7 Key Lessons To Make Your Investment IQ Skyrocket

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If you are a portfolio manager or fund analyst I feel for you. You are under attack — some of it is justified, some of it is ignorance. All you read about these days is how bad your mutual fund manager is. You can’t even beat a Vanguard ETF. Unfortunately, I am not here to defend you as I am not writing this for professionals.

I am writing this for regular people too busy in their normal lives to pay much attention beyond the headlines — all of you non-financial people, you know who you are.

  • The Gen X couple investing in their 401K’s without much guidance and sweating it out during periods of market turbulence.
  • The baby boomers wondering if they have saved enough to enjoy a dignified retirement.
  • The young parents stretching their finances to fund their kid’s college education.

Just to be clear, I am not writing an expose on the active fund management industry. If I had National Inquirer pictures, I would. But in my 3 decades in the business I have not come across many Harvey Weinstein’s.

For now, I am going to share with you several off-the-beaten path insights gleaned from my 3 decades in the investment business.

These insights will not make you rich on their own but will raise your financial IQ.

You will better understand what you are getting yourself into when, say, picking funds.

Without a doubt, you will learn to avoid making investment decisions based on some preconceived ideas that don’t hold water.

I love my work as an investment professional. It’s a craft I have been perfecting for a long time.

I have learned a lot about capital markets, investment strategies and above all else human nature especially the oftentimes complex relationship that otherwise normal people have to their own money.

One of the most difficult emotions that people struggle with is buyer’s remorse. In today’s world, most people have are left to their own devices when say picking funds in their retirement accounts. A lot of individuals are ill equipped for this task as they often rely on a set of assumptions that often do not conform to reality.

Naturally with so many people bashing mutual fund managers these days you might be having some second thoughts about your own investments. Am I doing as well as I should? What am I even invested in?

Especially when markets get volatile people start having buyer’s remorse — why did I put my 401K in this and that investment strategy? I could have done so much better if I had just picked that growth fund recommended by my neighbor. She seems smart!

Everybody is doing well so why is my portfolio not growing? It must be that the funds I picked are terrible. Dam, I should have never listened to my cousin Vinny!

Sure, there is a deluge of information online with fund factsheets and all kinds of pretty charts but without being on the inside how would you know what happens in the factory? Who has time for this?

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You might have an idea, but there is always a bit of distortion when looking from the outside in. You can see some things with clarity but your view is often obstructed or the light too dim to make out much of anything.

Most individuals are not financial experts and often hold a lot of misconceptions about their investments. These misconceptions can have long lasting negative effects on people’s financial well-being

Becoming a financial expert does not happen overnight and it certainly does not happen by osmosis. You are probably already over-booked with work, kids, a new boss, fixing that kitchen, aging parents, … and now you also have to worry about picking the right funds in your 401K or you will end up eating cat during your golden years in Pensacola?

We all have these gaps in understanding and fears when dealing in areas beyond our expertise. The vast majority of people are not financial experts, but for some reason many have opinions that are often at odds with reality.

From the idea that investing is easy and anybody can do it. To the idea that everybody in the financial industry behaves like Charlie Sheen. Wall Street versus Main Street, bulls versus bears, …

I would like to share with you some of the lessons I have learned as a fund manager over the last 3 decades.

None of these insights will make you immediately rich — for that try Bitcoin or Mega Millions if you don’t mind blowing it all at ounce.

But my insights will allow you to make more informed investment decisions that will have long-lasting positive effects on your financial well-being.

Here it goes — my 7 key lessons to make your investment IQ skyrocket and allow you to gain greater control over your financial future

1. Portfolio managers in large investment houses are highly educated and smart but unfortunately the market does not care

Everybody is smart and that is the problem. Out-performing is hard precisely because of how smart and informed portfolio managers are. Everybody is competing harder and harder. For every winner, there is a loser. Net, net the competition has become fiercer as more people have entered the investment business.

When funds under-perform the blame is on the portfolio manager and when the fund out-performs it is all about the genius running the money. But if you talked to the portfolio manager of losing versus winning funds you probably would find both highly educated, smart and well informed.

Lesson — don’t pick managers based on how smart they appear on TV or the number of degrees on their resume. The proof is always in the pudding — performance matters, looks and book smarts don’t.

2. The expense structure of many mutual funds makes portfolio managers look bad

Why? Because the average expense ratio for most funds is north of 1%. Some fund categories such as foreign stock funds are even higher at 1.5% according to the Balance.

Right off the bat, portfolio managers have to out-perform by at least their expenses (say, 1%) to break even compared to market indices such as the S&P 500 or the Down Jones.

