rebalanced, and locked-away to minimize trading and fees is the best way to make your money grow.

One Response to Want to Make More Money On Your Investments? Die.

  1. Scott says:

    Buy and hold have done well for me in the past. I guess I will continue on the path until the end.

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Posted in Investing

Your Treats Are Killing My Dog

A few years ago I encountered a rancher and his beautiful herding dog.  It was obvious this dog and man were one – riding the range, the dog sometimes sitting on the rancher’s saddle on a long haul.  Man’s best friend, indeed.  I was so taken by this dog’s beauty and effortless ability to follow his simple hand commands, that I asked the rancher if I could I give his dog a treat.  He looked at me funny, politely declined, and then sauntered away.  At the time I thought; “what a hard ass, what harm could one small treat possibly do?”   I didn’t realize how weird it must have seemed to the rancher that I, a dog less person, was carrying dog treats in my pocket.

Now I have my own dog, who suffers from food allergies and also battles arthritis. When Lemon gains even an extra pound or two she will limp and cry in pain.  And now it’s me who is living in a constant karmic payback scenario, politely declining offers from generous treat givers. Have you noticed it has become a common practice for businesses to offer dog treats now?  Gas station attendants, waiters, store clerks and even hotel concierge’s all want to give my dog a treat. At first I thought this was a thoughtful gesture, but now I see it for what it really is – a cheap ploy to extract affection from my unsuspecting furry travel companion. 

It’s understandable. My dog Lemon is the cutest yellow Lab alive.  She is beautiful, affectionate and smart.  I know this because my husband and I are stopped by total strangers and told this all the time.  Unabashed in our love for our dog, we often end our day looking at her lovingly, marveling at her magnificence and telling her how utterly adorable she is, as she winks back in agreement.

Lemon also happens to be one of the luckiest dog in the world. She goes to work with us, attends interesting meetings, flies on our airplane, swims and fly fishes in her own river and pond. She hikes, and loves Frisbee and soccer. The problem; many people that meet Lemon want to feed her treats. “Oh, just one? It can’t possibly hurt”, they mumble while their accusing pathetic eyes are saying; “what a sad control freak you are, let me give your dog a treat!!”

This adds up to a lot of treats when you count all our employees, friends, family, and random people she meets in a typical week (Lemon has a very busy schedule).

Due to her bad food allergies (this is code for she gets diarrhea or constipated depending on the treat) we do not feed Lemon anything but prescription dog food (lamb and rice, no chicken or cornmeal filler) and fresh veggies from our garden (she loves apples and carrots).  Strangely, we are constantly battling her weight gain, and twice have rushed her to the emergency room with “Pancreatitis” – with one nearly deadly episode where she hemorrhaged from both orifices.  Pancreatitis in dogs is a toxic food related illness, which is generally caused by giving dogs people food.

Last year, you may remember, over 600 dogs and cats died due to contaminated pet treats made in China.  A quick Google search revealed that in that same year there were over thirty brands of dog food/treats recalled for “possible health risk” issues, many of which include salmonella contamination and possible kidney failure.

So that treat you are so lovingly offering my dog, could actually be deadly. 

Don’t feed other people’s dogs.  It’s akin to giving candy to a baby.  It’s seems harmless,  but is a really creepy thing to do. 

 

One Response to Your Treats Are Killing My Dog

  1. Jo Anne says:

    Thank you for sharing Lemon’s story. As an owner of a puppy with similar gastro problems I find myself constantly explaining to people why she can’t have that nicely-offered treat. Because we grew up in a generation where people shared table food with their dogs, the idea that human food and a random dog treat could inflict harm is foreign to most people. Hopefully this blog entry will help people understand that dog owners are not being cold-hearted and we are not “pampering” our pets when we do not accept treats. That one treat could result in my dog becoming ill and dehydrated, which then precipitates a visit to the vet for subcutaneous fluids, an abdominal xray, and a prescription for Flagyl. I should mention that the very serious complication of pancreatitis is always possible and sadly, some dogs do not recover from that condition. Thanks again for being the voice for many fellow dog owners who live this reality daily.

