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Improving Investor Behavior – Managing Your Time Like Money

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This article originally appeared in the Denver Post, April 21, 2019.

As a financial advisor, I am typically hired by clients to help them manage their resources. Most often, these are financial resources including cash, investments, etc. Sometimes I help people to manage their business resources such as connecting professionals, encouraging action, and providing advice to help make sound decisions. But there is one resource that I help investors to consider, one that we all have, but tend to be terrible at managing.

That resource is time.

Because time is finite (we all have precisely the same amount of minutes in the day – 1,440 to be exact), it is our single greatest asset. We can’t create more of it, and it will continue to disappear if we choose not to use it. As a result, time is even more valuable than money. Ask anyone on their deathbed if they’d rather have $100k or another year to enjoy their friends and family and I’m sure you’ll hear the same answer time and again.

Historically, “traditional” companies sell products and services in exchange for cash, the most common currency. We trade money for a full pantry, warm clothes, and reliable transportation. We’ve come to expect this type of transaction, and we use software, services, and even financial advisors to help us manage money for products or services type purchases. But what about the businesses built to capture our most important currency?

Today many companies sell their products in exchange for time and attention. These companies tend to be web-based. Think services like Facebook, Instagram, Google, Netflix, etc. They exchange their product for your time. As a result, attention has become the most valuable currency in Silicon Valley and the war to collect more of it is fierce.

This results in the exploitation of some of our worst characteristics as humans. Consider the “pull-to-refresh” action in some of these apps. Sometimes we are rewarded with a new post, match, or picture. Sometimes we are not. But this intermittent reward is exactly what hooks people. Feels a lot like a slot machine, doesn’t it? There are studies on the chemical reaction that people experience, and yes it is very much an addiction.

Because attention has become so valuable, apps and services are designed to gather as much of it as possible, regardless of the psychological toll it may be taking on the user. This has a profound effect on people who may not be keeping track of their time budget. Just how much time did you spend on Facebook last week?

Recently I was introduced to the book, Making Time written by two early Google programmers who were instrumental in the creation of Gmail. The authors of the book laid out many examples of how technology rules our lives, and our time. They point out all the defaults that come with the devices we have in our pockets, purses, briefcases, at home, on our desks, and yes even on our wrists. If you think about time as a currency, you begin to change your mindset on how you spend your time, who takes (steals) your time, and how you might invest your time.

So many freely “pay up” with their time wallet, not thinking about time as a currency. How you invest the time in your time wallet is critical. Managing money can, and should, be applied similarly to how we manage time.  Wealth can be created and saved, but once the time is spent, it’s gone forever.

So I encourage you to apply some of the same methods we use to manage money and apply them to your time currency.

First, take stock of what you have. Without making an effort to change anything, merely monitor your time. Where are you spending it? How much of it is productive? How much of it is leisure? Where do you spend it and with whom? Track this and gain insight into where you currently stand.

Second, build out a budget. Ideally, how much sleep would you like to get? Do you want to budget an hour of your time for exercise? What about self-development via reading or taking a class? The habits we follow and the small things we do every day ultimately define us. Take the time to build out a budget and set an agenda for yourself. This will limit the feeling of being pushed and pulled in different directions all day.

Third, monitor and alter the budget as life changes. Nothing is set in stone and life is continually evolving. Your time budget should evolve as well. As you move toward making work a choice, your priorities are likely to change. Without working all day, you’ll find an ample amount of new time to budget. But I’ll bet the time spent at work resulted in feelings of productivity, accomplishment, and pride. Remember to find ways to keep these emotional “banks” topped off with revisions to your time budget.

Fourth, find ways to create more time. Now I’m not encouraging you to buy a second-hand Delorean, but there are ways to stretch the time you have available. For instance, hiring a fitness coach may result in a better workout, ultimately resulting in fewer visits to the gym or a better result in the same amount of time. A housekeeper may return time spent cleaning and dusting. Meal prepping on a Sunday means less time cooking throughout the week. Building a team of helpers and creating processes means you can accomplish more in the same amount of time.

