Category Archives: Investment Planning

Investment Strategies for Your Retirement Accounts

InvestMy Comments: A phrase I’m known to use from time to time is that ‘life in this country is better with more money than it is with less money.” While this might seem too obvious for you, there are many people whose efforts to have more money have fallen flat. Here’s a few ideas that might help you.

Michelle Mabry, CFP®, AIF® January 26, 2017

With interest rates coming off a 36-year low and expected to rise, most investors expect to see bond prices fall and consequently deliver a negative return in what is considered a low-risk asset. We have seen a rebound in equities, and with the S&P 500 and Dow at all-time highs, some say the stock market is richly valued. As a retiree seeking income from your investments and looking to preserve your principal, where can you turn? What are ways retirees can invest for income and still minimize risk?

You have always heard you need a diversified portfolio and that has not changed, but what has changed is how you diversify it. Retirees need to determine the proper asset allocation of stocks, bonds, cash and alternatives based on income needs, time frame, and tolerance for risk.

How to Diversify Investments in Retirement

Let’s look at bonds first. If you invest in a traditional bond portfolio you are exposing yourself to interest-rate risk as rates rise and bond prices fall. You need to understand the average duration of the bond investments you hold. For example, a typical intermediate-term bond fund will have a duration of 5-10 years. If the average duration is eight years, then a 1% increase in rates will result in an 8% decrease in the net asset value (NAV). This would wipe out all the interest gains and then some. The shorter the duration, the less the potential loss.

So it is important to look for other assets that have low-risk characteristics or standard deviation similar to bonds but produce absolute returns, that is, a positive return regardless of which way rates are moving. Floating rate income, TIPs and some market neutral funds can be a good way to diversify your fixed-income portfolio. You may also want to look at structured notes as a way to produce yield and protect your downside.

Dividends as Equity

For the equity portion of your retirement portfolio, consider blue chip dividend-paying stocks or dividend growth strategies. Many large-cap funds pay dividends in excess of 2.5%, plus you have the upside appreciation potential over time to keep pace with inflation during your retirement years. Remember to keep focused on the longer term and not be too concerned with short-term volatility. Dividend-paying stocks have outperformed most other asset classes over time. Small-cap stocks have been one of the best-performing asset classes, so it would make sense to find dividend-paying small- and mid-cap equities as well.

When searching the universe of mutual funds and ETFs, there are not many of these, but a couple that have attracted our attention are WisdomTree Midcap Dividend Fund and WisdomTree Small Cap Dividend Fund with yields of 2.63% and 3.03% respectively as of December 30, 2016. Of close to 2,000 ETFs available in the U.S., a search revealed only four that are exclusively dividend-driven and which also hold just domestic small- or mid-cap stocks. Two of the portfolios feature issues that have exhibited dividend growth while the other two ETFs (the WisdomTree funds) include all dividend payers in their capitalization range.

Include Alternative Assets for Diversification

Also important in developing a portfolio for retirement is a focus on absolute return strategies, and many of these fall into the alternative asset class. Alternatives are anything that is not a stock, bond or cash. Alternatives have no correlation or negative correlation to other asset classes so they are great diversifiers. Our retired clients typically have one-third of their portfolio in alternatives. Examples include managed futures and long/short strategies as well as volatility strategies using options. An example is LJM Preservation and Growth which has shown a positive return every year since its inception 10 years ago with the exception of one year, 2013, when the stock market went straight up and there really was no volatility. The fund was up in 2008 when stocks and bonds were not, and therein lies the importance of a diversified portfolio to manage risk.

By rebalancing your investments quarterly or semi-annually back to the original investment allocations you can create the cash needed to sustain your monthly withdrawals in retirement until the next rebalance. We do not recommend a withdrawal rate in excess of 4% in light of current market and economic conditions.

Wall Street’s 2017 Forecasts And Campaign Promises

rolling-diceMy Comments: We’re almost there. Whether it turns out OK or not remains to be seen. I suspect it’ll turn out better than many forecast and worse that many expect. Where you and I will fall in all this is a total unknown. But the combined intellect of those making these forecasts is staggering, so I’m paying attention.

by Julie Verhage / December 16, 2016

It’s a good thing that Wall Street analysts didn’t finish up their year-ahead outlooks prior to the U.S. Presidential election, because in the words of Deutsche Bank AG’s Chief U.S. Economist Joe LaVorgna, Donald Trump is “a game changer.”

