Hans Blake, CFA, CPA

What An Intelligent Investor Should Do When an Asset Class Falls Out of Favor

November 16, 2023 by Hans Blake, CFA, CPA

Reading Time: 2 minutes

In this episode of Intelligent Money Minute, I had the pleasure of interviewing Larry Swedroe, head of Financial and Economic Research at Buckingham Strategic Wealth, on what an intelligent investor should do when an asset class falls out of favor.

All Risk Investments: Enduring the Ebb and Flow

Larry emphasizes a fundamental truth: every risk investment, whether it’s stocks, bonds, commodities, or others, experiences prolonged periods of underperformance. Investors often underestimate these cycles, mistakenly assuming that three, five, or even ten years are lengthy evaluation periods. However, historical evidence proves otherwise, with instances where the S&P 500 trailed behind treasury bills for 13-year durations occurring three times since 1929.

The crux of Larry’s advice centers on diversification across various unique risks, aligning with one’s risk tolerance. This strategy, substantiated in his book, “Your Complete Guide to Factor-Based Investing,” promotes the inclusion of assets proven to offer premiums over time. Diversifying globally and including varied sources of risk—be it stocks, bonds, commodities, or currencies—reduces dependency on any single investment, mitigating the impact when a particular asset class is out of favor.

Intelligent Investing: A Holistic Approach

Larry Swedroe’s wisdom underscores the importance of persistence and diversification in an investor’s journey. When faced with an asset class in decline, staying committed to a diversified strategy tailored to individual risk tolerances is key. We invite you to engage with us in exploring your unique risk profile and leveraging our financial technology to fortify your investment journey.

For those seeking a financial advisor or aiming to reevaluate their investment strategies, we extend an invitation to connect with us. Our goal is to help you minimize financial stress and maximize your life’s potential through informed, tailored financial decisions.

Schedule a short discovery call or meeting

We’ll be interviewing Larry on several podcasts regarding markets, passive investing, and diversification, so be sure to subscribe to our Intelligent Money Minute podcasts.

Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “The Only Guide to a Winning Investment Strategy You’ll Ever Need.” He has since authored seven more books.

Larry Swedroe Bio

Since joining Buckingham Strategic Wealth in 1996, Chief Research Officer Larry Swedroe has spent his time and energy educating investors on the benefits of evidence-based investing.

In his role as chief research officer and as a member of the firm’s Investment Policy Committee and Board of Directors, Larry regularly reviews the findings published in dozens of peer-reviewed financial journals, evaluates the outcomes and uses the result to inform the firm’s formal investment strategy recommendations.

Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television shows airing on NBC, CNBC, CNN and Bloomberg Personal Finance. Larry is a prolific writer, contributing regularly to multiple outlets, including Advisor Perspectives and ETF.com.

Before joining Buckingham, Larry was vice chairman of Prudential Home Mortgage and senior vice president at Citicorp.

Larry holds an MBA in finance and investment from NYU and a bachelor’s degree in finance from Baruch College.

Credits: This blog was written in part by ChatGPT, an AI language model developed by OpenAI. The content of this blog reflects the knowledge and opinions of ChatGPT, may or may not reflect the knowledge and opinions of Intelligent Investing, and is protected by copyright laws. Please do not reproduce or distribute without giving proper credit to ChatGPT and OpenAI.

Assessing Risk in Your Small Business

November 2, 2023 by Hans Blake, CFA, CPA

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Reading Time: 3 minutes

In this episode, we had the pleasure of interviewing Bethany Winston, owner, and Editor-in-Chief of Kidding Around Greenville, as she shares valuable insights on assessing risk in your small business.

Small Business Financial Risk: The Peaks and Valleys

At Intelligent Investing, we emphasize four dimensions of risk:

Your willingness to take on risk
Your ability to manage risk
Your need for risk to meet your financial goals
The actual risk present in your investment portfolio

Bethany Winston highlighted the financial challenges inherent to her small business, which relies predominantly on advertising revenue. It’s not uncommon for income in this sector to fluctuate throughout the year. The feast-or-famine dynamic can make managing finances nerve-wracking

Financial Safety Nets and Resilience

Bethany wisely shared that she maintains a clear distinction between personal and business finances, a practice we strongly advocate. She sets aside specific amounts for personal income, ensuring that, even during lean periods, the business can continue to operate and pay employees.