It might not sound that hard but keep in mind that the average historical equity market return is 10% a year. Making up that 1% cost differential is hard in relation to market returns.

Lesson — fund expenses matter a lot. Fund expenses are disclosed upfront so there is no excuse for picking high expense funds unless the return is commensurate.

Fund expenses are determined way up the food chain and the portfolio manager does not have any control over the matter. As the say, don’t hate the player, hate the game. Pay attention to fund expenses and costs.

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3. Most fund companies do not allow portfolio managers to hold much cash in reserve

For an equity manager the number is in the range of 2 to 4 %. In my own experience, anything higher results in a call from the internal compliance police.

It is rare to see equity or bond funds hold much in cash. When you do it is usually in a smaller fund or a privately held fund company. For most of the industry the amount of cash held in funds is minimal.

According to Morningstar the average US equity fund currently holds 3.2% of assets in cash.

Why does this matter? The easy answer is that the ability of portfolio managers to play defense during difficult market environments is limited because they can only hold a very small percentage of fund assets in cash.

For example, lots of fund managers complain about equity markets being over-valued and at risk of a correction. But if you don’t have the ability to place a good chunk of fund assets into cash how can you protect the portfolio from falling along with the rest of the market during a correction? If you don’t believe me look at how many funds fell apart during the 2008 Financial Crisis.

Lesson — don’t expect your fund to play defense unless it is explicitly part of their strategy.

Some funds are designed to offer downside protection but these funds are seldom found in say 401K investment menus and represent a tiny fraction of the fund universe. Most of them have failed to deliver or they lag some much when markets recover making them at best short-term tactical holdings.

The best protection against periods of market stress is an asset allocation strategy designed for you– do not expect your equity or bond fund to save you during a market meltdown

4. Fund managers are not incentivized to care much about your tax bill

I have never seen a fund management compensation structure that rewards portfolio managers for saving taxes.

Who’s taxes anyway? The tax picture of a 75 year old retiree in Florida is very different from that of an up and coming biotech researcher in California.

Very few portfolio managers get rewarded based on their after tax performance. Some funds are designed to minimize taxes, but the universe of such offerings is small. If interested search for “tax-managed” funds in Morningstar.

Lesson — if taxes are a serious concern for you, do two things.

First, optimize your asset location. What does this mean? You should hold funds with higher potential tax obligations in tax-advantaged accounts such as 401K’s. If you are already maxed out in your tax advantaged accounts, put funds with lesser or minimal tax exposures in taxable accounts.

Second, some fund structures are inherently more tax efficient than others. For example, the taxation governing mutual funds is less advantageous than that of exchange traded funds (ETF’s).

ETF’s, in general, are more tax efficient than mutual funds. Assuming similar strategy risk and reward, pick a fund structure that is more tax efficient. The tax savings will compound nicely over the long-term. More money in your pocket. Who doesn’t like that!

5. Actively managed mutual funds used to be the only game in town but ETF’s have joined the party

Mutual fund managers have been under attack for close to 2 decades. The heyday of the active equity fund dates back to 1999 when the Technology, Media and Telecom bubble was in full swing.

From an investment perspective, the key difference between mutual funds and ETF’s hinges on the role of the portfolio manager in selecting securities for the fund.

The vast majority of ETF’s mimic the holdings of an index such as the S&P 500 or the FT 100. An index is nothing more than a listing of stocks with associated weights. Unbiased service providers such as Dow Jones or Russell use a defined set of rules to arrive at such a list.

In theory, anybody can replicate an index. That is what ETF managers do — nothing more and nothing less than build a portfolio with the exact stocks in the exact proportions. They do not deviate. There are no sex symbols in the ETF industry!

ETF’s are un-managed in the sense that there is no stock picker or bond manager making active decisions. Because of this, the fees are typically several orders of magnitude lower than those charged by mutual funds. For example, the SPY ETF which mimics the S&P 500 has an all-in expense ratio of 0.09%. Most active mutual funds are over 1%.

In contrast, an active mutual fund manager will consciously deviate from the index in an attempt to out-perform. They may, for example, emphasize cheap stocks or try to find the next Amazon or Google.

Active management funds charge higher fees in return for the prospect of higher than index performance. When active funds outperform the index, the extra costs of these funds are worth it and everybody is happy.

When active funds under-perform, buyer’s remorse sets in and you have the same feeling as during a long winter in Seattle! Very low…

Up to the mid-2000’s ETF’s were small fry in the industry but the growth especially in the last ten years has been spectacular. Investors have been moving aggressively out of actively managed funds into ETF’s.

