mhj3.com Premis: Investing Software, Opinion, Perspectives

mhj3.com Premise

I: All stockbrokers, investment advisors, and individual investors who manage their own capital are always closer to random investment selection than they think they are because, whether doing one's investment selection due diligence or whether selecting investments at random, the results from both investment selection methodologies — careful investment selection and random investment selection — will be about the same most of the time (sure, the exceptions of some great times when you can do nothing wrong; but, always offset at some point when you seemingly can do nothing right); both generating good and bad investment selections and both yielding similar investment performance distributions; some up and some down; most a little, some quite a bit, and a few a lot; the problems, of course, being not knowing in advance what each investment will do; what direction, when, how far, and for how long.

Therefore, investing performance excellence will be determined at least as much by what you do with investments after you own them as by what investments you buy and when you buy them as detailed in a Money Management Plan (recap) — the ongoing decision making action taking investment selection and investment management processes as investor investment profiles, current market conditions, relative investment values, and the market outlook change — thoughtfully defined, relentlessly applied, and rigidly enforced Investment Selection and Management (bonds, for example) and Portfolio Management disciplines rules, and procedures that govern the dynamics of change, that help amplify the impact of good/well timed investment decisions and help mute the effects of bad/poorly timed investment decisions. mhj3.com Premise Continued.

II: There are many types of investments, investment strategies, and investment tools that are profoundly flawed, fictitious, treacherous, and often predatory.

III: If the techniques, tools, and theories surgeons trusted and used were of the same quality and integrity in their specific fields of medical expertise as those used by Wall Street, many investment firms, most investment advisors — and almost all individual investors who invest for themselves — in their respective circles of responsibilities, an Apple-A-Day would be a wonder drug, Ouija Boards and Crystal Balls would be considered advanced medical tools, and Voodoo, Séances, and Witchcraft would be Pulitzer Prize winning Modern Medical Theories.

If surgeons were as undisciplined in their professions as Wall Street, many investment firms, and most investment advisors are in their respective areas of advertised expertise as they advise individual investors, a few lucky patients would succeed, most patients would have surgical complications, and, many, regrettably, would not survive.

IV: There is no theory — modern or otherwise — that can be ordained, no computer that can be programmed, no software that can be designed, no investing tool that can be 'imagineered,' no technical analysis voodoo methodology that can be contrived, and no equation that can be divined to quantify, evaluate, and predict the primary forces that drive the financial markets and investment prices; human consensus, mood, and behavior; intelligent and not, knowledgeable and not, reasoned and not, rational and not, and logical and not.

V: Monthly statements and investment portfolios most often look much like the 'Winchester Mystery House' without consistency, discipline, direction, continuity, control, or theme; neither structurally sound nor competitive.

VI: Investment Advisors have generally devolved from being fiercely independent, self reliant, skilled investment advising practitioners to being investment advising generalists who are merely superficially and conversationally competent in many wealth management related issues and masters of none; trained to focus more on the marketing, gathering, and moving of capital than on the advising, building, and protecting of capital — products and transactions rather than portfolios and processes.

Extinction of the noble and important profession of investment advising, as we know it, is a distinct possibility because all markets eventually close, are closing the inefficiency gaps between value and price, competent and unqualified, skilled and unskilled, serving and self-serving, and, most of all, good investment advising judgment and management skills and bad investment advising judgment and management skills.

VII: Investors are often exposed to "hit and run" investment advice, being "sold" random, isolated, sometimes frequent transactions with no clear investment goal in mind — adrift, results more by chance than by design.

VIII: Many investment advisors have succumbed to the latest inane investment advising wisdom of the day; passive 'buy, hold, and forget,' untimed, unmanaged index funds, exchange traded funds investing — unknowledgeable, unskilled, undisciplined, unmanaged, untimed investing, an investing performance oxymoron.

Adopting this investing strategy is tacit admission to clients that you are unknowledgeable, unskilled, and undisciplined, that you can't do what you were hired to do — bring value added to the investing performance equation by managing and timing investments — and that you will most likely underperform (and, because all markets ultimately recognize and remove inefficiencies, that you will ultimately become extinct as more and more investors rely on the investment advising Internet). 'True, but have you seen my pie charts?'

IX: Investment Advisors continuously seek the nonexistent wellhead of the 'fountain of perfect investment ideas, investing strategies, and, investment timing sources' in the mistaken belief that the best investing performance can only come from better investment ideas while not acknowledging that they themselves are the weakest investing performance cog.

