Comprehensive Money Management

Bill's Blog

Pizza, Beer and Getting Punched in the Mouth

When I was a kid living in Tucson, Arizona, my family of seven often packed into our Chevy station wagon and headed to Shakey’s Pizza Parlor on Friday nights.  My ten-year-old self loved Shakey’s.  It wasn’t just about the pizza.  There was something magical about the overall experience.  Shakeys’ was always packed and noisy.  Mechanical “player pianos” pounded out music.  Live musicians in straw hats wandered from table to table, and we all sang along to familiar ragtime tunes.  I loved that we were there as a family and that my parents were momentarily unperturbed by their five rowdy kids, possibly helped along by the free-flowing pitchers of beer.

It’s odd how some small things become seared into our memories, while others simply disappear.  One such odd memory is one of the many comical signs adorning the walls that somehow inexplicably captivated me:   

     “Shakey’s made a deal with the bank.  We don’t cash checks and they don’t make pizzas”. 

I guess that just struck me as quite clever in my ten-year-old mind.  They were setting the rules, but doing so with a bit of humor.  In that spirit, I’d like to roll out my own new rule for you and the other clients of Comprehensive Money Management:

     “CMMS made a deal with its clients.  We’ll help you achieve your financial goals, and you’ll stop worrying about the daily ups and downs of the markets”. 

I’m hard at work doing my part.  Are you ready, willing and able to do yours?

We’re Standing Tall

     “Everyone has a plan until they get punched in the mouth.”  – American philosopher Mike Tyson

Unlike so many others, your plan remains strong and fully intact.  In fact, thanks to this insane volatility, a few new opportunities have emerged that may help us come out stronger on the other end.  Your plan was designed to weather an occasional punch in the mouth, and has handled that well.  You’re still standing and looking good without much added wear or tear.

The New World Order

I’ve spent a lot of time researching coronavirus and COVID-19 – and now – with confidence – I can tell you that I don’t know how this will play out. Nobody does.  It may go away in a month, or it may linger much longer.  The optimist in me thinks that over the next month or two – things will get worse – then will start to get better.  Just as it is hard to see what would ever stop good things from continuing forever, it is also hard for us to see how bad things will end and get better on the other side.

I do believe that capitalism will win – and that pharmaceutical companies will find a cure or a vaccine.  I’ll bet on capitalism – our selfish perpetual engine with the power to do seemingly impossible things.

The realist in me hopes the optimist is right, but suspects that COVID-19 may linger longer than a few months.  How much longer?  We don’t know, and we don’t have to, because you have a solid financial plan that knows how to take a punch and continue to push forward – not in panic – but with dignity and grace.

My Focus

All of my waking hours are focused on continually managing risk, lowering your tax bill, and repositioning your portfolio for the New World Order that lies ahead.  That will likely be a world of economic deleveraging, more people working from home, higher unemployment, lower investment returns and less fervent speculation on Wall Street.  Debt-fueled stock buybacks by corporate CEOs that pumped up stock prices to maximize their bonuses are likely a thing of the past.  Market returns for a diversified portfolio are likely to be no more than 5 to 6% in the coming years.  We’ve prepared for that.  Your financial plan built in to the MoneyGuide Pro financial planning software assumes a 5.5% average annual return.  Even after this recent punch in the mouth, your actual long-term average annual return is still beating that goal.  Your investment portfolio and overall financial plan remain solid and fully intact.        

Taking Action

I’m not sitting still.  For the past two weeks, I’ve been furiously rebalancing and harvesting losses in taxable accounts.  I’m adding value by capturing the loss in select securities for tax purposes, even as the replacement security is positioned to catch the rebound.  I’ve also begun to make a few strategic changes in individual investment selections within the confines of your overall asset allocation plan.

     “Life can only be understood backwards—but it must be lived forwards.” – Søren Kierkegaard

Within your EQUITY allocation (the “engines”), I’m gradually switching from ETFs that invest in the broader markets to those that focus primarily on high quality, cash rich companies with strong balance sheets.  I’m de-emphasizing REITs that invest in all property types (including shopping malls and office buildings) in favor of those that focus on trends with sound demographic underpinnings, such as medical offices, senior housing and hospitals.  I’m repositioning the portfolio in recognition that many small businesses will fail – and many industries will never be the same.

Within your FIXED INCOME allocation (the “brakes”), I deemphasized higher-yield corporate bonds long ago in favor of safer US treasury securities.  You have been rewarded for that move, as both short and long-term treasuries have soared while corporate bonds have faltered.

