While some planners charge a minimum annual retainer, there are planners who offer a limited engagement rate or even an hourly rate. And, with today’s web technology, you and the planner don’t have to live in the same area. Two places to find such services online are www.myfinancialadvice.com and www.garrettplanningnetwork.com. 

Always look for a fee-only financial planning advisor who adheres to a Fiduciary Standard, which means they act in the client’s best interests. These advisors are not Stock Brokers or Registered Representatives who benefit from selling you an investment or financial product. Fee-Only Financial Advisors sell only one thing—their knowledge. You can learn more about fee-only financial planning at www.napfa.org.

A second option is to teach yourself the basics of money management and investing through books, classes, and websites. The problem here is choosing wisely, because there is so much material available. The following guidelines may be helpful:

• Beware of any source that promises you overnight wealth or makes claims that sound too good to be true.
• Be cautious about sources promoting only one idea, such as buying real estate. Even if the author’s advice is sound for that one type of investment, it isn’t wise to plan your financial future around only one investment strategy. Look instead for sources like my own co-authored book Conscious Finance which teach you the fundamentals of investing and money management.
• Be aware that authors or seminar instructors will usually have a secondary purpose of publicizing their products or services (as, you may have noticed, I just did in the previous point). There’s nothing wrong with this; just consider their possible biases as you evaluate their information.
• The websites of online brokerage firms include a lot of basic investment information, and you can also find many articles from financial journalists online or in business magazines.

As you learn about investing, focus on some basics:
• Buy mutual funds, not individual stocks.
• Learn what “diversification” means, and practice it.
• Max out IRAs, as well as your 401(k) if your employer offers one.
• If you invest with a broker who earns commissions, comparison shop and insist on full disclosure of fees and costs.
• Be the tortoise, not the hare: invest for the long term instead of trying to build wealth overnight.
• Have a spending plan, and follow it.
• Don’t overlook estate planning. At the absolute minimum, make a will and provide for your family’s future with term life insurance.

Making sound financial decisions on your own is possible. What it takes is your willingness to invest time and energy in your own financial future.

Rick Kahler, MS, CFP®, ChFC, CCIM, is president of Kahler Financial Group, the first Fee-Only financial planning firm in South Dakota and recognized by Bloomberg’s Wealth Manager as the largest financial planning company in a seven state region. Kahler is a past chairman of the South Dakota Investment Council, managing $6 billion. He has co-authored four books on personal financial planning, including the recently published book Wired for Wealth: Change the Money Mindsets That Keep You Trapped and Unleash Your Wealth Potential (HCI Books).

First you’ll need to find one or two mutual funds you’d like to purchase.  If you don’t already have a fund in mind try referring to the list of the top 25 mutual funds published by Kiplinger each year (the list is available for free at www.kiplinger.com).  When you begin researching mutual funds you’ll see the minimum purchase amounts range from about $1,000 to $25,000 per fund.  Not many investors can afford these minimums, especially if you’re still in school or just starting your first job.  But the opportunity to invest is not lost.  Each fund you’re researching is run by a mutual fund manager, and that manager is responsible for deciding what stocks to buy and sell within the fund.  You may not have known that what stocks each mutual fund manager buys and sells is public information and is available for free to all investors.  In fact, a list of each fund’s holdings can be found on almost any stock research website including www.morningstar.com and www.finance.yahoo.com.  The top stock holdings are also listed directly on each fund’s website and in their prospectus, which is the fund’s primary selling document and acts as the fund’s owner’s manual.  A prospectus can be requested free of charge directly from each mutual fund company. 

Your next step is to research the different stocks owned by the mutual funds to make sure they’re a good fit for your portfolio and meet your investment needs and risk profile.  You should then calculate how many shares of each stock you can afford to buy. 

Finally, you’ll need to determine how to actually purchase the stocks you want to buy.  You can either buy them directly from the parent company or you can open an investment account at a brokerage firm which allows you to trade stocks.  For advice on how to open an investment account see my article titled, “Where To Open Your Investment Account."

By purchasing individual stocks instead of mutual funds, you’ll be able to avoid high minimum investment requirements and save on mutual fund expenses and commissions.  This strategy is also a great way to learn from the smartest investors for free.  Take Warren Buffett’s Berkshire Hathaway fund for example.  Just one of his fund’s “A” shares will cost you well over $90,000 (ticker symbol: brk.a).  But you can see a list of what stocks his fund owns for free and then purchase those stocks directly for only a few hundred dollars.  Of course, you won’t have Warren Buffett’s expertise of knowing exactly when to buy and sell each stock, but you’ll be able to closely copy his investment style without having to break the bank.

The phrase “fiduciary duty” means very little to most 21 year olds. I really didn’t fully understand the term either until I participated in Stetson University’s Roland George Investments Program, a student managed investment portfolio approximating $3 million.  Upholding a fiduciary standard means that you are now entrusted with managing someone else’s finances-and you are expected to act solely in the best interests of your client.

