Second Quarter 2016: It Was Better Than You Think.

Our investors were rewarded this quarter with positive returns. Every one. The average total return was about 2%. Domestic inflation for the quarter is not yet known, but is expected to be around .5%. FPAI clients, your second quarter preliminary asset management reports have been posted to your secure web portals.

Who is Mary Barra? She is the CEO and Chairman of General Motors Company. You know, GM, the automobile manufacturer that has sold more vehicles globally each year than any other car maker for most of it 108 year life. They make Chevrolets, Buicks, GMCs, Cadillacs and many other brands. Why do we care? Because she was quoted recently as saying that, “We will see more change in the automotive industry in the next five years than we have seen in the last fifty.” Let that sink in for a moment. Fifty years is quite a long time. More change in the next five than in the last fifty. We live in a time of great changes.

How do you teach your child about money? Here are a couple of lessons from Let’s Make A Plan.

Lesson One: Money is not just for spending.
Kids first see money as having one function only: as the means to get stuff, now. Give a young child $5, and he’ll want to spend it all, often looking for things that cost $5. To get kids to consider other uses of money – such as saving and giving – get them to divide their funds into three jars for spending, saving, and giving, and talk about ideas for each. To make the rewards of saving more concrete, consider adding a small match to the funds saved.

Lesson Two: Your credit limit is not money in the bank.
Don’t wait till your child gets her first credit card to teach her the prudent use of credit. Young kids may conclude that plastic is the same as cash by watching how their parents use their cards. Try to get the message across that cards are for convenience only and aren’t a source of additional money. Emphasize that when you pay with a card, you must have money available elsewhere to pay for the purchase. Use the three money jars to illustrate how funds must be taken out to cover the card transaction.

Good diversification means your portfolio always wins, right? No, it doesn’t. In fact, a number of years ago Charles Ellis wrote a highly regarded book which posited that investing has become a loser’s game – winners don’t win, they avoid losing. More specifically, Ellis’ book is about investment policy, which has diversification at its heart. So, why doesn’t good diversification mean that your portfolio always wins? Well, in the sense that a well diversified portfolio avoids losing it does win, but in the sense that it will always result in the best return it does not, and can not. Michael Kitces is a well respected financial planner/investment adviser/author/consultant who moves about the country sharing good information with other financial planners. In June he published a piece in FinancialPlanning which might be beneficial for my readers. It is called, “Why True Diversification Means Saying You’re Sorry.”

We hope you have a happy and safe July 4th break!

I had a bad dream.
















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