Author Archives: Kathryn

Classy and Fabulous Investing

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Mercedes-Benz Fashion Week, highlighting designs for Spring 2013, is in full swing in New York.  The colors and styles of the clothing, the beauty of the models, and the unique personalities of the designers represent a sensory explosion of diversity.  There is something to glean from this event for both beginning and advanced investors.

The Closet:

My closet has way too many pairs of jeans, a good balance of fun casual and conservative business attire, and too few pairs of shoes.  Just like our clothing, over time, most of us tend to become collectors of different investments.  It can creep up on you and before you know it you have amassed a good portfolio, but you may be missing some key essentials.  If you started from scratch today and rebuilt your entire portfolio, how would you structure and form your investment mix?  You probably are holding at least a few mistake investments, and some that are sentimental favorites that no longer serve you well.  You do not necessarily need a lot of different investments, just the right ones, and ones that work well together.  Just think, by starting fresh you would have the opportunity to re-invent your portfolio.  The top portfolio managers in the country might have slightly differing opinions about which essentials should be a part of every portfolio but here is a short list:

The Classics:

  • If you are just getting started, consider balanced mutual funds and low-minimum certificates of deposit
  • Basket of dividend paying-large cap stocks
  • Actively managed small cap and international mutual funds

Accessories:

  • Short-Intermediate term bond ladder of AA/AAA GO municipal bonds (essential purpose revenue bonds for larger or complex portfolios)
  • For longer term dollars, build in core classics as above, then blend growth stocks of great brands/cutting edge companies (take advantage of lower capital gains tax)
  • For very high-net worth individuals, consider selling covered calls against large stock positions to generate extra income
  • Private funds for SEC Accredited Investors

One of my favorite aspects of investing is that you can take a customized approaches, just as you can in building a wardrobe.  Start by sticking to some core basics, and then have a blast accessorizing.  Coco Chanel said “A girl should be two things: classy and fabulous.”  Make your portfolio both classy and fabulous and “invest right, live right!”

© 2012 Pawleys Investment Advisors, LLC.  All rights reserved.

“Younger Next Year” and “invest right, live right”

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I finally found the book that reveals the secret fountain of youth.  Yes, you can turn back your age clock and significantly enhance how you live during retirement.  Not surprisingly, it outlines all the things that we know we should do, or not do for that matter, at any age.  Work out (note: not just exercise, work out) six days a week.  Avoid eating too much and stop eating junk (shocker: have  lots of fruits and veggies, whole grains, non-fat dairy, fish, some chicken).  Stay positive and invest in your relationships and community.  Spend less money than you have coming in.  I love it!  The most difficult part of my job is watching people age.  The tagline “invest right, live right” is intended to show the critical importance of being physically, emotionally and spiritually healthy.  It means just about everything to our quality of life.  If you are a millionaire and your body is falling apart, all of your planning has been for naught.  A friend once told me “getting old sucks.”  As I preach with investing: focus on what you can control.  Consider a membership to the gym or hiring a nutritionist as a critical part of your investment planning (having a personal trainer is far more fun and interesting than staring at a boring copy of a long term care policy sitting on your desk).

From the book: “70 percent of premature death and aging is lifestyle related.  Heart attacks, strokes, the common cancers, diabetes, brittle bones, most falls, fractures and serious injuries, and many more illnesses are primarily caused by the way we live…we could eliminate more than half of all disease in women and men over fifty.  Not delay it, eliminate it.”  Wow, powerful.  Work out 6 days a week, eat better, stay in touch with everyone, put work aside for a few days and go volunteer, and save more money.  Nice, I am off to put on my running shoes to run my River Club neighborhood loop!  For real.  As soon as it stops raining (totally kidding, I am going now!).  invest right, live right…right here in Pawleys Island.  Hopefully the healthcare system we have in place 30 years from now will be irrelevant to me, because my goal is to not have to use it very often.

🙂

Please try to read this book.  I learned a lot and my short article here does not do it justice.  The science sections are fascinating, the skiing stories are fun and the language is witty.  Oh, and I read it in one evening, it is a breeze.

“Younger Next Year” by Chris Crowley and Henry S. Lodge (there is a version for men and a version for women).

© 2012 Pawleys Investment Advisors, LLC.  All rights reserved.

