Boston’s South Shore is home to two varieties of money mysteries. There’s a big, almost unsolvable whodunit. Then there are thousands of smaller cliffhangers easily solved if the gumshoes kept the legwork simple.
The big unsolved mystery is the 1962 Great Plymouth Mail Truck Robbery. Surpassing the Brink’s job, the Route 3 theft of $1.5 million in small bills was the largest cash heist ever. Adjusted for inflation, that’s about $12 million in today’s dollars. In a highly orchestrated plot, two robbers dressed as policemen and stormed a postal truck. Wielding machine guns, they tied up the driver and guards. With little haste, the gunmen drove the truck to various locations then eventually abandoned it on Route 128 in Randolph. I can almost visualize the robbers meandering through Capen’s Circle and the ancestor to the Braintree split.
The smaller mysteries are the stories of many residents baffled by the wealth management process. Thinking they have to be the financial super sleuth, people sweep money conversations under the carpet at their own peril. It doesn’t have to be this way; you can crack the case. There is no need for you to don a Sherlock Holmes deerstalker hat or adopt Miss Marple’s busy-body nature either. However, we are in Massachusetts, so channeling your Puritan sensibilities is always recommended.
Follow these steps and increase your chances of financial success.
1)Start right away and make things easy
If you have not started saving already, jump on the bandwagon. Don’t wait for the perfect time to materialize. The perfect time doesn’t exist. Take advantage of your company’s 401k. If no retirement plan is offered, start your own IRA. Invest money you only plan to access in retirement. If you are opening up a non-retirement account, do not invest money you’ll need in the next 5 years.
2)Understand things will happen
Murphy’s Law is always in effect. Sooner or later a financial emergency will happen to you. Accumulate a cushion of 3 to 6 months of expenses, more if you’re a high wage earner. When the chips are down you won’t have to liquidate your investments to meet an urgent financial need. You could suffer steep losses if you have to sell in a down market.
3)Diversify and take a long term view
As the saying goes, don’t put all your eggs in one basket. Owning a well-diversified portfolio of stock and bonds assures investments are spread out. You’ll likely own more winners than losers. Consider this: the S&P closed at 740.74 December 31, 1996. On Sept 30, 2016 it closed at 2,168.27. When you invest across the market and hold long term you are very, very likely to make money.
4)Keep Fees Low
There is simply no need for a huge magnifying glass here. The less fees you pay the more money you keep. Over time fees can cost you thousands of dollars and paying higher fees than necessary is very common. To illustrate burden of high fees, run some scenarios through a financial crime lab. Most ple call it an online future value calculator. Use a 30 year time frame and an annual investment of $2,000 at 5%. You result will be $132,878. If you pay less fees it’s reasonable to increase the growth rate to 7% and you’ll end up with $188,922. The difference is $56,044 and that’s quite a chunk of change.
5)Hire a Fiduciary
A fiduciary has a legal obligation to put your interest ahead of his. That means a planner with a fiduciary duty must put your money in the best investment for you, not the investments that make him the most money. Find a planner that has a fiduciary duty for all your investments, not just your retirement funds. This needs to be the first question you ask a planner. If they’re not a fiduciary, stop the meeting immediately. You’re only asking for trouble if you stay there.
6)No Variable Annuities
These complicated investments have sky high fees, restricted liquidity and dubious tax benefits. Why put your money into widely criticized investments that you don’t understand? If your tax advisor or his friend is recommending an annuity, I strongly suggest you get a second tax opinion. The Wicked Smart Investor is a CPA, so don’t take this advice lightly.
7)Take risks you’re comfortable with
Here’s the tricky one. If you’re without investment experience, you probably don’t know what your risk tolerance is. In order for you to earn investment returns, you have to take risks. There is simply no way of separating the two. Expect volatility. Stock market growth is never a straight line up. Start somewhat conservatively and increase your risk level if you get more comfortable.
There you have it, the mystery is solved. You have mastered the basics of shrewd investing. I do suggest you work with a qualified planner to fill in the many gaps. But you now have a sound foundation.
Have some fun when you interview some potential advisors. Remember the 70’s Peter Falk show “Columbo”? It was great. Although brilliant, Lieutenant Columbo would purposely act like a bumbling idiot when initially investigating a case. The suspects did not feel threatened then mistakenly let their guards down. Columbo would gain information easily then use it against them by the end of investigation. When they found out how ingenious he actually was, it was much too late. So play dumb with the advisor in the beginning, act like you know nothing. If he does not stick to these basics, you probably shouldn’t hire him.
As far as the Plymouth Mail Robbery is concerned, don’t bother trying to solve this. The trail is cold and the statute of limitations is over. The FBI no longer offers a monetary reward. Why risk wasting your time super sleuthing this mystery? You’ll get nothing for it. Remember, Wicked Smart Investors only take compensated risks.