Temper speculation with common sense

For Benjamin Graham, the greatest risk facing an investor is not the market, but short-term, emotional reactions to stocks. Nancy Tengler discusses the importance of emotional discipline.


Successful investors are students of history. Just as philosopher George Satayana famously declared: “Those who do not remember the past are condemned to repeat it,” so it is also true: Investors who do not study the historical performance of stocks are doomed to make costly mistakes.

No one understood that point as clearly as Benjamin Graham, author of “The Intelligent Investor.” And no one has articulated it so well. According to Graham, intelligent investing requires an informed (though not necessarily exhaustive) understanding of the companies we are buying. He does not argue that individuals must be endowed with superior intelligence; rather, they must possess the discipline to exercise “firmness in the application of relatively simple principles of sound procedure.”

For Graham, the greatest risk facing the individual investor is not the market but our short-term reaction (often emotional) to stocks. We sometimes find ourselves “beset with confusions and temptation… frequently unconscious toward speculation, toward making money quickly and excitedly, toward participating in the moods … of the crowd.” In other words, Graham warns us to be wary of our natural proclivity to desire instant success. Gambling, lotteries and speculative trading appeal to the eternal hope etched on our imagination; the hope we just might win, we just might get rich quick.

Read the rest of this column by clicking here:  The Arizona Republic

Why Rising Interest Rates Won’t Necessarily Be Bad for Stocks

When Benjamin Franklin said, “An investment in knowledge pays the best interest,” he may have been anticipating the low to zero interest rates savers and investors have been contending with for years.

Now it seems that rates have finally begun to rise, and contrary to conventional wisdom, that won’t necessarily be bad news for stocks.

Since the end of January, the S&P 500 has returned a positive 7.1 percent, while the price of bonds has declined and the 10-year Treasury yield has risen 0.6 percent. Investors have been busy selling bonds in anticipation of the inevitable (and much-anticipated) hike by the Federal Reserve Board while economists and pundits handicap the date of the upcoming rate increase. June? September? 2016?

Click here for the rest of the column: The Arizona Republic

When Market Levels Seem High Focus on the Best Companies with the Cheapest Valuations

The age-old maxim —”sell in May and go away,” is often quoted by traders as a sure-fire strategy. And, for seemingly good reason.

According to Yardeni Research, since 1928, the S&P 500 has risen an average of 1.9 percent from May to October but an impressive 5.2 percent from November to April. Yet since the beginning of this bull run the old adage has not held true. If you had sold in May during this cycle you would have underperformed the overall market by a cumulative 70 percent. Since 1926, the stock market has generated positive annual returns more than 70 percent of the time, so it turns out that despite market tradition, being out of stocks is often riskier than remaining invested.

So what strategy should an investor follow—if exiting is either too risky, or at the very least, undesirable—when convinced that the market is becoming fully, or overvalued? One of my tried-and-true investment rules? Buy stocks like you buy toilet paper — focus on price and yield.

For the remainder of the column, click here: The Arizona Republic

ETFs offer basketful of benefits for investors

Active money managers are having a tough time beating their benchmarks again this year. In fact, fewer than 15 percent of money managers were exceeding the market by the end of November.

You might say active management has hit a rough patch. According to Ben Levisohn of Barron’s, who cites the University of Chicago’s Center for Research in Security Prices, “From June 1983 to June 2014, the median fund underperformed the market by more than 80 percentage points.” That’s 30 long years of underperformance. Ouch.

If you invest in mutual funds, this information should be important to you. In addition to the high fees most funds charge, the majority have underperformed yet again in 2014.

What is an investor to do? Read the rest here:  The Arizona Repbulic

High Investment Fees: Public Enemy #1


Lower prices are often synonymous with value. Surprisingly, the same is true when selecting investments. Look for the lowest-priced, diversified exchange-traded funds (ETFs), the cheapest mutual fund or any investment vehicle or manager that ranks among those with the lowest costs. For top long-term returns, be more focused on the cost of your investments than in seeking the top-performing fund.

How can I make such a definitive statement? Because the research supports it.