Within your REAL ASSETS allocation (the “diversifiers”), gold, alternative strategies and other hedges are playing their part by cushioning the portfolio from uncertainty, economic turmoil, and corporate and consumer deleveraging.  Who would have thought that Brent crude would be trading at $4 a barrel – well below the price of water – which it did earlier this past week?  Or that gold would quickly rise by 25% in a few short weeks after many years of a slow and torturous decline?  The diversifiers in your portfolio serve us well when the unexpected strikes, or when the engines falter and the brakes fail.      

Consumer behavior will change due to this virus; and consumers are 70% of the US economy.  I’m working hard to anticipate and get out in front of these changes before they are fully known and appreciated by the wider world.

We’ll Get Through This Together

I told you earlier what I don’t know about this virus.  Nor do I have a crystal-clear picture of its impact on our consumer-driven economy.  What I do know is that you can have clarity, or you can have undervaluation; you cannot have both. Today we have anything but clarity, but undervaluation is coming to us real fast.  Bargains only happen when people are confused and truly scared. 

For an added confidence booster, I recommend that you revisit my earlier blog “What Do I Own and Why Do I Own It?”.  A newly updated and revised copy is attached.  Each of the investments in your portfolio – the engines, the brakes and the diversifiers – play a critical role.  They work together to produce the best possible long-term outcome and maximize your long-term wealth.

So, let me do the strategizing and the worrying and help you navigate these volatile markets.  We may not yet be at a market bottom, but I’m convinced that the things we own today offer compelling long-term value once we get past the current period of uncertainty.  I also believe that investors will be rewarded for adding new money to their investment portfolios at these levels. 

Maintaining a long-term time horizon is paramount.  Every decision we make, we need to make from the perspective not of tomorrow, next week or even next year – but three to five years from now. 

That’s why investing is hard. 




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My Support for You in a Crisis

Good evening.

I’m sure you don’t have to be told that our country – and the world—are in a big awful mess.  The Covid-19 virus has disrupted everything: our sense of personal safety, our jobs, the economy, and – for an undefined period of time – our investment portfolios. 

I’m reminded of the stories my mom and dad shared with me about growing up during the Great Depression and World War II.  They were stories of collective sacrifice as the world faced great and sometimes mortal threats.  Of course, my parents survived (or else I wouldn’t be here), and we both know that our society will survive this as well. 

Perhaps a silver lining is what doesn’t kill us makes us stronger.  I’m hopeful that this crisis will bring us together as one nation and one world.  We are all human, and all a bit fragile.  This pandemic also reminds me that we are all on this planet for a short period of time.  Perhaps this crisis may help us re-learn what is truly important and what is less so. 

There is nothing that brings people together like a common enemy.  This time that enemy is COVID-19 and the threats that it presents to our physical and financial health.  I’m writing, not because I can add much to what you’re already getting from the media, but because I deeply want to proactively comfort you and lighten your load a bit if I can.  Let me offer these thoughts in no particular order.

Keeping your head when all others are losing theirs

I would ask you to recognize that we are ALL experiencing a lot of stress as we navigate through this pandemic.  You do not need to worry.  I’m doing that for you!  I lie awake at night thinking about you and my other clients.  I’m spending many of my waking hours looking for opportunities that will help us come out stronger on the other end.  I’m also thankful that tax season is largely behind me, with nearly 100 client tax returns already filed or ready to file.  That frees up my time to rebalance, harvest tax losses, and look for new opportunities.  I’m taking action to protect your portfolio, reduce future taxes, and reposition your investment portfolio for the gains ahead.

Herd mentality

We all need to recognize that we’re all part of the human herd.  By that I mean that you probably share the instinct to sell and get out of the way of whatever the market does in the highly unpredictable near future.  Our fight or flight instincts tempt us to retreat to the sidelines.  Even those of us who manage investments for a living are not immune.   The outcries of the irrational, instinctive part of our brain – which scientists tell us is the most powerful – is screaming right now. 

This is precisely why investing is not easy. 

We are all emotionally affected by the events of the world.  Neither you nor I are immune from human emotion.  But despite all the emotional pressure, our higher cognitive functions must remain in control. 

Are you currently thinking like a lizard, rabbit or Dr. Spock?

Scientists tell us that the human brain has three parts, the cerebral cortex at the top (which makes us rational humans), the cerebellum immediately below (which has the intelligence of a rabbit), coordinates muscular activity, and then the limbic brain at the top of your spinal cord, which controls fight or flight reactions.  That bottom nodule of thinking tissue has roughly the same intelligence as a lizard.

When humans encounter danger (and the recent market behavior certainly qualifies, particularly when it is also associated with a life-threatening pandemic and global economic shutdown), the mind instinctively retreats to the limbic brain.  Which means that many of us are currently functioning with the intelligence of a lizard.  It’s in that kind of environment that a disciplined investment strategy really shines!

Don’t feel bad if you find yourself thinking like a lizard at this moment.  We all do that from time to time.  The key for each of us is to recognize what is happening with our biology, tame the fight or flight automatic impulses of our limbic brain, and strive to react more like Dr. Spock. 