Time is a resource, just like cash and investments. And while we are all blessed with it, it is still more valuable than gold. Take stock of how you spend your time and invest it well. It will pay a dividend greater than any available in the market.

Steve Booren

Steve Booren

Steve started his investment career in 1978 with the NYSE investment firm EF Hutton, working in the environment of a large investment company. Desiring to provide clients with objective investment advice, he founded Prosperion Financial Advisors. Learn more about Steve here.

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Improving Investor Behavior – Learn to Love a Falling Market

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This article originally appeared in the Denver Post, January 20, 2019.

The financial markets have given investors quite a ride in the past few months. Not only have we seen a drop in the prices, but the volatility and multiple-percentage point days seems to have investors feeling a little seasick. The first thing queasy people want to do is to get off the boat.

This is precisely the wrong thing to do, and here’s why. Thinking fluctuation is bad for investors is an incorrect perspective. Volatility is the stock market’s way of redistributing shares of great companies to their rightful long-term owners. When markets fluctuate as they have in recent months, it is nearly impossible to divorce yourself from the emotional powers of fear and greed. The price per share does not matter unless you are buying that day, or selling that day. Other than some “entertainment value.” daily fluctuation should be ignored.

“What makes stocks valuable in the long run is not the market. It is the profitability of the companies you own,” said Peter Lynch in Worth Magazine in 1995. I agree with him. Over time, as corporations become more valuable, sooner or later, their shares will sell for a higher price. Our contention is you need to remember you own a piece of successful, profitable companies.

When we experience moments in time like this past December, when prices decline temporarily, investors tend to get anxious and fearful. If you are a long-term investor who likes owning great-dividend paying companies, the short-term volatility should be irrelevant. If you do not intend to sell any investments for many years to come, why worry about what the prices are today? Short-term price declines cause many investors angst. That emotional heartburn is just one reason it makes sense to work with a professional who can help keep you on track.

Managing assets for the past 40 years, I often feel I live in what might be described as “investment manager hell.” When clients are excited, almost giddy with enthusiasm about the markets and economy, I tend to feel frustrated. Moments like these usually mean my favorite companies are overvalued.

On the other hand, when clients express frustration, anger, fear, or anxiety about the markets, I tend to get excited. This usually means my favorite companies are on sale. Remember that falling prices mean better deals. Sometimes the price drops so far, and so hard, it’s possible to pick up shares at fire sale prices. Panic can be an expensive emotion for sellers.

Rather than get caught up in the moment, we look toward the future and what opportunities may develop for investments. This is investment manager hell – loving “bad” markets and hating “good” markets. When you work diligently to understand each of the companies you may own as an investor, you realize the value of the company is the sum of the future cash flow that a company may generate. The higher the current stock price, the more over-valued that investment may be. Likewise the lower the price today, the more under-valued that company is. It may be a great time to increase ownership shares.

When prices are temporarily falling, rather than be fearful, recognize that you can purchase company stocks at lower prices. Try to make it a practice to never react to prices alone. A more in-depth, thoughtful approach is necessary to evaluate how a company is doing. Price should not be the sole indicator.

How you think about market fluctuation and, more importantly, what you do about it takes discipline. Often investors let fear and greed override common sense or wisdom. Don’t be a victim of the market. Remember, the best time to buy is when things go on sale. Investments are no different. Great investments, like great products or services, sometimes offer discounts. When they come along, buy them, keep them for a long time, and watch how that investment can pay off.

Steve Booren

Steve Booren

Steve started his investment career in 1978 with the NYSE investment firm EF Hutton, working in the environment of a large investment company. Desiring to provide clients with objective investment advice, he founded Prosperion Financial Advisors. Learn more about Steve here.

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Improving Investor Behavior – Focus on the Right Number

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This article originally appeared in the Denver Post, December 16, 2018.