At the end of each year, Wall Street firms publish outlooks for the next 12 months. While it is already difficult to forecast what the S&P 500 Index, for instance, will be trading at in roughly 365 days, having a regime change in Washington makes things even more complicated. Just ask Goldman Sachs Group Inc., which was stopped out of 5 of its 6 top trade ideas last year before Valentines Day.

“We can’t recall a time when a change in leadership in Washington had the potential for such large and diverging effects on the U.S. economy,” Bank of America Merrill Lynch analysts said in a recent note.

Strategists are thus doing their best to hedge their calls, with JPMorgan Chase & Co.’s equity outlook saying, “Due to uncertainties, these impacts [Trump’s campaign promises] are not incorporated into our base case earnings forecast until there is more clarity around which policies will be emphasized and/or are politically feasible.”

But given the market’s forward looking nature, that uncertainty hasn’t stopped a number of banks from at least trying to calculate what a Trump administration will do to their respective areas of coverage. Here are a few highlights.

U.S. Dollar

One of the biggest winners since the election has been the U.S. dollar. While many on Wall Street had been forecasting the dollar’s demise if Trump were to take the White House, the opposite has been true. Now, due to factors including the prospect for more fiscal spending and a potential tax holiday, analysts are changing their minds. Here’s a look at what some banks are saying:
BNP Paribas SA: “We continue to be bullish on the U.S. dollar following the U.S. presidential election. The key implication of Trump’s victory is that his proposed expansionary fiscal policy is likely to push U.S. yields up and steepen the curve. As a result, USD strength has further to run, in our view, although the speed of its rise is likely to differ versus the different G10 currencies.” The team adds that they are most bullish on the dollar vs the Japanese yen, with one of their models targeting a rise above 120 for the currency during 2017. It is currently trading around 115, after sitting below 105 before the election.
Citigroup Inc.: “We’ve got euro dollar falling just below parity, as consistent with the rate differentials very much moving in favor of a weaker euro. I mean, it’s largely driven by the U.S. side of things and a changing policy mix really gets you to a stronger dollar environment.”
Bank of America Merrill Lynch: “The Trump electoral victory is likely to lead to substantial U.S. fiscal easing, helping push the U.S. dollar up and yields higher,” the firm writes, adding that it expects the Euro to trade at 1.02 vs. the dollar by mid-2017 and the yen to hit 120.
Of course, there are also signs that the “long U.S. dollar” trade is getting crowded.

Bond Yields

While the vast majority of Wall Street was betting on interest rates to continue moving lower, that has not been the case. Analysts are now calling for yields to rise, marking an end to the bond bull market.
Bank of America Merrill Lynch: “The U.S. election was a game-changing development for markets, with single-party rule likely leading to significant fiscal stimulus. We look for a stronger U.S. dollar and higher U.S. yields in 2017,” the analysts write, adding that they are targeting a U.S. 10-year rate of 2.65 percent for the end of next year.
Credit Suisse: “In our judgement, President-elect Donald Trump’s policies are stagflationary at worst, or reflationary at best. Either way, bonds face challenges.”
BNP Paribas: “The key implication of Trump’s victory is that his proposed expansionary fiscal policy is likely to push U.S. yields up and steepen the curve.”


Stocks, some sectors in particular, have rallied to new highs following Trump’s win. In their outlooks for 2017, a number of analysts attempted to gauge which sectors would see the biggest boosts.
Deutsche Bank: “If the corporate tax rate is cut to 25 percent, all else the same, it would boost S&P earnings by $10 and support an S&P rally to 2,300 and 2,400 by 2017 end.”
JPMorgan Chase & Co.: “We estimate that Trump’s corporate tax plan, which incorporates a 15 percent statutory federal tax rate, would add roughly $15 to S&P 500 earnings.”
BNP Paribas: “After lagging since 2013, U.S. small caps may face more favorable fundamental trends than their larger peers under Trump administration.”;

