When Important is Not Important

Sam and Sadie have been happily married for over sixty years. A good friend asked Sam the secret of his successful marriage. "Well," Sam declared, "I was in charge of the big issues and Sadie was in charge of the small ones." The friend seemed confused by the answer.

"You see," Sam explained, "Sadie handled the small things, like what cars we drove, where we lived, and where the kids went to school. I dealt with the big issues—politics, the economy, world peace."

In the world of investments, you can be either like Sam or like Sadie. According to financial planner Carl Richards in a recent article in the AAII Journal, it's better to follow Sadie's approach. Instead of agonizing over the fate of Europe, the U.S. economy, and the daily fluctuations of the stock market, Richards believes it is more fitting to concern ourselves with something we at least have control over.

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The Meaning of "Failure" in Retirement Planning

Financial advisors are often asked:  "How much money do I need to retire?" Today, advisors are more apt to prepare a financial plan that determines the probability of your retirement success or failure, not a fixed dollar amount. In either case, the result of a complex analysis is articulated as a single number. We often attach great faith in this one number even though the underlying concepts may be misunderstood. We should be cautious as to how much emphasis we place on this number.

This does not mean that we should avoid engaging in retirement planning. Far from it. We must be careful, however, how we interpret the results. Properly understood, retirement planning can help us determine if we're on the right track. [Editor's note: The link is worth clicking, especially for Broadway fans.]

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The Illusion of Certainty

When it comes to investments, we often crave the comfort of certainty.  But the typical cost of known investment results is lower returns over time.  There is a need to embrace some level of uncertainty to obtain the reward of higher returns.  We  must, however, allow for sufficient time for the market to reward us for taking on this risk.

We should also be aware that "obvious" areas of potential return are not necessarily a sure thing.  Humility in making predictions is helpful.  Making big bets has its dangers.  Taking on too much risk may lead to undesired results.

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Protecting You from Email Fraud

We are all aware of the many email scams out there—the Nigerian prince seeking to reclaim his fortune; the relative stuck in London needing money to get home; and, the poorly-spelled, urgent alert from "Banc of Amerika." You should be aware, however, of a new fraud that you won't even know is happening to you. It turns out that we stopped one such scam artist ourselves.

My assistant Jessica received an email, allegedly from a client, asking for the balance of his account and requesting us to wire the money to a bank in North Carolina. My client claimed to be unable to speak to us because he was heading out to a funeral. Even though the email address was accurate, the ever-vigilant (and skeptical) Jessica thought something was up and called the client, who said this was a scam—somebody had hijacked his email address. We quickly got Schwab's fraud unit involved.

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