With the year coming to an end, 2018 has been a tumultuous one for investors. For the first time in 46 years, there has not been a clear winner in any asset class: from stocks to bonds, emerging markets to precious metals. As of this writing, none are on track to generate a better than five percent return according to a recent article from Bloomberg.

With all the attention focused on performance and prices, little appreciation goes to what we believe is a most desirable outcome for investors: income. Why do most people invest? Income. Whether you need that income today or tomorrow, most people invest with the belief that doing so will provide, maintain or improve their income.

The problem is that some people tie their income directly to the performance of the market. After all, this is a common approach to investing. Step one, buy a bunch of your desired asset class (stocks, bonds, gold, real estate). Step two, hope their value improves over time. Step three, sell the asset when the price has improved using  the proceeds for income.

But this is akin to a farmer selling off acres of his land. As the area shrinks, so does his ability to grow crops. It becomes a downward spiral, eventually leading to asset depletion. This is what we refer to as a Growth for Income strategy, whereby growth is necessary for continued income. Years like 2018 make this strategy hazardous. No growth means it’s time for the farmer to sell some land, which makes generating income next year even more difficult.

The other risk is that of inflation. At a mere three percent inflation rate, the prices of food, fuel, and just plain living doubles every 24 years. That might seem like a long time, but that’s the age range of 60 to age 84. With better access to healthcare, science, innovation, and taking better care of yourself during the retirement chapter of your life, reaching age 84 is more likely. If your income has not doubled from 60 to 84, your standard of living is lower, and for many retirees, this is a problem. Often people do not realize this until it is too late.

So what can be done to protect income, and grow it at a rate that outpaces inflation?

There are many ways to approach this challenge, and you should ask your financial advisor if there’s one that may be a good fit for you. From my perspective, dividends are a solid way to grow income since companies distribute a portion of their profits from the business to investors, usually in the form of cold hard cash. Though not always, these companies are typically successful and established. Their dividend is a point of pride and offers them a vehicle to reward investors for owning their shares.

As a result, some companies maintain a long track record of paying a consistent dividend and even grow that dividend over time. Companies like Colgate, 3M, Coca-Cola, and Clorox  all have a long track record of paying and adding to their dividends. Better yet, as a result of the tax law changes enacted late last year, some companies chose to increase their dividend more than five percent, beating most asset classes this year. As in our farmer example, dividends paid are like income from the sale of the crops. The land is only a vehicle for generating revenue. We call this a Growth of Income strategy.

We believe Growth of income is a better strategy rather than Growth for income.

In times of extreme volatility and uncertainty, it’s easy to get thrown off your plan. But as we’ve seen time and again, abandoning a well-constructed plan in favor of an emotional reaction almost always leads to a poor outcome. This is why we encourage investors to keep an eye on their income, not their portfolio value. My guess is your real estate agent doesn’t call you every 15 minutes with an update on the value of your home. This would make even the best investors a little cranky, although this is precisely what investors do with the stock market. Using a cell phone and app, the value of your portfolio is only a glance away.

So as you wrap up 2018, I’d encourage you to look past the value of your portfolio. Try flipping to page two or three in your statement and find the income line. Did your income improve in 2018? Did it stay the same? Did it go down? Hopefully, your income is rising, and at a rate higher than inflation. Over a long period, this will lead to more choices, more opportunities, and greater freedom.

Steve Booren

Steve Booren

Steve started his investment career in 1978 with the NYSE investment firm EF Hutton, working in the environment of a large investment company. Desiring to provide clients with objective investment advice, he founded Prosperion Financial Advisors. Learn more about Steve here.

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Improving Investor Behavior – Longevity and the Fear of Running Out

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This article originally appeared in the Denver Post, July 15, 2018.

When do you plan to die? Weird question, right? It’s one that financial advisors have to ask their clients. The typical approach to retirement planning involves spending down the portfolio, a lifetime of savings for a client, at a rate that will ensure they have enough to live on now and for the rest of their life. The hard part is knowing how many years a person has left.

