​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.

​Life gets complicated quickly. That doesn’t mean that our response needs to be complicated. I recently read the book Simple Rules by Donald Sull and Kathleen M. Eisenhart. They discuss the use of simple rules and why they are so successful in the face complex situations. These types of situations range from surgical triage to dieting. It turns out that simple rules can help us make much better functional decisions because they allow us to focus on variables that really make a difference while allowing for flexibility to pursue new opportunities as they arise.

​The secret at the heart of financial planning is one they don’t teach you in the classroom. The secret is that the financial planner’s main job is to help clients develop reasonable expectations about their money, their lifestyle and their future standard of living. This can be tough emotional work.
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