What We Do
At Empowered Investor Incorporated, you will very quickly see what makes us different than the rest. If you have gone to this page, then you are no doubt aware of the fact that we manage your money directly and do not rely upon the goons on Wall Street to do it for you! No matter what type of account you have, our investment strategy is the same: Simplicity, Liquidity, Consistency℠.
Simplicity: You’ve heard it said, “if it ain’t broke, don’t fix it” and no doubt one of our favorites, “keep it simple, stupid.” Just because you may be a sophisticated investor does not necessarily mean that your investments have to be! Currently, there are more mutual funds traded on the market than stocks! Can you believe this? Research it and see for yourself. Each one of these investments are overly complicated and in a market downturn and systematic sell-off, they do not give you additional protection because you cannot diversify away systematic risk! What it does give you however is the inability to see a quick sell or recover as the nature of these products are explained below. Owning a well diversified, but not overly diversified portfolio of good quality investments is the way to go. Why would you “risk” investing in anything else?
Liquidity: We never encourage you to give up the most important thing in your portfolio- liquidity- for a “promised return.” Have you ever stopped and asked yourself if it is worth the risk to tie up your hard earned money in exchange for an interest rate? The next question you need to ask yourself (or your advisor) is “how quickly can I get out of the market?” If the answer is not immediately and on that day, then we strongly suggest you reconsider your positions! What if you made an investment choice and shortly thereafter global or domestic tragedy occurred? How quickly can you reverse your decision? With today’s market and in light of the recent downgrade of the US and many insurance companies, perhaps “Safe” investments aren’t so “safe” after all.
Consistency: Preserving and building wealth takes a good plan and a strategy that conforms to what the market is doing. Too often investors (and financial advisors) try to make the market conform to what they want to do. It is vitally important to do what the market is doing and not what you or your advisor “feels” they should do. Empowered Investor believes in taking the “sweet spot” out of the middle with the buying and selling of investing. It’s in this consistent pattern where success is most often found. Remember- there is no real profit or loss unless you sell when needed!
401k, SEP, SAR, 457, 453 – and other types of company sponsored retirement accounts
Did you know that as a small business owner you have certain advantages available to you in your company’s retirement account(s)? Empowered investor manages these with the exact same principles as the other types of accounts. Instead of Mutual Funds, we promote using Exchange Traded Funds within your 401k. There are many advantages for this but they are not often offered. Why? Well, for starters, they almost always pay the advisor more money. Also, because the investments therein are managed by another money manager and not that advisor directly, there is a lot less work involved than purchasing ETF’s. But, there are many more reasons than this. Here are a few more for you to consider:
Disadvantages of Mutual Funds
1. Mutual Funds are Overly Complicated Financial Instruments!
2. Mutual Funds charge High Fees!
3. Mutual Funds are Not Very Liquid!
4. Mutual Funds are Not Transparent!
5. Mutual Funds are Too Diversified!
6. Mutual Funds are Usually Poor Performers!
It is rare for a Mutual Fund to have positive double digit returns over a period of 10 years or more. Unlike the stock market, which has yielded an average of nearly 10% over its very long history, Mutual Funds are usually sold as safe alternatives to the stock market. Interesting though that a great majority of them are made up of stocks! Simply put, Mutual Funds are not good performers in the market by comparison, although they are great performers in producing income for the company managing and selling the funds!
- Investment Complexity
You end up making multiple trades at multiple prices when you buy or sell mutual funds. Targeting a specific price through your transactions can get complex if you are trying to accomplish a specific investing goal with a mutual fund. It’s not as easy as buying a simple asset like an exchange traded fund. Unlike purchasing an exchange traded fund, mutual funds are not as easy. ETFs make it simple with one price, one transaction. With mutual funds it’s many trades and multiple transactions. - High Fee Structure
Mutual funds come with associated costs as well as the trading complexity. Multiple trades have management fees, and pay out multiple commissions. Including the advisory fees. Costs can add up quickly with an active mutual fund portfolio. - Lack of Liquidity
There are many different mutual funds, but that doesn’t necessarily mean they are very liquid. With mutual funds, the final transactions are not complete until the end of a trading day. At the final bell, is when you actually get the price of trades for the fund in all. It becomes difficult on days when the market is not stable. Getting instant information is vital in order to adjust your trading strategy. You are not able to get this with Mutual Funds. - Lack of Transparency
There is not very much information when it comes to mutual funds. What you are buying (or selling) with a fund is not always clear and some information is delayed. When you need fund information to make important investment decisions, it makes the whole process very challenging. - Over Diversification
One of the top 5 reasons our studies have shown that put your retirement at risk! One cannot diversify away from systematic risk in their portfolio!
Now, here a few reasons why you might want to consider an ETF in your 401k and/or other retirement accounts:
Advantages of ETFs
1. ETF’s are Bought and Sold with Single Transactions!
2. ETF’s are Not Cost Prohibitive!
3. ETF’s often offer Options!
4. ETF’s are Liquid!
5. ETF’s are Transparent!
6. ETF’s usually Pay Dividends!
7. ETF’s are Easier to Understand than Mutual Funds!
8. ETF’s are not Too Diversified!
ETF’s give the investor exposure to a sector of the market, but no where near the typical exposure you get with Mutual Funds. This helps the investor to intentionally position their investments with focus and purpose as to the area of the market they want to be invested in! Instead of putting all your “eggs” in one basket, ETF’s give you multiple baskets to put your “eggs” in, without sacrificing your potential gains because of being too diluted as is the case with most Mutual Funds!
- Single Transactions
ETFs follow certain market sectors and act like indexes. However, you can purchase an ETF with one single transaction, unlike an Index. You are purchase, not a basket of stocks, but a mini-portfolio. This makes life easier when finding a certain price, and gives Empowered Investor, Inc. the capability to maximize your investment returns. - Cost-Effectiveness
There is only one transaction per trade, commissions are lower on an ETF as opposed to an index, which requires a basket of stocks and multiple trades. There are also no load fees, and as opposed to regular mutual funds, managing fees tend to be lower. - Derivatives
Many ETFs list options and futures contracts. These are great tools for risk-managing your portfolio. So whether you want to trade ETF volatility with option straddles, or hedge your ETFs with calls and puts, some funds will have that flexibility. - Flexibility
Like an equity, ETFs trade throughout market hours, giving you flexibility. ETFs prices are continuously updated during the trading day and can be sold short or on margin. ETFs trade just like equities on the stock market. - Accountability
The company sponsor/designer/creator of the ETF publishes the list of assets in the fund on a daily basis. Most mutual funds publish the constituents on an infrequent basis. However, with ETFs this is the opposite case. - Immediate Dividends
Dividends (open-ended) are immediately reinvested back into the fund, with most ETFs. The time frames may vary in the case of traditional funds. While ETFs are tax friendly, one should not ignore the taxes on ETF dividends either. - Simplicity
ETFs are simple. They have a simple structure and are easy to understand. If you are looking to emulate the ROI on a particular index or underlying asset invest in a certain industry, you are only a trade away from getting started with ETFs.
There are many advantages to utilizing ETFs in your 401(k) portfolio. While mutual funds, equities, derivatives, and indexes are all solid investments, ETFs are a weapon that should be part of your investing arsenal.
Need more convincing information? Please contact us for a list of additional reasons why ETF’s should be considered for your retirement accounts!