What Rory Teaches us About Investing

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This past weekend, Rory McIlroy subtly stormed past the best golfers in the world to win the 2012 PGA Championship at Kiawah Island.  I served as a volunteer at the event.  Out of 136 golfers in the field, I asked for and was graciously given 1 autograph, and it was from him.  I thanked him and wished him luck.  After his win on Sunday, I was compelled to buy a Powerball ticket because I felt lucky, then I remembered that it is more likely I will be struck by lightning two or three times than to become a lottery winner.  I kept the $5 in my purse, and then thought about those few people who think the lottery route might actually be a viable way to fund retirement.  While I absolutely love the enthusiasm, I am a numbers nut, and the odds are stacked heavily against the strategy actually working.  I quickly jotted some notes about Rory’s win, because he comes across as so gracious and humble, and it is exciting to watch his success.  This is what I learned from Rory this past week:

1.  Experience Matters – At the age of 23, Rory won a major championship by the largest margin of victory in history, 8 strokes.  He broke the previous record of a 7 stroke margin set by Jack Nicklaus in 1980.  Wow!  Although people are talking quite a bit about Rory’s smashing success at such a young age, few mention that he started playing before he turned 2, and has been working at his craft for over 20 years.  Similarly, it takes years of honing knowledge and skills to become a succesful investor.  Avoid falling into the trap that it is easy to make a quick buck…it takes time and experience.  Investing is complex and it is challenging to become successful.

2.  Diligence and Hard Work are Critical –  Confidence springs from preparation.  Rors (as he calls himself) is a fitness nut, citing the importance of strength, a healthy mind, and strong self-image.  While many others golfers were hanging out at the Kiawah Resort between rounds, Rory was out running on the gorgeous South Carolina beach with his trainer.

3.  Be Humble –  Being able to rebound from a setback is critical, and can make or break both golfers and investors.  I see so many investors hold on to a losing stock just because they do not want to admit their mistake, and if it comes back they will again be right.  Usually it is a fat chance.  In the final round of the 2011 Master’s Championship at Augusta, Rory gave up a 4 stroke lead in a meltdown of poor play as the win slipped from his sights.  Going into the back nine, he was still 1 stroke ahead, and dropped 6 shots in just three holes.  Press photos showed him hanging his head and clearly disappointed.  But, his own words on Twitter reflect a willingness to take it as a learning experience, along with grace and humility: “…you have to lose before you can win. This day will make me stronger in the end…and congratulations Charl Schwartzel!! Great player and even better guy! Very happy for him and his family!”  In a press interview he stated “Shooting a bad score in the last round of a golf tournament is nothing in comparison to what other people go through.  I’ll have plenty more chances I know and hopefully it will build a bit of character in me as well.”  Perspective and attitude can not only help you learn from setbacks, it can keep you motivated to trudge through hard times.

4.  Set Goals –  Do the math.  Rory told the press that he decided going into the final round if he could finish 12 under par, nobody would be able to catch him.  He never backed off with his effort, finishing the day by sinking a long putt on hole 18 for a birdie, and scored exactly 12 under.  Flawless execution to the very end.  Everyone wants to perform well, but in addition to hard work and preparation, a specific strategy will go a long way.  Many investors do quite well amassing a big portfolio by dumping thousands of dollars into their investment and retirement accounts.  Fewer have a defined strategy (a written Investment Policy Statement is a great starting point) and benchmark or evaluate their performance periodically.  Continuous improvement is a goal of the world’s top golfers, and should be as well for investors.  Just like every stroke counts in golf, every dollar counts in your portfolio, and this is a great way to supercharge your results.

5.  Follow your Passion – “I just couldn’t get enough,” Rory said of playing golf as a child.  He stills describes golf as his “passion,” which probably makes it more enjoyable to spend hours on the range, putting greens, and practice courses.  Some players on the tour might be more focused on the pure competition, money and fame.  If you invest solely to make money, it may not become something at which you excel.  It is a long haul.  I would suggest your level of involvement with your investments should equate to your level of passion.  Those obsessed with investing can become the most successful do-it-yourselfers, while those whose interests lie elsewhere should consider hiring a fiduciary and delegating the work.

Just two hours north of Kiawah Island, Pawleys Island boasts some of the greatest courses in the world – Caledonia Golf and Fish Club, The Heritage Club, Pawleys Plantation, River Club, Tradition Golf Club, True Blue Golf Plantation, and Willbrook Plantation.  Golf course designs hail from greats including Mike Strantz, Dan Maples, Tom Jackson and Jack Nicklaus.  At the age of 12, I took lessons from Peter Duffy, the pro at Toftrees Resort in Pennsylvania.  These days, I play every few weeks, and have moments of brightness combined with lots of snowmen (for the non-golfers, that is a score of 8, which is not very good)!  I am even fortunate to live adjacent to the 16th hole at River Club, and my office windows have a view of the golfers teeing off.  I spend hours here, and from time to time look up from my work to watch the players.  But it took a young lad all the way from Northern Ireland to help me connect the dots.  Thank you very much Rors, for inspiring some ideas for better investment performance, and congratulations on your victory at the 2012 PGA Championship!

p.s. the last and perhaps most important lesson, “invest right, live right,” and consider how you can give back to your community.

Rory McIlroy UNICEF Work in Haiti – with Big Boss Mata

© 2012 Pawleys Investment Advisors, LLC.  All rights reserved.