​We have a kitchen drawer handle that gets loose frequently. It’s attached with a Philips Head screw. This one particular screw is very easy to screw in with a tool at hand in the kitchen – a butter knife! It just so happens that the screw is the perfect size and the butter knife does as good a job as a real screwdriver in tightening it up. Which is convenient since there are lots of butter knives around the kitchen, but the screwdriver is in the garage. 
 
Now, despite the fact that the butter knife is great for that particular screw, I would not put one in my toolbox. I wouldn’t pack it up if a friend asked me to come over and help put up a swing set – unless I was planning on making toast or a sandwich - because outside that one perfect screw the butter knife is a lousy screwdriver (believe me, I’ve tried). Which of course reminds me of insurance…

There are no guarantees in investing. So I will say this: almost always, an investors long-term performance is related to their behaviors. Most successful investors develop a long-term orientation that successfully drives their wealth building over the years. For some this will look like benign neglect. They develop a strategy, make their contributions automatic and infrequently, if ever, check the progress of their accounts. In fact, one study by Fidelity indicated that the best performing accounts in their system was from people who had forgotten that they had an account. Others may be incredibly rational with nerves of steel, successfully adding funds to their accounts during times of fear and doubt. But whatever the personal traits that enable it, successful long-term investors are able to resist the siren songs of both fear and greed and keep to their game over the long haul.

Most of you reading this are no doubt disappointed in your investing performance for the year, and rightfully so. Usually we count on the benefits of diversification to provide one of the few free lunches in investing: mix together different asset classes and experience lower volatility with similar returns. What’s not to like; less volatility, same returns!
 
Some might say this year diversification failed. Not one major asset class had a significant positive return. Most major US and international stock indexes were down, some in the double digits. Even the stalwart hero of the conservative portfolio, the aggregate bond index was basically flat for the year. Gold and Silver, the supposed safe haven assets in a crisis, were both down: -2% and -9% respectively. (Client note: since we have been expecting interest rates to rise in the last couple of years, our portfolios have mostly short duration bonds. These bonds have returned 1.5-2% this year.  For a refresher on bond math, click here)

​I have a confession; I love the movie Sliding Doors. The millenials reading this will find this an oldie-but-goodie. I think it’s held up surprisingly well. And – yes – I did re-watch it as homework for writing this post. For those so culturally bereft as to have never seen this gem, here’s a quick synopsis:
 
Helen (played by the angelic Gwyneth Paltrow) is having a very bad day. On her way home early from work, she barely misses the sliding doors of the subway that would take her home. Except inexplicably, her timeline splits and we witness two parallel lives unfold: one where she made the train and one where she missed the train. Hilarity, love and sadness unfold as we get to watch the dance of the two timelines progress.

​In my last post, I talked about the need for prudence in the current market environment. It is a message that has been well received by most people that I talk to. But the discussion often turns to “Well, what does that mean?”Prudence as an over riding philosophy sounds great, but how do we put that into practice? One way to address this is the Barbell Approach. In investing, the Barbell Approach is a strategy with two components. On one side is a very aggressive and potentially volatile investment with high expected returns. On the other side is a conservative cash-like investment with lower return expectations. This helps smooth out the overall volatility of your strategy. It also potentially gives you dry powder to invest when volatility turns down.

​During the second half of 2017, I spent a lot of time with clients walking through annual market reviews. I would like to share some of the insights that have come out of those meetings. There are two broad areas of focus: investment implications and personal finance implications (or, as I like to think of it, regular old life implications). 

Over the last several months, I have spent upwards of 50 to 60 hours researching bitcoin, crypto assets and blockchain. I’ve had several questions from clients on bitcoin and blockchain. My research is designed to answer one basic question: Is bitcoin a good investment?

The short answer is “No” 

The somewhat longer answer is... 

​As many of you know, I spent the last week in Yellowstone fishing with a group of family and friends. It was a wonderful trip! I’m a somewhat perpetual intermediate fly fisherman. But I have the luxury of fishing with some truly word-class fishermen. They taught me everything that I know about fly-fishing, and yet they’ve probably forgotten more about the endeavor than I can ever hope to learn.
 
As I was there, I couldn’t help but notice the many parallels between fishing and investing. Hopefully you will appreciate some of the lessons…

Recently I read an article in the Wall Street Journal titled: “Homeowners Are Again Pocketing Cash as They Refinance Properties” (subscription required). My first thought: Here we go again.
 
Unfortunately, the article was mostly positive on the development, as the writer’s take was that this reflects confidence in the economy and relative job security. I have no idea if this bodes well for the economy or not (although my intuition says it’s a negative), but on an individual level I think this is a really bad idea. There are no absolutes in personal finance, and everyone’s situation is different. With that caveat out of the way, lets look at why taking cash out of your home when you refinance can be a poor financial decision.