The most recent Investment Company data shows ETF’s in the US with $2,524 Billion in assets while mutual funds held $16,344 Billion. Mutual funds still dominate, but ETF’s have joined the party.

Lesson — ETF’s are legitimate alternatives to mutual funds and you should consider them. You should also measure the performance of your mutual fund versus the appropriate low-cost ETF.

For example, if you have a large cap US equity mutual fund in your 401K compare its performance versus the SPY ETF. If you own an emerging market equity fund compare its performance versus the IEMG ETF.

Mutual fund rankings relative to peers only confuse the issue. The number of Morningstar Stars or the latest Lipper rankings are niceties. If you have the option of owning an ETF similar in strategy to that of the mutual fund, the comparison should be relative to the ETF. Find that clarity!

6. The fund name is not always a good descriptor of what the fund owns

This happens when the securities that the fund owns are no longer representative of the stated aim and strategy of the fund.

How can this happen? We have something that people on the inside call style drift. Style drift happens when the characteristics of the securities held in the fund have changed.

For example, the EJW Small Cap Value Fund (purely hypothetical) may have been so successful that its stocks appreciated wildly. All the stocks went from small to large capitalization (capitalization refers to the size of the company).

At the same time assume that the stocks went from being cheap (hence the word Value in the fund name) to expensive. There is a dis-connect between the name of the fund and the type of stocks that the fund now owns. Your fund has become the victim of style drift!

Lesson — always know what your fund owns. Do your basic research by going to, say, Morningstar to get an updated view of your fund holdings.

At the very least you should understand your fund’s economic sector and geographic exposures, its capitalization (large, mid or small), and its style characteristics (value, blend or growth). Why? Because these characteristics can have a huge influence on returns.

Does your understanding of your fund’s strategy match up to what the numbers are saying? If yes, you have done your basic homework. If not, sprint away and choose a fund that you understand.

And if you don’t understand any of this, buy a low cost ETF such as SPY (US Stocks) or AGG (US Bonds).

If you can’t tell a stock from a bond go even simpler and buy an ETF that combines both such as the AOM ETF.

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7. Fund selection should be done only after you have figured out what type of overall portfolio best matches your goals and risk profile

A mouthful, I know. But actually the most important insight that I can share with you. Your financial health is at stake.

Smart investment decisions are not just about picking this or that fund. Low cost does not matter if the fund or ETF you picked makes you wake up at 3 AM in a pile of sweat. Similarly, being too cautious may be doing you more harm than good if your retirement nest egg fails to keep up with inflation.

Picking funds or ETF’s is a significant component of your financial health, but it is a distant second in importance to first figuring out what you are trying to accomplish with your money and how you feel about the inherent risk of investing

Everybody is unique in this regard. Even long-term partners can sometimes find themselves at odds when first discussing their goals and expectations.

And, it doesn’t get any easier when the discussion involves your feelings about the inevitable ups and downs created by market swings.

Lesson — before you pick any funds or ETF’s know yourself and your partner.

What are you trying to accomplish? How comfortable are you watching the fluctuations in your investment account? Are you confident of making informed financial decisions on your own?

At a minimum, figure out what proportion of your portfolio should be in stocks, bonds and cash reserves. This is a process called asset allocation and accounts for over 90% of the fluctuations of your portfolio. This is really, really IMPORTANT!

You can start with a free online tool such as that from Vanguard, but if your financial situation requires a bit more fine-tuning or some complexity the best starting point is to see a fee-only financial advisor.

Make your money work for you — your goals, your aspirations — it’s your life after all!

Be proactive about your financial health — it’s a big part of your life.


None of this shall constitute an investment recommendation. Consult your wealth manager if you need help.


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Watch Your Tail — 5 Risks Facing Investors in 2018

2017 came and went without nary a whimper. None of the big concerns at the end of the previous year happened or at least global capital markets did not seem to be disturbed by much of anything.

Stocks went up in a straight line, bonds did ok, volatility was super low and at the end of the year exuberant expectations were in full bloom as everybody and their aunt became fixated on Bitcoin

The global economy keeps doing well and memories of the 2008 Financial Crisis are receding.

Consumer sentiment remains upbeat. Maybe some drama out of Washington but generally smooth sailing.

Being an investor is wonderful when markets are calm and 401K statements show gains month after month. Everybody is an investment genius.

We forget how painful it is when markets experience stress and things get a bit crazy.

Similarly we tend to forget how lucky we are at times such as in 2017 when capital markets deliver bountiful gains.

