Kirk Chisholm

Kirk Chisholm is a Wealth Manager and Principal at Innovative Advisory Group (IAG). His roles at IAG are co-chair of the Investment Committee and Head of the Traditional Investment Risk Management Group. His background and areas of focus are portfolio management and investment analysis in both the traditional and non-traditional investment markets.

Correlation Does Not Imply Causation

correlation does not imply causation

 

His argument was presented with data so it must be correct.

I stopped watching the news on TV years ago. I think it was the invention of the 6 box debate on-screen all-at-once. This was around the time that the news became entertainment, rather than news. However, despite my distaste for TV news, I was watching a news show yesterday and I saw a story about how guns were dangerous and should be outlawed. This story was followed up by a story about how the temperature was becoming more erratic, this was due to global warming so we should all drive electric cars. These stories are just one of many, where commentators (frequently not scientists, specialists, or frankly anyone who is remotely qualified to speak on the subject) elaborate how their point of view is correct because of this specific set of data. After studying the data in these and other similar types of issues, I can absolutely tell you that…

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Top 8 Titles Used by Financial Advisors – Is Your Financial Advisor Registered?

 

financial advisors
 

This post is a continuation of the last post, Who is your Financial Advisor? In this post I will discuss some of the more common titles and licenses used in the finance-related profession. These are titles which professionals use to promote themselves. Some of these titles are given to them by their broker dealer, some are titles provided to them by obtaining a license and passing a test for proficiency, and some are self-designated.

Financial Advisors, their titles, and licenses

This is not an exhaustive list. There are many title professionals choose to call themselves. This post is only meant to discuss the more popular ones to help you navigate through all the terminology. Here is a list of the most common used titles for the finance-related profession:

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The Real Estate Investor’s Guide: Using a Self Directed IRA to Buy Real Estate

Using a self directed IRA to buy real estate

 

“Every nickel I make gets put back into real estate.”

This is what an investor told me my first week of working on Wall Street. At the time I didn’t understand it, but this quote epitomizes the mind of the typical real estate investor. All they know is real estate, all they trust is real estate, and they are not remotely interested in any other type of investment.

I get it. Real estate is a very attractive asset class. I discussed some of the reasons for this here, These Top 7 Powerful Tools Can Create Legacy Wealth from Real Estate, and Inflation – The Secret to Building Wealth in Real Estate. Real Estate is unique in a number of ways. One of which is the ability to use massive amounts of leverage. When leverage is paired with inflation, you have a powerful combination.

As great of an asset class as real estate is, many real estate investors still come up frustrated.

While real estate investors may choose to invest every nickel they have into real estate, they are reluctantly forced to invest their retirement accounts into stocks, bonds, and mutual funds. Some investors are so turned off by non-real estate investments, they choose to not contribute to their IRAs or 401ks at all. This is mainly due to the “inadequacies” (in their mind) of the other available investments.

If they only knew the truth…

So rather than saving for their retirement in a tax-deferred or tax-free account, and potentially getting the significant tax deductions, they choose to ignore the retirement account option completely. Until now…

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The 2018 Comprehensive Guide for Year End Financial Planning Strategies

 


year end financial planning

 

“A goal without a plan is just a wish.” – Antoine de Saint-Exupery

 

12 Smart Actionable Tips For You To Maximize Your Year End Financial Planning Strategies

The end of the year is fast approaching. Now is the time to plan your year end activities so you can make the most of your financial planning and tax strategies.

In a perfect world, you would have a comprehensive financial plan that you review often to ensure you are on track. However, I’m more realistic. I know you are probably not going to do this…

And to be frank, you would not be reading this in December if you had already done your planning for the year.

Having a financial plan is an important step in making sure you have a path to reach your goals. Financial planning is about figuring out where you want to go, putting together a path to get you there, and monitoring your progress along that path to adjust for unexpected events.

While most financial planning should be done continuously throughout the year, many people wait until year end to complete their checklists. This post should help provide you with 12 immediate actions you can take to get up to speed on your financial planning before year end.

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Proof That Share Buybacks are a Powerful Strategy for Building Wealth

The Curious Case of IBM Share Buybacks

This is an overlay chart of IBM’s stock price and its market cap since 2000. Do you notice anything interesting about this chart?

IBM share buybacks

Look closer…

The stock price and market cap have performed differently. How can that be? Aren’t they the same?

While the stock price and market cap are highly correlated, they are not the same.

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What You Don’t Know About Renting vs Buying a Home Can Cost You Money

 

renting vs buying a home

“If you rent a home, it is an expense. When you buy a home, it is an expense. If you buy a home and rent it out to a third party, it becomes an investment. A better way to put it is that when you are renting, you rent from a landlord. When you buy a home to live in, you are renting from yourself.”

This is the third and last post of this series. The first post, Should You Rent or Buy a Home?, examined what factors you should consider when renting vs buying a home. The second post, What is the True Cost of Owning a Home? , examined the true cost of owning a home. In this final post I will be examining whether it makes sense to rent or buy a home. Numbers don’t lie, so lets look at some real numbers.

