NPR put out a great podcast that describes a small sampling o how the crowd generally is good at averaging the right guess of what things really are. http://www.npr.org/sections/money/2015/08/07/430372183/episode-644-how-much-does-this-cow-weigh
This goes well with timing of the overall market. It is becoming widely accepted that most fund managers under perform the market almost 95%+ of the time. We all just assume this is the case because they have to charge fees for their services on top of matching the market, but it seems it might be a little more than that. So why do we need fund managers or professionals?
We can always just invest ourselves and try to take a jab at it. We would maybe fall short or maybe we will get lucky and pull ahead. We can also try and become experts, but then if we do we will probably be doomed to under perform just like other experts. I have quite a few clients who do their own investing and actually live off of their income from trading. I kind of put these clients in the same realm of my professional gambler clients. I notice their actual incomes to be quite dismal in the grand scheme of losses and gains, but they sure have some really big roller coaster rides along the way. Living in a gambling town we always hear about the extraordinary big wins, but we never hear about how much was lost to make that money.
Working in insurance I see some these same big mistakes made. People look at insurance as a way to win the jackpot in having someone else pay for your losses. The way insurance is sold is through telling you about one incident where someone had a huge tragic loss and then the insurance came and saved the day. What they didn't tell you was about how much that family spent and the many other families that never used that coverage.
Life never works out the way we plan. We learn good principles and adhere to making good decisions and we create good outcomes. When insuring yourself against anything, take a look at what resources you have and think about what your real risks are. If you are making random decisions in your investments, maybe it would be a good idea to use an advisor who can minimize the downsides. If you are young and have a family, maybe get some term life insurance to protect them if you were to die prematurely. If you have a job that relies heavily on your good health, consider a good disability policy. If you are concerned about staying in good health, make sure and get a good health insurance policy, but don't be afraid of deductibles.
To sum up my question of why do we need fund managers and professionals, it is because we sometimes need some perspective on what we are missing. Maybe we have too much insurance or maybe we are under performing the market and just making less ideal choices. It is always helpful to take a look at what the crowd is doing on average and make sure we are't missing the boat.
Tuesday, August 11, 2015
Friday, May 15, 2015
Roth or not to Roth
What if you could save money on taxes now and still be able to save money on taxes in the future? Try splitting up your savings by investing in both pre tax and post tax accounts. If you invest 30% or so of your savings into a Roth account or even life insurance, you can use that tax free money to pay the taxes due on your taxable income. If you use Life Insurance as a tax free funding tool you also get the death benefit proceeds to help your family out with the tax issues and complications if you die prematurely.
Tuesday, May 5, 2015
Assurant Health announcement
Assurant announced on April 29 that they are getting out of the health insurance industry. See the press release here. To those in the industry this doesn't come as a huge surprise as the company stopped paying commissions on new business in January and has been terminating people as soon as the grace periods are over. Does this mean people are going to lose their coverage and be up the boat without a paddle? NO! They still will be covered and Assurant will still pay their claims. As soon as they figure out what is going to happen (either a sale or closing of the business) the insurance company will have to pay their claims and take care of all business for 6 months after they stop the health plans. Anyone who is enrolled in a plan with them now will continue to have business as usual without fear. It sounds like the changes won't go into affect until open enrollment, which means it will be super easy to go searching for a new plan. The question still remains of what will your options be for 2016 and will you be able to keep your doctor? (My guess is yes, but give us a call first to make sure)
Wednesday, April 22, 2015
How to save and invest your first $1,000
The more I learn the more I realize how naive I am. One of my favorite proverbs I have ever heard is a Haitian saying "What you don't know is bigger than you." When it comes to saving and investing nothing comes more close to that saying. I highly doubt anyone truly know every option available in the open market. There are tens of thousands of mutual funds, ETFs, bonds, stocks, etc that it becomes way too overwhelming. So where do you start?
I took the advice of a great speaker named Ramit Sethi and figured out how to save my first $1000 in an investment. I went online to a discount brokerage Schwab.com and opened up an account. It was just like creating an account anywhere else. I then tried to figure out how to add my bank account information to start transferring money from my bank account to the Schwab account. Since my goal was to start automatically saving, I searched for the section under mutual funds and automatic investing. Finding a good fund can be difficult, so I chose a very low cost fund that ties itself to the S&P 500 and is called an Index fund. There are a lot of index funds available and all they do is mimic the general overall market. There is no guess of what is going on every day and whether or not the company is doing good or bad. There is also no guess as to whether or not the fund is beating the market, because the fund is mimicking the market. If you hear on the news or go online and it shows the market went up 1% today your investments probably went up 1% as well.
Once I told the system to buy by index fund every month I couldn't figure out how to make it actually take the money from my bank account every month. I actually had to communicate with Schwab. I think this is why it is good to have some kind of human helping you such as an advisor or representative. They set up my automatic investing and I was set. Every month on the same day $100 exits my bank account then a couple days later a few shares of the mutual fund is purchased. Simple as that. The minimum you can do with automatic investing is $100, so it will only take you roughly 10 months and you will have your first $1,000.
