Friday, November 06, 2015

from Bloomingdale resident & CFP Chuck Donalies: "The Frugal Planner's Weekly Dispatch, Issue 7"

From: Chuck Donalies, CFP®
Sent: Friday, November 6, 2015 10:00 AM
Subject: The Frugal Planner's Weekly Dispatch, Issue 7

The Frugal Planner's Weekly Dispatch

Personal Finance, News, Ideas, & Things I Find Interesting

Issue 7

October 6, 2015

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Want to be a Better Investor? Stop Checking Your Finance Apps!

Do you own an iPhone? If so, you
know Apple pre-loads the phone with several apps that cannot be deleted. One of the undeleteable apps, called "Stocks", enables you to build a portfolio of stocks, ETFs, mutual funds and market indexes, allowing you to view performance, price, and news about the investment.

The app can be helpful: I use it to check the status of the S&P 500, Dow, and NASDAQ markets whenever I'm out of the office. Unfortunately, the app and others like it may also cause investors to make poor decisions about their investments.

A recent
article in The Wall Street Journal highlights something behavioral economists call myopic loss aversion, which sounds like a degenerative disease of the eye (it's not). The behavior is triggered by frequent feedback, such as checking the price of a stock many times throughout the day. In situations like that, investors are likely to see a loss nearly 50% of the time and thus more likely to sell the investment, often at the wrong time.

The takeaways:
  1. Stick to your long-term investment plan.
  2. Avoid checking financial apps or sites too often.

Now You Can Invest in a Startup (But You Probably Shouldn't).

I'm often asked if it's a good idea to buy gold (no) or invest in the latest hot IPO (also no). Soon I expect to receive questions about another type of investment: Startups.

The Securities and Exchange Commission (SEC) recently voted to allow equity crowdfunding (
read more about this in Wired). In the past, only accredited investors (people with a lot of money) could invest in startups. Now, pretty much anyone can invest in the next Facebook or Twitter.

In general, I believe this is good news. Equity crowdfunding will make it easier for entrepreneurs to raise the money necessary to get their businesses off the ground. The downside is that investing in startups will be another avenue for people to commit fraud.

My advice on investing in startups is the same as for other investments: Make sure you understand the business as well as the risks involved, review the financials, and don't invest more than you can afford to lose. Or just stick to traditional investments.

Having Problems With Your Financial Software? This is Why.

I depend on several different software aggregation tools to manage my business and personal finances. My clients often use the same tools. For example, sites like are wonderful for aggregating financial account information and creating budgets.

Unfortunately, over the past few weeks I've experienced problems with accounts updating properly or not at all. I know I'm not alone because many clients have had the same problem.

Now there may be an explanation for the problem: Big banks have started throttling the flow of financial data. J.P. Morgan and Wells Fargo are
named in The Wall Street Journal, but I wouldn't be surprised if other banks are doing the same. Their stated reasons for throttling data are overloaded servers and the potential for theft or fraud.

Data theft is a legitimate concern. Millions of people would be affected by a data breach at However, I can't help but think banks have other reasons for withholding data. Financial technology (
FinTech) has become a big business and there are many startups ready to take customers away from traditional banks.

I'm positive we'll be hearing more about this issue in the coming months. I'l be sure to provide you with updates.

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