“The wisest rule in investment is: when others are selling, buy. When others are buying, sell. Usually we do the opposite. When everyone else is buying, we assume they know something we don't, so we buy. Then people start selling, panic sets in, and we sell too.”
- Jonathan Sacks
People are mired in uncertainty and fueled by fear when it comes to planning for retirement or cultivating a cushion of financial security. Since the financial crisis of 2008 when everyday Americans witnessed over 30% of their investment portfolios take a nosedive with the credit-default SWOP mortgage scandal of 2008 and resulting government bailout, which resulted in the largest transfer of wealth in history, coupled with flat real estate markets and negligible money-market returns, confidence has been replaced by anxiety.
Americans who actually want to get back into the stock market are often deterred by the belief that it's a crooked game - with one set of rules for the big-time players such as banks and hedge funds, and another set for everyone else. And they wouldn't be half wrong, given the un-leveling of the playing field that happened 30 or 40 years ago when the investment banks went from being partnerships to being public companies; and out of that the hedge fund was born, which would allow the funds to take 20-50% profits but not nearly so high a percentage of the losses.
One financial advisor who has kept on top of all the vagaries, unpredictability, and opportunities of the investment markets is Dan Dijak, whom I have enlisted as my own financial advisor for over ten years now.
Dan worked as a financial advisor at Roney & Company from 1986-1998 and was first vice president from 1998-1999. He then worked at Raymond James & Associates from 1999-2012 as first vice president and financial advisor, and shifted to Ameriprise Financial in 2012, where he has served for little over a year. A life-long resident of Saginaw, Dan works closely with his Client Service coordinator, Lori Reetz; and he also has a son, Dan, Jr., who lives in New Jersey.
A distinguishing quality about Dan that separates him from the crowd is that he truly loves what he does. Dan's interested in the markets began at the tender age of 10, following his father's interest in the stock market. He would save a little money, chart some stocks, and log his activity and earnings in the closet door located in his bedroom. “I had an interest in the industry since day one and it's always been enamoring to me and something I wanted to do.”
After earning his BA in Business Administration from SVSU, Dan developed a passion for working with clients to help them meet their financial needs and plan for the future. He looks at the entire financial portrait of a client, including cash reserves and debt management, investments, protection, and taxes, and believes in asking the right questions and listening closely to answers, believing the key to success is confidence that the advice he offers reflects one's personal dreams and goals.
Given the market rallies in recent weeks that have realized unprecedented gains in an otherwise flat economy, I sat down recently with Dan to discuss his take on the investment landscape as we move into the summer months.
Review: What are your thoughts about the perspective and mindset that people need to adopt in this present financial landscape when planning and preparing for retirement?
Dijak: I tend to agree with Rob Arnett from PIMCO who feels that when it comes to expectations investment returns can vary, but they may not be what they once were. The bottom line for investors, regardless about relying on returns on their investments, is that they need to be more disciplined, save money, budget more, and prepare to earn less and possibly work a year or two longer when planning for retirement.
Review: With interest rates so low, it's hard to realize any type of return right now. With 2-3% gains over recent years, an individual would need to bank a few million dollars to realize a $30,000-$40,000 retirement pension. So in that context, what types of things should people be doing to prepare for the future with interest rates so low and the cost of living going up?
Dijak: The most important thing a person can do is become more disciplined. If you want to retire comfortably at $40,000 per year, that's a million dollars you need right there. Do most people have that? Probably not.
Review: The stock market is gaining right now, but because the Federal government eliminated inflationary considerations from calibration when determining growth, it doesn't take factors into account such as rising food costs, health care increases, and gas prices. Given that scenario it's harder for people to save, so what types of things are you advising people to look at?
Dijak: One of the most important things people should do is prepare a budget. A lot of people don't do it, but if you go through your checkbook and see how much you spend, you'd be surprised how many things you can eliminate. I would advise people to be as frugal as they can. With costs going up I try to invest more in 401 K retirement plans, which are a good way to go.
