What Can A Financial Planner Do To Assist You?

Living A Financially Secure Life

You likely have a number of personal and professional goals. For example, you may want to start your own business one day. You might want to set up a college fund so that your children don’t have to worry about paying for their education. Or, perhaps you’ve had your eye on a tropical vacation and want to save for it. Whatever your short or long term goals might be, financial planning can help. Financial planning involves being smart about your money so that you can reach your goals and deal with any unexpected financial burdens that may crop up along the way.

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You are in charge of your own finances. That doesn’t mean you have to shoulder all of the responsibility, though. A financial planner is able to give you advice that helps put you on the right track during what can be a long journey.

Financial Planning Benefits You

With financial planning, you can set both personal and financial goals that make sense for your life and situation. A financial advisor takes a look at how much money you have, how much money you make, and other items like insurance and taxes. He or she will come up with a plan to help you reach your goals by addressing your financial weaknesses and building on your financial strengths. The planner helps turn your plan into reality and watches over how things are going. If you want to meet your goals and turn your dreams into a reality, a financial planner is a great place to start.

Could You Benefit From A Financial Planner?

Is working with a financial planner in your best interests? Many people do not have either the time or the knowledge to really delve into their finances and create a plan for change. You may know what you want but you may not be sure how to accomplish it. Working with a third party is a great way to see things through a new set of eyes. Not only that, but you likely have a lot going on. Sometimes it helps to have a financial expert making sure that everything is going according to plan. He or she can also give you a little nudge if you start to lose focus.

There are certain things that may prompt you to reach out to a financial planner. For example, perhaps you are concerned about retirement and do not feel you have put enough money away. Maybe you recently inherited some money and you aren’t sure what you should do with it. Or, maybe you are getting married or divorced and you need some advice on how to structure your finances as a result. Kids, illnesses or the loss of a job may also make a difference. In addition, a financial planner can help if you are caring for a dependent adult or dealing with a death in your family. There are so many topics that they can assist with.

Are All Financial Planners Created Equal?

They are not. In addition, someone can state that they are a financial planner but be more interested in getting you to buy financial products than looking out for your best interests. Real financial planners deal with more than just investments. Their services cover a variety of areas. Also, it is in your best interests to look for a certified financial planner, because these individuals are required to watch out for you.

Is There Regulation In The Financial Planning Field?

There is not. Someone can say that they are a financial planner but not go through regulation at the federal or provincial level. There are financial planners that may have to deal with regulation as it relates to taxes and insurance, but this regulation is not broad enough to cover everything that they do.

Certified financial planners, however, are subject to regulation. They must abide by a certain code of ethics in everything that they do.

Why Work With A Certified Financial Planner?

Certified financial planners are committed to working with their clients to ensure that they are financially healthy. These individuals typically study finance in college and have a degree to show their proficiency. In addition, to become certified, the planner normally has to take additional classes that the board has given their seal of approval to.

This is a very distinguished title to have. In order to become a certified financial planner, and to keep the license over time, individuals have to complete four different steps.

First, they have to take the test that awards them their certification. This test covers a lot of different areas, and it helps to ensure that the candidate has the background knowledge necessary to succeed. In addition, they have to work in the field for at least three years before they can call themselves a certified financial planner.

In addition, they have to agree to the certified financial planner’s code of ethics. If they do not follow this code, they may lose their certification and be subject to other penalties as well. Finally, they have to log at least thirty hours of education over the course of every two year period. The topics should involve financial planning as well as ethics.

These four areas are comprehensive. If someone has the title of certified financial planner, you can rest easy knowing that they have earned it and are able to give you great financial planning advice.

The Financial Planning Standards Council believes that it is in every individual’s best interests to work with a certified financial planner to manage their money. There are a few other certifications, like the Chartered Financial Consultant as well as the Personal Financial Specialist, that are also valuable and should be considered as well.

How Can I Find A Planner?

Talk to people that you know, like your coworkers and family members, to see if they have any recommendations for you. If you come up empty, think about consulting with an accountant, a banker or a lawyer; these individuals often work in some capacity with financial planners, so they should have names to give you.

You can also check with the Financial Planning Standards Council; they can direct you to a certified financial planner that lives near you. Look them up online. There is even a form to fill out where you can request that a financial planner contact you directly.