I took the advice of a great speaker named Ramit Sethi and figured out how to save my first $1000 in an investment. I went online to a discount brokerage Schwab.com and opened up an account. It was just like creating an account anywhere else. I then tried to figure out how to add my bank account information to start transferring money from my bank account to the Schwab account. Since my goal was to start automatically saving, I searched for the section under mutual funds and automatic investing. Finding a good fund can be difficult, so I chose a very low cost fund that ties itself to the S&P 500 and is called an Index fund. There are a lot of index funds available and all they do is mimic the general overall market. There is no guess of what is going on every day and whether or not the company is doing good or bad. There is also no guess as to whether or not the fund is beating the market, because the fund is mimicking the market. If you hear on the news or go online and it shows the market went up 1% today your investments probably went up 1% as well.
Once I told the system to buy by index fund every month I couldn't figure out how to make it actually take the money from my bank account every month. I actually had to communicate with Schwab. I think this is why it is good to have some kind of human helping you such as an advisor or representative. They set up my automatic investing and I was set. Every month on the same day $100 exits my bank account then a couple days later a few shares of the mutual fund is purchased. Simple as that. The minimum you can do with automatic investing is $100, so it will only take you roughly 10 months and you will have your first $1,000.
Wednesday, April 15, 2015
Dental Insurance
I never knew there was a season for dental work and dental insurance but it seems like Spring is the time! Calls have increased and claims have started rolling in like crazy.
I actually dislike dental insurance. The purpose of buying insurance is to help you with the risk of possible losses. By having many people buy the insurance and have just a few actually make claims, helps keep costs low and makes insurance companies money. Since people typically don't go shopping for dental insurance until their teeth are hurting or they find out they are need of a lot of work, it makes the sale quite difficult. Insurance companies aren't in the business to lose money and they know that people who get cleanings done regularly and that purchase insurance ahead of time typically won't give them large claims, so they institute waiting periods. Group dental insurance plans don't use these when the group is large enough because they know for every one or two people who need work done right away there will be 2-5 people who don't need the work. When you are buying on your own, it is just you and the risk for the insurance company is too great. You will typically see 6 months for minor work and 12 months on major services. Dental Insurance DOES NOT cover implants, so don't even ask. There are a few carriers who will pay a small portion for services from day or year 1, but when they do that that give you small increments each year beyond that.
Dental HMO plans give you access to smaller dentist lists and they give the chance to participate in their low fee schedules. Due to the fact the insurance company isn't really on the line for any other costs, they don't have waiting periods, because you are paying out of pocket for the expenses.
If you need work done now, look into a discount program. If your dentists is a good friend, ask for a cash discount or work out payment plans. When you get insurance know you will wait, but know that you have the protection when you need it in the future.
I actually dislike dental insurance. The purpose of buying insurance is to help you with the risk of possible losses. By having many people buy the insurance and have just a few actually make claims, helps keep costs low and makes insurance companies money. Since people typically don't go shopping for dental insurance until their teeth are hurting or they find out they are need of a lot of work, it makes the sale quite difficult. Insurance companies aren't in the business to lose money and they know that people who get cleanings done regularly and that purchase insurance ahead of time typically won't give them large claims, so they institute waiting periods. Group dental insurance plans don't use these when the group is large enough because they know for every one or two people who need work done right away there will be 2-5 people who don't need the work. When you are buying on your own, it is just you and the risk for the insurance company is too great. You will typically see 6 months for minor work and 12 months on major services. Dental Insurance DOES NOT cover implants, so don't even ask. There are a few carriers who will pay a small portion for services from day or year 1, but when they do that that give you small increments each year beyond that.
Dental HMO plans give you access to smaller dentist lists and they give the chance to participate in their low fee schedules. Due to the fact the insurance company isn't really on the line for any other costs, they don't have waiting periods, because you are paying out of pocket for the expenses.
If you need work done now, look into a discount program. If your dentists is a good friend, ask for a cash discount or work out payment plans. When you get insurance know you will wait, but know that you have the protection when you need it in the future.
Friday, April 3, 2015
Are you saving?
In my recent conversations with clients and friends I have been trying to ask the question, "Are you saving your money?" Of all the financial gurus and financial programs I have studied I have learned one common thread that ties them all together: Save money.
I think some people are naturally born with this insight and others are taught it very young. For the rest of us it is just against our nature. The reason we have money is to buy things and since it feels like our resources are so low, when we get anything extra, we spoil ourselves with fun. Saving that money doesn't seem very fun, because it doesn't yield any instant gratification.
I have learned that in order to make saving fun I had to start doing it in a unique way. Just sticking extra money in a bank account or setting it aside doesn't work well for me. I can still see it there and it just sits, never growing or moving, just sits there as worthless cash. So instead of having the money be boring, why not start investing it? You don't have to have a lot of money to start investing. It really isn't all that difficult either. Most people tend to think they need financial advisors or lots of money to start investing. That couldn't be further from the truth. I wouldn't even bother hiring an advisor unless I had a ton of money, because their fees are way too high.