Clearly, we would all love smooth capital markets forever, but …

The close friend of return is always uncertainty. The two are inseparable even though they may not always be in direct contact


What is uncertainty in the capital markets?

There are as many ways of defining uncertainty as there are opinions as to who the greatest quarterback in history is (we all know it is Tom Brady, right).

My favorite way to visualize uncertainty is as a bell-shaped distribution of potential outcomes — the good and the bad with a lot happening in the middle.

We fear the left tail where things go terribly wrong, we accept the middle of the distribution as textbook risk/return, and we think that our own brilliance (just joking, of course) has led us to the right tail of the distribution.

In 2017 equities, in particular, had a monster year with the S&P 500 up over 25% and many international markets up even more. The year turned out much better than expected. What do I expect for this coming year?

My baseline capital market scenario for 2018 is fairly benign — some people would call it boring. A quick review is in order.

  • I expect equities to again do better than bonds
  • I also expect international assets to outperform domestic strategies
  • My most likely scenario for this year is for continued growth, subdued inflation and no major equity or bond market meltdowns

In my judgement there is about an 80% probability that such a Goldilocks scenario plays out in 2018.

On the downside I expect the low volatility of last year to once again revert back to risk on/off.

I expect to see more large jumps in market prices caused by low probability events lurking in the left hand side of the distribution. The press calls these events Black Swans.

On the other end of the uncertainty distribution you have what I call Green Swans — events, low in probability that when they happen are wildly positive for investors.

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What could cause a Black Swan in 2018?

  • An inflation spike caused by a sustained rally in commodity prices

Inflation in the US is currently running a bit above 2% and market participants do not expect to see any major revisions over the next two decades (see the Philadelphia Federal Reserve estimate of inflationary expectations).

Forecast complacency has set in and inflation risks are to the upside. An overcrowded trade as traders would say

The immediate effect of an upward spike in inflation would be a rise in bond yields. Equities would probably take a short-term hit but the primary casualties would be found in the fixed income market.

What could cause a sustained surge in commodity prices? One, could be a supply disruption say in the oil market. Oil is once again showing signs of strength.

Another could be a resurgence of global growth and continued demand for commodities such as iron ore and copper.

Third, a depreciating US dollar leading to a ramp up in commodity price inflation.

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  • A spike in capital market turmoil caused by a Geo-Political Blowup

The blowup could be anywhere in the world but most political commentators point to North Korea and Iran as the most likely centers of conflict.

Another possibility is a cyberattack endangering public infrastructure facilities especially if it is sovereign sponsored. Third, Jihadi terrorism on a large scale and on high profile targets. And last, the outcome of the Special Counsel investigation into Russian meddling.

All of these events have blowup potential.

Global economic growth would also, no doubt, loose some of its new found momentum.


  • An avalanche of bond defaults in the apparel and retail industries in the US and/or a debt bomb crisis in China

It is no secret that the US apparel and retail sectors are going through massive consolidation driven in part by the shift to online shopping. It is widely acknowledged that the US retail market is over-built.

The number of apparel and retail companies expected to disappear is higher today than in 2008 during the Financial Crisis. Read here for a list of apparel and retailers at risk.

According to the Institute of International Finance global debt hit a record last year at $233 trillion. Debt levels as a percentage of global GDP are higher today compared to 2007. Figuring prominently in the debt discussion is China.

The IMF recently issued a warning to the Chinese authorities about the rapid expansion of debt since the 2008 Financial Crisis. The rapid expansion in debt has funded lesser quality assets and poses stability risk for global growth according to the IMF.

Estimates by Professor Victor Shi at UC San Diego put Chinese total non-financial debt at 328 percent of GDP. Other estimates are even higher leading to an overall picture of rising liabilities and numerous de facto insolvencies.

The implications of a debt scare for investors are quite dire. Investors have had plenty of experience with debt crisis in recent years — Greece and Cyprus come to mind as Black Swan events that temporarily destabilized global capital markets.

A Chinese debt scare would no doubt be of great impact to investors. Emerging market debt spreads would certainly blow up.

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What about the right hand tail of the uncertainty distribution — the Green Swans?

These are wildly positive events for investors that carry a low probability of happening.

What type of Green Swan events could we hope for that would lead capital markets to yet another year of phenomenal returns?

  • A positive global growth surprise possibly brought on by the recently enacted US tax reform

The US is the largest economy in the world and still remains a significant engine of global growth. Could we be surprised by a spurt in US economic growth this year?

According to the Conference Board US real GDP is expected to growth 2.8% in 2018.

Could we see 4% growth? The President certainly hopes so. Not that likely. The last time that US GDP growth was above 4% was in 2000.