Other resources include the Better Business Bureau and the Certified Financial Planning Board. If you have a planner that you are considering working with, simply check them out to make sure they have a good reputation before you do business.

How Do I Know Which Financial Planner To Work With?

This is not a decision to take lightly. Just as you would take your time when selecting a doctor, you should take your time when selecting a financial planner. This is someone that you will be working with very closely. He or she should know what they are doing and be an honest, upstanding citizen committed to working hard on your behalf. You want a planner that wants to help you and see you succeed.

All planners are unique. Some work better with particular people; for example, the financial planner might specialize in working with small business owners. He or she might be well versed in retirement but not divorce, or vice versa. It is important to talk to a handful of planners prior to deciding which one you want to work with.

What Questions Should I Ask

Ask the planner to give you a written disclosure document. It will fill you in on most of what you need to know. However, it is always a good idea to also interview the planner and ask a few additional questions. Most planners will provide you with a free consultation.

You should find out what type of experience the planner has had in the field. Also, inquire about where they went to school and what they studied. Ask if they have any relevant licenses and inquire about the range of services the planner can provide you with. Ask him or her how they view financial planning and if there are any areas that they are proficient in.

Talk to the planner about their client base and if they have any requirements of their clients. Find out if they belong to any professional organizations. Ask the process involved in setting up a plan. Also, find out how he or she would help you. Finally, make sure to discuss any applicable fees as well as what you can expect to pay.

An interview is always a good idea because you can get a feel for what the planner is like. Does he seem honest? Do you think you can trust him? Do you think he wants what is best for you and is not just interested in selling you something?

What You Should Know About Full Disclosure

You have to be able to trust your financial planner and believe that he will do everything possible for you. Full disclosure is a part of trust; this means that you learn about what the planner has done in the past and how they have operated. They tell you where they have worked before, what they charge and other things that would be useful information to you.

How Is The Planner Compensated?

A planner may work solely on commission. He may also receive a commission but also charge a fee. For example, he may charge you to consult with you or put together your plan. A planner may also receive a salary from work or use the commissions they earn from you to mitigate the costs associated with helping you plan.

If you are looking for a financial planner, visit the website of the Financial Planning Standards Council to see who is available in your area.

The Super-Investors Graham and Dodd

Graham And Dodd

Have you ever learned about super-investors Graham and Dodd? There were, in fact, two men by those names, but if you also heard of them as ‘superinvestors’, then you might have been hearing about an article penned by Warren Buffett. It was titled “The Superinvestors of Graham-and-Doddsville”. It promoted a concept known as value investing. Originally published in the fall of 1984, it appeared in the Columbia Business school magazine known as Hermes. The content was based on an earlier speech, delivered on May 17th of the same year. The speech marked the 50th anniversary of a book titled “Security Analysis” which was written by David Dodd and Benjamin Graham. The speech was given at the Columbia University School of Business. Both the article and speech were done to challenge the notions that equity markets are actually efficient, given studies of nine investment funds that successfully generated long-running returns that were notably above the broader market index. These nine funds were all managed by alumni of Benjamin Graham, all who pursued their own varying investment tactics but still stuck to the value investing strategy laid out.

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The occasion that Columbia Business School arranged was a celebration of Graham and Dodd, but it wasn’t just one speech given …

In fact, two happened. Michael Jensen delivered one, as the professor from the University of Rochester was an advocate for efficient-market theory. The other speech was delivered by Buffett, who personally opposed it. Jensen tried making the argument that a simple experiment of coin tossing across a broad group of investors could generate a handful of successive winners, further arguing that the same would happen in real-world financial markets. Buffett seized on the metaphor, starting his very own speech using the same experiment involving coin tossing. The big difference that Buffett noted was that somehow, the same school owned a statistically significant percentage of that winning minority.

That minority followed the value investing rules which Dodd and Graham established.

 

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Graham and Dodd had argued for looking for values in the market that had a substantial safety margin as compared to stock prices, but others had claimed this was then obsolete given improvements and upgrades in both information technology and market analysis. If the markets could be assumed as truly efficient, then no one would be able to beat them over the course of time, so pure chance alone would be the only path to long-running success. Buffett argued however that if a number of the long-running winners all belonged to one group of adherents to value investing, and they were operating independently of one another, then their success had to be more solid than a fluke.

The right strategy was more likely to be triumphant than just pure chance.

