New Advisors
Business Development
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
Investments
Sullivan's 15 Rules of Investments
- 1.Only buy what you understand.
- 2.Passive over active.
- 3.ETFs over mutual funds.
- 4.Own no more than 3 to 5 ETFs.
- 5.Trading or market-timing is a fools game. Buy and hold.
- 6.Never get excited. Never panic.
- 7.Advisor's fees are less about investments; more about financial planning and service.
- 8.Don't over-think performance. Stocks pay 10% and bonds pay 4%.
- 9.Avoid single stock concentration. Odds are against you.
- 10.Don't trade options. Let me say it again. Don't trade options.
- 11.Economists, strategists, analysts, and portfolio managers are generally wrong.
- 12.Don't underestimate the Rule of 72.
- 13.Dollar cost average investing is a powerful multiplier.
- 14.Build bond ladders: they work!
- 15.Corporate bonds vs. treasuries: yield advantage not worth the risk.
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.
Asset Allocation
Age Based Model
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
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.
Time Management
Time Blocking Weekly Planner "Sample"
Morning Routine:
Coffee, WSJ, Check-in with Staff, Assistant, etc.
Client Meetings:
In-Person or Zoom
Business Development:
Proactive Calls, LinkedIn, Marketing (CPAs & Attorneys)
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.
Compensation
Formula
WIREHOUSE
INDEPENDENCE
*Earnings Before Owners Compensation.