There are many calculators available online to help you figure out whether to rent or own. Unfortunately very few include the true costs of owning a home in their calculations. If you read the prior post, you will have some understanding of what was left out and how to calculate it. The math in post this will be relatively straight forward and a bit more fun.

I will be showing you some examples of real properties that I have found in the past year to illustrate this secret that very few people know. Whether you are a real estate investor or looking to buy a home to live in, you will want to know this secret.

“you are paying someone else’s mortgage, so why don’t you pay your own?”

There is a myth out there that when you rent, “you are paying someone else’s mortgage, so why don’t you pay your own?” This is a farce. It doesn’t matter whose mortgage you are paying, what matters is your costs to live in that home.  No matter where you live, your cost to live in that home is an expense. If you rent, you pay rent to a land lord. If you own, you pay a mortgage, taxes, insurance, maintenance, etc. There are costs for both options. Unless you live in a tent you will be paying for a home either way.

The reason many people think that owning is better than renting is that they equate owing a home as an investment rather than an expense. Once they make the realization that it is…

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Investing is Not Gambling… if it is Done Correctly

 

investing is not gambling

“The distinction between investment and speculation in common stocks has always been a useful one and its disappearance is a cause for concern. We have often said that Wall Street as an institution would be well advised to reinstate this distinction and to emphasize it in all dealings with the public. Otherwise the stock exchanges may some day be blamed for heavy speculative losses, which those who suffered them had not been properly warned against.”
-Benjamin Graham – The Intelligent Investor

 

Are you gambling with your money?

Investing is not gambling.

Gambling is exciting. Gambling is entertaining. Gambling can make you rich… or so you imagine, but the odds are against you. That is why it is called gambling. That is why casinos are such profitable businesses.

There are professional gamblers who play Texas hold ‘em for a living and do quite well. But they are not gambling, they are playing the odds, they have a system, and they know the probable outcome of their “gamble”. There is certainly a large amount of skill involved as well. Reading people, remembering prior drawn cards, and concentrating for long periods of time.

This does not apply to all games of chance, like the lottery. A friend of mine likes to say, “The state lottery is a tax on people who are bad at math.” If anyone ever looked at their chance of winning the lottery, they would not waste a nickel on it, certainly not the rent money. According to the Massachusetts state lottery, the odds of winning a jackpot in Powerball is 1 in 175,223,510. I assume those odds don’t account for potentially splitting the jackpot with one or more people.1

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Your Emergency Fund – Understanding the Importance of Cash

emergency fund

“Never spend your money before you have it.”  -Thomas Jefferson

 

Have you ever lost your job? Has your car ever required an expensive fix? Have you or a family member ever need funds for a hospital visit?

Now imagine that you didn’t have access to cash to pay for that emergency. What would you do?

The mass issuance of credit cards has allowed people to neglect the need for an emergency fund. This is a mistake. An emergency fund is not only about preparing for the rainy day that you will need the funds. It is also about reducing risk, providing you options, and helping you sleep better at night knowing that your financial emergencies do not have to be debilitating.

According to Go Banking Rates, 71% of Americans have less than $1,000 saved in their savings account. Although some age groups vary by a small margin, 70%+ of them (including seniors) have less than $1,000. If their income is cut off for even a few weeks, how are they going to survive?

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Dividend Growth – Learn How This Simple Secret Can Exponentially Increase Your Returns

Dividend growth

“Inflation is taxation without legislation”      -Milton Friedman

Regardless of what happens in the future with inflation in the US, it is important to consider how it will affect your investment portfolio. While I discussed how a hypothetical dividend stock could help you compound the growth of your family’s wealth in the first three parts of this series, I have not mentioned how the effects of inflation can eat away at this performance. This fourth article in the series will discuss both how inflation affects your investments, and how to use dividend stocks to beat inflation. This inflation beating secret could help you minimize the effects of inflation through another form of compounding or super-compounding.

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These Three Dividend Secrets Could Make You a World-Class Investor

 
dividend secrets
Ever since I was young, I was always good with numbers. I picked up new mathematical concepts very easily even though many were abstract. Once I started studying finance, and real money was involved, it became even easier to grasp many of the concepts.

Wall Street tends to embrace complex systems. Maybe because the creators of these systems think that the complexity will make it more successful, or maybe they believe that because it is complex they have found the holy grail of investing/trading. While these systems are interesting to me on an academic level, in my 15 years of working on Wall Street and studying what works, the conclusion I have reached is that simple is better.

I have seen simple investment systems, multi-million dollar trading systems which require astro-physicists and rocket scientists to run, and everything in between. With all those reference points, one thing that has become crystal clear, adding complexity does not necessarily make things better.