What could give us the upside scenario for growth? Maybe a jump in consumer spending (representing 2/3 of GDP) driven by real wage growth and lower taxes.

Another possibility is a surge in investment by US corporations driven by cash repatriations and recently enacted corporate incentives.

We view both scenarios as realistic but providing only a marginal boost to growth. Sorry, Mr. President!


  • A spurt in exuberant expectations driven by the cryptocurrency craze

Fear of missing out (FOMO) takes over repricing all investments remotely tied to the cryptocurrency craze along the way.

We saw a similar scenario play out in 1999 in the final stages of the Technology, Media and Telecom (TMT) bubble.

In those days TMT stocks were no longer priced according to traditional fundamentals but instead on the idea that laggard investors would buy into the craze and drive prices even higher.

Lots of investors succumbed to FOMO in the final stages of the TMT bubble

The recent price action of Bitcoin and most other cryptocurrencies has a similar feeling to the ending stages of the TMT bubble. It is almost as if Bitcoin and its cousins are being discussed along with the latest Powerball jackpot.

No doubt fortunes have been and will continue to be made in cryptocurrencies.

Blockchain technology which underlies the crypto offerings is here to stay, but I worry about the lack of investor education and the speed of price action in late 2017. Whatever happened to Peter Lynch’s “buy what you know” approach?

What could we see if exuberant expectations make a sustained comeback?

First, technology stocks would continue out-performing. Chip suppliers such as Nvidia and AMD would continue to see massive growth.

Companies adopting blockchain technologies would see their valuations increase disproportionally.

Animal spirits would be unleashed onto the capital markets making rampant speculation the order of the day. The primary beneficiaries would be equity investors with aggressive portfolios.


History tells us that it is almost certain that after 8 years of an economic expansion and stock market recovery we should see an outlier type of event in 2018. What shape and form it will take (or Swan color) we don’t know.

Preparing for tail risk events is very expensive and under most scenarios not worth bothering with. Focus on the big picture instead. Predicting tail events is possible only in hindsight.

Black Swans create great distress for investors, but the opportunity cost of playing it too safe is especially high today given prevailing interest rates that fail to keep up with inflation.

The fear of missing out (FOMO) during Green Swan events is also a powerful investor emotion. Again playing it too safe can result in many lost opportunities for capturing significant market up moves.

Investing is all about weighting these probabilities and focusing on a small number of key fundamental drivers of risk and return.

Most to the action takes place in the middle of the distribution of potential outcomes.

How you structure your portfolio and navigate the uncertainties of capital markets is important to your long-term financial health.

Watch those tail events but don’t become paralyzed by fear or greed — these are after all low probability occurrences.

Have a realistic and well thought-out financial plan in place and if needed have an experienced Captain Sully-type as your captain.

Focus on the big picture and live your life!


None of this shall constitute an investment recommendation. Consult your wealth manager if you need help. A version of this note first appeared in Financial Insight Strategists.


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Time flies as the saying goes.

Time flies as the saying goes. One minute you are graduating from high school, the next you are starting your first real job, getting married, having kids and then fast forward to the time when you actually start thinking about retirement and yet another phase in life.

And it all goes faster and faster and you start wondering where all this time went.

There is this little voice in your head that starts creeping in reminding you of your age. You can’t run as fast, you feel stiffer in the morning, you can’t stay up as late or enjoy multiple glasses of wine without totally destroying your next day.

Age has become your crutch.

You stop doing things because of your age. You don’t have as much fun because of your age. You slow down because society tells you that that is what you do. You and your needs and aspirations become invisible.

You accept it. The harsh reality, right?

You start questioning your own mortality. Maybe because a dear friend has passed away (here’s looking at you Scott). Maybe your doctor has put you on Lipitor. Your daughter has become a mother.

You realize, time does not expand, it only shrinks. Every day the only certainty is that you are a day closer to your last one.

No longer can you afford to sit back, moan about what should and could have happened, and endlessly wait for that moment of inspiration or luck to propel you to the life you always dreamt of.

All of a sudden you realize that time has become your enemy whereas before you thought of it as a friend.

When I get my masters in English Lit I will start writing, when I get that bonus at work I will hire a personal trainer to get my 20 year old body back, when I retire I will start wood working again. Lots of talk, no action.

The excuses are endless because you do not attach enough value to your dreams — you think that you have all the time in the world and that things will eventually fall into place.

You lack urgency because you see time as a friend. Once you have X, you will have Y and become Z. Sound familiar?

“Just Do It”, you hear in your head. This is your year. Plow through.