COVID-19 was a stark test for businesses. Bethany’s experience mirrored many entrepreneurs’, with traffic and client advertising taking a hit. However, she emphasized the importance of having a financial safety net to weather such storms. By diversifying her content and addressing the changed needs of her audience, she managed to not only stay afloat but also experienced increased traffic in 2020.COVID-19 was a stark test for businesses. Bethany’s experience mirrored many entrepreneurs’, with traffic and client advertising taking a hit. However, she emphasized the importance of having a financial safety net to weather such storms. By diversifying her content and addressing the changed needs of her audience, she managed to not only stay afloat but also experienced increased traffic in 2020.

Living Below Your Means: A Wise Financial Habit

We discussed the critical principle of living below your means, which acts as a buffer during times of financial stress. Having a game plan and the ability to pivot is pivotal to surviving and thriving through challenging times. Risk management is at the core of Intelligent Investing’s financial strategies. We offer a complimentary risk assessment to help you understand your risk tolerance and assess your portfolio’s risk. Reach out to us to get started.

Small business owners face unique financial risks and rewards. When it comes to risk management, especially in your finances and financial goals, we encourage a prudent, diversified approach. The COVID-19 crisis highlighted the importance of having a financial safety net. Ensuring you can manage expenses and continue operations during challenging periods is crucial. We always advocate living below your means and having a solid financial game plan in place to navigate financial uncertainties.

Schedule a short discovery call or meeting

We’ll be interviewing Bethany on several podcasts regarding markets, passive investing, and diversification, so be sure to subscribe to our Intelligent Money Minute podcasts.

Bethany Winston Bio

Bethany Winston is the owner and editor-in-chief of Kidding Around Greenville & Kidding Around Spartanburg. She enjoys exploring parks, discovering local events, and meeting the people who make Greenville an amazing place to live.

Kidding Around Greenville is known for tapping into the heart of Greenville and bringing readers firsthand reviews of the best things to do and see in the Upstate and Southeast region. Readers use Kidding Around® to find things to do, places to visit, and businesses and resources they need, helping them to make wonderful memories with their families.

The Rapid Rise of Artificial Intelligence

October 19, 2023 by Hans Blake, CFA, CPA

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Reading Time: 2 minutes

In this episode of Intelligent Money Minute, we had the pleasure of interviewing Larry Siegel, the director of the CFA Institute Research Foundation and a prolific investment management author. We dive into a discussion with Larry on the rise of artificial intelligence.

AI’s Ever-Changing Landscape

Larry Siegel began by highlighting the dynamic nature of AI technology. It’s a field that’s progressing at a breathtaking pace, making it challenging to keep a steady viewpoint. The implications of AI’s continuous evolution extend far beyond what we can currently anticipate.

An anecdote from Tyler Cowen’s blog, “Marginal Revolution,” left Siegel impressed. The story was written by an AI program and exuded creative writing with a flair for evoking emotions. This starkly contrasted previous AI outputs, which Siegel found unimpressive and likened to amateurish essays.

The Future of Financial Advice and AI

Despite the breathtaking progress in AI, Siegel remains cautious. While acknowledging AI’s ability to process vast data sets at remarkable speed, he is skeptical about whether it can truly mimic human intelligence. The debate rages on about the extent to which AI can replicate the intricacies of the human brain.

The interview delved into the question of AI’s role in financial advice. Could AI replace human advisors, particularly for intellectual tasks? Siegel’s cautious approach to AI’s evolution is timely given its potential impact on various professional fields, including finance.

At Intelligent Investing, we continuously explore the intersection of technology and human intelligence. As AI develops, it’s essential to strike a balance, recognizing the strengths of both humans and machines. The future will likely demand a collaborative approach to maximize the potential of both.

Larry Siegel Bio

Laurence B. Siegel is the Gary P. Brinson director of research at the CFA Institute Research Foundation and an author, consultant, and speaker on investment management and economics. Before retiring from full-time work in 2009 he was director of research at the Ford Foundation and, before that, head of research at Ibbotson Associates (since acquired by Morningstar). He attended the University of Chicago (BA 1975, MBA 1977). His book, Fewer, Richer, Greener, has been published by Wiley and is available, along with his other work, at https://www.larrysiegel.org.

Is Bitcoin a Good Inflation Hedge

October 12, 2023 by Hans Blake, CFA, CPA

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Reading Time: 3 minutes

In this episode of Intelligent Money Minute, I had the pleasure of interviewing Larry Swedroe, head of Financial and Economic Research at Buckingham Strategic Wealth, on the topic of whether Bitcoin is truly a good inflation hedge.

