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Do You Need an Investment Adviser/Financial Planner?

Once again we see the market throwing a temper tantrum. On the way up it was tempting to handle your investments on your own. Now with the horizon less clear and a modest correction in the books as I write, you wonder if professional help might be worth the extra expense.

Those most knowledgeable about money resist the advice of commissioned (or fee-based) professionals. As everyone know, fees have serious consequences over long periods of time. The lower the fees the more you’ll have 10 years down the road.

But when the market gets schizophrenic confidence in one’s abilities declines. Worse, you can make serious mistakes well in excess of what you would pay a financial professional.

Is Staying Fully Invested in the Market the Right Move?

Most of the time the stock market is climbing north. Interspersed between bull markets are those times when rookie investors act as if the sky is falling.

Long bull markets turn normally intelligent investors into casino gamblers; they even use gambling terminology: we’re due for a bear market or as they say at the casino, “Red is due after 8 black spins” at the roulette wheel; as if the ball has a memory. The odds of it coming up red are the same as it was last spin, in case you were wondering.

Of course, long moves in the stock market sets off our sixth sense that this can’t last forever. Before long you’re not fully invested (a religious mantra of many investing circles) which smacks of market timing.

This brings up a good question: Should you always be 100% invested in the market?

If only it were as simple as a yes or no answer.

The truth is many people should NOT be fully invested in the market and some people SHOULD be and it has nothing to do with market timing. The trick is to know when to be fully invested and if not, by how much.

It boils down to your personal situation: where you are on your journey to financial independence, how close to retirement you are (or if you are in retirement), spending habits and viable alternative investments.

Regaining Motivation When You Have No Debt

The literature is largely silent on what you should do once you attain financial independence(FI). Plenty has been written about building wealth and how much is needed to reach FI and how much you can safely withdraw each year in retirement.

Plenty of debate has also revolved around paying off the mortgage — any debt for that matter — versus plowing the excess payments into investments that pretend to offer a return greater than the interest rate on your debt. While investments can provide outsized returns, the return isn’t guaranteed; the interest on the debt is.

As much as we preach about eliminating debt as part of a smart wealth building program designed for FI, there are some benefits to having certain kinds of debt. Risks are always present, but the advantage may be worth the risk. Buying a home without debt ever would mean most people would never have a chance at home ownership. And you can forget about income properties if you can’t use leverage to start your real estate empire.

A mortgage (all debt) does have one powerful advantage most people overlook. Debt is the #1 motivator when it comes to getting people to sacrifice time with family and friends. Debt motivates you to work harder than you ever would if debt demands were not hanging over your head.

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