Morningstar reports that the average actively managed stock mutual fund sports an annual expense ratio of more than 1.4 percent. (Compare that to the average ETF fund fee of 0.2 percent.) If we assume a long-term return on stocks of approximately 9 percent and an average annual inflation rate of 3 percent, we obtain a real rate of return of 5.8 percent annually. Before accounting for the compounding of the expense ratio — yes, fees compound and erode total return just as dividends and interest compound and increase total return — you can see that an average annual fee of 1.4 percent consumes a significant portion of the average annual real total return of stocks of 5.8 percent.

To continue reading click below:

The Arizona Republic

Don’t Expect the Stock Market to Continue Current Path

Recency effect is the tendency to remember a more recent experience better than a previous experience.

Behavioral economists call this recency effect “availability” and it is programmed into our DNA: I touch a hot stove — ouch!; I learn not to touch a hot stove again. Eventually I use the contained flame to my advantage, to prepare meals for my nourishment. But the result of touching the stove and getting burned is still stored in my memory, inspiring me to use a hot pad and keep my hands well away from the heat.

For investors, recency effect can bias investing decisions based on recent market performance. Whether up or down, we tend to extrapolate the recent event into the future. If the market is going up, we are more likely to act on expectations of a rising market. The converse is also true. Both tendencies can be dangerous.

The Arizona Republic

Chart a Course of Financial Discipline

Most of us won’t have 97 years to save and invest. But Stephanie Mucha, who recently was featured in Barron’s, has. Ninety-seven long and productive years. And she has made the very most of each one.

Mucha’s peak annual earnings of $23,000 were modest even in 1994, when she retired. Still, she has managed to grow her assets to more than $5.5 million. Mucha has given $3 million to charity and retains $2.5 million — still percolating — in her portfolio. Her goal: to donate $6 million before she dies.

Mucha is obviously blessed with longevity, an enviable work ethic and a high financial IQ. But she doesn’t have any unusual advantages. She reads financial publications and uses good sense and, incredibly, does not even own a computer. Still she has succeeded. Fabulously.

Read the rest of Stephanie Mucha’s story here: The Arizona Republic

A Conversation With… Nancy Tengler

Providing proven wealth accumulation strategies, tailored advice and a comprehensive market analysis, The Women’s Guide to Successful Investing is a must-read for female investors who want to master volatile markets with long-term success.
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In The Women’s Guide to Successful Investing, you share the astounding facts that women control over half of the nation’s personal wealth; own businesses that grow at one and a half times the national average; and—when they don’t excuse themselves from participating—outperform men in the realm of investing. What are they doing with their money if not investing and why do you think they have a tendency to shy away from it?

Women tend to be savers rather than investors. They are more risk-averse than men which is one of the reasons they make better investors and consistently generate better returns. I think women shy away from investing because they have not been encouraged to participate in finance. A recent article on The Wall Street Journal’s MarketWatch website cites a recent T. Rowe Price study entitled the 2014 Parents, Kids & Money Survey which cites the surprising statistic that among children eight to fourteen, 58% of the boys say their parents talk to them about setting financial goals while only 50% of girls report the same. Clearly, one of the problems is that (young) women are still not encouraged as much as (young) men to focus on financial matters. In addition, they seem to self-select out of finance as well. ASU reports that the number of women enrolled in finance has declined over the last ten years. The irony? Women–empirically and anecdotally–make excellent investors.
Can you give us a sneak peek into the case studies and personal stories of financial management that you feature in your book?

I spend some time talking about stocks that have fallen from grace. We call these Fallen-Angel Growth stocks. These are great companies that have had a marketing misstep or a product problem and the stock price has fallen to reflect the problems. I compare three stocks using the techniques outlined in the book: Apple, Coach and Nordstrom. Together we explore the variables and reach a conclusion about which Fallen-Angel might be a stock to own for a lifetime and which may not. You’ll have to buy the book to find out which is which.

If you can narrow your eleven “intelligent investing rules,” what would you say are the top three steps a woman can take to improve their approach to investing?

First, women must identify an investing style that suits their risk parameters and their schedule. Once they establish a investing discipline they must stick to it. Like an exercise program or diet the point is to follow the plan, even on days when things don’t go exactly as planned. Second: don’t run with the fast crowd. Women should never buy a company they don’t know or understand. My biggest investing mistakes were “stock tips” from a friend who claimed to have made a great deal of money or provided assurance of a home run. Never, never, never follow that kind of advice. And finally, identify stocks to own for a lifetime. The kinds of companies that are industry and brand leaders–survivor companies–that you will feel confident owning for a lifetime.

