Educational Investment Seminar-Take Aways

This past March I held an educational investment seminar based on my career experience as an institutional and high net worth investor. The seminar content was also based on my Cornerstone Investments website. Since I am retired, this was simply a labor of love to provide investment and financial planning guidance and recommendations. There was no revenue to me and there was no effort to get business or clients, but rather an effort to provide independent and objective advice. Although the bulk of the seminar content covered typical investment and financial planning items, I also included sections on charitable giving and impact investing from a Christian perspective.   CornerstoneInvestmentsLLC

See Topic Content Here.

(The content is also listed further down this post.)

This was not a typical investment seminar with a fancy “gourmet” dinner and a pitch for an annuity or a stock strategy guaranteed to make you rich. Instead of a typical 2-hour dinner/presentation with a maximum of 6 Powerpoint slides, we started on a Friday evening and then continued Saturday morning. The seminar included a 77-page course book, and I tried hard to get through as many slides as possible. Not really. Actually, the plan was to cover items in the book that had broad interest. Ultimately, we covered about half of the content of the book. The seminar was held at my home church (Peace Church, 2180 Glory Drive, Eagan MN.) Attendance included 16 individuals with ages ranging from the 40s to 80. Most attenders were from Peace but there were several others as well. This proved to be a good-sized group that allowed time for discussion during the formal presentation and for additional comments during breaks.

Although there was no revenue to me, there was a recommendation to make a charitable contribution to the Peace Church General Fund. It felt good that the event generated $840 for the General Fund. “Professional” was a key seminar objective. My wife, Carol, has an IT background and she designed the professional marketing materials and formatted the course book for the seminar. She also played funny and engaging YouTube videos to provide light moments after complicated topics. Although there was no fancy dinner, there was plenty of good healthy food and ample leftovers that went to our Lao congregation for their Sunday morning lunch.

Although a broad group like this had different levels of interest and knowledge, we primarily focused on topics of common interest. Nevertheless, some topics that were covered had an interest level ranging from “High” to “Extremely Low.” For example, stock valuation elicited a range of reactions from enthusiastic to “when is he going to end?”

It was certainly a busy Friday night and Saturday morning. The Q&A portions were particularly beneficial as participants and I shared experiences and perspectives. Feedback showed a need for less jargon and more definitions. Another comment related to action steps on how to get started investing with the first $5,000. Some thought topics were covered too quickly, but there was a broad consensus that the content was applicable to real-world situations. I was told that I needed more of Carol’s funny YouTube videos, but I was not told what to cut out. Referrals were also provided for estate planning and a couple local advisers. Unsurprisingly, Pastor Tim and the Deacons welcomed the unbudgeted additional funds! On an overall basis, the evaluation responses were very positive and there were numerous requests for additional course books that necessitated a second printing. The word-of-mouth channel generated multiple requests to do it again. The feedback was constructive and it should be helpful as I consider a seminar targeted at millennials.

Highlights of Topics with the Most Interest:

Advisers/Brokers, Robo-Adivsors, Do-It-Yourself and Fiduciary:
This part of the seminar generated the most interest and discussion. Although many people might prefer a root canal to dealing with investment and financial planning items, there was a clear understanding of the need for a rational approach to retirement, education and other priorities. Most individuals would not attempt brain surgery on themselves, and they take their car to a local professional for overall maintenance, but they still remain uncertain about investment services. Here are a few key points:

The Do-It-Yourself (DIY) approach, sometimes called Self-Directed, is possible with a disciplined approach but it is not recommended for most individuals. Do It Yourself

-I think that most individuals need a trusted adviser that is a fiduciary. This service can be provided through either the traditional Registered Investment Advisor-RIA model or the robo-advisory services model.  See Outside Advisors

-I believe the new Robo-Advisory services that include access to an adviser are services that provide the right solution for many, and I also believe that these services will become increasingly popular and effective. See Robo Advisors

-Some brokers provide good service, but there is reason for caution for brokers due to potential conflicts using the commission-based model. See Brokers

Indexing:
Indexing is a an increasingly common and effective investment strategy. Indexing essentially uses low-cost index funds and it is generally best for most investors, whether large or small. Indexing is characterized as a passive form of investing that seeks to replicate all the stocks and their weights in an index like the S&P 500 index without attempting to pick outperforming stocks. Passive indexes stand in contrast to Active Investing. Active investing involves mutual fund portfolio managers who pick individual stocks with the expectation of generating a higher return than their benchmark or index. Most studies conclude that a passive index strategy generates higher returns than active strategy. See Active & Passive Investing.