Dividends and Buybacks

BNP Paribas: “In 2004, Congress implemented a 5.25 percent tax holiday on foreign profits for U.S. multinationals which resulted in $362 billion being brought on onshore. This led to dividend + buyback growth of +46 percent/+26 percent in 2005/2006 on top of adjusted earnings per share growth of just +12 percent/+15 percent over the same period. Markets have started to price the potential for a repatriation tax holiday as a part of corporate tax reform.”
Deutsche Bank: “If a repatriation holiday is introduced at a ~5 percent rate, as opposed to the generally proposed 5-14 percent rates, 10 percent even by Trump, then we think ~$500 billion will be repatriated in 2017. These funds will go to a combination of dividends, buybacks, onshore debt reduction, M&A and capex. We think a permanently more tax efficient means to access offshore earnings via a lower U.S. corporate tax rate, and thus lower repatriation tax, causes many S&P Tech, Health Care and Staples firms to boost their dividend payout ratios.”
JPMorgan Chase & Co.: “Cash repatriation alone could boost shareholder payouts by ~$350 billion over multiple years, with possibly even greater payouts coming from freed up cash on the back of a reduced tax rate — we estimate that buybacks from repatriation alone could add ~$1.30 to S&P 500 earnings per share, assuming that 60 percent of potential payouts come in the form of buybacks.”fundamental trends than their larger peers under Trump administration.”

Do Record Low Yields And Record High Stocks Spell Trouble?

roller coaster2My Comments: This week I’ve focused my posts on what other people think is likely to happen to your money if you have it invested in stocks and bonds. It’s pretty obvious that no one has a clue.

Until a lot of stuff gets sorted out, my recommendation is to go to cash and sit on the sidelines for a few weeks or more. I think the chances of losing money right now are higher than the chances of making money, which is what most of us are trying to do.

Of course, if you wait several weeks, and nothing bad happens, and you jump back in, be assured that within a few days, if not hours, the bottom will fall out. It’s your call.

Bryan Rich Jul 13, 2016

Earlier this week we talked about the disconnect between yields and stocks.

The move lower in German yields, given the contagion risk in Europe that people have feared from Brexit, as we’ve discussed, has also dragged down U.S. yields. With that, the U.S. 10 year yield, post-Brexit, has traded to new record lows.

So we have record highs in U.S. stocks, and record lows in U.S. yields.

For people looking for the next reason to be worried, this is where they are hanging their hats. But is the uneasiness associated with this divergence warranted?

Let’s take a look at the chart…

Now, you can see from the chart, we recently breached the record lows of 2012 in U.S. yields (the green line).

For a little back-story: Back in 2012, Europe was on the verge of sovereign debt defaults that would have blown up the euro and the European Union. The ECB stepped in and promised to do “whatever it takes” to preserve the euro, which included the threat of buying unlimited Italian and Spanish government bonds (the real threatening spot in the crisis). That sent bond market speculators, which had been running up the yields in Spanish and Italian debt to unsustainable levels, swiftly hitting the exit doors. At the height of that threat, global capital was pouring into U.S. government debt, which sent the 10 year yield to record lows.

Still, U.S. stocks at the time were in solid shape, UP nearly 8% on the year in the face of record low bond yields.

What happened when the ECB stepped in and curtailed the threat? U.S. yields bounced aggressively. And U.S. stocks went even more sharply higher, finishing the year up 16%. In fact, the U.S. 10 year yield more than doubled (to as high as 3%) over the next seventeen months, and the S&P 500 added to 2012 gains, going another 32% higher in 2013.

So we have a very similar scenario now — and the drag on U.S. yields is, again, Europe and the threat to the euro and European Union.

And again, U.S. yields have hit new record lows, and stocks are putting up a solid year, as of July (the same month the tide turned in 2012).

We would argue, for the many reasons we’ve discussed in our daily notes, that stocks are in the sweet spot. As long as a global economic shock doesn’t occur, which is what central banks have proven very capable of managing over the past seven years, U.S. stocks should continue to benefit from the incentives of record low interest rates. And when market rates/yields rise, it’s only because the clouds of uncertainty clear. That’s very good for stocks too.


bear-market--My Comments: Do you know what’s going to happen? Me neither.

