Friday, January 28, 2011

Entrepreneur is No Newbie When it Comes to Start-Ups

By Arianna Capital

Scott Wisniewski (left), co-founder of Arianna Capital, and his partner Ramin Baranpourian have a lunch meeting with a client, Shameem Nazeer (right).

Arianna Capital had the great fortune of gaining notice of the Dallas Morning News who did a short story on the company and their early success.

Scott Wisniewski began showing his entrepreneurial streak at 12, selling his mom’s cookies and reselling golf balls he collected from ponds. As a college student in 2009, he started Arianna Capital Management, a Dallas wealth management firm, with friend Ramin Baranpourian. Today, read the full article...

Monday, January 24, 2011

TRUSTs That Your Family is Taken Care Of

By Arianna Capital

Trust needs will vary from individual situation to individual situation as there are different aspects of family that must be considered when deciding to begin these types of wealth management services. Below we have a common depiction of a scenario that was developed by our genius professional network. We will explain how it helps families go above and beyond their goals.

(Click to Enlarge)

The above picture describes multiple trusts formed after certain occurrences. They are useful for keeping wealth out of probate - a timely and expensive court process - and for passing benefits onto future generations of your family.

The first trust setup is generally a joint trust between husband and wife. This trust can begin to be contributed to during the lifetime or at death according to the will's of the trustees.

At the time of the husbands death in this example, the trust is split into two trusts so that we can begin to take advantage of the estate tax limits of both individuals. Half the wealth goes into the Husband's Estate and half goes to the Wife's Estate Survivor Trust of which the wife still has access to both trusts. Now, when the wife dies we can fully take advantage of both estate taxes. In 2011 this is 1,000,000 dollars. One million dollars from both the Wife's Estate Trust and the Husband's Estate Trust goes into exempt trusts for as many children as necessary forgoing probate and estate taxes allowing for more of your wealth to be passed on to your children so they can accomplish their goals in life.

The remaining in the Husband's Estate is now called Non-Generation Skip Martial Trust as it is no longer subject to generation skip tax and according to your will it can be passed on to younger generations and avoid this other tax. This trust and the rest of the Wife's Estate Trust may now be contributed to Non-Exempt Trust for children or grandchildren as to your will's description.

All this complex mumbo jumbo can be actually very beneficial for you and your family and should be looked into when developing a financial plan so that the road is easier and happier for those that come after you.

Friday, January 7, 2011

Best and Worst Investing Awards for 2010

By Dan Solin

We are coming to the end of 2010, which has been a very interesting year for investors. I thought this would be a good time to hand out the Best and Worst Investing Awards for 2010. I hope you will find them helpful as you formulate your investing strategy for next year and thereafter:

1. The best prediction : To Newsweek Magazine. It predicted the possibility the Dow would hit 12,000, which is close enough.

2. The worst prediction : This was a tough one because there were so many contenders. I give the nod to Mohamed El-Erian, who predicted stocks would tank in January, 2010. Dr. El-Erian has credibility as chief executive of Pimco, overseeing over $1 trillion in assets. Hard to believe his predictions have no more merit than those of an astrologer.

3. Best TV media for sound investment advice: CNN because it does the best job of providing reliable information without encouraging bad investor behavior. It’s sad there isn’t a single program on TV that tells investors how to invest intelligently. I am working hard to change that.

4. Worst TV media for sound investment advice: CNBC is the hands down winner. An entire network devoted to instilling fear and uncertainty and encouraging stock picking, market timing and fund manager picking. The network is a shill for the securities industry. Its viewers are the hapless victims of its programming.

5. Investors’ Best Friend: Irving Picard, the court-appointed trustee assigned to recover assets from victims of the Madoff Ponzi scheme. His tireless efforts have recovered almost one-third of the $20 billion in losses, and he is hot on the trail of the balance.

