Vanguard Personal Advisor Services introduces Five-Fund Active Equity offer
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Vanguard files initial registration with the SEC to launch three new active
equity mutual funds.
4 years ago
Monday, November 22, 2010
Interview At The WSJ Online Regarding My Investment Approach
http://blogs.wsj.com/financial-adviser/2010/11/22/voices-joe-alfonso-on-keeping-it-simple/
Tuesday, November 2, 2010
Monday, September 20, 2010
Aegis Financial Advisory Featured In Wall Street Journal
See our mention in today's Wall Street Journal article regarding planning for young people.
http://online.wsj.com/article/SB10001424052748704206804575467810222109230.html
http://online.wsj.com/article/SB10001424052748704206804575467810222109230.html
Friday, July 16, 2010
ACA Member Joe Alfonso Elected to NAPFA West Region Board of Directors
FOR IMMEDIATE RELEASE
July 6, 2010 - Highland, MI –ACA member Joe Alfonso, CFP®, ChFC has been elected to the NAPFA West Region Board of Directors. He will begin his two-year term on September 1, 2010.
Mr. Alfonso looks forward to contributing to the current work of the West Region Board and adding his own perspective given his interests in new planner outreach, pro-bono programs and strategic marketing.
“As a long-standing NAPFA member, I feel that I have benefitted greatly from the support that the organization has given me and my practice,” said Mr. Alfonso. “I look forward to stepping up my effort at giving back and see membership on the Regional Board as a great way to do so. I also look forward to sharing the perspectives I have gained as an ACA member regarding the value of truly comprehensive and holistic financial planning.”
Mr. Alfonso is the founder of Aegis Financial Advisory, LLC, a Fee-Only financial planning and DFA-approved investment management firm in Santa Clara, California providing comprehensive wealth management services to families, individuals and small business owners throughout the San Francisco Bay Area. He has been an ACA member since 2008.
ACA is a non-profit 501(C)6 organization providing training and support to fee-only financial advisors with a passion for holistic financial planning. Its collaborative community continues to develop the next generation of holistic planning concepts and strategies. Currently ACA consists of more than 150 members serving 45 states across the U.S.
For more information about ACA, please contact Valerie Kriss at 888-834-6333 ext. 706 or valeriek@acaplanners.org.
July 6, 2010 - Highland, MI –ACA member Joe Alfonso, CFP®, ChFC has been elected to the NAPFA West Region Board of Directors. He will begin his two-year term on September 1, 2010.
Mr. Alfonso looks forward to contributing to the current work of the West Region Board and adding his own perspective given his interests in new planner outreach, pro-bono programs and strategic marketing.
“As a long-standing NAPFA member, I feel that I have benefitted greatly from the support that the organization has given me and my practice,” said Mr. Alfonso. “I look forward to stepping up my effort at giving back and see membership on the Regional Board as a great way to do so. I also look forward to sharing the perspectives I have gained as an ACA member regarding the value of truly comprehensive and holistic financial planning.”
Mr. Alfonso is the founder of Aegis Financial Advisory, LLC, a Fee-Only financial planning and DFA-approved investment management firm in Santa Clara, California providing comprehensive wealth management services to families, individuals and small business owners throughout the San Francisco Bay Area. He has been an ACA member since 2008.
ACA is a non-profit 501(C)6 organization providing training and support to fee-only financial advisors with a passion for holistic financial planning. Its collaborative community continues to develop the next generation of holistic planning concepts and strategies. Currently ACA consists of more than 150 members serving 45 states across the U.S.
For more information about ACA, please contact Valerie Kriss at 888-834-6333 ext. 706 or valeriek@acaplanners.org.
Monday, March 1, 2010
Save Early, Save Often
Investors fret about the performance of their portfolios. They worry whether they will be able to realize a rate of return sufficient to help them meet their goals and if they are taking on enough (or too much) risk to achieve this. While these are valid concerns, they are ultimately beyond anyone's control. Other than diversifying broadly to lower volatility and keeping investment and tax costs low to increase net gain, there is nothing we can do to determine the actual rate of return on our investments; the markets will ultimately decide this fate for us.