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Dividend Stocks – This One Secret Could Significantly Increase Your Returns with One Quick Phone Call

 

dividend stocks

 

In my last article, Compound Interest- the most powerful force in the universe… Maybe, I discussed the powerful secret of compound interest. This secret works well if you take advantage of the aspect of time. This secret is not for those who want “action” with their investments. People who “gamble” with their investments will find this concept difficult to successfully master. To learn more about investing vs. gambling, read my prior article, Investing is not gambling…if it is done correctly.

Using the element of time to your advantage allows your money to grow and also requires a bit of patience. We are bombarded on a daily basis with ideas, news and emotional triggers which urge us to react to them. The question you have to ask yourself is,

“Does this piece of news change anything?”

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Compound Interest – The Most Powerful Force in the Universe… Maybe

 

compound interest

“Compound interest is the most powerful force in the universe.” – Albert Einstein

I have heard this quote many times over the years. I, like most people, have just assumed that Albert Einstein said it since it is so widely attributed to him. However when I looked it up, I realized that it may be just another urban myth. There is no context for his quote or specific mention in writing of which he has made it.
Regardless of whether he said it or not, it is a very important concept to understand.

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Inflation Monitor – June 2017

inflation monitor subscription

Inflation Monitor – June 2017 – Introduction

“The equity market continue to float on a cloud of who knows what”. | “This is not like any market anyone alive has seen before.” | “There is no euphoria, which is usually not a sign of a market peak.” | “There is enough pessimism for the market to continue climbing higher.” | “The engine seems to be running, but no one has bothered to look under the hood.” — These are just some of the comments I have heard from portfolio managers in the past month.

This month I want to discuss the topic of value. Value is a term that means different things to different people. Frequently. people use the term to describe investments that are “cheap”. Of course, “cheap” also means different things to different people.

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30 Top Investment Quotes for New Investors

 

Investment Quotes

 

I like investment quotes. They are snapshots of wisdom. An insight into the minds of genius investors. Many of these quotes individually could be the basis of an entire book.

I have been collecting these quotes to add to each post I write. Unfortunately I have way more quotes than I have posts up on this site. So I thought I would compile this list to provide more bite-sized pieces of wisdom for your enjoyment.

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Inflation Monitor – March 2017

 

Inflation Monitor Summary – Composite Ranking

Inflation Monitor - March 2017 Summary
 

Inflation Monitor – March 2017 – Introduction

 

Wow! What a winter we have been having this year. We have had some big changes in recent inflation data. It is a mystery to most people as to why this has taken place, especially with the pre-election slowdown. However, this month we will be discussing a number of things including, a big surprise to earning growth, the mystery of the big jump in inflation, Trump’s potential impact on inflation, and most importantly the biggest change in inflation trends in the past 8 years. You will not want to miss this month’s Inflation Monitor.

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Inflation Monitor – December 2016

 

Inflation Monitor Summary – Composite Ranking

Inflation Monitor - December 2016 Summary
 

Inflation Monitor – December 2016 – Introduction

 

We have a lot to cover this month in the Inflation Monitor – December 2016. This is the end of 2016. It is a time for reflection for the year past and for pontificating the future. We all know no one can predict the future. And so much is up in the air with the recent populous trend changes, let’s focus on last year.

Let’s start with the US presidential elections. Donald Trump will be our next president (#45) in the US. Some people are happy, and others are sad. Regardless, we have a huge potential shift in the US with the results of the presidential election finalized. The first thing to address is that Trump may or may not pursue the same policies he campaigned on. Every presidential candidate has their platform, but not all of the promises actually happen. Let’s put these in the wait and see category up for discussion after his first 100 days. He will have about 100 days to prove his worth and keep the positive (market-related) momentum going.

While I have seen a lot of positive signs since Trump was elected, the US is overdue for a recession. The S&P 500 had a string of 5 quarters in a row of declining earnings. Apparently, no one noticed. I would consider this a recession, but the markets did not. The markets are always right regardless of what I think. It will be interesting to see what happens once the “new president hangover” wears off.

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A Simple Solution to America’s Health Care Crisis

 

health care crisis

I have a question for you…

“What is the one industry that you can walk into an establishment and not know what you are going to pay before you get your goods or services? It is this industry where if you ask the price for their service they will say they cannot tell you or don’t know?”

You might guess the legal profession. I have never met an attorney who wants to give an estimate on their services, but they do tell you the hourly rate, so at least you have some sort of baseline to compare with other attorneys.

It’s not the legal profession.

It is health care.

 

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The Wall Street Shuffle

Timeless Wall Street Wisdom: The Wall Street Shuffle

Wall Street Shuffle
The Wall Street mentality is the art of the possible, where optimism rules the day. While bears may be intellectually correct, they are rarely proven so, and they are never invited to parties.

Wall Street is made up of creative people who can find ways to turn a little money into a lot of money: mathematicians, rocket scientists, astrophysicists, and people who can sell ice cubes to Eskimos.

Youth, ego and arrogance quickly turns wealth into wisdom and experience. Wisdom and experience is transmuted back into gold, cash, and reputation… if you can wait long enough.

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