Financial Advice WHICH MAKES Cents (and Dollars)

Great Needham Town Fair last night and good conversations at the Client Priority Financial table. Visitors comprehended the benefits of an Hourly, Fee-Based Financial Planning and Advice model. No commissions. No automated, recurring fees. No poorly-performing, in-house products. Only your best interests are believed. And an adviser who has studied or worked well in finance for 30 years. When choosing a financial adviser, always ask what the total fees will be over 5 years. Ask about any payments or compensation the adviser may receive whenever choosing an investment for you (such as will he or she win a vacation for selling a certain product.) And ask about the adviser’s background. Then you will understand the advantage of the hourly model and experience provided by Client Priority Financial.

Expanding on this point, using a MOS shall create biases in your collection. Using the MOS to choose investment will lead you away from investments that are more exposed to firm-specific risks, which loom large on a person company basis but fade in your portfolio. Thus, biotechnology companies (where in fact the primary risk lies in an FDA acceptance process) won’t make your MOS trim, but food processing companies shall, for all your wrong reasons.

In the same vein, Valeant and Volkswagen will not make your MOS cut, even although risk you face on either stock will be lowered if they are elements of larger portfolios. I know that many investors abhor betas, and contrary to popular belief, I understand. I’d not put myself in the MOS camp but I identify its use in investing and believe that it can be integrated into a good investing strategy. Self exam: Even though you believe that MOS is a good way of picking investments, it is not for everybody.

Before you adopt it, you have to evaluate not only your own position (including how much you have to get, how risk averse you are) but also your trust (in your valuation prowess and that markets right their mistakes). Sound Value Judgments: As I observed within the last section, a MOS pays to only if it can be an addendum to appear valuations.

This may be a reflection of my biases but I think that this requires intrinsic valuation, though I am prepared to concede that there are multiple ways of doing it right. Accounting valuations seem to be built on the twin presumptions that publication value is an approximation of liquidation value and that accounting reasonable value actually means what it says, and I’ve little trust in either. As for passing of prices as value, it hits me as inconsistent to use the marketplace to get your pricing quantity (by using multiples and comparable firms) and then claim that the same market misprices the asset in question.

A Flexible MOS: Tailor the MOS to the investment that you will be taking a look at: You can find two reasons for utilizing a MOS in the first place. Valuation Uncertainty: The greater uncertain you are about your approximated value for an asset, other things remaining equal, the bigger the MOS should be. Thus, you need to use a smaller MOS when buying mature businesses and during stable marketplaces, than when putting your cash in young, riskier business or in marketplaces in crises.

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Portfolio Tailoring: The MOS that you use also needs to be tailored to your profile options. Market Efficiency: I understand these are fighting words to an active investor, warning flag that call forth intemperate replies. The reality, though, is that even the most rabid critics of market efficiency believe in their own versions of market efficiency ultimately, since if markets never corrected their mistakes, you would never make money of even your canniest investments.

Pricing Catalysts: Since you make money from the purchase price changing to value, the existence of catalysts that can lead to this adjustment will allow you to settle for a lower MOS. Would I favor to buy a stock at a 50% discount on value rather than at just below fair value?

Of course, and I’d be even more happy if you made a 75% discount. Would Personally i think even convenient if you approximated value very conservatively. Yes and I would be delighted if whatever you counted was liquid assets. Having said that, I don’t live in a world where I see too many of these investments and when I do, it is usually leading for a fraud rather than a legitimate bargain. That’s the reason that I’ve officially used a MOS in trading never. 45 for the ongoing company. 35 or if it was a huge chunk of my portfolio?