Here are two very opposing opinions of what the markets will do in the coming days. If it makes you afraid, you are not alone. My only bright spot is a program that grew by over 50% in 2008. Will it do it again?



The EVERYTHING Bubble: What’s Coming Will Be Much Worse Than 2008
by Phoenix Capital… Jul 8, 2016

The amount of negative issues the markets are ignoring is staggering.
1. Italy’s banking system is on the verge of collapse. Nearly 20% of loans are non-performing (meaning garbage). This is not Greece. We’re talking about a €2 trillion banking system.
2. The US is in recession. Consensus is that all is well, but industrial production, labor market conditions, the corporate bond market, C&I Delinquencies, the Conference Board Leading Indicator, Inventory Accumulation and ISM are screaming “RECESSION.”
3. China continues to devalue the Yuan at an annualized pace of 12% year to date. This is exporting a massive wave of deflation to the West.
4. The US Dollar has begun the next leg up in its bull market. The first leg crashed Oil, commodities, and emerging markets. This leg will crater US corporate profits and stocks as well.
5. Corporations are more leveraged than they were in 2007. Meanwhile, earnings are at 2012 levels while stocks flirt with their all-time highs.

The whole mess is just like late 2007/ early 2008 all over again. Brexit was the Bear Stearns moment. Italy or Spain will likely be the Lehman moment.

The big difference between now and 2008? Central Banks have already spent $14 trillion propping the system up. And they’ve created the single biggest financial bubble in history.


S&P 500: Ready To Resume Higher; Next Stop 2300
Taylor Dart July 4, 2016

Sentiment levels are currently consistent with what is found at major market bottoms, not tops.

June 28th and 29th were consecutive 90% up volume days on the NYSE. This has only occurred 7 times in the past 50 years and forward returns are extremely bullish.

We are currently entering the two strongest consecutive months during election years, with average gains over the 2 months of 5.1%.

Despite many people labeling Brexit as a black swan, the S&P-500 is still bullish on all time frames and within 2% of all time highs.

Just a week ago today we had CNBC preparing to air its “Markets in Turmoil” special, bears were high-fiving on social media and it was near impossible to find a bull in sight. The S&P-500 SPY closed the week at 2037, and according to the bears this was the final nail in the S&P-500’s coffin. In addition to this, Nasdaq QQQ newsletter sentiment took a massive dive into bearish territory, as shown by the below chart. Monday morning opened up exactly as the bears wanted with more weakness below the psychological 2000 level, but by Monday night the bulls were out in full force. To say this week’s rally was impressive would be a huge understatement. The Brexit black swan that so many touted as being the beginning of the end for markets was completely absorbed with all of the losses erased in 4 trading days. The market closed this week at 2102 and posted the highest weekly close in over 11 months.

For those that are short the market currently I don’t know what their game plan is with Brexit being a complete non-event. Brexit and a potential June rate hike were the two big catalysts in the bears arsenal for downside this year but neither event inflicted any lasting damage on the market. I have been very bullish on the S&P-500 this year and believe this recent correction and violent recovery was extremely bullish.

Markets often find a way of shaking out the weak and impatient hands before the real move occurs, and Brexit did exactly that for us. Those that were long the market and panicked have now sold nearly 100 points below where we were Monday and will have a very hard time buying back in 5% higher. Those that were short the market that finally had their beliefs confirmed most likely did not cover as they believed a larger correction was finally underway. This correction and subsequent snapback rally has shaken out any impatient longs and trapped aggressive shorts, and in doing so, made the trade higher. I believe it is no longer a matter of if but when we will see 2200 on the S&P-500, and would not be surprised to see 2300 at some point before the year is over.

Secondary Market Annuities (SMA)

Piggy Bank 1My Thoughts: Last month I posted about having stock positions in your retirement portfolio and how much was appropriate. This post is about another option where there are no stocks at all, only a promise by an insurance company to return all your money to you, over time, at a guaranteed rate of interest. Typically, the rate of return, of ROR, is 4% or more, which in today’s world is pretty good.

