It's Your Money After All

by: Bruce Lebowitz


It's true, no one cares about your money as much as you do.

Financial advisors, may or may not have your best interests at heart.

Seeking Alpha is a wonderful place to learn.

This is a story of a personal financial history. I outline my investing mistakes so as to help others avoid such foibles.

I'm 70 years old, a recently retired podiatrist after 30 years at Johns Hopkins. I began investing through their 403-b plan in the 1980s and began investing in equities in the early 1990s. In 1991, my wife inherited shares of Merck (NYSE:MRK), General Electric (NYSE:GE) and International Telephone (NYSE:ITT). The broker who helped manage my father-in-law's account offered to become our broker. We agreed to use him, why not? He immediately suggested selling off half (400 shares) of the MRK as it had grown so much over the years. He bought fine stocks such as Procter and Gamble (NYSE:PG), Royal Dutch (RDS) and Xerox (NYSE:XRX). He also put us into a proprietary mutual utility fund from his brokerage company. More about that later. Unfortunately, MRK came out with the first ever cholesterol drug, Mevacor two months later. While MRK soared, I was reminded of a story another Hopkins physician had told me. He had just completed his tour at the end of WW2. As a doctor, who read all the medical literature, he became aware of a new drug that would treat high blood pressure. When FDR died, his high blood pressure had been 190/110 and was untreated. This colleague read that a relatively unknown company, Merck Sharp and Dohme had invented this drug. When he told his commanding officer, also a doctor, that he thought he should invest some money in this company, the other doctor said, "Are you crazy? A drug like that will never sell!" He didn't buy Merck. The drug, Hydro Diuril became the first of many blockbuster drugs that this company would create.

By the mid-90s internet and dot com stocks became all the rage. I purchased some Microsoft (NASDAQ:MSFT) and Intel (NASDAQ:INTC). My big break occurred in 1995 though. My brother-in-law gave me a hot tip. A company, Sun MicroSystems (NASDAQ:SUNW), had created a new programming language. Moreover, they were selling something called a server. I didn't know what that was, but I wanted in on it. I called the broker and bought 200 shares of SUNW at $20 per share. The company was very successful and the stock increased virtually every day by more than a dollar a share. The stock went straight up, it split two or three for one, multiple times. By 2000 I was sitting on 4000 shares trading at $65 a share. Then the bubble began to burst. I sold off my other high tech companies, but I loved SUNW. After it dropped ten points though, I called the broker and sold half. I watched the other half dissolve to pennies a share. By then the value of the holdings in the brokerage account and my 403-b accounts were getting close to my goal of accumulating enough reserves to retire.

Fast forward to near retirement. The 403-b accounts have done well with target funds. The equities have grown, but in 2002 and then again in 2008 were crushed. This led me to think, maybe professional advice was needed to really prepare for retirement. In 2008, my utility fund threw off a massive capital gain. Of course, I didn't receive one penny of it. I did however discover when doing my taxes that I owed $2000 of that capital gain in taxes. I called my broker and asked if the same thing was going to occur the next year? He didn't know. He checked and called back with the news, it would. I thought he had my back! Sold the mutual fund and fired my broker.

A year before retiring I saw an invitation from a financial advisor for a free dinner in one of our favorite restaurants. We went, followed up with the free consultation and agreed to hire him. His advice as our fiduciary would only cost $1200 per year. He assured us he would help direct our investments to guarantee our future. I nearly put $300,000 into a Variable Annuity, but for one thing. I expressed concern that when selling off all my GE and MRK to fund this, there would be a substantial capital gain and tax. He told me there is NO capital gain when you sell a highly appreciated stock as long as it used to purchase an annuity. I realized then he had turned into a used car salesman who was explaining that the loud noise from the engine together with the black smoke, constituted a good sign. I thought he was going to have my back! I fired him.

Once retired in 2014 I had a nice collection of dividend stocks. I had been following Seeking Alpha daily. I was particularly enthused by reading the posts of Crosetti, Wells and Rose. People just trying to get ahead and sharing their experiences and advice. I still felt I was missing out on the use of bonds in the portfolio. My money was invested in Schwab accounts and my Schwab advisor was helpful in many ways. Again, there was an opportunity to hear from a local investment company who would invest my funds. Their specialty was investing in dividend stocks and individual bonds. They only charged one percent per year for their service. I was leery of bond trading and thought this would be a good way to protect and grow the nest egg. With the expectation we would live off dividends and interest going forward, we signed on with this company when I fully retired in April of 2014. At first I was pleased. The manager bought dividend paying companies such as Deere (NYSE:DE), DuPont (NYSE:DD), Unilever (NYSE:UN), Washington Real Estate (NYSE:WRE). He bought many corporate bonds, most of which paid 5-6% interest and were intermediate in length.

A few months ago some reality hit me. I saw in my email he had traded out of a dividend aristocrat, T. Rowe Price (NASDAQ:TROW) and purchased Schwab (NYSE:SCHW). Although Schwab was a great company, they paid less than a 1% dividend. I called to question the sale, but was told it was for eventual capital appreciation. I was put off by the change in philosophy but more put off by the fact that I had no power in the decision making. Also true, the portfolio of stocks and bonds throw off 5% yearly. I pay him ONLY 1% and live off the remaining 4%. Therefore he is receiving 20% of my income and with no risk! I later noted I had BTU bonds, 2020 which were quickly becoming worthless. When we hired him, it was with the express notion that he watched all the bonds all the time. He would get rid of any bond before it would have a chance of going bad. I thought he had my back. I fired him.

Now I'm back in control to stay. As the bonds mature I'll replace them. The first few purchases I can do with the aid of someone at the Schwab bond desk for a fee of $25. The portfolio of stocks and bonds was about $880,000. I feel like I just got an $800 per month raise.

I once wrote directly to David Crosetti, asking his advice about hiring a financial advisor. He told me he had interviewed one recently. He felt the advisor was guaranteeing his own future, not David's. I should have listened then.

In summary, I have truly learned over the years that no one cares about your money as you do. Salesmen want to make a living too, but they don't always have your best interest in doing so. A site like Seeking Alpha is a wonderful resource.

Disclosure: I am/we are long MRK, GE, BTU,TROW, WRE, MSFT,INTC.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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