There is, however, something outside of investing that we can all do that is completely within our control and that can have a great impact on whether we achieve our life goals. Indeed, by forming certain habits early, we can help reduce the rate of return that we need to realize on our investments and even how much we need to invest in the first place. I am referring to the habit of saving.
Perhaps the greatest risk we all face is not saving enough to meet our long term needs. Saving as much as we can and beginning this practice early allows our money to grow exponentially with time given the magic of compounding. Just how significant an advantage one can reap from an early commitment to saving can be illustrated in the following example.
Ben and Jerry are twin brothers. Ben decides to begin saving at age 30 at a rate of $10,000 per year. He continues this practice until the age of 40, at which time he stops saving altogether. Jerry waits until he turns 45 to begin saving. He puts away $15,000 per year until retiring at the age of 65. If we assume both brothers earned the same 7% average annual rate of return, how much did each accumulate by the age of 65?
First, let's compare how much each brother socked away. Ben saved $100,000 in total over 10 years compared to Jerry who saved a whopping $300,000 over 20 years. In spite of having saved more over a longer period of time, however, it turns out that Jerry winds up with the smaller nest egg of the two. At age 65, Jerry's savings will have grown to about $615,000, certainly a significant sum. In comparison, however, Ben's savings will have grown to approximately $750,000, $135,000 more than Jerry in spite of Ben having only saved a third of what Jerry saved for half as long. This is the magic of compounding at work and a great example of why saving early is so beneficial.
The moral of the story is that we are more in control of our financial destinies than we think. By deciding to save early and often, we can minimize the need to risk our money in the stock market since even modest rates of return over long periods of time yield impressive sums. The secret to getting rich is to do so slowly, saving as much as we can for as long as possible. So take matters in your own hands and get started, now!
There is, however, something outside of investing that we can all do that is completely within our control and that can have a great impact on whether we achieve our life goals. Indeed, by forming certain habits early, we can help reduce the rate of return that we need to realize on our investments and even how much we need to invest in the first place. I am referring to the habit of saving.
Perhaps the greatest risk we all face is not saving enough to meet our long term needs. Saving as much as we can and beginning this practice early allows our money to grow exponentially with time given the magic of compounding. Just how significant an advantage one can reap from an early commitment to saving can be illustrated in the following example.
Ben and Jerry are twin brothers. Ben decides to begin saving at age 30 at a rate of $10,000 per year. He continues this practice until the age of 40, at which time he stops saving altogether. Jerry waits until he turns 45 to begin saving. He puts away $15,000 per year until retiring at the age of 65. If we assume both brothers earned the same 7% average annual rate of return, how much did each accumulate by the age of 65?
First, let's compare how much each brother socked away. Ben saved $100,000 in total over 10 years compared to Jerry who saved a whopping $300,000 over 20 years. In spite of having saved more over a longer period of time, however, it turns out that Jerry winds up with the smaller nest egg of the two. At age 65, Jerry's savings will have grown to about $615,000, certainly a significant sum. In comparison, however, Ben's savings will have grown to approximately $750,000, $135,000 more than Jerry in spite of Ben having only saved a third of what Jerry saved for half as long. This is the magic of compounding at work and a great example of why saving early is so beneficial.
The moral of the story is that we are more in control of our financial destinies than we think. By deciding to save early and often, we can minimize the need to risk our money in the stock market since even modest rates of return over long periods of time yield impressive sums. The secret to getting rich is to do so slowly, saving as much as we can for as long as possible. So take matters in your own hands and get started, now!
Tuesday, January 5, 2010
The Impact of High Mutual Fund Turnover
Morningstar recently issued a report regarding the performance of the CGM Focus mutual fund. They reported how this fund was the decade's best performing mutual fund, rising more than 18% annually, yet investors in the fund experienced a yearly loss of 11% during this same period. How could this be?
