Success in investing is not as complicated as some people make it out to be. It doesn't require a crystal ball or a bunch of numbers and charts. However, if you do research on any investment, this is typically what you see. Type any investment in Morningstar.com and you will see what I am referencing. All of this is designed to make you think that investing is a complex discipline.
The Prudent Investor Blog
The advisors at Waypoint enjoy living active lives and like to experience the outdoors. Two advisors, in particular, love to play disc golf (frisbee golf). They have travelled all over the southeast, braving all forms of inclement weather, to play disc golf. On one trip to a course in North Carolina, one of the advisors asked the other what life after Waypoint would look like for them. The advisor answered that he would love to travel to all parts of the world and play disc golf. Then that advisor returned the favor and asked the other advisor about life after Waypoint. He said that he would love to sit on his back porch drinking warm apple cider and watch the moon rise over the mountains. Then the discussion turned to how would each of them accomplish these visions for life after pharmacy.
The team at Waypoint believes that people have a natural affinity for the number three. Most of the financial planning we do is in three year increments because that appears to be the time period that is most clearly visible to our clients. You will see that most of our blog posts (including this one) have three tips or ideas (or perspectives) because this number is easier to process. This has been our experience in working with our clients over that past 33 plus years. We also ask many of our clients to identify the three most important things they could teach their children or grandchildren.
We have been blessed to be part of a great community for the past 30 plus years. That community is Summerville, South Carolina. We have seen this community transform from a small bed and breakfast town to a thriving city where people want to live. To illustrate this, our team was eating dinner last week at a small restaurant in town and, I asked three people where they lived before Summerville. The first said Chicago, the second said Pittsburgh, and the third said Seattle. Boeing relocating a second 787 dreamliner assembly line to the Charleston area has only accelerated this.
A measure contained in section 404(a)(1)(B) of the Employee Retirement Income Security Act (ERISA) that requires the fiduciary of a defined contribution retirement plan to use "care, skill, prudence and diligence", and to act in the same way that someone "familiar with such matters" would act. The "familiar with such matters" language has been interpreted to mean "expert". This language creates an important distinction from the earlier prudent person guideline, in that it holds fiduciaries to a stricter standard.
Our common sense tells us that we have to base our investment program on reality to be successful. In philosophy, our worldview contains our most basic assumptions about the world and the things we accept as true about the world. The practical decisions we make everyday flow from our worldview. The starting place for a prudent investor to judge investments, financial advice and financial advisors is economic reality.
As an independent Registered Investment Advisor with offices in both Summerville, South Carolina and Asheville, North Carolina, Waypoint is ever aware of uncertainty. This is the uncertainty of Mother Nature. This is particularly true during hurricane season in Summerville. Being twenty miles from the coast, we have learned to be vigilante of the tropics from June until November. If you become complacent, Mother Nature will send you a reminder of why this is not a good idea. Hurricane Hugo in 1989 was that reminder for many South Carolinians. In Asheville, freak blizzards in the winter can reak havoc. In fact, two winters ago, one of our advisors got pretty comfortable working from home (when he had power) because he was unable to get down the mountain for days even weeks at a time. So living with this natural uncertainty is a way of life for us at Waypoint. Uncertainty also exists in the financial markets. The past couple of years have been very uncertain with the housing market crash, debt issues in Europe and many other factors. This has wreaked havoc in the financial world. It is very imporant to know that there is nothing a prudent investor can do about uncertainty whether the financial or natural kind.
Enacted in the Summer of 2012, ERISA Section 408b(2) is part of a long term strategy being implemented by the Department of Labor (DOL). It is designed to facilitate and enhance the exchange of information between all parties related to a company sponsored retirement plan. The intent of this strategy is to improve the transparency of retirement plans as it relates to the fees and services associated with them. Another intent of this new strategy is an increase in disclosures of conflicts of interest. The ultimate goal is to help employees make better informed decisions and ultimately reach their retirement goals. The following 5 things are important for the prudent investor know about these new regulations.
The quarter in review:
The second quarter taught investors an important lesson: it is impossible to predict the news that will move markets, and consequently nearly impossible to try to time the market's highs and lows. Renewed concern over the European debt crisis in May caused the biggest monthly drop for stocks since last September. The Standard & Poor's 500 Index lost 6 % and overseas indexes did even worse. Things looked pretty bad through most of June. But on the last trading day of the month a surprise announcement that the European union would take unprecedented steps to help Italy and Spain sent stocks soaring, with most markets gaining 3 percent or more in one day. A single trading session turned the month around, helping to erase a lot (but not all) of May's losses. Anyone sitting on the sidelines for just one day on Friday was probably pretty sorry they missed the dramatic rally.