If risk is defined as the potential of making a mistake, I believe the most significant risk facing investors and their retirement is judgment about their life expectancy or longevity. Live too long, and you’re liable to run out. Die young? Well, you can see the problem with this. It’s a variable that few people like to discuss, so it gets tossed to the backburner with a “let’s just say 85 and go from there” type answer. Ask a client how long they’ll live, and nine times out of ten they say they will die at the same age their parents did.

The problem with this approach is advancements in healthcare, education, and technology. I think most Americans significantly and consistently underestimate their life expectancies. Much of this is due to the increased rate at which people are living longer.

Life expectancy is increasing due to innovations in vaccines and antibiotics; they have indeed caused our health to be significantly better. Stories of pandemic flu today are solved in a matter of weeks or months, yet just 100 years ago it wiped out millions. Tuberculosis and polio were common in the early lives of today’s 70-year-olds. Today they are non-existent. Knee, hip, and shoulder replacements are common, as are cataract and heart stents, enabling people with worn out parts to lead active lives free of what used to be life-limiting pain.

When baby boomers consider their life expectancy, they are using a measuring stick for someone who was born in the 1930’s, expecting continuing improvements in healthcare. But advancements in the past 30 years have been exponentially greater. This creates a significant gap between the estimates of how long retirees will live, and how long they actually live.

More concerning is the combination of a couple in retirement, and their joint life expectancy. It’s like taking the same issue and multiplying it by two.

Data reveals couples live longer than single people. This may be attributed to caring for one another, socialization, and plain old love. Living for another gives purpose to your day. Rarely do people plan for and consider the life expectancy of a couple. In all actuality, the issue becomes even greater than the sum of its parts.

Education is also a significant factor in determining life expectancy. Today, the vast majority of our population is well educated. Educated people have higher incomes, and are more active, eat better, and more in tune with their health. If education is the trump card to longevity, today’s Americans may break out way ahead in life expectancies.

Underestimating your longevity is a significant risk and can become a large financial problem especially for those planning to retire in the next 20 years. Pensions plans cover the life of the individual, but as those plans are replaced with independent retirement savings, will retirees be prepared? Social Security may provide a base of income, yet it escalates at an anemic rate (only 2 percent this year, 0.3 percent in 2017, and none in 2016) and inflation has historically risen at 3 percent per year. This means the purchasing power of your Social Security income falls in half in just 35 years. Live ten more years, say from 85 to 95, and you might see another 35 percent reduction in your purchasing power.

According to a study released this month from The Senior Citizens League, the reduction in the buying power of Social Security benefits from 2000-2018 was 34 percent. Some of the largest cost increases during this period were medical related: Medicare Part V monthly premiums (195%), prescription drugs (188%) Medigap (158%) and medical out-of-pocket expenses (117%). (Source: https://bit.ly/2ItT6NW)

Living longer is a goal to which we should all aspire. With advances in modern healthcare and technology, the goal seems more attainable than ever. As such, we need to start accounting and planning for longer lives and the effect it may have on your retirement. Your investments should support you at all stages of life, whether that’s 65 or 105, especially when going back to work is no longer an option. If you haven’t already, talk with your financial advisor to discuss your longevity plan so your money doesn’t run out before you do.

Steve Booren

Steve Booren

Steve started his investment career in 1978 with the NYSE investment firm EF Hutton, working in the environment of a large investment company. Desiring to provide clients with objective investment advice, he founded Prosperion Financial Advisors. Learn more about Steve here.

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The 3 Paychecks of a Modern Retirement

On November 29th, the oldest living person in the world, Emma Morano will turn 117. Based on my research she is the last living person to have been born in the 1800s. While some people might marvel at all she’s seen and been through, I ‘m curious about what she did during her more than 50 years in retirement.

With life expectancies continuing to grow, from about 69 in 1970 to almost 79 in 2012 here in the U.S., this examples illustrates my point: I think the traditional picture of retirement will look very different in the coming years. Palm trees and Pina Coladas are fun for a little while, but 50 years of it would surely drive many of you insane.

With our dividend strategy we aim to keep checks coming for clients, because we believe in a steady growing income. But there are two other “paychecks” I encourage clients to pursue as well.