CGM Focus Fund illustrates the issues with mutual funds that have excessive "turnover". Turnover is the rate at which a fund's holdings change every year. A turnover rate of 50% means that half of the stocks held by a fund are completely replaced within one year. The typical managed mutual fund has a turnover rate of 85%. Index funds, which hold all the stocks in a stock market index and do not sell unless the index itself changes or in order to generate cash for redemptions, typically have turnover rates in the single digits. According to Morningstar, CGM Focus's turnover rate is an astonishing 504%, meaning that its entire portfolio is replaced five times over the course of a single year!
In addition to generating excessive taxable gains in non-deferred accounts and driving up trading related costs, high turnover funds are very volatile. Due to their volatility, the actual return experienced by fund investors is often lower than the internal return of the fund itself because the fund’s volatility increases the likelihood that investors will buy and sell at inopportune times.
When asked about the great disparity in fund versus investor performance, CGM Focus Fund's manager Ken Heebner replied, "A huge amount of money came in right when the performance of the fund was at a peak. I don't know what to say about that. We don't have any control over what investors do."
I would argue that, while a fund manager may not be able to control investor behavior, any fund manager realizes that increased volatility also increases the likelihood that investors will buy high and sell low, and pay more in the process. John Bogle, the Founder of the Vanguard Group, Inc., certainly feels differently than Mr. Heebner. In a recent interview, Mr. Bogle rails against "...funds (that turn) over at 100% or 200% annual rates, leading, among other things, to incredible tax inefficiency." He goes on to ask, "Would you do that with your own money? Do you think those managers would do that with their own money?"
Like Mr. Bogle, I feel that the best approach is to work with investments that are low cost, tax efficient and have low turnover as part of a long term approach aimed at achieving a fair, market rate of return. The issues raised with the strategy of funds like CGM Focus illustrate why a "market return" approach is appropriate for most clients and is in fact the only approach compatible with a fiduciary standard of care that places client's best interests first at all times.
CGM Focus Fund illustrates the issues with mutual funds that have excessive "turnover". Turnover is the rate at which a fund's holdings change every year. A turnover rate of 50% means that half of the stocks held by a fund are completely replaced within one year. The typical managed mutual fund has a turnover rate of 85%. Index funds, which hold all the stocks in a stock market index and do not sell unless the index itself changes or in order to generate cash for redemptions, typically have turnover rates in the single digits. According to Morningstar, CGM Focus's turnover rate is an astonishing 504%, meaning that its entire portfolio is replaced five times over the course of a single year!
In addition to generating excessive taxable gains in non-deferred accounts and driving up trading related costs, high turnover funds are very volatile. Due to their volatility, the actual return experienced by fund investors is often lower than the internal return of the fund itself because the fund’s volatility increases the likelihood that investors will buy and sell at inopportune times.
When asked about the great disparity in fund versus investor performance, CGM Focus Fund's manager Ken Heebner replied, "A huge amount of money came in right when the performance of the fund was at a peak. I don't know what to say about that. We don't have any control over what investors do."
I would argue that, while a fund manager may not be able to control investor behavior, any fund manager realizes that increased volatility also increases the likelihood that investors will buy high and sell low, and pay more in the process. John Bogle, the Founder of the Vanguard Group, Inc., certainly feels differently than Mr. Heebner. In a recent interview, Mr. Bogle rails against "...funds (that turn) over at 100% or 200% annual rates, leading, among other things, to incredible tax inefficiency." He goes on to ask, "Would you do that with your own money? Do you think those managers would do that with their own money?"
Like Mr. Bogle, I feel that the best approach is to work with investments that are low cost, tax efficient and have low turnover as part of a long term approach aimed at achieving a fair, market rate of return. The issues raised with the strategy of funds like CGM Focus illustrate why a "market return" approach is appropriate for most clients and is in fact the only approach compatible with a fiduciary standard of care that places client's best interests first at all times.
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