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Dear Investor, What The Hell Are You Doing?

Ken Weber

With Ken Weber, President of Weber Asset Management, Inc. and author of  “Dear Investor, What the Hell Are You Doing? Smart and Easy Ways to Fix the Mistakes You Make With Your Money”

Before you can become a smart investor, you’ve got to make a few mistakes—but you don’t want to repeat those mistakes.

With over 30 years of experience in the investment industry and recognized as one of the leading mutual fund experts in the country, Ken Weber knows more than a thing or two about smart investing and educating yourself against repeating bad financial behavior. His book, Dear Investor, What the HELL Are You Doing?: Smart and Easy Ways to Fix the Mistakes You Make with Your Money is the antidote we, as investors, all need.

Financial wizards and amateurs alike can be baited by the power of emotions into making risky or bad financial decisions. Greed can cause us to plunge into dangerous waters during a bull market and fear can lead us to foolishly head for the hills in a bear market.  Just as it is with laying off the cigarettes, it takes behavior modification to resist the pull toward making bad financial choices and to avoid those triggers that drive us toward them.

Ken says that once you know what not to do, it’s a much simpler path to being a good investor, and the best way to change bad habits and quell risky impulses is through education. It’s vitally important to have a trusted and competent financial advisor who “in addition to taking good no-load mutual funds for our clients is being that helping hand, being that voice on the other end of the phone they can call when they feel nervous.  That’s clearly part of helping people get out of their traditional ruts.” Sort of like a 911 for investors.

Ken’s book covers the all-important subject of assessing your particular money needs and goals and having a strategy for long-term wealth. Grabbing onto a pie in the sky opportunity for a 15% return—as compelling as they may be—has to be viewed in context of many factors and often is not worth the overall gamble. Rates of return always will vary with economic climates, so aiming for a reasonable 6 to 7 % return on your money pretty much covers all the ups and downs to which the market will always be privy. A rising tide makes everybody a genius. So in today’s period of a 5-year boom market, Ken strongly cautions against timing the market. Instead, you should assess your station, your age, and your life goals.

Especially now that we are an aging population (and one that is aging quite well), it’s more important than ever to invest wisely so that our money lasts longer. Life insurance companies know this—they’re now running illustrations out to age 113.

One of the subtitles in Ken’s book is “I don’t know, you don’t know, they don’t know”, meaning that Ken Weber doesn’t know and the talking heads on television don’t know.  Everything is just an educated guess and you don’t invest your nest egg based on guesses.

Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital.  Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions.  Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances.  The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.

Read The Entire Transcript Here

Steve Pomeranz: My next guest has more than 30 years experience in the investment industry and is known as one of the premier mutual fund experts in the United States.  He’s also a founding member of Fidelity Investments RIA Advisor Council and the Financial Planning Association.  He’s a co-author of a new book, Dear Investor, What the HELL Are You Doing?: Smart and Easy Ways to Fix the Mistakes You Make with Your Money.  My guest, Ken Weber.  Hey, Ken, welcome to the show.

Ken Weber: Steve, good to talk to you.  Thank you.

Steve Pomeranz: Sometimes you say it’s the negative that proves the positives.  In other words, knowing what not to do may be more valuable than knowing what to do.  Explain that.

Ken Weber: Yes, I say that pretty early in the book is that a lot of people are intimidated by investing, and my philosophy—and probably yours—is smart investing is not that difficult once you clear away all the mistakes.  Truly, the book came out of hundreds or thousands of conversations I’ve had with smart people who were doing dumb things with their money.

Steve Pomeranz: I think we’ve all done dumb things with our money.  That’s how we got a little smarter, right?

Ken Weber: Everybody, me, you, my partners in the business.  We all make mistakes, but you got to learn from the mistakes, and those of us who are professional, at least we have the advantage of our feet are in the business every day, and our feet are helping the fire every day, and so we learn from our mistakes.