X: Investment advisors announce the required, responsible, and absolutely true investment footnote, "Past performance is not a guarantee of, …is not necessarily indicative of, …is not a true indicator of future investment results," and then proceed to use past performance as the primary basis for making investment recommendations and projecting future investment results.

XI: All economic opinion and market forecasting will range from terrible, to close, to a few lucky calls.

XII: Core investments include bonds, equities, real estate, commodities, coins, and precious metals. When these investments are 'packaged' into 'new and improved' investments or 'unpackaged' as derivatives by Wall Street's marketing 'imagineers,' the value added most often accrues directly and immediately to investment firms and investment advisors in the form of increased revenues for the former and increased commissions for the later; but, without adding substantive investment value for investors at any time while, in most cases, masking added investment risk:

Bond Mutual Funds — There never is an investing situation in which an investor will be better served by investing in a bond mutual fund as opposed to investing in individual bonds.
Margin* — Never leverage capital to buy more investments unless borrowed capital will be used only as a short-term source for cash needs outside the investment portfolio and where there is a clear and specific source of funds to eliminate margin in the short term.
Sell Short* — If Warren Buffett can survive without shorting stocks, so can I; odds are bad going against the upward bias of the market, loss potential infinite.
Options* — Never buy, never write covered, and never, ever naked; well, OK, maybe "buy" every once-in-a-while!
IPOs — In most cases, if you can get it, you do not want it.
Index Funds — Passive 'buy, hold, and forget,' untimed, unmanaged index funds, exchange traded funds investing — unknowledgeable, unskilled, undisciplined, unmanaged, untimed investing, an investing performance oxymoron.
Hedge Funds — Use other peoples hard earned money, take extraordinarily high investment risks with other peoples' money, pay yourself exorbitant base fees and performance fees for your so-called expertise from other peoples' money; the results of which are much more a function of taking a multitude of extreme investment risks with the hope that one will work out rather than the result of astute analysis and correctly predicting and managing the one 'best' investment risk.

XIII: Modern Portfolio Theory, the Olestra™ of advising and investing, and all of its illegitimate relatives — Monte Carlo Analysis, Efficient Frontier Analysis, Beta, Brinson's Asset Allocation, Pie Charts, and a distant relative, Technical Analysis (worth a glance) — using yesterday's news as an investment crutch, are just other ways to record and to illustrate investment history without valid analytical, interpretive, deductive, predictive, or directional investment value because they assume and suggest, incorrectly, that the financial markets' cycles of the past and the valuations of underlying investments in the past — because they are somehow mysteriously connected as part of an orderly, sequential financial system — will repeat themselves similarly or exactly in the future as they did in the past in much the same order and with the same frequencies, durations, levels, relative valuations, and volatilities; suggesting, contrary to fact and law, that investing hindsight is, indeed, investing insight and investing foresight — absurd, as anyone who has spent more than a nanosecond in the financial markets would, should know.

XIV: All investment advisors and investors must accept, understand, and agree that, on occasion, they will be both right and wrong because investing has being right and wrong built into it.

'Wrong' investment decisions are not the primary reasons for investing failure:
- 'Wrong' is not having investment selection disciplines.
- 'Wrong' is not having portfolio management disciplines.
- 'Wrong' is not having portfolio design and construction disciplines that define right and wrong.
- 'Wrong' is not having price management disciplines resulting in doing nothing when right or wrong.
In most cases, when confronted with the possibility of being 'Wrong,' unskilled and undisciplined investment advisors choose to depend on the five greatest obstacles to investment performance to save the day; 'It'll come back,' 'The analyst said,' 'It's not a loss until it is sold,' 'I rely on unmanaged index fund investments,' and 'I am a long-term investor' — translated, I can make a reasoned decision to buy based on current and projected investment value and market conditions; but, I refuse to make a reasoned decision to sell based on current and projected investment value and market conditions.'

Conclusions

The conclusions are as clear and inescapable as are any other investing performance priorities indefensible.

To prosper, investment advisor must piece the investment advising, investing, and investing performance puzzle together by first developing a unique proprietary investment advising value; your own prospectus; who you are, what you represent, what you will and will not do, and how you conduct your business; why, when, how, and what if.

Investment advisors must create an organized, efficient, and disciplined investment advising environment in which each investor, regardless of investment need, knowledge, experience, and the amount of investment capital, will be honorably, properly, intelligently, and efficiently served consistent with each investor's investment profile and investment goals, the current market conditions, and the market outlook and as the financial markets and relative investment values change; nothing learned the hard way, do it right the first time, suitable, hopefully timely investments, full disclosure, investor informed, economic best interest investing in specifics and in detail.