6. Investors’ Worst Enemy: The feeder funds, banks and other institutions who ignored the obvious red flags indicating Madoff was a fraud and accepted hundreds of millions of dollars in kickbacks for investing their clients money with him. While some have done the right thing and made their investors whole (the Bank of Kuwait is a laudable example), many others have lawyered up and are engaged in a scorched earth defense of their indefensible conduct.

7. Best source for intelligent investment advice: The hands-down winner is the Fama/French forum where noted economists Eugene Fama and Kenneth French dispense investing wisdom, in an easy-to-understand format. Essential viewing for all investors.

8. Worst source for intelligent investment advice: Jim Cramer’s Mad Money, where Cramer fools investors nightly into believing he has some special insight into the direction of the markets and the ability to pick stock winners, although there is precious little evidence he (or anyone else) has this expertise.

9. Best Financial Product: Exchange Traded Funds which, when used correctly, can permit investors to invest intelligently, at low cost. Unfortunately, they are more often misused to pick sectors and trade frequently, which reduces returns.

10. Worst Financial Product: Another tough one. Hedge funds, variable annuities, equity-index annuities and private equity funds all qualify. However, the award goes to Principal Protected Notes. Their name got them the nod. The principal is not protected against issuer default. They have excessive fees and the upside is grossly overstated. Their complexity makes it very difficult for investors to understand how they are being ripped off and why much simpler alternatives would be superior investments. This combination of qualities typifies the conduct of many brokers and other “investment professionals”, and earned this product the award, but it was very close.

11. Most intelligent investing phrase: “It’s not different this time.” Because it wasn’t.

12. Dumbest investing phrase: A tie between the “new normal” and “buy and hold are dead.” There is no “new normal” and those who bought and held came through the crash and subsequent recovery with flying colors.

14. (I know it should be 13, but I’m superstitious). Most appreciative author/blogger: This was an easy one. Me. I get a tremendous amount of fan mail from readers of my books and my blogs (Okay, there is the occasional hate mail from a disgruntled broker). My books had stellar sales in 2010. It’s particularly encouraging to hear that many of you give my books to your children so they won’t make the same mistakes you did. I can’t answer everyone who contacts me and tells me how my advice has impacted them, but I do read every e-mail. I deeply appreciate your encouragement and support. I view it as a privilege to be able to dispense sound investing advice to such a wide audience.

To all of you and your families, I wish you a prosperous New Year!

Solin, Danielle. "Best and Worst Investing Awards for 2011." Index Funds Advisors Blog. Word Press, 12/09/2010. Web. 7 Jan 2011.

Thursday, January 6, 2011

Looking Through the Eyes of an Active Manager

By Arianna Capital

Even with all the tricks we will see in this article, active managers still seem to believe that they can beat the market. Let's get a better idea of what active managers actually are so we can identify them and choose our investment adviser correctly.
Often, active managers tout their ability to beat the market and pick stocks. They use software like the images bellow to complete their tasks.

or even more complicated...

They enjoy using complicated research as well...

You could expect many more slides like the one above. So, what? My manger is doing his diligent homework to make sure my portfolio is adjusted for all market conditions. Really?

Well let's find out. How many active managers actually beat the market? And, can they do it year after year?
(click to enlarge)

This chart shows that from 1999 - 2009 most active managers fail to beat their respective index or market. They do not add value to you over time - due mainly to their larger fees and tax costs.
So, what would happen if you were the lucky one who changes managers every year to find the needle in the haystack, best manager ever.

(click to enlarge)

This chart says that - okay, some managers can beat the market this year or that, but they can't do it consistently. Over the years the outperforming funds fail, one by one. So, while it is possible to find the active manager that is worth his salt - they are few and far between. It is better for your financial health to relax into low-cost index funds, practice good financial planning, and good risk assessment.