You have heard and tried it all, but invariably you get to the point where you don’t even try anymore. No more New Year Resolutions for me — I am too old. Why try, why fight against nature?

But, do you really accept that this is all there is to life or do you still have that nagging feeling that you could do better?

What happened to all those dreams you once had? You took a stab at them for many years but you could not quite get to the finish line.

So many false starts, and unfinished half-projects. Many of us would have no trouble coming up with our top ten list of unfulfilled dreams!

Next month becomes next year. Next year becomes next decade. As you get older your dreams and aspirations only seem further and further out of reach.

Time is now really working hard against you. What can you do, you have accepted that this is the way it goes. But is there really no way out?

You already know the answer — taking action is the only way to make a change in your life. It does not matter if you are 20, 40 or 70!

So, “Just Do It”? From zero to 60 and don’t look back. Unfortunately we have all tried this advice and it has not stuck.

What you need is to create lasting change. Change in how you view your possibilities in life, change in the intensity of your focus and finally change in your own behavior and actions.

First, stop framing your expectations of what your life should look like by what society expects. Don’t accept a fixed path from birth to adulthood to death. Don’t buy into what the commercials are selling.

Life is not linear but society often wants to put us in a fixed place based on our chronological age.

As Deepak Chopra says, your chronological age is simply a count of how many times your body has revolved around the sun. What’s more important is your biological age — how well your body is currently functioning.

Besides all the myths about age and physical health, what is even more important is your mental health.

Think for yourself. Adopt a growth mindset where artificial constraints imposed by society are removed or at least questioned.

Ok, so the first step is to think for yourself. Now what?

The second step is to intensify your focus on what truly matters to you. As Stephen Covey used to say, “Put First Things, First”.

Clarify your goals and aspirations to the point where you can close your eyes and see the movie of your life. Visualize the finish line.

What will they write in your obituary? The average length of an obituary is 200 words. What will they say really mattered to you in those 200 words?

Figuring out your must-haves is the key to action. Be skimpy — time is not your friend anymore. Decide for yourself what you really value.

Asking why you want to achieve specific goals will buy you clarity. In some cases you will find out that the “why” is weak and not worth wasting any of the 200 words in your obituary.

In other cases, you will find your “why” so strong and intimately tied to your core that you will want to put all your available energy into making sure that these are the things that will be written in those 200 words.

Figuring out your purpose will give you the crystal clarity that will allow you to navigate through the inevitable ups and downs of life.

Too many goals and you will get stuck in mud. Not a clear vision of what you want to accomplish and you will become more focused on the bumpiness of the ride rather than the destination. Indifferent to what goals you want to achieve and you will end up with a bunch of half-finished projects in your attic.

Without a clear purpose you will only find hurdles in the way and the goal line will remain elusive.

Narrow down the choices to what you truly want and value. You can’t be all things to all people.

Finally, the third step to achieving lasting change is to take action. Adopting a growth mindset and getting clarity on your “why” are the prerequisites to your success, but with no action you will only end up with the blue prints to your life and nothing more.

Taking that first baby step, followed by the next and so forth is critical. Walk, jog, run. Nothing happens overnight.

The common wisdom is that it takes 21 days to develop a habit but scientific research does not back up this claim. That is unless all you are doing are very simple tasks such as drinking a glass of water first thing in the morning. Exercise habits, for example, have been known to take much longer to become automatic.

Research published in the European Journal of Social Psychology finds that it takes between 2 and 8 months to build a new behavior into your life.

Habits should be viewed as a process rather than an event. You are not done after 21 days. The hope is that by consistently changing your behavior you reach a state called automaticity. The behavior goes from new to automatic.

If you attach a high value to your goal who cares if it takes 2, 8 or even 18 months to create the lasting change you are looking for? Your payback is forever.

Malcom Gladwell popularized the notion that it takes 10,000 hours of practice to become an expert. Did those 10,000 hours just happen by chance? Can you become a sprinter by just running around the block every day? No sweat, blood and tears?

As Thomas Edison said “Genius is 1% inspiration and 99% perspiration”. A boulder does not move on its own — conscious action is required.

Come Up With Your Own Call to Action

Achieving your goals and aspirations is up to you. Don’t use age as a crutch.

Think you are too old? Vera Wang did not start designing clothes until she was 39, Sam Walton started Walmart in his 40’s, and Colonel Sanders started KFC in his 60’s.

I recently listened to an interview on NPR with Jonathan Terrel who is running 7 marathons, in 7 days, in 7 continents. Sounds impossible, right? Especially when you find out that Jonathan is 55 years old, had major health issues in his 40’s, and only ran his first marathon six years ago.