What to do? 

If you feel shut down by fear, I understand what that feels like and empathize with your feelings.  I’m here to listen.  Sometimes just talking things through can pull the locus of our awareness out of the bottom of the brain toward the top. 

Focus on the opportunities:

The market turmoil is giving us a rare opportunity to add value to our financial lives.  I feel like a kid in a candy story when I’m harvesting tax losses and reestablishing cost basis across your portfolio.  I’m also looking for opportunities to perform Roth IRA conversions at these lower valuations.  And of course, the treasury bonds, infrastructure, precious metals and cash in your investment portfolio can be redeployed at a time when stocks are on sale, giving portfolio returns a boost once we get to the other side of this crisis and the economy recovers again.

What’s Next?

I hope that you were not expecting me to tell you how long the Covid-19 epidemic will last, or to measure its long-term economic impact, or have any insights into when the markets will eventually recover.  Of course, I have no idea of any of those things – and nobody else does either.  Humility is a good thing to have when you’re forecasting the economy or markets. You never know what relevant facts you might be missing, so it’s best not to be too confident.  Those of us who have experienced three major downturns (or four if you experienced Black Monday crisis back in 1987) remember how unexpected they were, how experts and pundits were caught by surprise, and how wrong they were when they tried to tell us what was coming next.

The Long Term:

I only know one thing: which direction the next 100% movement in the stock market is going to be.  Long term investors know this.  Throughout recorded history, investment portfolios typically double every ten or twenty years, especially when measured from what could be close to a market low.  Cash may feel good right now, but it is guaranteed to lose value after considering inflation.  Of course, getting out of markets may feel satisfying in the moment, but it begs the question of when to get back in.  Most of us can’t finance our retirement earning less than 1% per year. 

Selling low and buying high is not a winning investment strategy.  Neither is consistently selling during market downturns and buying back in at market highs.  Our highly diversified 7/20 model (seven primary assets classes and 20 sub-asset classes), routinely rebalanced, is a winning strategy.  It has consistently provided high single digit returns with fewer negative years than any other strategy (see 47-year analysis attached).  Note the worst three-year rolling return for this strategy was -13%.  This is also a strategy that on average has resulted in a doubling of value every 7 to 10 years.  This is not a strategy practiced by lizards.  It is a strategy created by and faithfully followed by academics and the smartest minds on Wall Street who think and react more like Dr. Spock.

Bill’s crystal ball

I’ve been writing and publishing blogs for my clients every quarter now for 18 years.  My long-term clients may remember that I often signed them “Dr. Doom”.  I’ve always been a bit of a contrarian.  I have found that tendency has served me well over time.  That also manifests itself in feeling more optimistic when those around us are losing their heads.  That’s where I am today.  I suspect that the short-term pain is not over.  But for long term investors, when Wall Street sees “blood in the streets”, it has always proven in retrospect to be a great time to invest for the long term. 

If you need help getting through this crisis, please let me know. 

Please accept my best wishes, my sympathy, and my support as you and your family navigate this crisis together.  Rest assured that you are never far from my mind, and that I’m working diligently to ensure that your investment portfolio comes out of this crisis well positioned for the rebound that will inevitably come.  I’m glad to have you as a client and am lucky to have a job that I truly love. 

Be kind.  Be smart.  Be well.

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Perspective in the Panic

Back in 1987, right after the markets had experienced the famous “Black Monday” decline which took the Dow Jones Industrial Average down by 23% in a single day, the cover of the weekly Barron’s financial publication featured a suitcase with the frightened eyes of investors peeking out of its dark recesses, and an arm reaching out to wave a white flag.

This weekend—after the worst market week since the 2008 financial crisis—and one of the worst months since the 1930s—that image represents how a lot of poorly diversified, high-flying investors are feeling right now.  The US stock market finished out a remarkably bad week of negative returns, including consecutive days of 1,000-point drops in the Dow and similar percentage declines in the S&P 500 index. 

The Good News:  If you’re open to hearing good news, consider that even after the market turmoil this week, your portfolio is still up about 3% over the past 12 months (February 28, 2019 to February 29, 2020).  You are not one of those “poorly diversified, high-flying investors”.

Diversification is a bad word when markets are steadily rising and we’re all feeling a bit greedy.  Likewise, that word is music to our ears when the unexpected turns to surreal and the bottom falls out.  Diversification means you’ll never have all of your money in the top performing asset class.  It also means that you will lose much less when markets inevitably and unexpectedly fall.  Over the longer term, diversification provides solid market returns without the thrill of a roller coaster ride (see the “47-Year History of a Multi-Asset Class Diversified Portfolio” attached).