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Posted in Livin' Large

Update on the Stock Picking Contest

It appears that comedian Auggie Smith’s reign as our resident financial whiz might have come to an end.  At the beginning of the year Auggie used the “blindfolded by a Mexican Wrestling-Mask ink blot” process to pick his ten best stocks for the year.  In the past, his controversial “throw darts or shoot the Wall Street Journal with a pellet gun” technique outperformed some of Wall Street’s best stock pickers, but this year he is actually at a loss!  Here are the standings:

Auggie’s value (based on an initial valuation of $10,000) – $9156.

Investor Place’s Ten Best Stocks – $13,037

Vanguard’s Growth – $11,125

Auggie’s portfolio had a few huge holes, including Tapinator, which lost over 90% of its value, and Xueda Education, which is down over 40%.  Disney is his best performing stock.

In contrast, Investor’s Place had several big winners, including Emerge Energy Services, up over 260%, and Tesla, up over 50%.

Of course there are several months left in the contest, but it is not looking good for Auggie.

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Posted in Investing

What I Did On My Summer Vacation (hint: Disneyland is more fun than lung cancer)

Over the last few months I’ve unfortunately had the opportunity to test our health care system, and personally consider my own mortality.

In March I woke up in the middle of the night in extreme pain.  Suspecting an appendicitis, my wife rushed me to the hospital.  After a few hours of pain killers and tests, they concluded it was most likely a kidney stone and sent me home. They took a Cat Scan, which looked fine, and recommended I send it to my Doctor for his opinion.

My doctor found nodules in my lungs in the Cat Scan that he thought warranted follow up, and three months later I had another Cat Scan.  And that is where the story really begins….

A couple days after my second test I received an email from my Doctor informing me of the following:

  1. My second Cat Scan looked very suspicious for lung cancer.  The nodules had doubled in size.
  2. He was leaving on vacation, and his nurse would follow up with me to get appointments for tests with specialists.
  3. Kiss your ass goodbye, and get ready for a really rotten death.  (OK – he actually didn’t say that, but of course after getting his email I jumped on the internet and did a little research on aggressive lung cancer, which brought me to that conclusion.)

And at this point my first experience with our wonderful health care system begins.  For the next week, working in conjunction with my Doctor’s nurse, I attempted to get appointments with specialists.  It was confusing and frustrating.  I actually went to the doctor’s offices with copies of my Cat Scans – but no matter what I did I was thrown into a dark morass of bureaucracy, at the awful intersection of insurance company nonsense and our health care system’s idiocy.  The only available appointments were weeks – even months away – and from what I read, I probably didn’t have that time to spare.

So I spent the next few days assuming the worst, until I hired a concierge doctor.  For those unfamiliar with the term, a concierge doctor limits their practice to a small number of patients (my doctor takes a maximum of 50).  The patients pay a monthly fee that covers all the costs for that doctor, they get to know you and your medical history intimately, and they handle all the hassles of the health care system.

Within a few hours of hiring the new doctor, I was handed back my life.  He gave me a complete physical, then took my test results to several specialists to examine.  They determined that my original doctor and radiologist has misread the results, and that there had been no growth in my lungs.  He also arranged an appointment with a specialist a day later, and just to be sure, he arranged a lung biopsy to be performed two days after that, which also tested negative for cancer.  The total cost for all of this (and bills are still coming in) is around $50,000.

Luckily I had the resources to hire the concierge doctor, otherwise they still might be shuffling me around our messy health care system.  I learned a lot of tough lessons through the process:

  1. Always get a second, even a third opinion.  Our wonderful new technologies often lead to incorrect diagnosis.
  2. You need to be your own health care advocate (or find someone that loves you willing to fight the fight).  The system is a maze of incompetence that will suck you in.
  3. A lung biopsy is more serious and painful than they tell you.
  4. The everyday frustrations of life seem very inconsequential when faced with your own demise.
  5. Giving up cigars really isn’t that tough.