Part of his preparation — finding a cause or his “why” (supporting pediatric mental health), exercising his belief and visualizing the end line in each of his seven races, and of course a steady amount of training (20 to 25 hours a week).

You cannot will your way to achieving lasting change. First, think for yourself. Second, think about what truly matters to you. And, third take persistent action and create new lasting habits.

Think of those 200 words in your obituary. Do you want those 200 words used on Census data fluff? Or do you want those words to be so vivid, so you that they figuratively bring you back to life? A postmortem role model of how to achieve your dreams!

Time does not expands, it only shrinks from day to day. Every day the only certainty is that you are a day closer to your last one.

Make your time on earth matter on your own terms. Age has nothing to do with it. Get going.

5 Reasons Why Retiring Abroad Will Shock You Into Living Again

Most people stumble into retirement — what they are usually faced with is a loss of identity and purpose.

In a new book “Prescription for a Happy Retirement”, Dr. James Bash calls this the new PMS — Post Work Melancholy Syndrome. Whatever you call this state of mind, don’t let it happen to you.

What a lot of people need is a good shock to the system — retiring abroad just might do the trick.

Have you ever been in an environment where everything was unfamiliar and your senses were hyper-active? Retiring abroad will feel like that at first.

Things will smell different, look different, act different, taste different, sound different. Even you will start acting different and that is exactly the point.

You will sense that something is happening inside of you. That what you assumed to be true before may actually be less certain now.

A new perspective maybe. Or the awakening of something inside you that cries out for redefining life on your terms. Retiring abroad will test your hidden assumptions about the life you want to lead for the next 30 years or so.

10 million baby boomers retire every day in the US saying good-by to their old job routines. Some are prepared for what lies ahead. Most are not!

I am not just talking about finances. Up to this point, you have done what is expected. You have built a career, maybe raised a family, diligently paid your mortgage and stashed money away in your 401K. Life has probably thrown you more than your share of curve balls but you kind of followed the grander playbook.

Now the playbook is missing. Somebody ripped the pages out. Now what? You feel lost at sea.

That little voice in your head keeps going off. Do the right thing and you will spend your golden years enjoying 5 o’clock buffet line specials, endless rounds of golf (substitute shuffleboard if you wish) and lots and lots of TV watching. Wash, rinse, repeat for 30+ years?

Census data shows that More Americans Are Retiring Abroad. Maybe you will benefit from this trend as well. You could be shocked into living again.

Here are 5 reasons why retiring abroad could be the best decision for you:

#1. The pace of life is slower which ironically will make you think more about what you really want to do

Having more time to smell the roses or more likely a good cup of coffee. More time for conversation? Watching a sunset from your ocean front balcony? A mid-afternoon nap? How delightful.

Yes, I want a bit of that! Life in many countries just moves slower. If you have a type-A personality you will have to adjust at first and dial it down a bit, but think of all the free time you will have.

The word “manana” translates to tomorrow but what it really means is maybe tomorrow, maybe in a couple of days, maybe in the rainy season. Is life really that urgent?

A slower pace of life will give you more time to think. It will also allow you to reconnect with yourself, your significant other and the world at large.

#2. The cost of living is less and you will be able to afford to do a lot more fun activities

Who doesn’t like a sale? Especially when it is on everyday prices. A big part of the appeal of retiring abroad is about stretching your nest egg.

Surveys show that one of the biggest worries of people, as they retire from their full-time careers, is outliving their savings. Would it not be great if you could remove one more worry from your list? Imagine being able to live well on an income of half or even a third of what you were earning before.

Let’s take a quick look at cost of living numbers for countries in the Americas. Numbeo is an organization that compiles such data from actual consumers. From my own experience, the cost estimates seem to be in the ballpark — maybe not down to the penny but the actual rankings of the countries conform to my own intuition.

Source: Numbeo

What does the data say? Retiring in the Caribbean will cost more but you already knew that from taking those family vacations. The good news is that there are plenty of other places offering a more inexpensive lifestyle than at home.

For example, have you thought about moving to one of the most affordable places in the western hemisphere — Ecuador? The cost of living is about 40% cheaper than in the US.

While not as affordable, how about Costa Rica? With any luck you could find yourself surfing next to Tom Brady. If that is not enticing how about moving to Panama and salsa dancing to the tunes of Tito Puente? Both come at a 20%+ discount.

#3. Your brain will feel stretched again as you encounter many new things.

Not only will your surroundings be new and unfamiliar but you will most likely need to learn a new language. Spanish? Portuguese? Thai?

