If you haven't had a chance to download my book, I wanted to share the first chapter (of the original version) with you right here.
I hope you enjoy and find value within its 80 pages.
Chapter 1 - Why Should You Care?
I am not a doomsayer. Although it may sound this way at first, I have no wish to be an alarmist.
I am merely an advocate of prudent asset stewardship. A decade in the investment and financial planning industry has left me concerned for the investments of my family, friends, and fellow humans--I’m talking about a vast majority of investors and billions of dollars in the market.
See, I told you I’d come off as an extremist doomsayer… but bear with me, and you’ll see I’m not.
First, you must know it’s not your fault that you and your investment dollars are at risk; it’s the poor advice you’ve received. It’s the poor advice everyone receives. I’m talking about the investment paradigms commonly taught in schools, preached over the airwaves, and whose proponents include more than one Nobel Prize winner.
See? Not your fault. It’s hard to argue with such a compelling force. Who would be crazy enough to even think to question the dogmas preached by such highly-esteemed authorities?
Hi. My name is Stephen Spicer.
I have dedicated my career to helping people understand this potentially ruinous reality and providing them accessible, affordable solutions.
Why am I putting up such a fuss? It can’t actually be that bad… right?
It’s tempting to think that. I wanted to think that. It would make life substantially easier. I could follow the cookie-cutter solutions to which most people subscribe, continue to market my services as such, and do very well for myself and my family. That path would have saved me from much stress.
There was just one problem (at least, it started as one problem): I kept discovering issues with the traditional investment paradigm… potentially devastating flaws in the logic. As I made these discoveries, I would adjust the investments over which I was in charge, only to find another hole. After years of searching for better solutions to each of these problems, I reached a point where I felt my portfolio could better withstand unpredictable stress without compromising the growth of a traditional portfolio.
I sighed a breath of relief…
...and then looked around and realized nobody else had adapted. Nobody else was dedicating any time to challenging the traditional investment paradigms. They all just continued to argue about the same old inconsequential issues: which stocks will perform better tomorrow, what precisely was meant when the Fed Chair said this one particular word, the residual repercussions of Donald Trump’s most recent tweetstorm...
Who’s This Book For?
Financial advisors may read this (and I hope they do; it could help them), but this book is primarily intended for the average to high-net-worth investor. It’s for anybody with money invested in the market who cannot afford to lose a substantial portion (like more than 50%, for example) of their portfolio’s value for an extended period of time (like decades).
The investment reality I’ll bring to your attention can be pretty harsh and unsettling, like when you first realize Santa isn’t real… except with your life’s savings at risk.
There it is again--that doomsayer rhetoric! I promise it’s not. My logic is simple and sound. My concerns are real, and I’m confident that within a few pages, you’ll begin to question your own portfolio make-up and crave better solutions, just like me.
And don’t worry. The goal of this book is not, in fact, to leave you feeling depressed and helpless. I’m actually writing it in response to the fact that my blog posts were depressing all my readers… ha! My purpose is to present some specific potential solutions for you and your life savings.
How to Use this Book
I designed this book with various levels of investment savvy in mind, from the knows-absolutely-nothing-about-investing-that’s-why-I-pay-an-advisor-in-the-first-place investor to the Certified Financial Planner® practicing professional. It is designed so that any concerned investor can find what they need in order to understand my point and discover some investment-stress-reducing solutions.
- If the only reason you care about investments is because you have some and want to make sure they are okay, you should read the whole book, from front to back. You’ll need to understand the basics I explain to best understand the potentially critical risks to your portfolio.
- If you have a solid grasp on market basics--stocks, bonds, diversification, and correlation--feel free to skip to Chapter 3. Of course, if you’d like a quick review, or if there is a concept you don’t have entirely nailed down, they’re all there for you.
- If you have read and are familiar with my Modern Portfolio Theory concerns, feel free to simply review Chapter 3. I would at least skim it, though, so those concerns--the real reasons you should care about everything else presented here--are fresh in your mind.
- If you already understand the basics of alternative investments and are just looking for the meat of this book--the specific fund type suggestions--skip to Chapter 5.
There you go--you get to choose your own adventure!
Why Should You Worry?
What’s so bad to warrant all this fuss? Well, the answer to that question has two major parts that together compound the risk for you and your investment dollars.
1. The precarious and unprecedented state of the global economy
I’m sure you have experienced the off-putting feeling that comes from the precarious and unprecedented times in which we live. (If you’ve abstained from any form of news over the last several years, you may have avoided this feeling… if that’s the case, congratulations! I am sure you’re much happier for it!) In case you haven’t noticed, I’ll catch you up on some of the most pressing issues relative to your investments.
- As of this writing in 2017, the US stock market has reached highs only seen twice in the past, in 2000 and 2008.
- The bond market seems to be coming to the end of a massive bull run, and with interest rates where they are, its future does not look promising.
- Oh yeah, and interest rates? Countries have negative interest rates now--crazy, right!?! In fact, countries with negative interest rates now make up more than 20% of global GDP. We have never seen this before! Only time will reveal the outcome of this grand experiment. Sure, it could turn out fine, I suppose… but it could also end badly--very badly--for anybody with money in the market.
- Interest rates in the United States are starting to rise, but they’re only around 1%, which is still well below our historical average. Before the crash in 2008, that number was over 5%. Dropping it to 0% was one of the primary ways the government attempted to reverse the aftermath. If the next crash happens within the next several years, that won’t be an option this time.
Regardless of whether or not this is information is new to you, these realities are important to keep in mind when considering the second part of this equation. After all, it’s your asset allocation--and the accompanying promise that over any long-term investment time horizon, your savings will absolutely appreciate--that gives you confidence. Right?
It helps you sleep at night to know that, no matter what, 20 years from now, your investments will be worth more than they are today--isn’t that what you’ve been told? If that’s the case, you can easily stay the course, come what may. Bring it on! Am I close? Is that why these facts don’t cause you to worry about the long-term viability of your invested dollars?
That axiom is precisely the problem.
2. The flaws in our Modern Portfolio Theory (MPT)
Modern Portfolio Theory is supposed to protect you from these upsetting realities… but MPT itself is the second, more significant, problem with your investment equation.
What if that confidence were shaken?
What if you realized your confidence is derived from fallacious principles, and that you are feeling a false sense of financial security?
What if your portfolio could drop by 50% or more (while dutifully following traditional investment advice) and not recover within your lifetime?
If you were to discover that your 60/40 stock/bond portfolio is not the panacea it’s made out to be, the aforementioned concerns become more real--more potentially ruinous.
Unfortunately, I believe that outlook--albeit difficult to stomach--is much closer to our investment reality, whether you accept it or not.
The Purpose of this Book
In view of our current global economy and the critical flaws in investment theory, I’m writing this book to present my practical, logic-based outlook, and provide some simple solutions that may better protect your portfolio without sacrificing long-term gains.
For you to best understand my case and subsequent suggestions, you’ll need to grasp the basics.
In view of the precarious and unprecedented state of our global economy, and critical flaws in investment theory, prudent investors will challenge the traditional paradigm.