Buffett augmented his argument by presenting nine different investment funds that were successful. One of them was his very own Buffett Partnership, which was liquidated back in 1969. Two of the others were pension funds, having eight and three portfolio managers. Buffett asserted that he personally had influence in choosing both value-oriented managers and the broader strategies of the funds. The remaining six funds were all managed either by business associates of Buffett or someone well-known to him. The pair of pension funds leaned towards conservative portfolio mixes, given their function and purpose, but still showed 5 and 8 percent leads over market averages. The other seven investment partnerships showed double-digit leads.

Buffett has consistently made several notable points regarding value investment theory. He has run with a postulate of Graham and Dodd, that being that an investors risk goes down as the margin between a stock’s value and its undervalued stock price goes up. Conversely, as the margin thins, the risks increase. He also argued that as a fund increases in size, the potential for returns diminishes.

In 1991, Seth Klarman published “Margin of Safety”, citing Buffett’s “Super-Investors” work. Klarman acknowledged the work as a primary source, arguing that efficient-market theorists had never successfully rebutted it, instead actually living in a world of theory that actual data and practice disproved. Klarman’s work went on to achieve a cult-like status. As it’s never been reprinted, existing copies can sell for thousands of dollars.

Buffett was born in 1930 and over his career has been a philanthropist, investor, speaker, and business magnate. He currently serves as the CEO and chairman of Berkshire Hathaway. He is widely considered one of the planet’s most successful investors, enjoying a personal worth in excess of $84 billion. That makes him the world’s third-richest individual.

He was born in the Nebraska city of Omaha, and his interests in investing and business started early. He entered the University of Pennsylvania’s Wharton School before transferring to the University of Nebraska and graduating from there at only 19 years of age. He was a graduate of the Columbia Business School he later famously wrote and spoke for. It was there that his personal investment philosophy was focused on the idea of value investing that Graham pioneered. His early business partnerships even included one with Graham. After meeting Charlie Munger, he created his Buffett Partnership. The firm, later on, would acquire Berkshire Hathaway, a textile manufacturing firm. They would assume the name in creating a company of diversified holdings. He’s been both the largest shareholder and chairman since 1970. Common nicknames for him in global media including being the sage, oracle, or wizard of Omaha.

Buffett is noted for his philanthropy. Regardless of how much wealth he enjoys or generates, he has pledged to give up as much as 99 percent of it to various philanthropic causes. The primary vehicle or avenue for this will be through the Bill and Melinda Gates Foundation. He partnered with Bill Gates in 2009 to found The Giving Pledge, where billionaires state their intention to give away a minimum of half their overall fortunes. Buffett is also an active political contributor. He endorsed the 2016 Democratic nominee for the White House, Hillary Clinton, the former first lady, senator, and secretary of state. He has opposed in public that statements, actions, and policies of the actual winner of the presidential contest.

Value investing and Charlie Munger of Berkshire Hathaway

Every year, Warren Buffett, the billionaire investor, addresses the shareholders of Berkshire Hathaway, a multinational conglomerate holding American company controlled by Buffett.

Commenting also was billionaire Charlie Munger, who works closely with Buffett. Investor Munger is the Vice Chairman of Berkshire Hathaway and his considered Buffett’s investment partner and principal advisor.

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Unlike Warren Buffett who initially focused heavily on the advice of Benjamin Graham, Charlie Munger developed a different approach that had an influence on Buffett. How does Charlie Munger feel about the state of value investing? To answer that question, let’s first explain what value investing is. It’s buying securities that are under-priced, and it is an investment philosophy launched by investor Benjamin Graham in the 1930s. Graham was an American investor, but he was born in Great Britain. He wrote two pivotal books on the subject of value investing including Security Analysis and The Intelligent Investor. Warren Buffett was one of Graham’s students, and Buffett worked for Graham at his firm Graham-Newman Partnership on Wall Street.

Value investing means stocks can fluctuate in price, but that doesn’t mean you’re getting them undervalued.

So value investing means knowing the actual value of something, but buying it on “sale.” Your goal with value investing is going for “margin of safety.” When you buy a stock at a bargain price, you’re better able to earn a profit when you sell the stock, and you’re less likely to lose money. That would also be considered intelligent investing. For example, you could buy a stock that’s worth $100 for $50. You would then sell the stock for $100 once the stock returned to its original price. In turn, you’ve made a $50 profit. Even more, if the cost of the stock rose to $130, for example, and you sold it for $130, you’ve made an $80 profit.