The Bad News:  The bad news is that last week’s market events were caused by something real—the Coronavirus, more precisely COVID-19—and the uncertainty surrounding the possibility that it will spread into a pandemic—and if it does—how much damage it will do to the world economy.  That uncertainty and the potential risks to our health and wealth have not gone away.  A case can be made that the worst is behind us, or that this is just the beginning. 

At present, fewer than 100 people have been diagnosed with the virus in the United States.  That may provide false comfort considering that fewer than 500 have been tested.  According to the CDC, the U.S. has tested 459 people for COVID-19 as of February 28th.  In comparison, Guangdong, China, has tested 320,000 samples, and South Korea has tested more than 66,000 people.

We appear to be behind the curve.  A laboratory test designed by public health officials to identify cases of COVID-19 in the U.S. has been bogged down by a botched rollout to states and inaccurate readings.  There are currently no tests available outside of the CDC in Atlanta.  That comes on the heels of budget cuts to the operational disease fighting budgets of the CDC, NSC, DHS and HHS by $15 billion in 2018.  The Complex Crisis Fund designed to preemptively prevent and fight pandemics was eliminated in its entirety just last year. 

Even though a lot of attention has been given to the virus’s impact on the markets, the more important issue is the health of you and your family.  You—like Jae and I—should be closely monitoring the spread of the disease.  You should know that simple surgical masks will not prevent wearers from contracting the virus.  Medical experts say that we should be conscientious about washing our hands and using hand sanitizer and cleansing wipes. 

There doesn’t appear to be a working coronavirus test at the moment, at least not in the US, so watch for the symptoms: fever, cough, runny nose, shortness of breath.  There is no cure, but experts recommend resting and avoiding overexertion, drinking plenty of water, using a clean humidifier or cool mist vaporizer, and taking aspirin, ibuprofen or naproxen for pain and fever.  In 98% of the cases, the disease is not fatal, but it does seem to be more dangerous for older people and those who suffer with heart disease, diabetes, lung disease and obesity. 

Our wish is that you and your family will stay well, and that the virus will not become the pandemic that many (including market traders) are fearing.  And please understand that we (and everyone else) don’t know what the market will do on Monday or next week.  The downside action might continue, or we might experience a quick recovery.  Historically, the best plan when bear markets present themselves is to sit tight.  My goal for you is to follow the best plan we know and wait for the recovery.  That being said, your individual ability to withstand volatility and risk not only dependent on the size of your resources and your time horizon before needing to withdraw money, but also on your psychological makeup.  You have a carefully crafted financial plan and an investment strategy designed to maximize your wealth over a lifetime.  That plan is our collective best effort to help you achieve your long-term goals.  If you need a refresher on the investment strategy, an update to your financial plan, or have concerns about your psychological ability to stay the course, let me know.  I’m here to listen and to help.  

In the meantime, your most important priority should be on keeping you and your family safe.  My suggestion is that you prepare for the worst, even as you hope for the best.  I have attached a COVID-19 Fact Sheet that I compiled from reputable websites including the World Health Organization and the Center for Disease Control in Atlanta.  I consider these to be the best and least biased resources available to help you navigate this crisis: and

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Live Long and Prosper: Resources That Will Change Your Life


Yes, it’s true.  Jae and I are fully committed to a whole food, plant-based (WFPB) lifestyle.  Variations on this theme include the Mediterranean, Flexitarian, Nordic, Ornish, DASH, Engine 2, Mayo Clinic and Vegan diets.  All of these diets emphasize eating fiber-rich, low-fat unprocessed whole plant foods to maximize health, prevent or reverse disease, and increase longevity.  WFPB diets minimize or avoid processed foods, junk foods, added sugar, meat, eggs and/or dairy. 


The January, 2020 issue of US News & World Report includes their annual “Best Diets” report ranking 35 diets based on multiple criteria selected by a nationally recognized panel of experts in diet, nutrition, obesity, food psychology, diabetes and heart disease.  Whole food plant-based diets took most of the top 10 spots. 


We’ve both been “woke” (slang for self-educated and newly awakened) to the impressive health benefits of living a mostly whole-food, plant-based lifestyle. For us, there is no turning back.  Jae’s new company, PLANTATUDE® offers a wide variety of services including helping individuals and families make a successful transition to a healthier lifestyle.  Jae also works with restaurants seeking to add high quality plant-based meal alternatives to their menus.  See for a complete list of services.  


If your new year’s resolutions include losing weight or pursuing a healthier lifestyle, you will find the following list of our favorite health supportive videos, books and websites helpful, if not essential.  These resources will help you become “woke” too and increase your odds of a successful transition.    


