Comments for Road To Independence

Comment on Getting More Efficient Through Paperless and Aggregation by Ramon

Ramon — Fri, 05 Mar 2010 04:27:49 +0000

I was on the phone with Fred from Trade PMR not too long ago getting some useful information regarding the platform. I am glad to hear that there are making improvements to make it more efficient. Would love to hear the sort of improvement currently being made. I think I’m pretty much settled on the custodian thanks to mike!

Comment on Getting More Efficient Through Paperless and Aggregation by Mike Patton

Mike Patton — Tue, 02 Mar 2010 04:13:33 +0000

Dave,
Thanks for your comments. It’s hard to say exactly how long it took before I could pay myself a steady income. Really, the question was how long until I could pay my living expenses. That said, it’s important to keep your expenses to a minimum in the beginning unless you have a cash supply to sustain you. I’m getting ready to help another advisor make the transition, sort of a trial run as this is not my core business. If it goes well, and you’re interested, I might do some of this on the side. In any event, I hope things go well with you.
Mike

Comment on Getting More Efficient Through Paperless and Aggregation by Dave Grant

Dave Grant — Mon, 01 Mar 2010 18:53:05 +0000

Mike,

Your articles keep getting better and better. As a financial planning assistant with a large fee-only firm, I have encouraged our “mature” planners that technology is something we should embrace and have the research to back it up, but I seem to meet a brick wall.

Being of an entrepreneurial spirit like yourself, I am eager to become an solo-RIA and start the ride. How long did it take you to where you could pay yourself a steady, recurring income? The jump itself scares me, but the stagnation of where I’m currently at scares me more.

Thanks
Dave

Comment on Building Portfolios on the Road to Independence—Part IV: The Role and Use of Alternative Investments by Dan Matheny

Dan Matheny — Fri, 26 Feb 2010 18:59:24 +0000

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Comment on Building Portfolios on the Road to Independence—Part IV: The Role and Use of Alternative Investments by ron dombcik

ron dombcik — Mon, 22 Feb 2010 23:35:38 +0000

One that I particularly like is managed by Robert Arnott, Pimco all Asset All Authority PAUIX. Its a fund of Pimco Funds that Arnott can go to.

Comment on Building Portfolios on the Road to Independence. Part II: The Role and Use of Bonds by Jerry Broussard

Jerry Broussard — Mon, 22 Feb 2010 20:53:47 +0000

Zachary,
I have completely converted my whole office to Macs. I don’t have any problems with most vendors. I do however have a couple of companies that refuse to see the (mac) light and must use a program called “Parallels”, which allows you to run windows inside your Mac.
Jerry

Comment on Building Portfolios on the Road to Independence by Mike Patton

Mike Patton — Mon, 22 Feb 2010 17:08:13 +0000

Julie,
Thanks for your comments. For what it’s worth, I agree with your MCS concerns. I have found that you can run the same scenario through different financial planning software programs and get very different results. It’s the black-box-locked-down versions that are a concern to me. However, I use an add in to Excel entitled Crystal Ball which is sold by Oracle (they acquired Decisioneering, Inc. the original maker). With this, and after running 100’s of simulations, I am convinced that while it it not a panacea (nothing is), it provides a much better tool than the aforementioned products. I’m not sure where some of the assumptive comments come from, but I have never told clients that I can forecast future returns. To be sure, and according to William Sharpe, past returns have no predictive value (they are not serially correlated). Past risk does have predictive value (again, according to Sharpe). There, I NEVER USE historical returns in forecasting. I use a simple weighted average because no one knows what the future holds. The MCS forecasting is simply an improvement over a linear or deterministic forecast and that’s it! It would be hard to argue differently. Actually, MCS is nothing more than a risk management tool which is again, better than a static projection.

I hear advisors say, “I use a well diversified portfolio.” How do you define this, mathematically, that is? How do you know if it’s “well diversified?” Do you look backwards to see how it performed over difficult periods?

In any event, I appreciate the way you opened your comments. Shows me that you are probably open to constructive discussions.

Take care.

Comment on Building Portfolios on the Road to Independence by Julie

Julie — Fri, 19 Feb 2010 20:30:20 +0000

Rob – exactly! No discredit to Mike. I am a CFP and do not use Monte Carlo simulations (horrors!). I understand the simulations and the mathematics behind them, but do not know how, even with the vast data, you can say with any certainty what rate of return will occur in the future.

Look at the past 1, 3, 5 and 10 yrs. Using historical investment returns 1, 3, 5 or 10 yrs ago would have never resulted in what we’ve experienced. Ever. If someone were retiring 10 years ago and came to you for investment planning assistance, you would have been dead wrong based on what has happened.

I do use benchmark index returns but focus entirely on constructing a well diversified portfolio. I do not enter the guaranteed (what the client hears), er….target (what we mean) rate of return conversation with clients. I will not be held accountable to the market’s volatility.

The only way to manage a portfolio, in my opinion, is by creating a well diversified, allocated portfolio and adjusting based on moving time horizon and market environment – not backward looking stats.

Comment on Building Portfolios on the Road to Independence. Part III: The Role and Use of Equities by Marty Cohen, CFP(r)

Marty Cohen, CFP(r) — Fri, 19 Feb 2010 16:01:51 +0000

Mike, There is an alternative solution to your management problem. I repesent a 12 year old online portfolio database management system that currently monitors and reports weekly to investment advisors on the trend of 14,600 tradable assets: stocks, mutual funds, & stocks. You develop your own asset allocation models and make all portfolio decision. Virtual Portfolio Manager issues weekly buy-hold-sell indicators on each asset. The database is highly statistical and incorporates up to 30 years of trend data on each asset. 600 algorithms and 60 asset trend indicators are built into the database to create a very high statistical probability of identifying trend. How has VPM performed over the past 12 years. It took our advisory clients in to an 85% cash position prior to the 2000 bear market and back into the market in 2001-2 as the market and tradable assets developed positive trend. VPM moved into a 40% cash position in 2007 and then into a 100% cash position by the third quater of 2008, avoiding the major market decline through March, 2009. AS the market moved off the bottom in 2009 Virtual Portfolio Manager moved all assets tracked into a 90% invested position and remained fully invested until about a month ago when it initiated some sell signals. We curruently support 350 investment advisor groups who are achieving an all time high in client assets based upon the market discipline of the service. We offer of 30 day full trial of VPM is you want to back test prior portfolio decision against the trend indicators of the VPM database. Contact me at 972-771-6783 if you would like to discuss detail and sign up for a trial of the service. I can assure you that VPM takes your portfolioi management beyon MPT & Monte Carlo Simulation into the reality of detecting the trend of marketable assets.

Comment on Building Portfolios on the Road to Independence. Part III: The Role and Use of Equities by Rob Geller

Rob Geller — Tue, 16 Feb 2010 22:13:04 +0000

so should you not project what these portolios can deliver for your clients in their time frame and plug those into their financial plan rather than vice versa
For most clients who do need investments and associated income for their financial planning goals there will be a substantial gap between the objectives of their plan and what their preferred risk-level portfolio can likely produce or worse yet any reasonable risk-reward optimized portfolio can deliver in their time-horizon environment. Which brings up the next question – if they invest with you on risk-reward prudent optimized basis isn’t it then that number of return that should be entered into their financial plan to show where they are likely to end up? It seems that starting with “planned” rate of return is starting backwards and is meaningless if investment execution is unlikely to deliver that in prudent and optimized manner other than as a sales gimmick to push clients into higher risk higher duration higher pay-out investment vehicles and alter their portfolios into higher risk category that they are comfortable with or that is prudent especially in the current economic environment on tactical basis.