Rebalancing:
Rebalancing a portfolio is necessary to keep the investment holdings in your portfolio at the appropriate weights. Since the various investment holdings within the portfolio generate different percentage returns over time in volatile markets, the overall portfolio increasingly deviates from your overall investment objective. As the portfolio gets increasingly skewed away from your investment objective, the portfolio is ncreasingly likely to generate lower returns and higher risk. Link in Terms. See Rebalancing

Financial Planning Accumulation Phase:
Analysis from Fidelity and JP Morgan show investment guidelines and mileposts for individuals at different ages and investment levels. For example, the analysis provides guidelines for investment levels for a 40 year-old seeking a specified portfolio level at retirement. See Asset Accumulation/Retirement MilePosts

The 4% Rule of Thumb for Retirement:
The 4% rule for retirement withdrawals is widely cited within the financial press and the financial planning community/industry. Although every situation is different, the 4% rule is a good starting point. However, I believe that a 4% withdrawal rate is too high due to current low fixed income interest rates and higher equity valuation levels. As a result, a 3.5% withdrawal rate offers more long-term security.

Social Security Claiming Break-Evens:
The Social Security section covered different social security claiming strategies based on analysis from Morningstar. Examples showed breakeven age levels for claiming social security at age 62 and at age 70. See Social Security into Website.  See Social Security

Charitable Contributions:
A primary objective of my Cornerstone Investments website is to bring a Christian perspective into the investment process. As a result, charitable contributions and stewardship are key factors. Items covered in the seminar focused on the benefits of giving to the local church, local missions and international missions. A key point of the seminar focused on economic studies showing the benefits of early-childhood education. Economic analysis also showed child sponsorship in foreign countries as having the biggest bang for the buck. Finally, websites were listed that rated charities based on their effectiveness, administrative costs, etc. Charitable Contributions

Values-Based Investing:
Values-based investing became prominent in the U.S. in the 1980s as Socially Responsible Investing sought to restrict investments related to the anti-apartheid movement in South Africa. In addition, Faith-Based investing developed based on religious convictions and the strategy generally avoids sin-stocks centered around alcohol, pornography, tobacco and gambling. Abortion, weapons and nuclear power are other common screens. Many faith-based investments also consider workplace issues and environmental factors.

Environmental, Social and Governance Investing-ESG is becoming increasingly common. ESG includes:
-Environmental-Climate change, emissions and waste, and resource efficiency.
-Social-Diversity, human capital & safety, product integrity and supply chain management, and community relations.
-Governance-Board & executive diversity, corporate structure, accounting & transparency, executive compensation.

Various mutual funds and ETFs were included in the analysis. The Vanguard ESG US Stock-ESGV, is a Cornerstone recommendation and a personal holding for Carol and I.  See Values-Based

Other Topics:
Other topics covered are listed in the Cornerstone website including Investment Objectives, Budgeting, Annuities, Fees & Expenses, Historic Investment Returns by Decade back to the 1920s, Expected Future Investment Returns, Stock Valuation and Markets & Economics. These topics are included in the CIA website.

Final Comments:
This seminar was an effort to Major on the Majors and to provide independent and objective investment advice. The Cornerstone website has even more content. Moreover, there are many professionals who can provide services for complicated and unique needs and objectives. Needless to say, I hope that this blog post and the links are beneficial for readers. Comments to this blog are always appreciated and helpful. At this point, I am considering a seminar targeted for millennials. And who knows, maybe the presentation will be updated and presented at Peace Church again.

Jeff Johnson, CFA
May 22, 2019

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