So, even after active managers spend hours analyzing reports and graphs they are still in no better shape than a so called passive manager who just bought low cost index funds. Most actually turn out being in a worse spot. Instead, what your manager could be doing is looking at your entire wealth solution - your entire plan. They could be brainstorming new ideas for your tax mitigation, wealth preservation, insurance, estate planning, further education, et. cetra. In short, your manger is wasting your precious payment doing something that does not further your future goals. It is time to find one who will. Refer to this other article for more help on choosing the right manager for you.

Wednesday, January 5, 2011

Be It Resolved - 10 Steps For a Prosperous New Year

It's that time of year when many of us think about establishing one or more New Year's resolutions. This often means committing to improving one's lifestyle by losing weight, exercising more, or drinking less. Some investors could probably benefit from resolutions targeting their financial health as well. Just as many individuals endanger their well-being with bad habits, numerous investors suffer from ill-advised practices that are detrimental to their wealth. Perhaps a set of New Year's investment resolutions, along with an advisor capable of helping investors adhere to them, will lead to a more prosperous future.

Everybody wants to be healthier, and many people want to be wealthier, but it's just not that easy. Most of us are creatures of habit and discover that making permanent changes in our behavior is surprisingly difficult. We need every possible mental crutch at our disposal to help us adhere to a new regimen; hence we establish mental road signs, such as New Year's resolutions, as behavioral aids.

To make matters worse, our commitment to change is sometimes tested by examples of those who ignore prudent behavior to their apparent advantage and those who follow it to their apparent detriment. Winston Churchill lived to age 90, fortified by an ample supply of champagne and cigars, while author and jogging enthusiast Jim Fixx died of a heart attack at age 52. In the financial world, the investor who sunk every penny into Apple shares ten years ago watched her investment multiply over forty-fold while the S&P 500 lost money. These isolated examples may test our faith but should not encourage us to abandon a proven set of prescriptions; continuing to apply them will still improve our odds.

So, for those who find making such promises useful, here are ten investment-related resolutions that will hopefully result in better long-term wealth:

1. I will not confuse entertainment with advice. I will acknowledge that the financial media is in the entertainment business and their message can compromise my long-term focus and discipline, leading me to make poor investment decisions. If necessary I will turn off CNBC and turn on ESPN.

2. I will stop searching for tomorrow's star money manager, as there are no gurus. Capitalism will be my guru because with capitalism there is a positive expected return on capital, and it is there for the taking. And for me to succeed, someone else doesn't have to fail.

3. I will not invest based on a forecast—whether it is mine or anyone else's. I will recognize that the urge to form an opinion will never go away, but I won't act on it because no one can repeatedly predict the future. It is, by definition, uncertain.

4. I will keep a long-term perspective and appropriately consider my investment horizon (i.e., how long my portfolio is to be invested) when determining my performance horizon (i.e., the time frame I use to evaluate results).

5. I will continue to invest new capital and work my plan because it is time in the market—and not timing the market—that matters.

6. I will adhere to my plan and continue to rebalance (i.e., systematically buying more of what hasn't done well recently) rather than "unbalance" (i.e., buying more of what's hot).

7. I will not focus my portfolio in a few securities, or even a few asset classes, as diversification remains the closest thing to a free lunch.

8. I will ensure my portfolio is appropriate for my goals and objectives while only taking risks worth taking.

9. I will manage my emotions by learning about and acknowledging the biases and cognitive errors that influence my behavior.

10. I will keep my cost of investing reasonable.

Most of us find it hard to follow a sensible diet or a sensible investment strategy 100% of the time. If you must stray when managing your wealth or well-being, moderation is the key. Chocolate cake is OK, as long as it's not for dinner every night. Speculating on a stock or two is all right as well, as long as you don't do it with your investment capital.

Finally, just as successful athletes rely on coaches and trainers to help them achieve their goals, most investors can probably benefit from having a "financial coach" to remind them about their New Year's resolutions and keep them on track toward a more prosperous future.

I wish you and your family good health and good wealth in 2011.