Blockchain Technology’s Potential

Larry Swedroe commenced the discussion by emphasizing the potential of blockchain technology, the foundation on which cryptocurrencies like Bitcoin are built. The blockchain is already revolutionizing the financial sector by facilitating faster and more efficient payment transfers and record-keeping.

While the blockchain shows promise, Swedroe took a more skeptical view of Bitcoin. He pointed out that Bitcoin’s value proposition is questionable. Bitcoin has a theoretical limited supply, capped at 21 million coins. However, the existence of an unlimited number of substitute cryptocurrencies means Bitcoin faces a daunting challenge. An asset with an unlimited supply typically sees its value approach zero. Swedroe categorized Bitcoin as a Ponzi scheme, though he acknowledged that it could achieve high trading values based on what people are willing to pay.

Bitcoin: A Poor Inflation Hedge

Swedroe was humble in his skepticism, admitting he might be wrong. He would never recommend shorting Bitcoin. Nevertheless, he found comfort in the agreement of financial economists like John Cochran and Nobel laureate Gene Fama, who shared his view on Bitcoin’s intrinsic value.

Addressing a common belief that Bitcoin is an inflation hedge, Swedroe made it clear that Bitcoin’s performance does not support this notion. Its value is highly volatile and can plummet significantly during times of rising inflation.

Speculation ≠ Intelligent Investing

Swedroe’s insight serves as a reminder that speculation does not equate to intelligent investing. While some may choose to speculate on Bitcoin or other cryptocurrencies, such endeavors come with substantial risks and should be approached with caution.

At Intelligent Investing, we prioritize serving high-net-worth clients. Through our proprietary financial technology, Intelligrations®, we help our clients minimize financial stress and maximize their quality of life. If you’re seeking a new financial advisor or haven’t had one before, we’re here to discuss your financial goals and risk tolerance. We aim to provide sound financial advice and services tailored to your unique circumstances.

Schedule a short discovery call or meeting

We’ll be interviewing Larry on several podcasts regarding markets, passive investing, and diversification, so be sure to subscribe to our Intelligent Money Minute podcasts.

Larry Swedroe Bio

Since joining Buckingham Strategic Wealth in 1996, Chief Research Officer Larry Swedroe has spent his time and energy educating investors on the benefits of evidence-based investing.

Before joining Buckingham, Larry was vice chairman of Prudential Home Mortgage and senior vice president at Citicorp.

Larry holds an MBA in finance and investment from NYU and a bachelor’s degree in finance from Baruch College.

The Finances of Starting a Business

September 21, 2023 by Hans Blake, CFA, CPA

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Reading Time: 2 minutes

In this episode, we had the pleasure of interviewing Bethany Winston, owner, and Editor-in-Chief of Kidding Around Greenville, as she shares valuable insights on the finances of starting a business.

The Profit-First Approach

Bethany shared valuable insights into her experience and how she has applied financial strategies to ensure her business’s success. She highlighted the book “Profit First” by Mike Michalowicz as a valuable resource. This book discusses transforming a business from a cash-eating monster into a money-making machine.

One key lesson Bethany learned from “Profit First” is the concept of setting up separate bank accounts and allocating income into various categories. This method involves segregating income into different accounts, such as operating expenses, dividends, taxes, and profit. By doing so, entrepreneurs can ensure that they’re not only generating revenue but also consistently turning a profit.

The Importance of Manual Management

Bethany found that a hands-on approach allows her to assess her financial situation regularly and make informed decisions. While there might be automated solutions, the act of personally managing the finances provides a deeper understanding of the business’s financial health.

We discussed the significance of planning for taxes, especially in a small business setting. Setting aside funds for taxes prevents financial stress when tax season arrives. It’s a practice that not only saves money but also eases the burden on the family and ensures the business remains in good financial standing.

The 10, 20, 30, 40 Rule

In addition to Bethany’s insights, I shared a simple financial plan, the “10, 20, 30, 40 Rule,” which encourages entrepreneurs to allocate percentages of their income to different financial categories. This structured approach includes dedicating a portion to giving, savings, housing, and discretionary spending. It’s a framework that can help business owners strike a balance between enjoying their earnings and securing their financial future.