After witnessing it first hand, it is no wonder that we have one of the world’s most expensive health care systems, yet we rank very poorly in the quality of healthcare.

 

 

One Response to What I Did On My Summer Vacation (hint: Disneyland is more fun than lung cancer)

  1. Bob Cook says:

    Man……….really glad to read the outcome – glad you’re okay. My kids agree with you, by the way – Disney IS better than lung cancer.

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Posted in Life

Five Easy Ways To Save On Your Taxes

As you agonize over your 2013 tax return and see the sting the new tax law is inflicting, here are some ways to reduce the bite. Some are retro-active to last year so there is still time to act.

Briefly, the “American Taxpayer Relief Act of 2012” effective for 2013 eliminates virtually all of the tax preferences of the Bush administration. It increases the top tax rate from 35% to 39.6% and overlays an additional .9% Medicare surcharge on incomes over $250,000 for married tax filers and $200,000 for singles. For high incomes, the new law also eliminates personal exemptions, phases out the benefits of itemized deductions such as interest, state income tax, and property taxes, imposes a Medicare surcharge tax of 3.8% on excess investment income and higher capital gains tax rates. Federal taxes, when combined with state income taxes (especially in high-tax states such Oregon and California), yield tax rates over 50%.

So what can you do?

If you have self-employed income such as consulting fees, you can open a Qualified Retirement Plan (“QRP”) with your broker by completing a few simple forms. A QRP is essentially a personal retirement plan that enables you to contribute up to 20% of the net profits from consulting or similar income up to a maximum of $51,000 for 2013. This is in addition to any 401(K) contributions that you may have from your regular job. You can still open an account now and make a contribution against 2013 taxes.

Second, if you have a new-high deductible health care plan you are now eligible for a Health Savings Account (“HSA”). An HSA is a separate account where you can contribute extra money to pay for medical costs that aren’t covered. If you are married, you can contribute up to $6,550 ($7,550 if over age 50) annually for 2014 and slightly less for 2013. The contributions are 100% tax deductible and there is no income limit. When you withdraw money for qualified medical expenses it is not taxed and you can carry over unused amounts in perpetuity. All income earned is tax free and you can even invest in mutual funds. This is a terrific benefit! You may want to look at your insurance needs and the combination of a high-deductive plan coupled with an HSA may be right for you. And like a QRP, you can still make tax deductible contributions now against your 2013 taxes.

Third, if you have children or young relatives and would like to give them a gift, I recommend setting up a college fund using your state’s 529 program. This is a fantastic way to fund college as income earned in the plan is tax free and qualified withdrawals are not taxed. In some states, such as Oregon, you can deduct the contributions against your state income taxes resulting in a nice benefit for doing a good thing.

Fourth is the tried and true use of tax-exempt interest income. This is one of the few items that passed thru the new law with minimal impact. It is even a better deal now with the new high tax rates and the very low rates on bank accounts and CDs. They normally take the form of city or state issued notes and bonds and the interest is excluded from your taxes so this may warrant a renewed look.

Last, I encourage you to review year-end brokerage statements and not rely solely on downloading the data directly into Turbo Tax. In my case I had several thousand dollars of “accrued interest” that required a manual adjustment; otherwise I would have paid tax on interest I did not earn.

I hope you find these useful with the usual disclaimer of reviewing your tax situation with a tax professional to fully understand all the issues.

Ray Link is a CPA and holds an MBA from the Wharton School. He is EVP/CFO of FEI Company (NASDAQ: FEIC), a world leader in nano-scale imaging for industry and science. He is also on the on the Board of Directors of Cascade Microtech (NASDAQ: CSCD) and nLight Photonics.

One Response to Five Easy Ways To Save On Your Taxes

  1. Scott says:

    Great additional benefits for added information Ray, while I miss the beauty of Portland, I don’t miss paying the taxes for it. These are some great ideas for me to look at further.

    Thanks,
    Scott
    One of the few conservative visitors

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Posted in Investing