The art of value investing has changed, but according to Munger after the 2018 Annual Shareholders Meeting for Berkshire Hathaway, as told to Yahoo, the fundamentals haven’t.

That said, Munger says finding value investments has gotten harder due to the competitiveness that exists in the world. According to Munger, due to the tougher environment, Berkshire has to look in different places for value investments, places where they didn’t have to look before in addition to other changes to the traditional approach.

Munger, who spoke at the shareholders meeting with Warren Buffett, made it clear that Berkshire doesn’t use a “formulaic approach” to value investing. In other words, he doesn’t believe there is a clear-cut blueprint for investing. Instead, he simply looks at the “gap” between value and price and takes it on a case by case basis. Munger used Costco as an example where the stock sold for 12 to 13 times earnings. He considered the cost to buy a “ridiculously low value,” due to the substantial strength of the business.

Furthermore, Munger is such an individualist that he does not worship Benjamin Graham even though he considers him brilliant and a good writer and teacher. Munger believes his own ideas, for today’s times, are better, and he explained how his approach to value investing influenced the way Warren Buffett views today’s value investing strategy.

Munger urged Buffett to focus on better quality businesses despite their prices being higher in some cases.

His reason for that is that better quality businesses could be held for decades, continually providing cash to its owners. In the recent years, Berkshire, under the influence of Munger, has gone from traditional undervalued cheap companies to higher quality companies such as Coca-Cola. For example, as Munger pointed out, a single share of Coca-Cola went for $19 in 1919. Today, that share would be worth more than five million if dividends were reinvested.

Therefore, Munger’s modified value investing strategy is to focus on excellent businesses that are reasonably priced. In that way, an investor can watch his or her money grow in a stable company that can be held on for decades, cutting down the number of buy and sell decisions and improving the stressful life of an investor in the process. It is the modified version of Graham’s value investing theory that Munger feels is a better approach for the 21st-century and beyond.

Warren Buffet Uses Mr Market – Investment Philosophies

Have you heard of Benjamin Graham? He is the author of a book called ‘The Intelligent Investor,’ and it was published in 1949. Much has transpired with the investment market since then, but Graham’s advice, especially as it pertains to Mr Market, still rings true today.

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What does Warren Buffet have to say about Mr Market, an allegory from Graham’s book?

First, it is good for you to have a little background information on Mr Market. He is your business partner as an investor. To be a more rational investor, one is supposed to act as though he or she is buying shares in a company from Mr Market. The objective here is to buy low and sell high, obviously, but human emotion often causes investors to do the exact opposite.

Stock valuation is very important when discerning whether or not to make a particular investment. That being said, Mr Market acts as sort of a buffer against making foolish investment decisions. Mr Market is very emotional, and he, being the stock market itself, tends to fluctuate quite dramatically. While that was the case in 1949 when Graham wrote his book, fluctuation within the market is more widespread than ever before.

Certain companies’ stock prices are more volatile than others, and there is also market manipulation to workaround. These days, it is even more important to do your due diligence in terms of stock valuation because you don’t want to buy into market manipulation trends. You need to know that the shares you are buying are worth the money you’re paying, and you want to pick up company stock at a value.

The value buy is the ideal way to handle the stock market. After all, you have to remember the basic objective is to buy low and sell high. Determining the value of a company’s stock is based on many objectives. You have to first take into account sales. Without sales, a company isn’t a company.

That’s just the bottom line.

You want to see forecasted sales growth that spells out profits. Naturally, you have to also look at a company’s debt. At the same time, you want to look at the market cap or what the company is worth. Price to earnings ratio is also important. It’s kind of ridiculous in some ways that companies are priced well ahead of earnings. Without that happening, however, there wouldn’t be the significant gains you see in today’s market, save for high dividend payouts.

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Warren Buffet wrote an essay about Mr Market in his letter to Berkshire Hathaway shareholders in 1987. He urges investors to think as though they were investing in private companies. That makes it more personal, and to be clear, investing is certainly a personal matter. At the foundational level here, Buffet uses this allegorical figure, Mr Market, to solidify his belief about buying and holding when it comes to investing in the stock market.