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Steve Booren

Steve Booren

Steve started his investment career in 1978 with the NYSE investment firm EF Hutton, working in the environment of a large investment company. Desiring to provide clients with objective investment advice, he founded Prosperion Financial Advisors. Learn more about Steve here.

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The Role of a Fiduciary – Putting Your Interests First

Starting my career with a large very well-known investment firm some 38 years ago taught me valuable lessons we use to counsel and advise clients. During that 18 year period of disappointing (biased) research and proprietary investment products that were actually manufactured by that company, I continuously asked the question: “What about my clients?” You see, inherently I felt I worked for my clients, not some financial services firm. It was by my nature and core that I cared about clients first and always sought to put their interests above that of my own or the company that wrote me my paycheck.

As many of you have undoubtedly heard, regulatory changes are coming to the finance industry pertaining to “fiduciary standards” and the obligations we have as financial professionals with respect to retirement accounts.

Let me be clear: we embrace these changes as we serve as a fiduciary for your money in advisory relationships, just as I believe we always have.

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Steve Booren

Steve Booren

Steve started his investment career in 1978 with the NYSE investment firm EF Hutton, working in the environment of a large investment company. Desiring to provide clients with objective investment advice, he founded Prosperion Financial Advisors. Learn more about Steve here.

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Brainworks – Simple Strategies for Staying Sharp

Steve Booren

Steve Booren

Steve started his investment career in 1978 with the NYSE investment firm EF Hutton, working in the environment of a large investment company. Desiring to provide clients with objective investment advice, he founded Prosperion Financial Advisors. Learn more about Steve here.

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The Power of Growing Dividend Income

We create and communicate ProsperOn’s to deliver timeless, valuable wisdom to our clients, with the hope to provide greater clarity, capability and confidence. In other words to help people be better investors. We hope these are valuable to you and your family.

By now most of you have heard us preaching the gospel of our Growing Dividend Strategy. At the very core of our investing philosophy is the notion that our clients invest for income. That income may be for today, or needed sometime in the future. But the crux is almost always income.

A focus on income invites unique challenges and opportunities. For instance, the largest challenge is a continually growing income that outpaces inflation, the “consistent hill” that always needs climbing. Without growing income the purchasing power of your money will decrease over time, along with your standard of living.

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Steve Booren

Steve Booren

Steve started his investment career in 1978 with the NYSE investment firm EF Hutton, working in the environment of a large investment company. Desiring to provide clients with objective investment advice, he founded Prosperion Financial Advisors. Learn more about Steve here.

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Are your Heirs Prepared for Their Inheritance?

If you’re anything like the majority of our clients, you already have an estate plan in place. This likely covers all the general aspects of passing your wealth onto your heirs. It details investments, savings, totals, and all the other items that require crossing the “t’s” and dotting the “i’s”. Yet we believe there are many important areas an estate plan does not cover. It boils down to one simple question: Your estate plan is in place, but are your heirs prepared?

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The 8 Best Financial Apps for Money-Conscious People

You’d be hard-pressed to find someone without a smartphone or tablet these days. Companies like Apple and Samsung have redefined how we communicate, what we rely on, and our ability to access information. Around here, we call this device a “de-materializer” because you no longer need to carry a phone, calendar, watch, calculator, music player, or a computer. Instead, you have access to all those functions and plenty more in one small device.

With so much access to information, how can we use these devices to make our lives easier? From market data to mobile price checking, I’ve selected my favorite financial apps that every money-conscious person should have.

eMoney (Wealth Vision)

emoneyFor those of you who utilize our complementary WealthVision service, this app gives you instant access to your entire financial dashboard. It makes it easy to track your spending, access your document Vault, or follow your investments in one place.

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John Booren

John Booren

John started his investment career in 2012 after graduating from Colorado State University with a bachelor’s degree in Financial Planning. His desire is to provide care and guidance for individuals and families through all aspects of their financial life. Learn more about John here.

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