The are called SMAs and are discounted receivables. Somebody (an insurance company) has agreed to pay someone else a series of payments for a specified period of time. The contract that makes this happen is an annuity, where the payments are guaranteed. The difference is that the initial recipient of these payments has changed his mind and instead, wants  a lump sum and not monthly payments. So that person sells the future stream of payments to another person in exchange for a lump sum. This new person sees all this as an investment, so he/she in turn finds someone who has a lump sum but would rather have a stream of unbreakable payments. Ergo, Secondary Market Annuities.

If you, for example, own your house and have some money sitting in a bank somewhere that is earning very little, you might consider using that money to buy a favorable stream of future payments, where the return on investment (ROI) is much better than what the bank is paying you.

How Do SMAs Work?
Secondary Market Annuities are not what you would normally associate with the term, “annuities.” Annuities tend to be more complicated – involving contracts with riders, contractual terms, guaranteed rates, variable indices, and a host of other terms. By comparison, the purchase of an SMA is quite simple.

The easiest way to explain SMAs is with an example case.

Using today’s SMA yields, you can purchase a 10 year SMA case for $91,656 that begins to pay $1,000 per month for 120 months beginning on June 1, 2016 and ending on May 1, 2026. This SMA offers a guaranteed payment stream with definite dates of payment. To determine the purchase price, SMA Hub, the provider of choice, applies a discount rate to those payments, and the result is the purchase price today.

Comparing Apples To Apples
The real value of an SMA comes to light when you compare this SMA to a period certain annuity, such as a 10 year Single Premium Immediate Annuity (SPIA).

If your goal as a member of the public is to have a check every month of $1,000, you’ll find that if you purchase a SPIA with the same 10 year guaranteed income stream, it will cost about $110,254 based in today’s rates.

In our example here, if you can find an SMA to provide $1000 per month for 10 years, would you rather spend $91,656 or $110,254 to achieve the same outcome? You’ll pay roughly 20% less, provide you with the exact same income stream, and comes to you from a very high credit quality insurance carrier.

Each SMA case is like a unique, rare gem. While they are not too good to be true, they are one of a kind. Each case is offered for sale and once sold, it is gone. I have access to a weekly inventory of what is available. Talk with me if you want to further explore this idea.

Earnings Don’t Support A Continued Rally In U.S. Stocks

roller coasterMy Comments: Many ordinary investors, people who one way or another have retirement money invested in the markets, are worried. And they should be. I’m worried about my money.

The tide is going to turn, and it’s probably not going to be a pretty sight. There are things you can do to protect yourself, but it’s going require you take proactive steps and even then, you may suffer.

But if you do nothing, I can almost guarantee you’re going to be unhappy.

by Daryl Montgomery, June 12, 2016


  • S&P 500 GAAP earnings peaked in 2014, although Pro Forma earnings have increased.
  • GAAP Earnings tend to peak the year before or the year of a stock market peak.
  • So far, the S&P 500 price high has been in May 2015.
  • Currently, earnings don’t support a move higher. A fall to the lower end of the current trading range is more likely.

There is a considerable amount of negative opinion on U.S. stocks as the S&P 500 approaches its all-time closing high of 2,130.83 reached on May 2, 2015. The index came close to this value on June 7th with its last trade recorded as 2,119.12. The S&P 500 has actually been trading in a range between approximately 1,800 and 2,130 for over two years now and needs to decisively break either above or below this level to indicate a new up or down trend has begun. Until this happens, the index should be considered as moving sideways in a 300+ point trading band.

S&P 500 Trading History 2011-2016

SP500 trading history






There are a number of arguments as to why the market is very overvalued and should be going down instead of up. Some of these include a very high price to earnings ratio, a very high price to sales ratio, a very high market cap to GDP ratio, a very high percent of NYSE stocks trading above their 200-day moving average, etc. The best measure of the direction of stock prices, however, is earnings. For the stock market to keep moving forward, earnings must be increasing, and not just any measure of earnings, but GAAP (Generally Accepted Accounting Principles) earnings.

