"Helping You Navigate the Course to Financial Freedom"
April 2015
Warren Buffet:  Takeaways from a stellar 50-year track record


What comes to mind when you hear the name Warren Buffett - investor, mutual fund manager, CEO, entrepreneur, stock picker, philanthropist, or billionaire?

Whatever you think, one thing is clear: he has made a lot of money investing over the years.

If you're wondering, Forbes' 2015 ranking places his net worth at $72.7 billion, which makes him the third wealthiest person in the world behind Mexican telecom king Carlos Slim ($77.1 billion), and Bill Gates ($79.2 billion).

Market Performance




3-year* %

Dow Jones Industrial Average




NASDAQ Composite




S&P 500 Index




Russell 2000 Index




MSCI World ex-USA**




MSCI Emerging Markets**




Source: Wall Street Journal, MSCI.com



Buffett's success over the last 50 years just enhances his credibility, and when I think of Warren Buffett, "patience" and "value investor" are among my first thoughts.

"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price," Buffett once remarked.

"If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes," he also advised. That compliments another one of his quips, "When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever."

He seems to have mastered the art of patience, not worrying about the daily twists and turns in the market in favor of the long term view.

Or course, there will be times when we make specific buy or sell recommendations regarding various investments, some of which may have to do with economic fundamentals or your personal situation.

Still, Buffet's "forever" philosophy is a guideline that reminds us to be patient investors, keeping our eyes on the long-term goal of financial freedom.

In some ways, his accumulated comments add up to the equivalent of a Book of Proverbs for investing. There generally aren't hard and fast rules that apply to every situation, but a focus on the fundamentals has typically proven to be among the wiser paths one can take.

Just review Buffett's long-term performance. Since today's management took charge at Berkshire in 1964, he's averaged a 21.6% compounded annual gain, or an astounding 1,826,163% in 50 years, according to the most recent letter he released to shareholders.

That compares to a 9.9% annual rise in the S&P 500 Index, inclusive of dividends, or 11,196% during the same period.

Of course, we aren't advocating pursuit of Buffett-like returns (for one thing, he gets investment terms not available to the general public!), nor would we want to suggest that our goal is to consistently exceed or even match an index like the S&P 500. There are too many factors that go into our recommendations, including a cash and fixed income component that has historically reduced performance over the longer term, but has better managed risk while provide a critical income component.

But one final thing. Even with severe bear markets in the mid-1970s, 2000-02, and 2008-09, stocks have still registered strong returns over the longer term.

I can't say for sure where the market will be in 12 months-who really can? But an investment in a broad-based portfolio is basically grabbing a stake in the global economy.

While we'll see setbacks from time to time and from region to region, economies continues to plow forward, supporting corporate earnings and rewarding investors who practice patience.  ##

In This Issue
Don't Overpay for Medicare

Many are aware that Medicare premiums are income-based.  However, you may not be aware that Medicare makes those premium calculations using income from two years ago, i.e. your 2015 premium is based on your reported Modified Adjusted Gross Income (MAGI) from your 2013 tax return!

If your MAGI was more than $85,000 for a single or $170,000 for couples filing jointly, you will pay more for your Medicare Part B & D premiums.  And the additional cost can be substantial, starting at an increase of $42/month per individual, and increasing all the way up to almost $231/month, depending on your MAGI bracket.

The good news is that you can qualify for a reduction if you've experienced a major life event (as defined by Social Security).  The bad news is that you need to notify the agency of such an event, and provide proof before they will grant a reduction.

Life changing events, which can apply to an individual or spouse, include:
  • Stopping work or reducing work hours;
  • Cessation, termination or reorganization of employer's pension plan;
  • Marriage, Divorce, or Widowed;
  • Loss of income-producing property due to disaster, theft or fraud (not because of a sale or transfer).

For more information on appealing your Medicare premium, visit the Social Security website at http://www.socialsecurity.gov/forms/ssa-44.pdf or call us at 201-933-1790. ##

In the News

Leslie was recently interviewed by NJ radio station 101.5 about Asking for a Raise. 
It's Been a Bumpy Ride

Volatility has returned with a vengeance in 2015, with 100+ point market swings occurring on 51 of 61 trading days in the Dow Jones Industrial Average.  Markets were whipsawed by political turmoil in Russia, Greece, and the Middle East; central bank action (or lack thereof) in the US, Europe, and the Far East; extreme currency and commodity price swings; and increased merger activity. 

Bad weather and the strength of the US dollar caused most US GDP estimates to be revised downward to the area of 2%, creating hope that the Federal Reserve will delay raising interest rates until the latter half of 2015 or possibly even 2016.  Although the US continued to outpace European economies, there are signs Europe will improve due to lower interest rates, a weaker currency, and lower oil prices.  And with Chinese growth slowing more abruptly than planned, officials there have increased stimulus to re-energize demand. 

Although the S&P 500 squeaked out a gain for the quarter, stock sector performance was all over the map.  Healthcare was a top performer, driven by merger activity.  Utilities, one of the leaders in 2014, lost 6% for the quarter.  Financial services and energy also lost ground due to various factors including dollar strength, regulatory concerns, and global unrest.

Fears that the Fed would raise interest rates in early 2015 abated by the end of the quarter.  In fact, the 10-year US Treasury yield has fallen from 2.12% to 1.94% during that time-period.  Taxable bond funds gained as a result, while emerging market and world bond funds saw modest declines, primarily due to dollar strength.

The rapid strengthening of the US dollar was a surprise and a primary driver of returns to date.  As a result, we have added dollar-hedged international exposure to some accounts to lessen international return volatility. ##

Securities and advisory services offered through The Strategic Financial Alliance, Inc. (SFA), Member FINRA, SIPC. Supervising office at 678-954-4000. Financial planning offered by Compass Wealth Management LLC. Leslie Beck and Martin Siesta are registered representatives and investment advisor representatives of SFA, which is otherwise unaffiliated with Compass Wealth Management. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Please note that individual situations can vary.  Therefore, the information presented here should only be relied upon when coordinated with individual professional advice.  For more information visit www.compasswealthmanagement.net