1. Focus on broad diversification and cost when it comes to stocks and bonds

• Own entire markets with the majority of your stocks and bonds
• Keep costs below .3% and ideally below .1%

2. Focus on the five factor model:

• Stocks: Market (own it all), Size (go small), Value (out of favor companies)
• Bonds: Term (intermediate and short) and Quality (no junk)

3. Consider taxes with every decision as you focus on the three primary resting spots

• Traditional Accounts (401k, IRA, and Qualified Annuities as called TSA)
• Roth Accounts (401k, IRA, and Non-Qualified Annuities)
• Taxable (non-retirement accounts)

4. There are many ways to rebalance

• Within retirement accounts (usually buying bonds and selling stocks)
• Contribute new money to the asset class that needs to be increased
• Withdraw money (for income needs) to decrease the asset class where needed
• Own Target Date Funds that do it for you within the fund

5. Go all passive and stay away from low probability active management

• Index Funds
• ETF’s
• Low turnover Managed Funds

6. Avoid individual stocks and bonds

• They are very risky
• Someone on the other side of the trade thinks you’re wrong
• That other side is usually a professional or a machine

7. Look for TD Ameritrade within poor high cost retirement plans if offered

• When possible, buy Vanguard Institutional or Admiral Share Index Funds
• Set up the systematic investment (automatic investment) to avoid fees
• Avoid the small fees throughout the process (there are many)
• Steer the client away from the many other poor choices on the platform

8. Get out of Managed Funds, especially outside of retirement accounts

• High Turnover equals higher yearly taxes
• Cash held back taxes money out of the stock market
• Identify the cost basis before selling so the client knows what to expect on taxes

9. Avoid Social Conscious Funds

• They are high cost and high turnover in most cases
• They do not do a good job in finding “good” companies
• Do good outside your investments; not inside

10. When looking at a 401k plans, consider all fees

• You have the expense ratio
• You have revenue sharing in some cases
• You have excessive administrator costs in some cases

11. Keep track of the dollar limits when it comes to retirement accounts

• Max IRA contribution is $6,000 ($7,000 if age 50 and older)
• Max 401k contribution is $19,000
• Max income for IRA starts at $122,000 (Roth) and $64,000 (Traditional)
• Consider the backdoor Roth IRA when incomes are too high (avoid Traditional IRA)

12. There are four primary annuities nowadays (avoid in most cases)

• Fixed rate where the insurance companies pay a guaranteed rate and assumes the risk
• Variable rate where the risk goes to the investor; usually invested in mutual funds
• Indexed where there is a floor and a cap and the risk goes with the insurance company
• Immediate where a certain payment is locked in for a set period of time or forever

13. There are multiple cash accounts (most should be avoided because of inflation risk)

• CD’s where they guarantee a low rate and lock up your money for a period of time
• Money Market Account (at the back) pays a bit more than savings with high minimums
• Money Market Fund (at the investment company) pays about the same as the bank
• Regular savings and checking accounts will get you almost nothing in most cases
• Online banking gets you a bit more because of lower overhead
• High rates at some banks come with many moves on your part with ATM and elsewhere
• Cash value life insurance (“dead money” that makes other rich instead of you)
• Savings bonds can work, but wouldn’t be advised because of the next option
• Short-term Bond Index Fund is the best option on the moment

14. Understand the differences between Roth accounts at work and Roth IRA’s outside of work

• Roth 401k can and should be moved to a Roth IRA when leaving that job
• The new Roth IRA can become a short-term emergency fund if needed
• Earnings become qualified after 5 years from starting

15. Look at Roth 401(k)s with moderate/low income and Traditional 401(k) with high income

• Consider $60,000 as a threshold (consider big picture as well to include spouse)
• Under $60,000, go with Roth 401(k)
• Over $60,000, go with Traditional 401(k)

16. Avoid speculation (similar to gambling at the casino)

• Avoid gold and sliver (at best it stays up with inflation; very volatile and no income)
• Artwork, coins, cards, guns, etc are just a bad idea; no income as well
• Raw land is a no-no; no income and pure speculation

17. Why Vanguard? (Fidelity can work for those who know what they are doing)

• Low cost
• Consolidation and simplicity
• First class service
• Transparent with costs

18. Knowing what to do and helping the client are two different things

• The books and Finley will help you know what to do
• Understanding how to move money using transfer documents takes practice
• Help the client understand the difference when you are fumbling with the admin part

19. You only need 4 asset classes

• Cash (use the Short-Term Bond Index Fund) to simulate this environment)
• Bonds (short and intermediate term index funds are the solution)
• Real Estate (rental properties can work, but REITs are the simple and wise solution)
• Stocks (total markets with over-weighting to small companies and value companies)

20. You start as a financial advisor and you transition to a therapist (counsellor)

• A financial plan takes care of the financial advisor piece
• Implementing, maintaining and hanging in there in tough times requires therapy
• Time is your friend and emotions are your enemy when it comes to investing