Whether you buy and hold, swing trade or day trade, the philosophies learned from the tale about Mr Market have truth. One aspect of investing that people need to understand is that you don’t lose money until you sell. While you don’t want to ride a losing investment all the way down, you have other options. You can set a stop loss order, and you can also average down.

The fact of the matter is that investors need patience. If you are as manic depressive in your stock market investing as Mr Market is, then you are going to be allowing him to buy low and sell high, not yourself.

You are going to need to be the patient investor here, and that is the point that Mr Buffet is trying to get across.

Ben Graham – An American ‘Value’ Investor

An American ‘Value’ Investor

Even though Ben Graham was born in England, he is famous for the impact that he had on investing in America. He has frequently been described as the father of American value investing.

Ben Graham

He Wrote Important Investing Texts

One of the biggest ways Graham shaped investing is through the books he wrote. Two of his books, Security Analysis and The Intelligent Investor, are considered to be essential texts in the world of neoclassical investing.

In addition to these two books, Graham published several other books on investing. He also wrote a number of papers. When Graham initially began publishing, a lot of the ideas he had about investment weren’t mainstream. He helped to change the way that people think about investments. A lot of his investing ideals are still championed today.

Ben Graham’s Investment Philosophy

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One of the primary things that Graham focused on was the psychology of the investor. He used behavioral economics to shape a lot of his opinions on investing. Graham also championed holding minimal debt and buy-and-hold investments.

Graham was a big proponent of activist investing, and he also believed that it could be highly valuable to be a contrarian in the investing world. While his philosophies might not seem that radical in the present day, in the past, a lot of the ideas that he talked about were still very unusual.

Ben Graham And Corporations

Even though Graham built his career around investing, he was very critical of a lot of corporations. He believed that corporations hid a lot of essential information when they reported their financial information. Because of this, a lot of investors were unable to make informed decisions about whether or not to invest in a company.

Graham also believed that shareholders should receive more benefits. He thought that a company’s revenue shouldn’t go to the company alone. He thought that a portion of those assets should be passed along to the shareholders as well. He spoke highly of any ideas that made it easier for people to make smart investment decisions.

Ben Graham And The Stock Market

Even though Graham lived through the stock market crash that eventually led to the Great Depression, he believed in buying stock at any price. He didn’t hold a buy low and sell high mindset. Instead, he believed that a price growth could happen at many different price points.

Rather than focusing on the price of the stock, Graham believed that investors should focus on the health of the business. According to his ideas, investing in a business that is about to see growth is always going to be financially beneficial.

Ben Graham And Economic Theory

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Graham did not just make contributions in the world of value investing. He also spent time discussing economic theory. He developed an entirely new basis for both U.S. and global currency. These contributions are one of the reasons that Graham revolutionized the finance world.

Because Graham’s investment advice was so solid, people took what he had to say about economics very seriously. He was able to advise a number of people, and he was able to provide advice to many businesses as well.

The Students Of Ben Graham

There are a number of students that were able to achieve investment success because of the teachings of Ben Graham. Of these students, the most successful might be Warren Buffet. At one point in time, Buffet was the third-richest person in the entire world. Almost all of Buffet’s wealth was accumulated through investments.

Buffet studied directly under Graham, and the two of them had a very close relationship. Buffet has said that Graham believed that investors should be both creative and generous. That’s a philosophy that you can see in Buffet’s own investment history. Warren Buffet is one of the most charitable people in the entire world.

Graham’s Personal Life

Graham was born in London, but he moved to America when he was just a year old. His father died when he was still young, which left his family in poverty. These experiences motivated Graham to learn more about investment and how it could help him.

Graham graduated at the top of his class of Columbia and found a position on Wall Street shortly after graduating. From there, he worked to forge important connections and build a name for himself. Before long, there were few investors and economists that hadn’t heard of Graham.

The Legacy Of Graham

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Financial advisors still rely on Graham’s books and his investment philosophies today. Even though the world of investing has gone through a lot of changes since Graham passed away in 1976, the ideas that he was a proponent of are still very sound.

Many economics students still study his books, and he is still considered to be the most important and significant figure in the world of value investing. It’s likely that people will continue to study Graham and his books for many years to come.

Anyone with an interest in value investing should take the time to read some of the books that were published by Ben Graham. His principles are rock solid. If you learn more about the investment philosophies that he was a champion for, you may be able to make smarter decisions about investing in the future.