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Thumbs-Up on CalPERS’ Thumbs-Down to Hedge Funds

Thursday, December 11th, 2014

By J. Haden Werhan

For more than a decade, the California Public Employees’ Retirement System (CalPERS) has invested a modest portion of its plan assets in hedge funds. “Modest” for CalPERS, anyway. As the nation’s largest pension fund, it currently manages nearly $300 billion in assets, approximately $4 billion of which had been allocated to hedge fund investments. The allocation also represents a minuscule drop in the hedge fund market ocean, where investments are measured in the trillions of dollars.

Still, presumably because of CalPERS’ strong reputation among pension plan providers, even small changes in its investment strategy have a way of looming larger than life, in California and nationwide. That’s why we were particularly gratified when CalPERS announced its decision to eliminate all of its hedge fund investments, including 24 hedge funds and six hedge fund-of-funds.

Are Preferred Stocks a Good Choice for Fixed Income?

Friday, September 19th, 2014

By Dave Harlow, CPA/PFS

Some portion of almost any balanced portfolio will be allocated to fixed-income investments. Among the options for executing a fixed-income strategy are bond funds, individual bonds and preferred stocks. Let’s take a moment to look at preferred stocks as a choice for the fixed-income portion of your portfolio.


Insurance Needs vs. Insurance Wants

Thursday, August 14th, 2014

By Jared Nelson

I remember lying awake in bed one night several years ago, tossing and turning. There was something on my mind that I just couldn’t resolve. My wife had recently given birth to our fourth child and I just couldn’t shake the weighty feeling of financial responsibility. Then it hit me. As the only wage earner for my family, I had a moment of sudden clarity. My family was wholly dependent on me for financial support and I didn’t have a backup plan. I needed life insurance! I had a very pressing insurance need.

While there are certainly a lot of opinions about life insurance, there is a methodical way to approach the topic. To begin, you need to separate the various reasons to purchase life insurance into two categories: needs and wants. The act of dying itself does not create a need for insurance, but depending on your own unique individual circumstances, your death may indeed produce the need for those you care about.

$1 Million Doesn’t Go as Far as It Used To

Thursday, July 17th, 2014

By J.P. Wirig

A right-handed pitcher from my hometown earned a $1,860,000 signing bonus in the 2001 draft. That is a phenomenal amount of money for a young man to receive! Many of us would think that ought to be enough for just about anybody to live off of for the rest of his or her life.

I wasn’t so sure, and I quickly ran some calculations to see how long this bonus would really last. The answer may surprise you.

Ignoring the Siren Song of the Market

Thursday, June 19th, 2014

What causes market prices to change? It begins with the never-ending stream of news informing us of the good, bad and ugly events that are forever taking place. For example, when there are reports that a fungicide is attacking Florida trees, orange juice futures may soar as the market predicts that there’s going to be less supply than demand. But what does this mean for you and your investment portfolio? Should you buy, sell or hold tight? Before the news tempts you to jump into or flee from breaking trends, it’s critical to be aware of the evidence that tells us the most important thing of all: You cannot expect to consistently improve your outcomes by reacting to breaking news.

The Value of Secondary Market CDs

Thursday, June 12th, 2014

By Barry W. Oliver, CPA/PF

One way to bring value to fixed-income portfolios, especially during times of low interest rates, is through secondary market CDs. These CDs are nearly identical to new issue CDs, except that they are now out of their primary issue phase and can be offered at a discount (or premium). The result is usually a pickup of yield over new issue CDs.

How Hungry Are You for Risk?

Thursday, May 15th, 2014

By Joe Kalinowski, CPA/PFS

After the bear markets of 2000–2002 and 2008, we seem to have entered an era in which investors wonder whether a market collapse is right around every corner, even following new market highs. The S&P 500 and Dow Jones are reaching new peaks as I type, but have experienced considerable volatility since the beginning of the year. So, is it reasonable to fear a severe market downturn given this generally good performance, particularly as we watch events unfold in Ukraine and around the globe?

The Advantages of Evidence-Based Investing

Thursday, April 10th, 2014

People are becoming increasingly familiar with “passive” or “index” investing, making it easier for individual investors to gain cost-effective exposure to globally diversified market returns. That’s good news! What’s even better news is that there’s a similar approach we use with our clients that incorporates the many strengths of passive/index investing while eliminating some of its inherent weaknesses. We call it evidence-based investing.

More than any other approach, evidence-based investing is founded upon available research about how markets have delivered long-term wealth to patient investors. By combining sound strategy with objective advice, evidence-based investing can help you tune out harmful distractions and confidently pursue your financial goals.

The True Value of Coaches

Thursday, March 13th, 2014

By Jay W. Wirig, CPA/PFS

Most sports enthusiasts pay attention to coaches and their roles. In fact, watching football coaches is almost a viewers’ sport in itself. During a football game, we see coaches running up and down the sidelines with headsets on, receiving information from several different sources. They talk to players and other coaches, and are known for heated displays when trying to make a point. Sometimes, we even see their “noise” directed at those who are officiating the game (often in a vain attempt to influence the potential outcome). However, effective coaches aren’t always front-and-center.

Level-Headed Support

Tennis coaches stand in stark contrast to football coaches. As you may know, tennis coaches are not allowed to coach during an actual match. Whatever communication happens between the tennis player and the coach is not publicly broadcast—so we really don’t know how or when the communication takes place. I am drawn to the tennis coach, mostly because of the lack of noise!

Is Your Portfolio as Diversified as You Think?

Friday, February 28th, 2014

By Brent P. Thomas, CPA, PFS

Diversification is one of the most widely accepted strategies for structuring a successful investment portfolio. In fact, according to Nobel laureate Merton Miller, “diversification is your buddy”—one that mitigates risk and volatility in your portfolio.

What is Diversification?

Simply put, diversification is the process of spreading your portfolio across several asset classes. For example, a diversified portfolio may be invested in several U.S. and foreign stocks, bonds and short-term investments. The logic behind this strategy is that because your portfolio is invested in several asset classes, if one category takes a dip, the rest won’t necessarily follow.