We are proud to announce that Amanda Nichols has passed the Series 7 exam. Congratulations Amanda! Now all members of the Excalibur Financial Services team have passed the Series 7 exam and are actively pursuing other designations.

I recently received a question from one of our clients. Highly analytical person that makes well though out, calculated decisions. He wanted to know if he receives significant sum of money should he just hold it in cash until the equity markets come back down? This was my response. It can apply to many investors.

There are two types of forecasters:
1. Those that know they don’t know
2. Those that don’t know that they don’t know

All that being said it is hard to park new money in cash b/c markets can be irrational over periods of years and an investor can miss out on gains. Also, it becomes increasingly difficult to identify an entry point and then have the emotional wherewithal to pull the trigger when everyone else is panicking.

I believe key is to find undervalued assets and overweight investment into those. For US exposure I would suggest higher quality assets with some downside protection in form of put options or managed volatility strategies. It will cap the upside to a certain extent but the US stock market is arguably overvalue so I wouldn’t mind giving up some upside while protecting myself against any major drawdowns.

We are proud to announce that the newest member of our team, Connor Marsh, passed the Series 7 exam. Congratulations Connor!

“October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February.”

-Mark Twain Pudd’nhead Wilson

It is human nature to believe that there is a way to find an individual investment that has little risk and is going to provide an above average return.   The reason this belief exists in the minds of many investors is due to the fact that some stocks do outperform.  Apple readily comes to mind, we see this and confirmation bias steers us to believe that we can pick the next winner.

Even worse, at times an investor does pick an individual stock that does very well.  Then ,due to outcome bias, believes that they made the right decision.  What they don’t realize is they had taken a tremendous risk and received a corresponding return.  A good analogy for this is if you go to a Vegas roulette table, put all of your money on one number and win, you will have a huge return.  Despite that return it was clearly not a good investment decision.  It was a simply a combination of a huge risk and luck – gambling.

Unfortunately, for every individual stock that has outperformed, there are many that have lost money or gone to zero.  This is the reason for diversification.  You may not be able to brag about a 40% return over two weeks but will know that with a consistent investment plan in a well constructed portfolio, you can reach financial independence.   This sounds better than gambling to me.

-Konrad Karwowski CFP®

Contemporary artist Jay Wayne Jenkins suggests in one of his pieces of poetry that after saving substantial amounts of money his very next goal is to continue saving more. There is a great amount of wisdom to be taken from this approach when viewed from the frame of retirement planning.

He then refers to transferring as much of it as possible in a location that will not only be out of reach of temptation of impulsive spending but will also be sheltered from the federal government. I am unsure of what his exact intention was in this line of his poetry but it can also be applied to the retirement planning arena. Tax deferred accounts such as 401(k), IRA and Roth IRA’s are great places to save money for that future date when you no longer have to work for a living. The primary reason is that without the drag of annual taxation on capital gains and income earned on the investments inside of those accounts is sheltered from tax, which leaves more money in the account to continue its growth over the long term.

Frequently inspiration to take care of one’s finances comes from traditional sources such as newspaper articles, financial advisors or responsible friends or family. Sometimes it comes from a less traditional source like a contemporary poet such as Mr. Jenkins.

-Konrad Karwowski, CFP®