New Advisors

Prospecting

Law of Large Numbers

The LLN is important because it “guarantees” stable long-term results for the averages of some random events. For example, while a casino may lose money in a single spin of the roulette wheel, it’s earnings will trend towards a predictable percentage over a large number of spins. Any winning streak by a player will eventually be overcome by the parameters of the game. It is important to remember that the LLN only applies (as the name indicates) when a large number of observations are considered.

Rule of 7,000

Rule of 7,000

Investment

Modern Portfolio Theory

MPT is a theory of finance that attempts to maximize portfolio expected return for a given amount of portfolio risk, or equivalently minimize risk for a given level of expected return, by carefully choosing the proportions of various assets. Although MPT is widely used in practice in the financial industry and several of its creators won a Nobel Prize for the theory, in recent years the basic assumptions of MPT have been widely challenged by fields such as behavioral ecomonics.

Behavioral Economics

Behavioral economics is an area of study focused on how psychological influences can affect the behavior of investors or financial analysts. It also includes the subsequent effects on the markets. It focuses on the fact that investors are not always rational, have limits to their self-control, and are influenced by their own biases.

Age Based Model

Behavioral Economics

Bond Ladder

Bond Ladder

Question: What happens if interest rates rise?

Answer: Two year treasury matures and rolls to ten year at higher rate.

Question: What happens if interest rates decline?

Answer: Two year treasury matures and rolls to ten year at higher rate.

Market Returns

Market Returns

Rule of 72

Determines the amount of time it takes for an investment to double assuming a fixed annual rate-of-return. It's a simple calculation; Divide 72 by the rate-of-return.

Rule of 72 One Rule of 72 Two

Time Management

Day Planner (16 hours per day)

Compensation

Waste One Hour a Day… Lose One Month a Year

The average office worker easily wastes one hour every day on social media, chatting with co-workers, or watching CNBC or Bloomberg.

It’s actually more than one hour per day for those working from home. Add to the list of work distractions such as laundry, walking the dog, occupying the children, and running quick errands.

weekly annually net loss

Compensation

Formula

WIREHOUSE

Wirehouse

INDEPENDENCE

Wirehouse

*Earnings Before Owners Compensation.