Bethany’s experience and the financial strategies she shared serve as a valuable resource for entrepreneurs and small business owners. Navigating the complexities of business finance requires careful planning, discipline, and the right mindset. By adopting strategies like those discussed in this episode, entrepreneurs can chart a path to financial success in their ventures.

Schedule a short discovery call or meeting

We’ll be interviewing Bethany on several podcasts regarding markets, passive investing, and diversification, so be sure to subscribe to our Intelligent Money Minute podcasts.

Bethany Winston Bio

The Benefits Of Working Beyond the Typical Retirement Age

September 7, 2023 by Hans Blake, CFA, CPA

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Reading Time: 2 minutes

The Financial Advantage

First and foremost, extending your career offers a significant financial advantage. Most jobs pay better than the retirement benefits that follow. By working longer, you can bolster your income, reducing the need to draw from your retirement savings. This, in turn, allows your nest egg to last longer.

For instance, if you retire at 70 instead of 62, you have eight fewer years of retirement to finance with your savings. This can translate to a more comfortable retirement lifestyle. Additionally, working longer provides you with an opportunity to save more, further strengthening your financial position.

Mental Stimulation and Social Interaction

Beyond financial considerations, working beyond the traditional retirement age offers vital mental stimulation and social interaction. Engaging in meaningful work can keep your mind sharp and active. It prevents the feeling of life becoming a waiting game, as Larry aptly puts it.

The human need for intellectual engagement and social connection remains a driving force. Continuing to work allows you to maintain a sense of purpose, contribute to society, and interact with colleagues, fostering personal growth and well-being.

Personal Fulfillment

Larry Siegel stresses how remaining intellectually active and engaged can be personally fulfilling. By continuing to write books, give talks, and interact with colleagues and clients, he not only sustains his mental acuity but also enjoys the sense of purpose and fulfillment that comes with it.

At Intelligent Investing, we understand that the transition into retirement can be challenging. Husbands and wives often have differing goals and concerns. Our mission is to unify families through effective financial communication, helping couples make a successful transition into retirement.

Explore our retirement resources on our website to gain valuable insights into this transformative phase of life. We are passionate about minimizing financial stress and maximizing the quality of life for our clients.

Larry Siegel Bio

How to Create a Family Education Policy

August 13, 2023 by Hans Blake, CFA, CPA

Reading Time: 4 minutes

We’ve all seen the school supplies on sale at our local stores. That can only mean one thing….school’s about to begin… if it hasn’t already started.

Most articles written by financial advisors on education feature the savings plans for accumulating college funds, such as 529 plans. In fact, so much has been written about it that I would be remiss to bore you with one more article on a subject that has been covered so well, and so extensively. So, guess what….I’m not! If you live in South Carolina, there was a great way to calculate the estimated cost of college by using this Future Scholar Tool. Also, Investopedia has an excellent article on the basics here.

Few families have unlimited financial resources, especially larger families (lots of children), and of course the costs continue to rise. Additionally, student loan financing is an option, and this is a major decision that merits much reflection.

Unfortunately, when it comes to financing your children’s education (note, I did not say college), most people do not talk about it, let alone establish a formal Family Education Policy.

So…what is this Family Education Policy I’m talking about?

Family Education Policy

At Intelligent Investing, each client receives a personal Investment Policy Statement (or IPS), and the importance of this document is vital to the success of their financial plan. The Investment Policy Statement establishes reasonable objectives and guidelines regarding our client’s assets. It sets forth a target portfolio indicating risk levels, allocations, and return targets that the client’s money will typically be invested to achieve. We think it is just as vital to have a Family Education Policy, which is a tool used to make sure everyone is on the same page when it comes to any education beyond high school (postsecondary education). We’ve included a free template further down.

Importance of Family Unity

One of Intelligent Investing’s Four Unique Factors is to unify families in financial communication. Intelligent Investing strives to unify families in financial communication. Click To Tweet It is important for husbands and wives to come together on this subject and agree on their goals regarding the education of their children. The more children you have, the more important to come to an agreement early on as parents. This was a major part of my wife’s and my financial picture over our working years. And, sometimes, it doesn’t hurt if the grandparents get involved…it just might even help (can you say estate planning?).

Questions you may consider when making a Family Education Policy

What will we be funding? How much of an education benefit do we want to provide to each child?
What is our goal? What do we seek to fund?
Will we pay just tuition, or tuition and books? Or, tuition, books and housing all three?
What about spending money, transportation and other incidentals?
Are we planning to fund any trips, be they educational or spring break vacations?
What about post-graduate education?