People should also work with an advisor they trust. The stock market is doing better because interest rates are so low, so we've been seeing people bringing money they have banked on the sidelines in money markets back into play. They are feeling better about the stock market, but that can change anytime. And when things change, they change fast. That makes people nervous. So you've got to develop foresight and be disciplined and save aggressively while investing conservatively. That makes a lot of sense in this market.
Review: What precipitated your move to Ameriprise from Raymond James last year?
Dijak: I did a lot of research and found Ameriprise to be a very good company. They used to be the old H&R Block, so have been around for years, having recently acquired them. They have good back office support and are trying to grow and investing a lot to improve their name recognition. I had many friends in this branch from day's back, so after a month of deliberation decided to move over to Ameriprise.
Plus they have market analysts on board. David Joy is the chief strategist on CNBC and he's assembled a managed portfolio that's done very well over 10 years. Ameriprise has a good research department and track record and I'm attracted to that. They conduct seminars and are very broker supportive, bringing the best products to the table along with their best foot forward, by investing into community support.
Review: What are some of the qualities that you feel distinguish what you do in terms of other brokers?
Dijak: I try to stay in touch and talk with clients regularly. People want to be informed and want to know their broker cares, so I call and email each client on a regular basis. People have questions not just about investments, but insurance - who should I call? All kinds of finance related questions that people appreciate answers towards. I have to be a friend and confidante to my clients, so that means staying in touch with them. Right now I have 400 to 500 regular clients, so that keeps me busy.
Review: What are some of the most common concerns you are hearing from clients?
Dijak: A lot of people are still uncomfortable with the markets. They're not soon going to forget 2008 when the S&P went down 37% and they lost a lot of money. Right now with recent gains, if people had kept their money in the market back in 2008 they would have it all returned, but not a lot of people did that.
Right now I think of it this way. Money markets are getting about 0 percent return or less than 1 percent, so if inflation is 3 percent that means they're losing 2.5 percent a year just on inflation. So there's a lot of anxiety there. These are tough decisions, whether to pull money out of the bank and put it into the market. People are getting older and are still nervous about getting back into the game.
Review: What do you feel is the most challenging component involved with what you do?
Dijak: Well, you're risking peoples' livelihoods, so that's a big concern every day. You want to make good decisions, but even the best strategists can be wrong. Something can pop its ugly head up tomorrow, whether it's the Fiscal Cliff, the situation in Cyprus, the Sequester - but people have access to information immediately, which they didn't 15 years ago, so things can move to the downside very quickly.
Review: What things are you excited about for 2013 and do see potential in and would recommend people take a serious look at?
Dijak: There are a lot of good mutual funds with long-term track records, but that depends upon the fund manager. People need a managed portfolio and there are lots of good ones, along with hybrid funds that are combinations of stocks and bonds that have performed well. But you need to look at them every day and pick out those mutual funds that we think will outperform the markets.
Bonds have done well for 31 years now, but strategists think that rates may go up, so there are many colors and flavors of bond funds. Yields can vary depending upon the flavor and type that you have, so if you're not sure about bonds, you have to look at what would happen to them if interest rates go up. People need to be informed and ask questions.
Review: When you look at the different periods over the expanse of your career, do you see a repetition of investment cycles or is this all-new terrain that we are in now since 2008?
Dijak: To me it's always changing. Even if you go back to 1982-99 where there was a pretty good bull market, that changed in a hurry in early 2000 and then again in 2008 the velocity with the downside was enormous. That's the big difference. Rather than buying a whole lot of one thing you have to be a little bit nimble and more tactical; trim here, add there. And you have to rebalance rather than diversity and sit there. You've got to be able to know restrictions and have a balanced portfolio and be ready to change if market conditions change.
Daniel Dijak is located at Ameriprise Financial, 4177 Fashion Square, Ste. 4 in Saginaw. You can contact him at 989-792-9617 or email him at Daniel.firstname.lastname@example.org