Dr. Marvin Appel is CEO of Appel Asset Management Corporation and Vice President of Signalert Corporation, Registered Investment Advisors in Great Neck, New York, which together manage more than $300 million for individual clients. He also edits the highly acclaimed investment newsletter, Systems and Forecasts, and has authored Investing with Exchange Traded Funds Made Easy (FT Press, 2006).
He has been featured on CNNfn, CNBC, CBS Marketwatch.com, and Forbes.com, and has presented at conferences ranging from the World Series of Exchange Traded Funds to the American Association of Individual Investors. The New York State Legislature has invited Dr. Appel to present his economic and investment outlook.
Gerald Appel is a world famous author and lecturer. A frequent guest on television and radio, he has appeared on Wall Street Week with Louis Ruykeyser and his articles and/or articles about him have appeared in Money Magazine, Barron’s, Technical Analysis of Stocks and Commodities Magazine, Stocks Futures and Options Magazine, Wealth Magazine, the New York Times, Forbes, Kiplinger’s Magazine, and elsewhere. He is the founder of Signalert Corporation, an investment advisory firm that manages more than $300 million in client assets and is the author of numerous books and articles regarding investment strategies, including Technical Analysis: Power Tools for the Active Investor (Financial Times Prentice Hall, 2005).
IntroductionIntroduction
"Financial Savvy" How To Invest Smart So You Will Have the Money You Need When You Need It
By Gerald Appel and Dr. Marvin Appel
Articles and discussions of financial and investment planning generally focus on the accumulation of assets for the later stages of life—to provide for the maintenance of standards of living, medical needs, creation of estates, and vacations.
Each period of life carries with it special financial requirements associated with that particular stage. In certain ways, young adults require less capital than older adults. Medical expenses tend to be considerably lower. Younger people are more capable of traveling "on the cheap," in hostels, camping, and in less luxurious and/or group accommodations. They are usually more able to share apartments, to live in relatively small quarters.
On the other hand, younger people also often find themselves in situations that call for unusually large expenditures. New businesses and professional practices require start-up capital. Living accommodations have become particularly expensive in major cities across America. Funds may be needed to pay off college loans, perhaps to finance graduate school and other forms of advanced education. Certain professions, such as medicine, require long training periods, which may coincide with marriage and even with parenthood.
The age period between, perhaps, 33–45 is usually a period of increasing professional accomplishment and rising income. It is also a period of sharply rising expenses to meet the needs of growing families, which may require larger homes, multiple automobiles, summer camp, family vacations, perhaps private school, payment for special child events, and a whole multitude of expenses that families assume to be certain that their children have what other children have.
This is also the period during which families attempt to set aside the money needed to finance college, weddings, and other expenses incurred by children as they move through adolescence into young adulthood.
Although investment programs are best initiated as early in life as possible, it is not surprising that for many couples and individuals, serious capital accumulation tends to start only after the children, if any, have left the house. Fortunately, for most people, peak earnings often take place at this time. Hopefully, the years between middle age and retirement prove sufficient for the accumulation of capital needed later on.
Financial Planning and Sharp Investing Are Not Just for the Older Folk...
What is the point of all this discussion, which really, if we think about it, contains few surprises?
Well, you can work hard throughout your life to make the money you need to keep up with life's changing needs. Or, you can try to plan and carry through your affairs so that you accumulate an amount of money along the way that, by savvy, active investing, you can make work for you!
Which Is Where This Book Comes In...
It is, of course, possible to hand over your assets to a financial planner or to a money manager or to a stock broker (in recent years, referred to as an investment consultant) or to a mutual fund family, to step aside, and to hope for the best. Many managers have had excellent long-term performance records, and some will even make a reasonably serious attempt to match the portfolios they create for you to your own personal life situation, risk tolerances, and temperament.
Why and How to Become a Self-Sufficient Investor
However, although there are definite potential benefits that can accrue from retaining professional managers, there are also some definite disadvantages. For one, the use of professional managers usually involves additional expenses for your investment portfolio— typical management fees ranging between 1–2% of assets per annum, depending upon the size of your account. Hedge funds generally charge much higher management fees.
In many cases, professional money managers bring with them potential conflicts of interest in one form or another. Insurance agents, mutual fund managers, and brokerage house personnel work for and are paid by their companies whose interests often take precedence over the interests of customers. For example, financial advisors and/or brokerage house personnel often receive commission income paid by mutual funds to them for the products they recommend and sell, as well as management or custodian fees from client customers for as long as accounts stay open. It can be readily understood that such commissions are likely to impact the recommendations made by such advisors, particularly when alternative investment choices might lie with mutual funds that pay no commissions whatsoever to salespeople.
Investment representatives, brokers, or managers associated with large brokerage houses, mutual funds, banks, or other financial institutions may or may not have the ability to distinguish between "safe" market periods and unsafe periods. They may or may not even have the discretion within their firms to advise clients regarding market conditions. Would it really be possible for an employee of a large brokerage house to advise his clients to liquidate equity positions and to move totally or near totally into cash? Could and would any major brokerage house urge its clientele as a group to sharply reduce their stock holdings? Could or would a major mutual fund family urge shareholders to redeem shares of its mutual funds because of negative market prospects?
Not very likely. Financial institutions rarely emphasize selling strategies. Wall Street emphasizes buying rather than selling recommendations. (It is not necessarily generally understood, but on Wall Street, when investment analysts become negative on a particular company, they do not downgrade its rating from "buy" to "sell" but rather from "buy" to "hold," which sounds like an entirely different opinion unless you are familiar with the code.)
You might just try to tune into one or the other of the television channels that specialize in tracking the stock market. Compare the number of times guests are asked to suggest stocks to sell compared to the number of times that they are asked to suggest stocks to buy.
Neither last nor least, brokerage houses, wealth managers, asset managers, and financial planners are most likely to provide careful supervision to "wealth assets," usually thought of as clients who have at least one million dollars worth of assets in account. The odds are much less that clients with relatively small amounts of assets—small to wealth managers, that is, but significant to these clients—will receive careful supervision, monitoring, and general attention.
To Sum Up the Alternatives
The hiring of professional investment managers may secure for investors useful general financial planning assistance, useful professional investment advice, and at least a modicum of personalized supervision of investment assets.
That said, professional investment advice is often tainted by conflicts of interest, well meaning but not necessarily superior investment guidance, and possibly by some neglect of your own particular individual investment portfolios.
In any event, if you ultimately choose to delegate the task of managing your investments to others, choose your managers with care, taking care to verify their actual long-term performance with other accounts, and particularly their ability to protect assets during poor as well as favorable general stock market and economic climates. At the very least, learn enough to be able to evaluate the strategies that are being employed on your behalf.
What You Will Learn from This Work
You may or may not have the desire or time to "do it all yourself." However, we have designed this book to provide you with specific, well-researched tools that you may well employ in self-directed investment programs to grow your assets and to build a way of life that will benefit you and yours for possibly decades to ...
