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Welcome to the Whole-Hearted-Way newsletter. I hope you enjoy this information and the practical tips. Feel free to email me with any topics you would like to see covered or great resources you would like to share. You may unsubscribe at the bottom. Enjoy! Meaningless Total Returns & Workshop March 3My practice used to be a suite of four offices in an old mansion in San Mateo, California. I really enjoyed decorating it and picking out the artwork for the walls. One piece of art that I bought was a painting from a Czech artist that I always wanted. It was a scene of the New York Stock Exchange. It showed all the specialists on the floor of the exchange in nice suits waving their hands and writing orders. Large monitors hang from the top of the walls throughout the room. The major reason that I loved this painting was that I knew that soon that scene would not exist. The old school way of a human being taking orders for a brokerage firm was filled with inconsistencies and ethics problems that went on for decades until recently revealed. Now that scene is being replaced by fewer specialists and a much faster electronic exchange. What this means is that the financial scene is changing all the time. This is the time of year when all the 2006 total returns for different indices come out. The Dow Jones Industrial Average (DJIA) returned 16.3%, the S&P 500 Index 13.6% and the Nasdaq returned 9.5%. So if you didn’t get these kinds of returns on your investments, does that make you a loser? No, not necessarily, although Wall St. would like you to think so. Here is the reason why. Mutual fund money managers and stock managers are paid to beat the market. After all, that is what you are paying them for. The average mutual fund fee is 1.3% and average managed brokerage account is 2%. That doesn’t sound like much but over the long haul, it adds up. That is why no-load index mutual funds and ETFs (Exchange Traded Funds) have become so popular. They have extremely low expenses and no active managers. Whatever returns the index gets, that is the return that you get. Sounds simple and easy, right? Well, yes and no. The DJIA is an index made up of large companies, and maybe you would like more diversification into the smaller companies that make up the Nasdaq index. See where I am going? It gets tricky trying to diversify across indexes and then there is the question of risk. Maybe you don’t want the risk of being in the stock market 100%. So how do you develop a portfolio with the amount of risk you want? You start to add bonds to the mix and you analyze risk ratios. I have had clients who are happy to be losers almost every single year. Why? Because they have a portfolio that is structured across various industries with a risk level that they are comfortable with, and they know what kind of returns that they are targeted to get. Doesn’t that sound like the level of comfort you would like to have with your money? That is the kind of money management that people really want and are willing to pay for. Remember these three elements- a diversified portfolio, an appropriate risk level, and a targeted return goal. So when I am at parties and people ask me what is the latest “hot” stock or mutual fund, I smile and say, “I don’t know.” News Flash! – I am giving a live workshop on financial planning concepts at the San Francisco Shambhala Center 1630 Taraval St. San Francisco, CA 94116 Saturday, March 3rd 10a.m.-5p.m. Cost: $50 Call 415-819-3065 to make a reservation or email me at fern@wholeheartedway.com. This is a one time event that I am doing as a benefit for the Center. I am very excited about this and hope to see you there! Past newsletters are now posted on my website, and check out the latest resources, too. Your feedback is always welcome and appreciated! Write to me at fern@wholeheartedway.com. <><><><><><><><><><><><><><><><><><><><><><><><><><><><> February 2007-- this column is produced by Whole-Hearted-Way and provided by Fern Alix LaRocca CFP® EA.
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