Getting financial advice


Probably 90% of the advice dispensed from brokers, financial planners and pundits on CNBC is liable to make you broke. The guys on Wall Street don’t care 1 bit about you or whether or not you make money. What they do care about is making money for themselves.

For me, as an investor and business man, this has always been a problem. Who’s advice can you trust?

Really, the only way that you can get good, unbiased advice is to pay for it. Being as frugal (cheap) as I am, even I have a hard time breaking out my credit card when there are free alternatives on the internet. I just love the internet for all of the freebies that you can get. But sometimes, it pays to spend a little money. I would never go cheap for a lawyer if I was in trouble or if I was buying a million dollar house. So why should I go cheap when I’m managing a million dollar portfolio?

I’ve read articles on The Motley Fool and Seeking Alpha and I can say that most of these articles are written by amateurs who know little about the market and have (themselves) never had a real stake in a Wall Street position. Many of these guys are novice traders but they sure talk a big game.

I’ve gone back and read many of the :”old” MF & SA articles and checked the success rate and I’ve found that the number of winners depends solely on the overall market. When the overall market is up, about 70% of these picks make money. When the market is down, only about 30% of these pics make money. When the market is flat, about 1/2 of the recommendations make money. And so, throwing darts at the Wall Street Journal stock page is just as likely to yield winners as some of these “free” websites.

I tried a few investment services on a short trial basis and I found that Stansberry Research offered me a new and fresh look at the market. I found that Porter Stansberry and his team(s) don’t tell you what you want to hear, they tell you what they believe. They don’t have an sponsors to satisfy, any government lobbyist to appease, they just tell it like they see it. For some, this doesnt’ work, especially for “sheeple.”

Sheeple are part human, part sheep. They move along with the crowd. They want public acceptance and to “fit in.” These people will rarely become financially independent and will rarely become rich. These people buy at market highs, sell at lows and are afraid to do anything different from their golf buddies or colleagues at work. Stansberry writes what he thinks is happening in the stock market and for some people, this is very upsetting.

Since I subscribed to his newsletters about 3 years ago, I’ve seen my net worth grow about $300,000. And I can honestly say that 95% of that gain is due to the insights that I’ve received reading three of his newsletters.

I recommend that you give it a look. Maybe try one of his one month specials wherein he offers one of his newsletters at a discount for one month to let you try it out.

A bit of a disclaimer: the “main” newsletter is about $30 a year and it offers some basic overall market instruction and a couple of good buy ideas. But most of his really good material comes from his “premium” newsletters that can run from $50 a year up to $4,000 per year. Each daily email from the standard newsletter is usually accompanied by one or two sales pitches to buy a premium newsletter. And this is sometimes (really) annoying. But, if you just get in the habit to delete the sales emails, its really worth it.

Once in a while, he offers a good price to try out a premium newsletter; I’ve tried 4 and kept the subscriptions for 2 so that in total I now have 3 newsletters coming from him. I think I pay $30 + $60 + $50 per year. Not bad when held up to $300,000.

I don’t make a nickle from advertising for this company. Have a look at it if you want. Like I’ve said before, I’ve offered this website as a way to give some of my experience to others. So take it what its worth: the honest recommendation from a guy from a poor family who managed to save a million bucks.

Stansberry Research

Good luck, and good investing!

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Don’t buy that Business!

Frown face

Sorry for the long absence from this blog; got married over the summer and I’ve been a little busy :-)

My job requires a LOT of travel, and with a new wife, I have been looking around. As I contemplate walking away from my job I have been diligently searching for other opportunities. The idea of opening my own business is very appealing: no boss to answer to, set my own hours and know that as hard as I work, I will reap the benefits.

One colleague at work (he is also considering starting his own business) told me that he was going to buy a Subway sandwich store and yet another colleague has(d) plans to buy  a UPS store. I listened to what they had to say and I was intrigued. I got online and did a little research.

What I read about the UPS stores didn’t impress me.

It seems that more than 1 our of 4 stores goes out of business and the majority of the remaining stores barely break even. I contacted the UPS Store and a nice lady called with the sales pitch. I asked her about all of the bad things that I had read on the internet and she didn’t have any reply. She thanked me for my time.