Documentaries and Videos:


The Gamechangers (2019) available on Netflix and


What the Health (2017) available on Netflix and at


Eating You Alive (2015) available for free at


PlantPure Nation (2015) available for free at


Forks Over Knives (2011) the movie that started it all available for free on Netflix or for purchase at


Books and Audiobooks (click on hyperlink):


How Not to Die: Discover the Foods Scientifically Proven to Prevent and Reverse Heart Disease by Dr. Michael Greger MD


How Not to Diet:  The Groundbreaking Science of Healthy, Permanent Weight Loss by Dr. Michael Greger MD (the sequel to How Not to Die)


The China Study: (revised and expanded): The Most Comprehensive Study of Nutrition Ever Conducted and the Staring Implications for Diet, Weight Loss and Long-Term Health by T. Colin Campbell, PhD


The Engine 2 Diet: The Texas Firefighters 28-Day Save-Your-Life Plan That Lowers Cholesterol and Burns Away the Pounds by Rip Esselstyn


Food Over Medicine:  The Conversation that Could Save Your Life by Pamela Popper PhD


The Cheese Trap  How Breaking a Surprising Addition Will Help You Lose Weight, Gain Energy and Get Healthy by Dr. Neal Barnard


Forks Over Knives: The Plant-Based Way to Health by T Colin Campbell, PhD and Caldwell B Esselstyn, MD


Prevent and Reverse Heart Disease: The Revolutionary, Scientifically-Proven, Nutritionally-Based Cure by Caldwell B Esselstyn, Jr., MD


The Healthiest Diet on the Planet:  by John A. McDougal, MD


Eat to Live: The Amazing Nutrient-Rich Program for Fast and Sustained Weight Loss by Joel Furhman, MD


UnDo It!How Simple Lifestyle Changes Can Reverse Most Chronic Diseases by Dean Ornish, MD


Websites: is a non-profit, science based public service providing thousands of bite sized videos on the latest in nutrition research:


Physicians Committee for Responsible Medicine leads a revolution in medicine that puts a new focus on health and compassion:


Recipes and more from the author of The Engine 2 Diet:


The nation’s first Medicare-approved program to reverse heart disease by making comprehensive lifestyle changes.


McDougall Research & Education Foundation offers the second of only two Medicare-approved programs to reverse serious illness including high blood pressure, heart disease, diabetes, and others all without drugs: 


Cornell Universities online program on the science of a plant-based diet and the role nutrition plays in chronic disease:


US News & World Report annual report ranking 35 popular diets based on multiple criteria selected by a nationally recognized panel of experts in diet, nutrition, obesity, food psychology, diabetes and heart disease.  Whole food plant-based diets took most of the top 10 spots.


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Why Do-It-Yourself Investors Underperform

The results of research performed by Dalbar Inc., a company which studies investor behavior and analyzes investor market returns, show that the average investor consistently earns below-average long-term investment returns.  This is amazingly consistent no matter what time period is measured.

Their 2016 study looked at the twenty-year period ended December 31, 2015.  During this period, the S&P 500 Index averaged 8.19% a year – a pretty attractive historical return.  The average multi-asset individual investor earned a market return of only 2.11%.


Admittedly, this data is outdated, spanning the 20-year period from 1996 to 2015.  However, 20 years is long enough to identify a strong trend.  The data is also consistent with earlier Dalbar studies.  While asset class returns may have modestly changed during the past five years, I highly doubt that the average individual investor has evolved to the point that his or her returns wouldn’t still be sitting somewhere towards the bottom end of this chart.

I saw similar charts early on in my own investing career and instead of getting discouraged, I decided to investigate why the average retail investor performs so poorly.  It didn’t take long to realize that there are two primary issues that we all have to overcome – fear and greed.                                 

Fear and Greed

Humans are a flawed species. We’re emotional creatures.  Often, in real life, that’s a good thing.  Joy and love, heartbreak and loss, hope and longing — these are all sensations that make life worth living.  However, when it comes the stock market, emotion is best left at the door.  It leads to undisciplined, irrational decisions, and often these emotions lead to losses.

Everyone knows it’s best to buy low and sell high.  This is an easy enough principle to understand.  However, it’s not easy to enact.

Most people love price reductions when they’re available at the grocery store, in the shopping mall, or on an e-commerce site.  However, people tend to be afraid of discounts in the stock market. 

On the contrary, many retail investors are prone to the herd mentality, where there is perceived safety.  They’re willing to chase momentum, allowing the fear of missing out to overwhelm their good sense.  Far too often, the average investor has shown a willingness to sell at bottoms and buy at tops, which is why their performance is so low relative to the performance of individual asset classes.


Why the Underperformance?  Emotions! 

We humans are emotional creatures.  Research shows that the main reasons for the dismal performance are related to emotional and behavioral factors. Turns out, the majority of us are terrible investors when investing our own money due to the way our brain is wired.  We just simply aren’t programmed to be rational, disciplined investors.  It’s not our fault.  It’s baked into our DNA!  Humans suffer from a myriad of behavioral biases which stem from emotions that impair our decision-making processes.  As a result, we tend to make irrational decisions at the worst possible times, which in turn lead to lackluster long-term investor performance.  This flaw in our make-up impacts us continuously.  Although its less obvious during roaring bull markets, it punishes us mercilessly during bear market downturns when the ramifications of our failure to adhere to a sound plan become clearer and painfully acute.   


Emotional Biases 

If you are going to manage your own investments, you will need to master your emotions and behavior.  This is not easy.  It is extremely difficult to emotionally detach ourselves from our money.  Investors need to recognize the biases they are most prone to.  Below is an overview of a few of the most powerful “money-losing” biases that control our behavior, even in those circumstances when we are fully aware: 


Buying High

Study after study shows that when the stock market goes up, investors put more money in it.  And when it goes down, they pull money out.  This is akin to running to the mall every time the price of something goes up and then returning the merchandise when it is on sale – but you are returning it to a store that will only give you the sale price back.  This irrational behavior causes investor market returns to be substantially less than historical stock market returns. 

What would cause investors to exhibit such poor judgment?  After all, at a 7% return, your money will double every ten years (see"Rule of 72").Rather than chasing performance, you could simply have bought a single index fund, and earned significantly higher returns. 



The problem is that the human reaction to both good news or bad news is almost always to overreact.  These emotional triggers cause illogical investment decisions.  The tendency to overreact can become even greater during times of personal uncertainty; near retirement, for example, or when the economy is bad.  There is an entire field of study which researches this tendency to make illogical financial decisions.  It is called behavioral finance.  The study of behavioral finance documents and labels our money-losing mind tricks with terms like "recency bias", “availability bias” and “herd mentality”.  Human beings tend to…   

·       Exhibit a recency bias, where we overweight what happened recently and extrapolate it into the future. 

·       Show an availability bias, making us more willing to invest into stocks we can readily recall. 

·       Perceive less risk in something we have familiarity with, thus helping to explain why so many are so comfortable keeping concentrated positions in their employer. 

·       Pursue gambles that have significant upside potential, despite their improbable outcome — explaining why we continue to buy lottery tickets with a highly negative expected value. 

·       Exhibit a significant aversion to losses.  Loss aversion refers to people's tendency to prefer avoiding losses to acquiring equivalent gains: it is better to not lose $5 than to find $5.  The utility of a monetary payoff depends on what was previously experienced or was expected to happen.  Some studies have suggested that losses are twice as powerful, psychologically, as gains. 

·       Move with the herd, showing a strong bias to do what everyone else is doing, and avoid the risk that comes with being singled out — especially if there’s a bad outcome and someone needs to be blamed. 

·       Overconfidence.  Investors repeatedly overestimate their ability to predict market events.  This leads to higher frequency of trading, which typically results in lower returns. 

·       Chasing Performance.  The average investor repeatedly performs the cardinal sin of investing, which is “buying high and selling low”.  Studies show that individual investors tend to wait to invest until they see strong market returns.  By the time their money is invested, they may have missed the majority of the market increase.  On the other hand, investors tend to panic after a significant decline and usually sell out near the bottom.  Waiting too long to invest and selling on fear will inevitably hurt a portfolio’s return.   

These are but a very few of our biases that negatively impact our decision-making.  If you want to blow your mind, take a look here at the many others that make up the full and depressing list:  (P.S.  Is it any surprise that our politics are so broken when you see the complete list of cognitive biases that drive our thinking?) 

A picture (or bar chart) that’s worth a thousand words

What is a wise investor to do? 

As the research shows, most individual investors have a difficult time ignoring their emotions when making investment decisions over their own money. But if you’re one of the rare individuals that can consistently do all of the following things, you may not need professional help.  Ask yourself if you can… 

·       invest the time and energy to create, implement and stick with a thoughtfully designed asset allocation plan (known as “investment policy” in industry jargon).   

·       design your investment policy to produce an “expected return” that is consistent with your long-term goals and ability to accept risk.  Risk and volatility are inherent in investing.  There is no “free lunch”.  Risk and return are always inversely related.  Risk doesn’t always manifest itself immediately, but tends to overwhelm after long periods of complacency. 

·       select low-cost, tax-efficient index funds or ETFs to build your portfolio consistent with the asset allocation plan defined in your investment policy. 

·       rebalance your investment portfolio periodically to maintain the desired allocation, all the while being aware of the tax consequences of your actions. 

·       harvest losses periodically to build a war chest of tax loss carryforwards that can be used to mitigate the inevitable tax consequences that will result if you’re successful. 