Steve Pomeranz: I agree with your statement that once you know what not to do that successful investing really isn’t that difficult. But I want to take one exception to that because I think the math, I think when you talk about the math of investing and how to think and so on, you’re right, but when you talk about the behavioral aspects of investing, I think it’s a lot tougher and I think it’s even tough for those of us who have been in the business for a long time because, human nature being what it is, we all are subject to these forces that affect us that we may or may not be so aware of.  First of all, would you argue that point or would you agree with that point?

Ken Weber: You and I are in total agreement.  There’s nothing that you said just now that is not in the book.  When we talk about your investor, “What the hell are you doing?”, it’s behavioral issues primarily, basically.

Steve Pomeranz: Let’s talk about some of the behavioral issues real quick.  We know fear and greed, emotions cause you to flee in a bear market and to plunge head first into a bull market.  How does one emotionally directly counter that kind of almost primal feeling and the consequent action you take because of it?

Ken Weber: Yes, and it’s not easy, and I guess it’s just like other behavioral issues, whether it’s drinking or eating or a gambling addiction, it’s so much easier if you don’t try and do it all by yourself.  Those of us, like you and I, who are in the field, we can be that shoulder to lean on.  Clearly, the one word that helps people is education.

Steve Pomeranz: That’s right.

Ken Weber: One of our primary

Steve Pomeranz: I know one of the things that I do as I counsel myself through these times, is I go back and read the great writers and those individuals who I learn from, successful investors, Warren Buffet and so many others, and I go back and I start reading them again, just to remind myself and get re-grounded.  Do you do something like that?

Ken Weber: No, but that’s a great idea, but I don’t do that.  I think I’ve got burned enough early in my life. I’ve been permanently branded, and so I try very hard to pass those experiences along to my clients.  One of the things I want to say is our clients, as I’m sure for your clients, they span a spectrum from very novice investors, inexperienced to highly sophisticated investors.  It doesn’t matter, people still are subject to human emotion, and I don’t want people to feel that I won’t get this book because I’m not an investor.  Everybody is an investor.

Steve Pomeranz: That’s true.

Ken Weber: Or should be.  As long as you have excess cash, you should be figuring out what do I do with this money?  How do I think about where I’m going to be in 5, 10, 15, 20 years?  I just wrote an article for the Huffington Post a couple of weeks ago (I’ve just become a guest columnist) about if there are a few medical breakthroughs, in cancer, heart disease, we’re all going to live longer.  If you’re 75, you’re still investing for decades.

Steve Pomeranz: Absolutely.  The old adage of taking 100 and subtracting your age, that’s got to be out the window now because you need those extra returns.  You need that money to last a lot longer.

Ken Weber: Exactly.  Exactly.  Nick Murray, just in the last week—who’s known in the industry—he’s been railing against that type of thinking, saying most people need to have a little bit more risk, meaning more stock exposure in their portfolios because most of us now know somebody who’s past 100.  Look, 60 Minutes just a week ago did a whole report, two of their three segments, on what seems like it could be—fingers crossed—a major breakthrough in cancer research.  Well, if that comes to fruition, people who were going to die at 80 or 90 now may live to be 105, 110.  If you’re 80, you’re still investing for 3 decades.

Steve Pomeranz: I was working with a client to secure some life insurance just to analyze it for them and to make sure that the insurance agent was doing the right things.  Do you know that that particular insurance company required him, the agent, to run the illustrations out to age 113?

Ken Weber: There you go.

Steve Pomeranz: That was a shock.

Ken Weber: I’m surprised to hear it, but that’s what it’s got to be now.

Steve Pomeranz: Right. Let’s talk about another aspect of this and in 1999, when we were in that huge internet stock, tech stock bubble, when you would speak to clients or individuals and you ask them, “what do you think the rate of return on the stock market would be,” they would go, “oh, I should be able to get 15% a year?”

Ken Weber: You know, I’ve done a whole bunch of radio interviews, Steve, that’s one of my stories.  Have you been tailing me around?

Steve Pomeranz: I have not.  I have not.  Tell us your story.

Ken Weber: I actually talk about clients who would say, “Ken, I’m not greedy, I just want a nice steady 15% a year and I’ll be happy.”

