Money Matters: Pearls of Wisdom
Frederick D. Fischer, President
Fischer Financial Services, Inc.
The stock market is not for the faint-of-heart! It is not like a certificate of Deposit with some guaranteed rate of return. For an individual that is patient and has a long-term investment horizon (i.e., ten years), the rewards from a lack of a guarantee can be extremely rewarding.
Over the past 80 years stocks will generate a rate of return almost double what bonds will offer. Bonds and CD’s adjusted for inflation and taxes barely produce a positive return. Among stocks, bonds, and cash in a money market, the only category that produces a long-term hedge against inflation is stocks. It should be noted, however, that 1 in every 4 years in the stock market produces a negative result. In addition, 12% of the five year periods between 1926 and 2007 produce negative results. The good news is that 100% of all 20 year periods are positive in the stock market.
The best approach is to develop an asset mix that coincides with your risk level (i.e., aggressive, moderate, or conservative) and stick with it for the long term. Keep in mind that the market is very volatile. It can be up or down 10% in a month or 40% in a year.
Pearls of Wisdom on Investing
Professional management of your investments could save you money.
Even no-load mutual funds have internal expenses that are in the range of 1.3% to 1.5% per year. With total management cost for our large accounts between 0.85% and 0.95%, you can get management that is customized for your needs and save money.
Don’t be fooled by the stars.
Morningstar’s ratings are not meant to be a predictor of future value. In a study performed by Hulbert Financial Digest over the ten-year period ending December 31, 2003, Morningstar’s 5-star equity funds have averaged 5.7% per year compared to the 10.7% earned by the Wilshire 5000.
Weekend golfers don’t shoot par.
An elite few might, but most are not even close. The same is true for investments. A study by Dalbar, Inc. and Lipper, Inc. found that from 1984-2000 the average stock fund investor earned 5.3% annually verses the 16.2% earned annually by the S&P 500. We are proud that our large aggressive accounts have beaten the S&P 500 on a gross basis since starting full-time money management on December 31, 1992 through December 31, 2007.
You wouldn’t go to a Podiatrist if you had a heart problem.
Just as there are specialized physicians – there are specialized advisers. A person needs to select the type of adviser that best fits his or her financial needs and goals. There are money managers, financial consultants, financial planners, and stockbrokers. Each has a different focus. For example, a money manager devotes all resources to overseeing a client’s investments.
Just like Pro-golfers track their games…
Just as pro-golfers track their games, investment advisers should track their results. Performance statistics should be calculated on a time and size weighted basis for all accounts in a given category - not just a sample. Returns should not be hypothetical or theoretical. Performance statistics should be compared to relevant measures of comparison and tracked by a third party such as: Morningstar, Mobius, or PSN. Our large aggressive accounts’ performance was one of the ten best in PSN’s Large Cap Growth Universe, for the five-year period ending 3/31/2005.
You would never hire a stranger to watch your children.
The same prudence and caution should be used with your investments. Seeking references is crucial in choosing an adviser, regardless of the size of the firm. Three references are not enough. Ask for several pages of references and follow up with phone calls. A great deal can be learned in just several calls. Additionally, check with the Better Business Bureau, U.S. Securities and Exchange Commission or the Office of the Attorney General for relevant filed lawsuits or enforcement actions.
Make sure you kick the tires before you buy.
One method of “kicking the tires” is to ask for a FORM-ADV. All Registered Investment Advisers must provide this form to every prospective client and file a copy with the U.S. Securities and Exchange Commission as well as their respective state’s Securities Commission. This document reports information like conflicts of interest, the types of investments that an adviser selects, and how the adviser earns compensation.
About Fischer Financial Services, Inc.
Fischer Financial Services, Inc. is an independent money management firm serving clients across the United States of America. As a “Registered Investment Adviser” with the U.S. Securities and Exchange Commission, the firm specializes in money management for institutions and individuals. On numerous occasions, Fischer Financial Services, Inc. has earned national recognition for outstanding performance in the Large Cap Growth Universe.
To learn more about Fischer Financial Services, Inc. and our Pearls of Wisdom on Investing, please visit www.fischerfinancialservices.com or call 1-888-886-1902.