This term becomes real as you consider the awesome responsibility and challenges involved with managing such a fund. At this point you might ask, “What defines responsible management?” Is it simply investing wisely in stocks with the most perceived value, funds with neither too much nor too little risk, or developing and maintaining a portfolio that matches the client’s risk tolerance? Is it simply maximizing shareholder wealth?  Or does the phrase run deeper; do ethics play a part … a large or small part?

Part of my “fiduciary duty” entailed recommending a stock to the class, which would then be approved or denied by a board of trustees consisting of four students and three faculty members, majority rule applying. Mine and other qualified stocks were presented and some were approved throughout the semester. One stock in particular was brought forward, which raised ethical questions. This stock was a holding company whose primary line of business was a string of nightclubs providing live adult entertainment.  Technically, the stock met all criteria set forth by the class at the onset of the semester: It was small cap, growth oriented, undervalued, with increasing earnings per share – and it exceeded all these predetermined standards.

Among many other things, Stetson University actively promotes gender equality, and while some may point to gentlemen’s clubs as a lucrative job market for young women, many feel the practice and the mentality behind the practice severely demean the value of women.

Although the stock surpassed expectations at one level, the question was put to every member of the class as to whether the stock was actually a responsible investment. Did the stock represent the university’s core values or were they in large part compromised?  Did the absence of language prohibiting such an investment mean the previous question was a non-issue, or must a student-managed, donor-funded portfolio answer to the university’s values? Are we as investors restrained by only what is disallowed, or are we held to higher standards as human beings? Did our “fiduciary duty” require us to value stocks solely on the basis of their returns, and would one be wrong to not approve such a stock?  Whether or not the resolution was voiced, each member of the class came to a conclusion.  After vigorous debate on both the technical and ethical merits of the stock, it was decided that the stock would not be purchased. This was not a unanimous decision, however.

Unfortunately, many people solely define what is ethical by what is lawful: To be ethical means to abide within stated regulations and/or pay for the damages – and many companies and organizations operate on this premise. Businesses pay fines determined by courts rather than doing the right thing at the beginning. Ethical decision-making has become susceptible to cost-benefit analysis.  All other things being equal, what sets individuals apart in the workplace and in life in general is that some individuals hold themselves to higher ethical standards.  Most students I’ve encountered were searching for quality positions upon graduation, and what I’m afraid some failed to recognize, is that quality businesses are looking for quality individuals.  These are individuals who hold themselves to higher standards, who think and act independently with a critical and thoughtful mind, rather than let their actions be determined by society’s predetermined lowest level of responsibility.

The decision regarding the gentleman’s club stock was no different than what we all face day in and day out. It was just one decision that intensified the dilemma, questioned our understanding of responsible behavior, and made us examine our individual moral convictions.

Nathan McPhail earned a BBA in Finance in 2008 from the School of Business Administration at Stetson University in DeLand, Florida. He currently resides in DeLeon Springs, Florida.  He is employed as a financial analyst by the Fastenal Corporation, one of America’s largest industrial supply firms.

Roland George Investments program at Stetson is: http://business.stetson.edu/george/

Are you a trader or an investor?

 
Traders react to short-term changes in the stock market while investors take advantage of long-term trends.  Traders buy and sell stocks weekly, daily or even hourly, while investors use a buy-and-hold strategy that leads to investment gains over the long run.  Unless you have extensive knowledge of the markets and hours a day to research stocks, your money is safest as an investor.  But to be an investor you first need to know how to think like one.  That means you need to learn how to analyze current trends in our economy and see what has the best long-term growth potential.

Take the health food trend for example.  There’s been a huge marketing blitz over the past few years to encourage consumers to eat healthy and make smarter decisions about their diet.  But does this trend have the potential to make you money?  To answer this question you’ll need to examine the trend from three perspectives.  First, determine which companies could potentially do well and continue to gain popularity as the trend continues.  Second, determine which companies will do poorly as a direct result of the trend.  Third, identify the companies whose futures are uncertain, meaning they could be impacted either positively or negatively.  These are the companies you should avoid until the trend stabilizes.

3 Questions For The Health Food Trend

1. Which companies will do well?

• Producers that make and package health food
• Stores that sell health food
• The health food products themselves

2. Which companies will do poorly?

• Fast food franchises unwilling to adopt healthy menus
• Producers who make food high in fat and carbs

3. Which companies should you keep your eye on?

• Companies in the healthcare industry: As more people eat health food there may be less need for treatment of heart disease, diabetes and other related illnesses.  However, as more people monitor their diet they may be willing to spend more on preventive care.  It may be too early to tell how the healthcare industry will be affected by the health food trend.

Once you’ve identified the trend and the industries involved, your last step is to identify the actual companies that you expect to outperform the market.  This complete process is called “Top-Down Investing” and involves looking at the big picture in the economy and then breaking down a trend into finer details until you finally decide which companies to invest in.  For this last step - identifying the specific companies to invest in - you’ll need to search the internet and newspapers for articles that will give you an indication of the company’s financial stability.  As a general rule, you should spend at least 10 hours researching a potential stock before committing to buying it.  By using the Top-Down Investing approach you’ll be taking advantage of long-term market trends and learning how to think like an investor.