It seems that UPS is squeezing the stores and the owners are making less and less money. Some stores are bought and resold several times – it seems that new investors come in and then get wiped out. I read horror stories of people who sank in their entire 401(k) funds, worked night jobs at WalMart & they still lost their stores.

What is most amazing to me is that in a single afternoon I read all I needed to know that buying a UPS Store is a losing proposition. Yet there are stores sold every week. Don’t these buyers do their due diligence & check out the viability of a business before they buy?

I think not.

There is one truth I have seen again and again in business and in finance. Easy money comes, easy money goes.

The problem is that, to most people, a 401(k) is “easy money” because it was accumulated slowly, painlessly and out of site. When someone is given access to an account with six figures $, it is easy to spend that money quickly.

Whenever you look at your savings account, you need to look at the time requirement to build that account. If you make $50,000 a year and you have a $100,000 401(k) account, it is easy to think of your retirement savings as two years pay.

But it isn’t.

Maybe you only save $300 per month towards your 401(k). After company match, you might only put away $5,000 per year. In actuality, your $100,000 401(k) is 20 YEARS worth of savings. If you blow up that account (buying something silly), it may take 20 years to replace it.

Anytime you spend money, think to yourself, “How many months (or years) will it take me to replace this money?” When you do this, money seems more valuable and you’ll be more likely to save it.

Back to the UPS Store. Whenever you buy a business or any other financial investment (stocks, rental property, etc) you should do a simple financial calculation. Divide the investment amount by the total profit (net, not gross) that will take from the investment and determine how long it will take you to get your money back. If you buy a $150,000 rental property, assume a monthly mortgage payment after a down payment of $50,000, taxes and insurance of $700 per month and a rental price of $1,100 per month, you will net (assuming a 100% rental rate) $400 per month. Almost $5,000 per year. It will take you 10 years to get your initial investment back.

That’s not bad. Microsoft stock is paying about a 3.4% dividend right now. Assuming the stock price never changes, it will take you 21 years to get your initial investment back through dividends.

And so, if you make a comparison of different investments, you can see the amount of time it will take the investment to pay for itself. If two investments that have equal risk have payoff times of 10 years and 20 years, clearly the 10 year payoff is the way to go.

It seems that to purchase a UPS Store is an investment of anywhere between $100,000 – $300,000. Most of the stores are making about $20,000 per year after expenses. But here is the rub: most of the owner/franchisees reported working 70-80 hours per week or more.

Unlike owning Microsoft stock where the board of directors and management run the company, if you buy a franchise, you have to run it. If you dropped $300,000 into Microsoft stock, you could collect about close to $10,000 a year in dividends. This is only about $850 per month less than running the UPS Store. How many jobs can you find that pay at least $850 a month? In reality, you would be much better off buying the Microsoft stock and taking a job at Home Depot than starting your own UPS Store.

I’ve known a lot of people who started their own businesses. Back in 2004, one lady started a coffee shop. Her initial investment was $35,000 and she did very little homework about the business. She had a bad location, not enough $ in reserves and the store went bust in 3 months. Had she bought $35,000 worth of Starbucks stock, she would have collected a monthly dividend check every 4 months and would have been able to participate in any stock appreciation. Starbucks was $10 a share back then (today its over $79) and pays over a 1% dividend. If we assume she reinvested her dividends, her $35,000 investment would have grown to $298,231!

I bet that she wishes she had invested that money differently.

Back then, it was a loan. Free money. The money wasn’t respected. The business plan was poor.

Before you jump feet first into buying a new business, or starting your own, study & ask around to find how much profit you will net (after expenses) each month and compare that figure to the amount you’re investing. If it isn’t a good return on your money, you may consider something else.

The use of copyrighted material in this website is protected by the Fair Use Clause of the U.S. Copyright Act of 1976, which allows for the sharing of copyrighted materials for the purposes of commentary, criticism and education.  All shared material will be attributed to its owner and a link provided when available.  All other comment on this site may be reproduced with the author’s consent.  Please source any references or quotes of this website to: