Kevin Kroskey's Money & Mind

The article below is a timely one from Dimensional Fund Advisor's (DFA) Jim Parker, VP of DFA Australia. Though Ireland is a country there are many lessons to be learned from Ireland's missteps by the individual investor. ---- Reaching understanding on the right way to invest often starts with studying bad investment decisions. But the lessons are far less painful when they are built on others’ experiences. Recent events in Europe provide case studies on what can go wrong when a wealth-building strategy is built on too much debt , too little diversification and too little awareness of risk. Ireland in recent years, for whatever reason, became heavily dependent on a couple of industries – namely construction and banking. The IMF1 in a report this year described the causes of these imbalances as “rapid credit growth, inflated property prices and high wage and price levels”. Now, an economy is clearly much more complex than any individual and the ability of governments ...

It's quite difficult if not virtually impossible to have forecasting abilities to consistently predict future economic scenarios. Even if a prediction about what will happen to our economy is done accurately, an investor is not done yet. In order to capitalize upon an accurate economic prediction, the investor must still translate the economic prediction into a successful investment strategy and must also get the timing of it correct. No small feat indeed. As we get through a political season where much in relation to our country's economics have been discussed or at least used in the negative political ads that seemingly permanently reside on my television, it's helpful to keep things in perspective and look at things objectively. Marlena Lee, Researcher with Dimensional Fund Advisors, examines historical data to test the relationships between fiscal deficits, interest rates, business activity, investment returns, and exchange rates in a video and/or podcast available b...

I was recently interviewed for an article done by Betty-Lin Fisher, Business Writer with the Akron Beacon Journal, about whether bi-weekly payment plans and mortgage prepayments in general are a good thing. She wrote: Claytor and Kevin Kroskey, a certified financial planner and owner of True Wealth Design in Fairlawn, both agreed with McBride that paying off other high debt and funding other accounts should come before prepaying a mortgage. Another option is to do a little more each month. Claytor and Kroskey said they both round up their mortgage payments to add a little extra to their principal. ''By and large, paying down the house is a good idea,'' said Kroskey. But there is a caveat, he said, where he sees people making mistakes. Often, as people are getting closer to retirement and if they haven't done a really good job of saving, they might think, ''I have to pay off this mortgage before I get into retirement. It's what Americans are supp...

"The inflation-adjusted income of the median household—smack in the middle of the populace—fell 4.8% between 2000 and 2009, even worse than the 1970s, when median income rose 1.9% despite high unemployment and inflation. Between 2007 and 2009, incomes fell 4.2%." The above paragraph is from a Wall Street Journal article describing the pain the American middle class has experienced over the "lost decade." The media has generally referred to the "lost decade" for the lack-luster results of the S&P 500 from 2000-2009. While I disagree that this time period was a lost decade for a well-allocated investor, I do agree with the author of this article that it was a lost decade in terms of real or inflation-adjusted income. In his autobiography, Alan Greenspan describes this phenomenon and says how the mass influx of labor from China and India kept prices and inflation relatively low world-wide for an extended period of time. The good news, he says, is tha...

Consumer sentiment is down. Unemployment is not. Housings starts are terrible. A double dip is on the lips of many. Since this is an election year, each side of the aisle has reasons to portray the future as gloomy. There is an alternative view. Markets on average recover greatly. Yes, maybe this time is different, but then again, probably not. I like to say that 'this time is different' are the four most costly words an investor can utter. If this market recovery is average, then there is substantial market appreciation from today's valuation over the coming years. Moreover, alternative strategies-chiefly lending your money to the U.S. government is fraught with low interests and ultimately high probability in principal decline, if individual bonds are not owned and held to maturity. This is not a prediction, but we need to keep things in perspective. It's difficult to be objective when 'you're in it.' Kevin Kroskey, CFP, MBA

It seemed so obvious. With the economy slowly recovering last year from the worst recession in decades and the federal government seeking to tap the credit markets for over $2 trillion to fund an ambitious spending program, both laymen and experts alike seemed to agree that interest rates had nowhere to go but up. The yield on the ten-year U.S. Treasury note as of June 30, 2009 was 3.52%, down from 5.25% in June 2007 but well above the 2.09% level registered amidst the depths of the credit crisis the previous December. With retail sales and housing activity showing signs of gradual improvement, the only question appeared to be how much higher interest rates would go. Among fifty economic forecasters surveyed by the Wall Street Journal in June 2009, forty-three expected the ten-year U.S. Treasury note yield to move higher over the year ahead, with an average estimate of 4.13%. Seven expected a rate of 5.00% or higher while only two predicted rates to fall below 3.00%. The result? The ...

Recent Market Volatility in Perspective The US stock market has taken investors on a bumpy ride in recent years. This volatility has tested investor discipline and prompted some people to question their commitment to equities. While no one knows the future, looking at the past may help you gain a better view of long-term market performance and put the recent market volatility in perspective. The above chart shows the historical distribution of US market returns since 1926. The performance years are stacked in ascending order by return range. This chart illustrates that: • Market performance over the past two years has been extreme by historical standards. In 2008, US stocks experienced their second-worst calendar return in eighty-four years. Then, in 2009, stocks rebounded strongly to deliver a return in the top quartile of the historical distribution. • Over the long term, the market’s positive return years have outnumbered the negative return years. Since 1926, the market h...