·       ensure that each of your investment assets is located in the ideal type of account to minimize future taxes.  This is known as “asset location” (as opposed to “asset allocation”).  For example:  

o   Real estate investment trusts or REITs should always be held in tax-deferred retirement accounts since they pay high “unqualified” dividends that are subject to high ordinary income tax rates.  

o   Precious metals should ideally be located in tax-deferred retirement accounts since their long-terms gains are taxed as “collectibles” at a 28% rate rather than the regular 15% capital gains tax rate. 

o   High dividend paying value stocks and funds should be held in taxable investment accounts to take maximum advantage of the qualified dividend tax rate of 0%, 15% or 20% depending on your taxable income. 

o   Assets with high long-term growth expectations should be located in Roth IRAs or Roth 401(k)s where their long-term growth will occur completely tax free.  

·       sit tight and do nothing in periods of extreme market turmoil or other times of great personal stress.  This is when otherwise disciplined investors make their greatest mistakes that destroy their long-term average returns. 

Don’t overestimate your ability to keep fear and greed in check when managing your own money.  Even highly-skilled professional investment managers who do this for a living tend to outsource the management of their own portfolio to another investment manager.  All humans make emotional mistakes when it comes to their own money.   

Unless you have the logic and emotion-devoid disposition of Leonard Nimoy’s “Spock”, greed will slowly and deliberately cause you to deviate from your well-designed plan.  Likewise, fear will cause you to panic during periods of stress.  This is why the average investor in America fail to produce investment returns much better than the rate of inflation over long periods of time.  The past twenty years included two market crashes and several other periods of extreme volatility.  It took many investors 15 years to recover from the tech collapse of 2000 when the NASDAQ lost 78% of its value and broad US stocks fell by more than 50%.  A similar fate befell many less disciplined investors in 2008 when financial institutions collapsed, decimating investment portfolios and causing the Great Recession of 2008.  Those were the two biggest drops since 1987 and 1929.   

Significant market corrections tend to occur every 8 to 12 years.  None of us know when the next one will come, how severe it will be, or how long it will take to recover.  We can’t control returns, but we can control the risk we take to achieve them.  Absent an infallible crystal ball, asset allocation (spreading your eggs across different baskets) is a basic strategy in any well-designed investment plan.  Notice in the chart below the unpredictability of returns for each asset class from year to year.  Last year’s winner may be next year’s dog.  Or repeat for another winning year.  Putting too many eggs in one basket almost always results in broken eggs.  

Individual asset class returns in any given year are random and unpredictable.

Owning roughly equal weights of most asset classes (periodically rebalanced) produces a higher likelihood of solid and consistent returns.  I follow a discipline of investing across 7 asset classes, which I further divided into 20 sub-asset classes.  Each asset class and sub-asset class has been carefully selected based on their previous return history and their lack of correlation to each other.  Some can be expected to zig when others happen to zag.  After all, if the asset classes all performed equally, there would be no point in diversifying.  Historically this level of extreme diversification has produced returns similar to the best performing single asset class, but with much less risk and less volatility.   

In the following chart, notice that an equally weighted 7-Asset Class Portfolio produced an average annual return that was almost as high as the best performing asset class, but with (a) much less volatility (i.e. a lower-standard deviation from the mean), (b) more shallow periodic losses and (c) fewer negative years.  Although this data covers a full 46-year period, the same pattern repeats itself over any ten-year rolling period that one might choose to analyze. 

This data provides solid evidence for a well understood phenomena:  Following a disciplined investment strategy that equally weights multiple asset classes is likely to produce consistently higher returns with less stomach-churning volatility than owning any single asset class alone.   

This demonstrates a counter-intuitive but mathematically sound anomaly.  It consistently works because returns experienced by each individual asset classes tend to be non-correlated or even negatively correlated to each of the other asset classes.  Each responds differently to uncontrollable factors such as inflation, interest rates, government policy, and the ebbs and flows of dozens of other factors including human behavior.  Including them all in the mix smooths out the returns for the portfolio as a whole as those factors unexpectedly take center stage from time to time.     

Loss avoidance is the key to making this work.  Full recovery from a market loss requires a gain equal to roughly twice the magnitude of the original loss.  For example, after a 20% loss, it takes a 40% gain to return from the new lower base to get back to the original starting point.  Minimizing the size of periodic losses through effective asset allocation and routine rebalancing minimizes the size of the subsequent gain that is needed to fully recover.  One of the many pearls of wisdom dispensed by Warren Buffett is “Rule No. 1: Never lose money. Rule No. 2: Don’t forget rule No. 1”.  In reality occasional losses are inevitable, but keeping those losses shallow is the key to long-term success. 

Investing during bull markets always seems easy.   