The centerpiece of one's investment advising and investing performance skills must be to build and to protect investors' investment capital by first creating unique, structurally sound investment portfolios that match suitable, hopefully timely investment sectors, investment categories, and individual, underlying investments with different investor investment profiles — different investor investment risk tolerances, different income and capital growth objectives, and different time horizons — and then to keep investment portfolios competitive by managing, modifying, monitoring, and measuring investment portfolios - one at a time, a few at a time, or all portfolios all at once -as investors' investment profiles, the current market conditions, the market outlook, and relative investment values change as part of the ongoing decision making action taking investment advising and investment management processes:

To convert rhetoric into results.
To govern the dynamics of change.
To take advantage of change rather than to be the possible victim of change.
To amplify the impact of good/well timed investment decisions.
To mute the effects of bad/poorly timed investment decisions.
To outperform.
To excel.

The ongoing and vigilant investment management and timing processes of what you do with investments as you select them, buy them, own them, and sell them - the what, when, why, why not, how, and what ifs of investing in detail - in the context of creating and maintaining structurally sound and competitive investment portfolios - as determined and governed by both investment selection and management and portfolio management disciplines, rules, and procedures - are the primary determinants of investment advising excellence and investing performance success; the investing performance edge.

The absence of which are the root causes of performance mediocrity for most investment advisors most of the time.

Solution

Investments selected at random and governed by the most basic user defined Portfolio Management Disciplines, Rules, and Procedures: (1) to create, manage, modify, monitor, measure, and maintain unique, structurally sound, and competitive investment portfolios and (2) to process investment portfolios as investor investment profiles (risk, income/capital growth objectives, investing time horizon) , the current market conditions, relative investment values, and the market out look change — the weakest or completely missing investing performance link for most investment advisors — will outperform carefully selected investments generally ungoverned; can't get into trouble.

Carefully selected and weighted investments placed in structurally sound and competitive investment portfolios as determined by and governed by both user defined investment selection and management disciplines, rules, and procedures and user defined portfolio management disciplines, rules, and procedures will outperform most market indexes almost all of the time:

To the extent that one has a 'sense of the markets' and to the degree that investment timing can be improved, investing performance will improve exponentially:

Create a modifiable allocation table matrix composed of different selections, combinations, and weightings of Investment Sectors and underlying investment categories at different matrix intercepts which are reflective of different investor investment profiles.
Create modifiable model portfolio templates composed of suitable, hopefully timely investments that when linked to an allocation table matrix will distribute capital to weighted investment sectors and then to underlying investment categories and weighted investments at each matrix intercept consistent with different investor investment risk tolerances, income capital growth objectives, and investment time horizons.
Allocate investment portfolio capital over three or six month intervals in an effort to accumulate investments at the best average cost over the short term.
Blend an investor's existing investments with an investment advisor's Allocation Table Matrix and linked Model Portfolio template to manage the timing and the degree of change as an investor transitions from what he/she currently owns to what the investment advisor feels is a more suitable investment portfolio based on the investor's investment profile.
Rebalance investment portfolios every six or twelve months to maintain the initial structural integrity of all portfolios by forcing the process of 'buying low and selling high' as investments within portfolios oscillate/crisscross in price over the short term.
Reallocate investment portfolios to new or modified selections, combinations, and weightings of investment sectors and underlying investments to keep all investment portfolios competitive as relative investment values and market conditions change.
Replace all or a portion of individual investments; deteriorating fundamentals with improving fundamentals, overvalued with undervalued, apparently poorly timed with seemingly better timed, underperforming with outperforming, weak with the strong.
Set Investment Sector and Investment Price Alerts.
- 50% down means 100% back up just to break even.
  - A daunting task and an unnecessary, unpardonable, and undisciplined investment performance error.

How To Do It

Use investing performance software to help you drill down to investment selection and management, portfolio management, and investing performance bedrock:

Investor's CalcStation:

Define, modify, and manage the savings and investing tasks at hand; a walk in the park, just a bump in the road, or climb Mt. Everest — investor's current and projected Budgets (Income - Expenses), Assets, Liabilities, Personal Cash Flows, Balance Sheets, and Net Worth Investment Goal Analyses over selected analysis periods using the investor's actual and projected sources and uses of funds and the advisor's actual and projected capital growth rates, interest rates, and inflation rates.

Investor's WorkStation:

Create, manage, modify, monitor, maintain and measure unique, structurally sound and competitive investment as investor investment profiles, current market conditions, the market outlook, and relative investment values change.

PerfCalc:

Evaluate how you have done.

You will never look back.