You can open a simple thing called a brokerage account from your favorite on line fund manager like etrade or schwab or Fidelity. You can start by choosing your favorite company where you spend a lot of your moey already and just buy a share or more of their stock. now you have "Saved" your money and purchased something that can be fun to watch. You can watch as your money fluctuates every day and know you own a part of that company you frequent often. If you are willing to set aside regular amounts of $100 or more a month you can just invest in an indexed mutual fund that mimics the stock market. When the market goes up or down for the day you can rest assured your money has done the same thing. When you get bored or want more excitement you can sell those stocks or mutual funds and buy something different. It seems like every rich person I have heard about started out in the stock market doing something similar to that- just buying a few stocks. I think by starting to buy small stocks they got more interested in what was going on. As they got smarter and smarter about the markets they made more and more money.
Sometimes stocks don't grow and you lose money. The good news is you probably won't ever lose all of it. If you hadn't invested you wouldn't have anything left over anyways and probably would much sadder had you done nothing at all. You also gained a lot of experience and can start earning more later.
I think some people are naturally born with this insight and others are taught it very young. For the rest of us it is just against our nature. The reason we have money is to buy things and since it feels like our resources are so low, when we get anything extra, we spoil ourselves with fun. Saving that money doesn't seem very fun, because it doesn't yield any instant gratification.
I have learned that in order to make saving fun I had to start doing it in a unique way. Just sticking extra money in a bank account or setting it aside doesn't work well for me. I can still see it there and it just sits, never growing or moving, just sits there as worthless cash. So instead of having the money be boring, why not start investing it? You don't have to have a lot of money to start investing. It really isn't all that difficult either. Most people tend to think they need financial advisors or lots of money to start investing. That couldn't be further from the truth. I wouldn't even bother hiring an advisor unless I had a ton of money, because their fees are way too high.
You can open a simple thing called a brokerage account from your favorite on line fund manager like etrade or schwab or Fidelity. You can start by choosing your favorite company where you spend a lot of your moey already and just buy a share or more of their stock. now you have "Saved" your money and purchased something that can be fun to watch. You can watch as your money fluctuates every day and know you own a part of that company you frequent often. If you are willing to set aside regular amounts of $100 or more a month you can just invest in an indexed mutual fund that mimics the stock market. When the market goes up or down for the day you can rest assured your money has done the same thing. When you get bored or want more excitement you can sell those stocks or mutual funds and buy something different. It seems like every rich person I have heard about started out in the stock market doing something similar to that- just buying a few stocks. I think by starting to buy small stocks they got more interested in what was going on. As they got smarter and smarter about the markets they made more and more money.
Sometimes stocks don't grow and you lose money. The good news is you probably won't ever lose all of it. If you hadn't invested you wouldn't have anything left over anyways and probably would much sadder had you done nothing at all. You also gained a lot of experience and can start earning more later.
Tuesday, November 18, 2014
Affordable Care Act
http://www.exchangenevada.com/
Sal Morales, went from paying $560 month in Cobra insurance to about $145 a month through the Affordable Care Act. He also has a network deductible of $500. Here’s how he breaks it down: “There’s one party, the hospital who provides the service. There’s a second party, the patient, who receives the service. And there’s a third party, the insurance, who pays for the service.” What happened with Mr. Morale’s case is that the insurer negotiates a lessor amount for various plans, with a variety of hospitals through multiple agreements for the same hospitals or doctors.
Doctors are paid differently even if two patients have the same insurance company, if the plans are different in any way. To make this simple there are as many price tags for a hypertension checkup as there are insurers and providers.
The question that should be asked is how much is your doctor getting paid, to determine the best deals for coverage. If you have the history of medical procedures from lasts years doctors treatment the insurance company can provide a better assessment as opposed to shopping around to be told the price is more to cover you for the same procedures as last year.
“We’re identifying the procedure, we’re identifying the provider, the date of service and then making sure the amount, the member responsibility has to be in there,” Monzon says.
To get a clearer sense of what health care costs, someone would have to collect enough of those statements from patients at all different hospitals with all different insurance.
There are companies and crowdsourcing projects trying to do just that around the country. And Massachusetts has a law that says insurers have to disclose some of these prices in a way that is accessible to patients.
This story is part of a partnership that includes WLRN, the Miami Herald, NPR and Kaiser Health News.
Doctors are paid differently even if two patients have the same insurance company, if the plans are different in any way. To make this simple there are as many price tags for a hypertension checkup as there are insurers and providers.
The question that should be asked is how much is your doctor getting paid, to determine the best deals for coverage. If you have the history of medical procedures from lasts years doctors treatment the insurance company can provide a better assessment as opposed to shopping around to be told the price is more to cover you for the same procedures as last year.
“We’re identifying the procedure, we’re identifying the provider, the date of service and then making sure the amount, the member responsibility has to be in there,” Monzon says.
To get a clearer sense of what health care costs, someone would have to collect enough of those statements from patients at all different hospitals with all different insurance.
There are companies and crowdsourcing projects trying to do just that around the country. And Massachusetts has a law that says insurers have to disclose some of these prices in a way that is accessible to patients.
This story is part of a partnership that includes WLRN, the Miami Herald, NPR and Kaiser Health News.
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