Do Your Homework to Save and Make Money

The following tidbits are all interesting financial information that could help you in your investing, saving or purchasing, but weren’t enough to warrant individual columns.

— Interviewing a potential financial advisor? They want to know five things in writing:

1. What are your goals and objectives with your finances?

2. What is your most pressing need right now?

3. Where do you see yourself in five, 10, 15 years?

4. Where are all of your assets invested now?

5. What is important about money to you?

And make sure your spouse includes his/her answers in writing.

The questioning should go both ways, though. So you might consider asking the potential advisor (with proof in writing):

1. How did you perform in the year prior to this three-year period?

2. How many clients did you lose in 2008 to 2009?

3. How did those clients perform when they were with you?

4. How did you perform during your worst one-year period?

— Remember what Benjamin Graham, Warren Buffet's mentor, said: "The essence of investment management is the management of risks, not the management of returns."

every single day

— For the next 19 years, 10,000 baby boomers will retire .

— Only one of 10,000 drugs that the pharmaceutical industry investigates will make it to market; of those that start clinical trials, nine of 10 don't work or aren't safe. Drug costs seem to do the opposite of Moore's famous dictum about computers doing more and costing less; the amount of new drugs invented per billion dollars of research money is halved every nine years.

— CEOs hired from outside a company are twice as likely to be forced out as those promoted from within. Part of the reason is that they historically underperform internal promotions: 0.5% average improvement in stock value compared to 4.4%.

For that reason, four out of five CEOs are promoted from within. Internally promoted CEOs also have the advantage of familiarity and hitting the ground running.

— It is a truism that people who try to time the markets underperform those who sit and wait. For example, from 1991 to 2011, the market averaged a gain of 7.8% per year, but the average investor only realized an average gain of 3.5%. The main cause has been identified as irrationally jumping in and out of the market.

It may help to have a written plan that you and your advisor create to keep you focused. It is sometimes called a "Ulysses Contract" to force you not to act hastily based on tips or the wild gyrations that the day-to-day market is prone to. You'll remember that Ulysses had his crew lash him to their ship's mast so that he could withstand the Sirens' deadly song.

— Another reason to "time arbitrage" is that if you had bought "value" stocks à la Warren Buffett in 1980 and sat on them through various slings and arrows, by 2010 you would have had outperformed high-priced "growth" stocks by 575%. Patience pays, hard as it is to wait.

Consumer Reports

— A ' survey showed that 23% of consumers bought an extended warranty, on appliances, in spite of all recommendations to the contrary. Extended warranties are the highest margin things that dealers sell, by the way, which shows you the power of expert salesmanship to prey upon our insecurities.

Consumer Reports

also found that only one-third of shoppers did their homework on the net before shopping. And only one-third tried to negotiate the price downward, although they were successful 70% of the time when they tried.

— An interesting side note on the recent banking crisis in the internet age; we will never again see a good old-fashioned bank run on the nightly news with people queuing up in the street outside the bank waiting for the armored car full of cash. Now most of our financial dealings are virtual, anonymous and we only know what we are told.

— 60% of American workers are dissatisfied, according to a survey by Accenture. The usual suspects are to blame: low pay, lack of control, lack of advancement possibilities, heavy workloads and long hours. But 70% plan to stay put out of fear of losing benefits and the perceived difficulty of finding a new job.

Read more:

Save Twice for Retirement and Other Tidbits You Can Use

Studies Reveal Saving, Career Satisfaction, Other Ephemera

Expert Recommendations for Financial Success