GAAP earnings are consistent and comparable over time, whereas the alternative, pro forma earnings, are fairly arbitrary, vary by industry, and can change from year to year. The basic idea behind pro forma earnings is that unusual events don’t count, so they should be ignored when calculating earnings. This is like an individual claiming that they really have much more money in their checking account than the bank claims because they had to write a number of checks for unusual expenses last month and those shouldn’t have been deducted from their balance.

Pro forma earnings held up until 2015 (we’ll have to wait to see what happens in 2016) thanks to companies becoming increasingly fanciful with their accounting practices. S&P 500 GAAP earnings, however, peaked in 2014 and have been heading down since. They were $100.20 per share in 2013, $102.31 per share in 2014, but only $86.47 per share in 2015 (a significant drop). GAAP earnings in 2011 and 2012 were $86.95 and $86.51 respectively, almost exactly the same as in 2015, yet the price of the S&P 500 has moved much higher. When pro forma earnings and GAAP earnings move in opposite directions, market analysts describe this as a decrease in the quality of earnings (this allows them to avoid using generally accepted obscenities to more graphically state what is occurring).

GAAP earnings tend to peak the year before or the year of a stock market peak. Previously, they topped out in 2006 and the U.S. stock market hit a high in October 2007. It then subsequently fell off a cliff in the fall of 2008. Prior to that, GAAP earnings hit a high in 2000 along with the market. So far, GAAP has peaked in 2014, fallen 15% in 2015 and it doesn’t look like 2016 is going to be a great year for earnings, either (they’re down approximately 5% in Q1). There are estimates for sizeable earnings increases in the second half of the year, however. Realistically, these could come from improved earnings in the beaten down energy and materials sectors, if they indeed do occur.

Investors should be wary of projections for improved earnings once a substantial decline has taken place in GAAP earnings. Projections are made with the underlying assumption that the economy is growing and there will not be a recession. If there is a recession, S&P 500 GAAP earnings can decline by 50% to 75% or more year over year. For instance, in 2007, GAAP earnings were $66.18 per share, but in 2008, they were only $14.88. It’s been seven years since the last U.S. recession. In the post-WWII era, the longest period between U.S. recessions has been 10 years. The average time between them has been only five years. We are already overdue, so a recession beginning as early as the fall of 2016 or any time in 2017 is very possible.

When earnings are deteriorating, but stock prices are going higher, there are two possible explanations. Either a big jump in earnings is being anticipated by the markets or central banks are injecting liquidity into the financial system by more than enough to compensate for the potential decline in stock prices. If the S&P 500 is to break out and go higher, it will be currently be dependent on the Fed maintaining or increasing liquidity, which means no rate increase from them. Any increase, would likely immediately put a damper on an incipient rally.

Currently, risk is more likely to the downside with a return toward the bottom of the trading range. Investors, though, need to pay close attention to price moves. The market will decide where it wants to go. A close that is 2% above the upper end of the trading range, or about 2170 or higher, would indicate a new rally is beginning as long as price stays above that level. Investors can use ETFs such as SPY or DIA to trade the U.S. stock market.

5 Ways To Avoid Retirement Rip-offs

USA EconomyMy Comments: These five ways are not foolproof, but will at least give you pause for thought. In a couple of months, I’m starting a series of free workshops sponsored by the American Financial Education Alliance whose mission is to promote financial literacy across the United States. Check out their website if you are curious.

By Kathy Kristof – MoneyWatch – April 6, 2016

Federal regulators are cracking down on advisers who profit from providing venal advice to retirement savers with new rules that demand that the industry adhere to a so-called fiduciary standard. Officials estimate that imposing this standard, which requires advisers to act in the client’s best interest, will ultimately save American consumers $17 billion annually lost to conflicts of interest — in other words, where the adviser pockets the profit instead of you.

While consumer advocates lauded the soon-to-be-enacted rules on Wednesday, some acknowledged that the battle may not be over. Financial services companies, complaining that the rules are overly burdensome, have threatened to sue. In the past, they’ve also persuaded members of Congress to throw language into pending legislation to derail the rules.

