Investing for retirement

1. The Anti Free Lunch Investing for retirement

2. The Bad and The Ugly • Broker Conflict • Annuities • Churning • Pushing under writings • Pump and dump • Not fiduciaries • Inflation • Free lunch • Manipulation • Black Pools • Ponzi

3. Mutual fund Analysis by Forbes • Non-Taxable Account Taxable Account • Expense Ratio .90% Expense Ratio .90% • Transaction Costs 1.44% Transaction Costs 1.44% • Cash Drag .83% Cash Drag .83%– • Tax Cost 1.00% • Total Costs 3.17% Total Costs 4.17%

4. The Bad and the Ugly 2 • Mutual fund success 30% • How clients drive bad outcomes • How funds come and go • Mutual fund survivorship ( Review of Finance ) • 20% Lower when dropped funds are included • Mutual fund broker commission • 4.5 % – 5.75% • Stock picking letters ( Like a tout at the track )

5. Advisor and Broker Knowledge Advisors Asset Allocation Style – Sector rotation Brokers www.finra.org/Brokercheck The company line What makes money for them Why are they dealing with you?

6. Who are the Lions? Treasury Federal Reserve Pension Funds Mutual Funds Insurance Companies Hedge Funds Brokers Banks

7. Being a Mouse with Lions

8. Real interest rates

9. Interest and inflation(1970 to 1980 105.8%)

10. Inflation in Weimar Republic

11. Stable Interest chart

12. Fixed Income Securities • Banks - Checking, CDs, Safety Box • TIPS – Insurance not a good investment • Everbank Foreign Currency CD everbank.com • Foreign Bonds • Corporate Bonds in IRA (zionsdirect.com) • Tax Free Municipal Bonds or Funds

13. Bond Fundamentals • Maturity date • Yield to maturity • Discount / Premium • Callable • Taxable • Revenue source • http://screener.finance.yahoo.com/bonds.html

14. Alternate fixed Income • Closed End Funds cefa.com • Royalty Trusts • Utility stocks • REITs • MLPs • Diversify and Ladder

15. REITs • It represents ownership of property • Depreciation Tax advantage • Use all of the stock tools to pick • Look at their properties

16. Royalty Trusts • 99% Oil and Gas SDT,CRT,SBR,SJT,BPT,CHKR,PER,ROYT • Not actively managed • Earnings distributed • Depletion tax advantage • Will run out • Think of it as an energy cost insurance policy

17. LPs • Nearly all oil related • Use deprecation to show little income • Pay a good dividend • Basis is reduced by: dividend-income • Usually mid stream pipeline • Tax deferred • Must be inherited to avoid big tax hit

18. Why buy stocks?

19. Company Fundamentals - Stocks Income year and quarter – Sustainable? GS&A Growth Balance Sheet Inventory - Square root rule Debt Sneaky debt items Quick ratio

20. Company Fundamentals – Stocks 2 Other Yahoo items In depth at www.sec.gov Litigation Pension liability Auditor Qualification of opinion Derivatives Capital leases Related party transactions

21. Company Technical Analysis Moving average Look at 50 day and 200 day Breakout of 50 above 200 is a buy signal MACD and RSI Positive are buy signals Volume Stock Technical Analysis web site www.stockta.com

22. Buying stocks Check the market for direction Find candidates Things you like Graham Variations Candidates from ETFs Low P/S, P/E, P/B Do Fundamental analysis Use Technical Analysis for timing Diversify

23. Indirect ways to own stocks • Mutual funds • Good Managed • Bad Lower outcomes, tax • Closed end funds (Also works for bonds) • Good Managed • Buy at a discount • Not driven by their owners • Tax Efficient • Bad Sell at a discount

24. Indirect ways to own stocks 2 • ETFs Good Tax Efficient • Low cost • Do as well as the market • Bad Not managed • Smart Beta ETFs • Good Tax Efficient • Low cost • May do better than the market • Bad Added risk of the model

25. AAII Recommended ETF Portfolio • As of June 30, 2014 Weight YTD 2013 Expense • Guggenheim S&P equal weight 500 RSP 40% 8.4 35.6 .40 • Guggenheim MidCap 400 Pure value RFV 20% 6.5 38.3 .35 • Guggenheim SmallCap 600 Pure Value RZV 20% 2.9 45.1 .35 • iShares MSCI Frontier 100 FM 10% 9.9 25.6 .79 • Vanguard REIT index VNQ 10% 17.7 2.4 .10 • Performance 100% 7.7 33.7 • For Comparison S&P 500 SPY 100% 7.1 32.2 .09

26. Options Put is an option to sell Use Puts as a way of buying Never sell a put if you do not want to own the stock Buy puts on sinking ships Call is an option to buy Sell covered call for income Buy a call in place of stock for short term gains Use both for Pending major disruption Opportunistic

27. FOREX www.forex.com Fastest way to make and loose money Trillions change hands every day Can be irrational both good and bad Use Vegas money not Investment money

28. Gold Does not keep up with inflation Costs to own Not productive Is insurance against rapid inflation

29. Assent Allocation No debt: House, car etc. Emergency Fund – Three months 20-40% Fixed when rates are market rates 50-70% Equities 5-10% Specialties REITs, Closed end Funds, Royalty Trusts 0-2% Gambles Do not have blinders

30. Risk Civilization Collapses -Guns, ammunition and food Inflation – Commodities, foreign stocks and bonds, manufacture of things that will appreciate and short term securities Deflation - Longer term bonds, money and not Commodities Expropriation – Investments outside of the US Formerly only a risk in third world countries

31. Rules Understand it or don’t do it Know the source of the money Be bold when others are fearful and be fearful when others are bold Never give a Broker control Use only FINRA Brokers and SEC Advisors Do not buy Annuities