How about new customs? Finding that balance between the old and the new will keep you on your toes.

The change will bring a new step into your life — stretching again to make new friends, understand another culture, taste new foods and smells, a sense of adventure and maybe if you are lucky a bit of romance.

You could have unbelievable wildlife in your backyard — no, I am not talking about just the occasional spiders and critters eating away at any breadcrumbs.

Pretty soon you will be spending part of your day talking to your new found friends about that strange type of mushroom you found growing in your backyard or the colorful bird flying above your hammock. Could it have been a Toucan?

You could take up hobbies or activities that you either had long ago given up on or maybe never tried due to a lack of time. Bird watching anybody? Yoga? Maybe surfing if you are looking for a more vigorous workout.

According to the National Institute On Aging staying mentally engaged and continuing learning is vital for maintaining cognitive health. Retiring abroad just might do the trick!

#4. Your Health will improve as you simplify your life.

Life abroad tends to be simpler than back in the US. In fact many ex-pats refer to living abroad as something out of the 1950’s.

Healthcare is a big concern for many people moving abroad. People worry that you won’t be able to have access to the same quality of medicine as back at home.

For many retirees this is a real issue but thankfully health care in many parts of the world has improved dramatically. In a recent survey by Bestplacesintheworldtoretire.com 18% of retirees actually indicated that the quality of health care abroad was much better than at home with 30% stating that it was about the same.

People also worry about the cost of health care. Not a huge surprise there as for many of us healthcare is a large expense. Here the news gets really encouraging for anybody looking to retire abroad.

By most accounts, healthcare is a bargain abroad! Again based on surveys, 36% of retirees living abroad believe that their health care costs are less than a quarter of what it cost at home with a further 38% of respondents indicating that costs were between one quarter and half.

Many countries favored by ex-pats have nationalized health care systems available at very low monthly premiums. This option is great for taking care of the basics (health checkups, allergies, a broken toe) but there are often also private medical care options again at a fraction of the cost available in the US. Many of these facilities are staffed by personnel trained in the US and Europe and the equipment is often state of the art. Have you ever seen ads for medical tourism?

Beside health care cost and quality there is an additional benefit and it relates to something in your control. By that I mean what happens to you as you change your surroundings and adopt a simpler lifestyle.

Often you have no choice — things move slower abroad, the roads are narrower, there are fewer cars on the road, you are often closer to nature, people walk a lot more, and information overload is not as prevalent.

But the biggest change is often internal. Something changes in people when they retire abroad. Maybe it is by necessity as you get used to your new environment or that changing your habits is easier when you get a new lease on life.

Among retirees, surveys show that 43% of them believe that they now have a much healthier life style than at home. Another 31% think that they have a slightly healthier life style. For most people retiring abroad a less stressful life leads often to healthier living.

#5. It will give you a chance to reinvent yourself and that may be the biggest reason for taking a chance.

No, retirement abroad will not make you look like Gisele Bunchen or Tom Brady but it will give you the ability to re-define what you want out of the rest of your life.

There are four main reasons for this according to retirement expert Chuck Bolotin of BestPlacesInTheWorldToRetire.com. One is the shock from experiencing unfamiliar settings.

Maybe you never saw yourself as a nature lover but waking up every morning to a band of singing birds might trigger the Steve Irwin in you.

Another is simply being around new people. New friends, fresh conversations, different social norms? Throw in there a new language and I hope you get the point.

Yet another reason and one we alluded to before is the lower cost of living allows you to do more with your budget which, of course, has the side benefit of lowering your stress.

Maybe your budget will now allow for a couple of adventure trips a month. Imagine white water rafting the Reventazon River in Costa Rica or hiking Ecuador’s Chimborazo Mountain? Both would surely get your juices flowing!

Finally, being around people with a different perspective of life will force you to re-examine your beliefs. Not everybody views life the same way as your peers back home.

Some of your core principles will no doubt be re-enforced but you might end up seeing shades of color in areas of your life where once upon a time you only saw black and white.

Remember, living does not stop with the last paycheck. Retiring abroad could be the shock you need to restore your identity and purpose in life.

Try it and if it does not work for you come back. But whatever you do, re-inventing yourself is key to finding a life of adventure, new learning and meaning.

Retiring abroad will not cure all ills. Running away from problems will never work, but an open mind and a desire to lead life on your terms could yield a steady stream of dividends.

Retiring abroad is not for everyone, of course. But if you want that extra adrenalin rush and feel empowered again to lead a life of purpose at a discount price, retiring abroad might just do the trick

Thank you for reading!

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