Trusts are mismanaged on a regular basis. There are a lot of ways this can happen. Bad investments, expenses that are too high and poor tax decisions are just a few of the most common.
But one flavor of mismanagement that I think happens often, and doesn’t get enough attention, is blatant abuse. In other words, theft — by a trustee.
Theft is almost impossible to stop
Theft is so blatant and obvious of an infraction that it is often ...
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It’s hard to believe that exactly 80 years ago — nearly a century — our country was in the depths of the Great Depression. Although our world today is completely different in countless aspects, you can still get a lot of insight from finance and economics writings from that era. This is especially true for the years 1932 to 1934.
Risk, Uncertainty and Profit by Frank H. Knight was first published in 1921 and reprinted several times; each ...
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When brokers talk to clients or prospective clients, they are supposed to keep some sort of notes to the conversation. This is especially important for compliance purposes. It is necessary to have something that shows you “know the customer” to make sure you are making reasonable recommendations for them. Sometimes the content of these notes can be telling.
I started my career in 2002, just as the tech market was bottoming off the crash that started in 2000. ...
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Early in my career I had a job at what would be considered an “old school” brokerage. Business was done almost exclusively on the phone. We sold stocks on commission. Every once in a while there would be a wise crack from a broker in the room trying to sell a client.
Client: “I’ll pass on this one.”
Broker: “The only people that ever made money passing were quarterbacks and racecar drivers. Let’s pick up 100 shares.”
I didn’t spend much time ...
More →Beating the market is hard to do. And it is not just hard – like running a marathon is hard. Trying to beat the market is laden with peril because you have to risk money. So when I say beating the market is hard, I mean it in the sense of “walking a tight rope without a safety net” rather than “running a marathon.”
A mathematical impossibility
The first step in understanding how investments work is to accept that ...
More →I generally advise families to avoid using margin for investment purposes. This applies to the accounts I manage and to the investment vehicles I recommend in those accounts (mutual funds, ETFs, etc). There are several reasons why.
The “L” word
First and most obvious, with the leverage that margin enables, there is a greatly increased chance that an investor will be totally wiped out by a market downturn. When a family is investing for generations, there will be many ...
More →The term “mental accounting” describes a specific type of irrational investor behavior. It’s an irrational attitude investors can take when separating their money for investment. But I think a little “mental accounting” can actually be beneficial for families that are investing for generations. Let me tell you why.
Money mind games
How is mental accounting irrational? Let’s assume an investor saved $100,000 from years of hard work, then got $50,000 as a surprise bonus from their job, and then won ...
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This photo was taken on Montpelier Beach in Nevis, a tiny island in the Caribbean that plays a big role in North American history. Christopher Columbus sailed past Nevis on his second trip across the Atlantic. John Smith landed at Nevis on his way to Virginia in 1607. When I was on Nevis I visited the site where Alexander Hamilton was born, and another where Admiral Horatio Nelson was married.
In the late 1600’s, Nevis was one of the ...
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