“The industry complaining about unnecessary and burdensome regulations is like an NBA player complaining about getting called for a foul,” says Scott Puritz, managing director of Rebalance IRA. “Sports fans want officiating to be fair and even-handed; retirement savers need the entire personal finance industry to be guided by a level playing field of rules and pro-consumer protections.”

Largely technical in nature, the new fiduciary standard rules are designed to reduce invisible conflicts of interest that arise because of the way some advisers are compensated. Simply put, high commissions paid on some financial products encourage advisers to sell — and sometimes churn — these products. These rules will require all advisers to adhere to a higher standard when selling products and to warn customers with a disclosure statement what their conflicts of interest may be.

That said, the rules will not be fully enacted until 2018 — assuming that they survive any potential challenges in the court system.

“These are a step in the right direction, but consumer self-defense is very important,” says Liz Davidson, author of “What Your Financial Advisor Isn’t Telling You.”

What should you do to protect yourself from retirement rip-offs?

Don’t buy from the bank:

In explaining the need for the rules, Secretary of Labor Thomas Perez cited a couple who had been talked into pulling $600,000 out of Vanguard mutual funds to invest in annuities sold through their bank. The annuities charged exorbitant fees and performed far less well than the mutual funds that they abandoned. This rotten advice would arguably prove illegal under current law, which bans advisers from peddling investments that are “unsuitable” for their clients. It would be even more illegal under a fiduciary standard. Still, as a practical matter, bankers are notorious for selling high-cost investments of dubious value. Your bank is a good place to open a checking account — and, maybe even to get a credit card. It’s a rotten place to buy investments.

Beware advisers buying meals. In recent months, postcards inviting consumers to learn about retirement investments at hosted meals have become so common that financial advisers at the Tarbox Group in Newport Beach decided they had to be proactive. They asked clients who got the postcards to bring them in so they could look up the background of the advisers hosting the seminars together. The result? “About half of them have bankruptcies or disclosure events,” says Mark Wilson, chief investment officer at the Tarbox Group.

If your adviser can’t keep his own finances in order well enough to stay out of bankruptcy, it’s a clear warning sign. So too are “disclosure events” — financial speak for when an adviser is sued by a client or is sanctioned for bad behavior by regulators. The meal itself should make you suspicious, Wilson adds. The idea is to work on psychological cues that make us feel like we need to reciprocate when someone gives us something. At the very least, look up an advisers background here before you attend a seminar.

Stick to what you understand.
Good investments are straightforward. Buy stocks and you’re buying a piece of a public company, expecting to share in its future profits. Buy bonds and you have an I.O.U. from a company, government or agency. Buy a certificate of deposit and you have a government-guaranteed savings account. Buy a Real Estate Investment Trust and you have a piece of a commercial real estate enterprise that will pass a portion of its profits on to you each year.

Mutual funds are simply investment pools that own investments like these and it should be easy to see what’s inside the pool. Simple, right? If someone is trying to sell you an investment that can’t be easily explained like these, watch out. “You should never buy an investment that you can’t explain to a friend or family member,” says Davidson. “You need to know what it is; what you paid for it; and understand how it fits into your personal financial strategy.”

Read.The new fiduciary rules will require anyone who sells retirement products to spell out any potential conflicts of interest. But like the disclosure statements you get with your checking account, it would not be surprising if the important details are buried deep in the fine print. This is your money. Read it. And don’t let anyone rush you through the process, saying it’s “just legalese.” If they give you a disclosure statement, you need to know what it says.

Likewise, if someone tries to sell you an annuity or “a private offering,” ask for the paperwork. It will be long. It will be boring. And it will spell out just how much your funds can be put at risk. Unless you have money to lose, you need to battle your way through the fine print to make informed investment decisions.

Ask. The new rules won’t go into full effect until 2018. In the meantime, if you don’t understand an investment or know how your financial adviser is compensated, ask. A good financial adviser will take whatever time is necessary to educate you about the right investments for you and what makes them appropriate. Good advisers will also not hesitate to explain how they are paid.

“We talk to people all the time who don’t know what they are paying for investment advice and they think it’s impolite to ask,” says Davidson. “Really? Would you go to the store and not ask what the products cost? You should be comfortable discussing these things with your advisers. You have to. It’s your money and nobody cares about it more than you.”