Are there particular companies and/or stocks that women are more likely to invest in than men? What qualities do women look for in a company when investing?

Not really. Since women are more likely to be the purchasers in their families they are much more aware of product trends and quality; of client service oriented companies and the best discounters. Because they apply those critical skills to acquiring food and clothing and health care and just about everything else for their families they are well-positioned to identify stocks to own for a lifetime. What I can tell you about women is that the research shows they perform more detailed research than men and they tend to trade less often which enhances their total return.

When should women start investing and does age affect how they do so? Are millennial women who are relatively new to the workforce just as able as those who have worked their way up to management and c-suite positions?

Women of all ages should invest. I spend a great deal of time in the book explaining the long-term and medium term returns for stocks, the importance of the compounding of dividend payments and the passage of time. I share an anecdote of two transactions I engaged in the week my son was born in 1988. One was a share of IBM stock for him the second was a Donna Karan sweater that covered my post-baby body elegantly. That it was cashmere was lost on me and when I got the bill I choked. $1099. Plus tax. I still have the sweater. It is bally and misshapen. That share of IBM stock? Well it has increased 14 fold through the compounding of the dividend and growth in the stock price. Imagine if I had invested the $1099 in IBM stock! Conversely, as a professional money manager met an 80-year old man of considerable wealth whose entire portfolio was invested in stocks. He believed his time horizon was not his life but the lives of his heirs. All of us should invest that way with a small portion (whatever we don’t need to live) of our portfolio. It takes time–but well worth the effort.

What are the aspects of your professional career and personal life that drove you to write an investing roadmap for women?

When I retired from the investment business my kids were entering high school. I was busy with the daily living of carpools, and laundry and grocery runs and I no longer wanted to shoulder the responsibility of managing our assets. My husband and I interviewed investment managers and I was shocked by two things: the first was that though many of these firms knew me professionally, in each meeting the presenters spoke directly to my husband, ignoring me! And I had been a chief investment officer and portfolio manager in the same town for over twenty years as well as a financial news commentator. For the first time I understood why women check out of the conversation. The second problem I had was the fees being charged by the investment managers we interviewed. By the time we would pay their fees these money managers would be unable to generate performance in excess of the market. What was the point? That is when I began devising the intelligent investing rules I reveal in The Women’s Guide To Successful Investing.

How did you become such a knowledgable and capable financial manager? Is there any other book like The Women’s Guide to Successful Investing out there from which you were able to draw advice?

I have been investing other people’s money since the mid 1980’s. There have been some pretty exciting and devastating market periods over that thirty-year period. But overall, stocks have still managed to return between 9-10% per year on average. I’ve watched and learned. I’ve heard the panic on the financial news networks (on which I used to appear regularly) and I’ve learned that those times — the ones when everyone is scared — are often the best time to to identify great companies at fire sale prices. A stock like, Starbucks, for example, that traded below $9 per share in 2009 and is now trading in the mid $70’s. If you have been watching the company, know the product and have confidence in the management you can make a great deal of money over time. That is the purpose of the book: to share with smart, busy women a variety of strategies they can employ to meet their financial objectives.

My last two columns have dealt with the question of saving.  Because, of course, we must save before we can invest.  Below are the last two entries.  I hope you enjoy them.

The Arizona Republic–today’s column which delves into the concept of saving and shares a reader’s story.

The Arizona Republic–last week’s column which focuses on the difference in return when we invest rather than simply save.


More soon.  Loved seeing many of you at Rakestraw Books.  Thank you for your support and enthusiasm for the subject of women and investing.

Think of Retirement As 20 Years of Unemployment


I hope you will read my current column in the The Arizona Republic.  I discuss the disconnect between most individuals when asked about their readiness for retirement (the majority admit they are not ready) and how they plan to spend their retirement (in luxury!).  And what to do about it.

My book:  The Women’s Guide to Successful Investing is about to be released.  You can pre-order on Amazon.com whose editors just named the book a:  “Best Business and Investing Book of the Month!”