Steve Pomeranz: Yes, I know.  I mean, you truly own half of New York City if you live to be 100 years at 15%.

Ken Weber: Right.
Steve Pomeranz: However, now after the 2008 crash and kind of a mediocre decade—because of the fallout after the tech bubble, then the rise, then the real estate bust and all of this—if you tell people, “well, it’s possible that you’ll get an 8 or a 9% rate of return,” they go, “that seems really high.”  In one psychological context, 15% seems normal and in another, 7 or 8% seems really high.

Ken Weber: Right.  Right.

Steve Pomeranz: How does the average Joe think about that and how can you help them?

Ken Weber: I actually have a small section in the book about how do you define success?  One of the definitions is if you go to an advisor, to have done better than you would have on your own, to do better than your neighbors, and it’s always, you’re correct. It’s always within context of what is the overall market doing.  I always step away from the question, “Well, what do you think I’m going to make?”  It’s really rough, over the last 70 or 80 years the stock market has returned somewhere between 7 to 9% annualized.  I think we can sort of look at that number going forward, but it’s always safer to lean towards the lower number. So 6 to 7%, I think, is  reasonable and then, if and when you do better, that’s gravy.

Steve Pomeranz: Yes.  One of the characteristics of people’s buying behavior, too, is that when prices are rising, first of all, if you’re a do-it- yourselfer, or you just have a fixed portfolio of index funds, and there’s nothing wrong with either of those—a rising tide makes everybody a genius.  A rising market makes you a genius.  When the markets turn like they did in 2008 and 2009, everybody is running for the hills and, all of a sudden, all of the geniuses disappear.  As a matter of fact, there’s an old saying from Warren Buffet, you can only tell who’s been swimming naked when the tide goes out.

Ken Weber: Right.

Steve Pomeranz: Right?  Today I meet with people and they’re doing pretty well.  They feel pretty good about themselves.

Ken Weber: Yes, it’s a 5-year boom market.
Steve Pomeranz: Yes, so what are they supposed to do or what would you say the correct thinking is?  You’re reaching this 5-year bull market.  You’ve done very well.  You’ve thrown some darts and they’re all working out.  What’s next?

Ken Weber: Well, you bring up a lot of issues.  You know, and we basically always caution against timing the market.  At every given point in your investing life, the client, you the investor, has to say, what is this money for?  Is it for the next 6 months, the next 10 years, the next 20 years?  If it’s for the next 6 or 12 months, you want to keep it conservative.  If it’s for 5 years or more, you can certainly take on more risk.  You know, I always steer away from making predictions, but I will say that I’ve been predicting a bear market for the last 7 or 8 months and I’ve been wrong, but I’ll be right eventually.

Steve Pomeranz: Well, that’s true.  Some ties that I wear will come back in style one day, as well.

Ken Weber: Yes.  I know I’m happy to say I’m wrong about my predictions because it just—I want to point out to people that one of the subtitles in my book is “I don’t know, you don’t know, they don’t know”,  meaning Ken Weber doesn’t know and the talking heads on television don’t know.  Everything is just an educated guess and you don’t invest your nest egg based on guesses.

Steve Pomeranz: Yes.  I guess the way to say is, “I don’t know so don’t ask me.”  Right?

Ken Weber: Well, yes, but they will so we just say we don’t know.

Steve Pomeranz: Exactly.  The book, once again, is Dear Investor, What the HELL Are You Doing?:  Smart and Easy Ways to Fix the Mistakes You Make With Your Money.  It’s a book, I will tell you, Ken, that I wish I wrote.  I should have written this book, Ken, and it’s all your fault that I didn’t.

Ken Weber: All right.  You can get a copy for $9.99 on Amazon so you won’t feel so bad.

Steve Pomeranz: Okay, shameless plug.  My guest, Ken Weber, one more time.  The book is Dear Investor, What the Hell Are You Doing?:  Smart and Easy Ways to Fix the Mistakes You Make with Your Money.  Thanks for joining us Ken.

Ken Weber: Steve, I really enjoyed it thank you.