Just ask your next-door neighbors, friends and co-workers who may not know much about behavioral science, portfolio design, market discipline, rebalancing, tax loss harvesting, the math behind Buffett’s Rule #1, and who may have forgotten the stomach-churning lessons of 2000 and 2008!  However, they marvel at their own bull market investing prowess and wonder why you would pay someone to do what they do so easily.  That is the fallacy of focusing entirely on return, without understanding the risks one took to achieve that return.  Like a bad houseguest, those risks have a way of showing up unexpectedly and with great fanfare at very inconvenient times.     


Yes, investing always seem easy when everything you buy keeps going up.  Flaws in portfolio design, tax efficiencies, high fund expenses, and the failures to rebalance and harvest losses are easily ignored when the markets are rising.  Rising markets hide these sins.  But even in these good years, an undisciplined investor may be leaving money on the table.  The inherent costs mount through good times and bad, but are often unrecognized until the portfolio heads south.  Only then does the importance of asset allocation, rebalancing and tax loss harvesting tend to come into sharper focus.  Lack of attention to these disciplines tends to quietly punish investors even in good markets, but can be quite painful when markets turn negative as they inevitably do from time to time.   

For those Spock-like individuals who have the skills to build and consistently maintain a well-designed asset allocation plans – and who have superhuman abilities to detach oneself emotionally from their money during periods of great stress – going it alone may be for you.  But for the other 99% of the population, including many investment professionals, their challenge is to find competent and trustworthy professional help that will put their client’s interests ahead of their own. 

It’s an industry that is known for “smoke and mirrors” sales tactics and high fees charged by commissioned brokers and insurance agents, where does one find a true professional who will put your interest first?  Here’s a foolproof formula: 

·       Competence:  Make sure that your advisor is a CERTIFIED FINANCIAL PLANNERTM.  Good investment management begins with a well-designed and comprehensive financial plan.  Only CFPs have the skillset and industry-leading resources to build such a plan.  Most others offer “financial plans” that are little more than sales tools in disguise. 

·       Integrity:  Only work with someone who is a FIDUCIARY.  Stockbrokers and insurance agents are not fiduciaries.  They may call themselves “financial advisors”, “financial consultants” or “financial solutions advisors” (nobody like the titles “salesman” or “asset gatherer”).  But make no mistake, most of the people hiding behind these titles are commissioned stockbrokers and insurance agents in disguise.  The job is to keep as much of your money as they can get away with.  Their only obligation is to recommend “suitable products” – a very low bar.  You should only do business with “Registered Investment Advisors”.  Only registered investment advisors are fiduciaries.  Fiduciaries have a legal obligation to put your interests ahead of their own.  These others do not.  Ask for their Form ADV-Part 2 (their regulatory “firm brochure”) which all Registered Investment Advisors must provide. 

·       Fee-Only:  Know how your advisor is compensated.  “Fee-only” advisors reduce conflicts of interest by fully disclosing their fees and refusing to accept product sales commissions, mutual fund trails and any other forms of third-party compensation.  Fee-only advisors are more likely to recommend products like index funds and ETFs that are much less expensive since they don’t provide kickbacks to the advisor.  Be careful of the deceptive words “Fee-Based”.  That’s a clever way of saying that they take commissions, trails and other product sales compensation in addition to the fees that you pay to them directly.  Sadly, how much they’re paid and who pays them is not required to be disclosed. 

·       Track Record:  Check out the advisor and their firm at:  

o   For CFPs: 

o   For Commissioned brokers:   FINRA's BrokerCheck 

o   For Registered Investment Advisors:  SEC's Investment Adviser Public Disclosure 

·       Top questions to ask and other tools:


How does your financial advisor stack up?

 Comprehensive Money Management

·       Certified Financial Planner?  YES Ö

·      Fiduciary?  YES Ö

·       Fee-only?  YES Ö

·       Track Record?  YES Ö 

·       Financial Planning?  YES Ö

·       Design and Implementation of Investment Policy Statement?  YES Ö

·       Routine Rebalancing?  YES Ö

·       Tax Loss Harvesting?  YES Ö

·       Timely Response to Your Needs?  YES Ö

·       Attention to Detail YES Ö

·       Comprehensive set of services including tax preparation?  YES Ö

·       Market-like returns with less than market risk?  YES Ö

·       Strong track record during periods of turmoil?  YES Ö


Thanks for trusting in me and thanks for being such a great client! 




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Comprehensive Money Management Services LLC
535 Vilabella Avenue
Coral Gables, FL 33146
Phone 305-662-7757
Fax 305-402-8409
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Comprehensive Money Management Services LLC (“CMMS”) is a Registered Investment Adviser located in Coral Gables, Florida. The firm is registered with the State of Florida Office of Financial Regulation. CMMS and its representatives are in compliance with the current filing requirements imposed upon Florida-registered investment advisers and by those states in which CMMS maintains clients.

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