BUZ LIVINGSTON: Fear and loathing at the 30A Songwriters Festival

Published: Sunday, January 27, 2013 at 09:40 AM.

Instead of focusing on what is important to you, the financial planning industry would rather you believe financial salvation means a magical mystery product like an annuity. Last week, I saw six different annuities and every client was on the dark side of the moon.  Equally as bad are the noisy crew who totally dismiss annuities, mainly because they charge more fees on assets managed.

Sometimes annuities make sense, sometimes they don’t; it’s why it’s known as personal financial planning.

In addition to Byzantine products designed to confuse clients, financial advisors often can sidetrack you with arcane theories like sector rotation. Fritz Meyer tracked the Wall Street pros’ predictions and concluded that “the notion that strategists can consistently add alpha (greater returns) with accurate sector picking is ridiculous on its face. Markets are just too efficient.” 

For every sector correctly predicted, they missed two others. A similar batting average will get you in the Baseball Hall of Fame but in the investing world it’s the Hall of Shame. The best place last year was financials and everyone avoided them. You need a crystal ball to time the market correctly, a fact conveniently omitted but included in your asset management fee.

Basic financial advice, good for everyone regardless of income level, is to live within your means and focus on the goals, financial or otherwise, in your life. Make sure your investments are appropriate for your time horizon and risk tolerance. Diversify across asset classes with low cost index funds then rebalance regularly. Anything else is singing off key.

Buz Livingston, CFP, is a fee-only certified financial planner. He operates Livingston Financial Planning Inc. focusing on hourly financial planning and investment management. Contact him directly at 850-267-1068 or at buz@LivingstonFinancial.net.


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