Skin in the Game

Often parents will choose to not fund 100% of their child’s education, even when it is possible financially to do so. We all know that we are more committed when we have some “skin in the game”, and this increases the student’s odds of academic success. That summer job, and buckling down and studying hard to merit greater scholarship money may even help them excel in the work place once they graduate.

Scholarship money, you say? The words “College scholarship” were among the first words we taught our daughter, and fortunately, it did pay off.

The earlier and more often we discuss education and education funding with our children, the more aligned we will be as a family. It also gives our children the opportunity to discuss their hopes and dreams.

A Family Education Policy gives our children opportunities to discuss their hopes and dreams. Click To Tweet

Assuming our child wins scholarships towards college expenses, and assuming we require our child to pay a portion of their college costs, how should we apply these funds? To the child’s portion or to the parent’s or grandparent’s portion? How we apply scholarship money may indeed affect the student’s academic motivation.

College May not be the Best Path

This may be a hot topic for debate, but what if you have a child who is not interested in college, and instead wants to be, say, a homebuilder? Trade school can lead to business ownership potentially much quicker than college, and business ownership can be the path to both independence and wealth generation. Contractors, auto repair centers, and other such businesses are quite profitable, and once established are often very stable when compared to careers in corporate America. The quickest path to CEO is not necessarily up the corporate ladder. Also, student loans are daunting and continuing to increase. The quickest path to CEO is not necessarily up the corporate ladder. Click To Tweet

With trade school you are focused immediately on a certain curriculum, while in a University there is an opportunity to explore various fields.

Trade schools are much less expensive that colleges and universities, but remember, treating our children fairly and equitably based on their aspirations and aptitudes doesn’t have to mean treating them equally.

Download a free copy of your Family Education Policy

At Intelligent Investing, we have access to hundreds of college tuition and room and board costs, and our financial planning allows us to choose whatever specific college your child may want to attend using today’s costs. We can then customize how much we want to inflate those amounts and project them into the future. The bottom line is that we think it is important to discuss, determine and communicate a family education policy plan so everyone is on the same page.

Helping our clients meet their goals is our passion at Intelligent Investing. If we can help you with education planning or in any other way, please let us know!

Is Gold a Good Inflation Hedge?

August 10, 2023 by Hans Blake, CFA, CPA

Podcast: Play in new window | Download

Reading Time: 2 minutes

Evaluating Gold’s Track Record

Gold and Bitcoin have often been promoted as potential shields against inflation. However, to make an informed decision, we turn to empirical evidence. Let’s explore whether history validates gold’s reputation as a reliable inflation hedge.

When scrutinizing gold’s performance in the face of inflation, we find surprising results. Take, for instance, the period from 2020 to 2022, a time marked by significant inflation. Curiously, gold ended this phase down by about 4%, while inflation surged by approximately 14%. In essence, gold’s value slipped by 18% in real terms, negating its purported role as an inflation hedge.

An even more striking example stretches over two decades, from 1980 to 2002, a period characterized by high inflation. During these 22 years, gold lost over 85% of its real value. These historical data points prompt a reevaluation of gold’s effectiveness as an inflation hedge.

Alternative Perspective

Interestingly, gold’s claim to being an inflation hedge stands on firmer ground when we extend our horizon to a century or more. Across this extended span, an ounce of gold has maintained its purchasing power, reflecting its role as a long-term inflation hedge. However, this century-long hedge comes at the cost of a lack of real returns.

As Intelligent Investing, we believe in providing our high-net-worth clients with well-informed financial guidance. Gold’s questionable track record as a short-term inflation hedge underscores the importance of considering other strategies to preserve wealth and manage risks.

Schedule a short discovery call or meeting

We’ll be interviewing Larry on several podcasts regarding markets, passive investing, and diversification, so be sure to subscribe to our Intelligent Money Minute podcasts.

Larry Swedroe Bio

Since joining Buckingham Strategic Wealth in 1996, Chief Research Officer Larry Swedroe has spent his time and energy educating investors on the benefits of evidence-based investing.

Before joining Buckingham, Larry was vice chairman of Prudential Home Mortgage and senior vice president at Citicorp.

Larry holds an MBA in finance and investment from NYU and a bachelor’s degree in finance from Baruch College.