SÁCH: GETTING AN INVESTING GAME PLAN

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SÁCH: GETTING AN INVESTING GAME PLAN. The investment game has changed over the past two decades. Historically, the challenge facing investors has been to identify good investments. While that’s obviously still important, investors increasingly recognize that that alone isn’t enough. Five good mutual funds can still make a bad portfolio, or at least one that’s inappropriate for a given investor’s goals. It’s becoming clear that investors must move beyond good versus bad investments and toward appropriate or inappropriate usage of investments, taking into account their time horizons and risk tolerance. It’s a level of analysis that doesn’t transfer well to the sound-bite world of televised financial....

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GETTING AN INVESTING GAME PLAN Creating It, Working It, Winning It Vern C. Hayden, CFP with Maura Webber and Jamie Heller John Wiley & Sons, Inc. Copyright © 2003 by Vern C. Hayden, Maura Webber, and Jamie Heller. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per- copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978- 750-8400, fax 978-750-4470, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River .com.Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008, e-mail: permcoordinator@wiley Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. Designations used by companies to distinguish their products are often claimed by trademarks. In all instances where the author or publisher is aware of a claim, the product names appear in Initial Capital letters. Readers, however, should contact the appropriate companies for more complete information regarding trademarks and registration. For general information on our other products and services, or technical support, please contact our Customer Care Department within the United States at 800-762-2974, outside the United States at 317-572-3993 or fax 317-572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com. Library of Congress Cataloging-in-Publication Data: Hayden, Vern. Getting an investing game plan : creating it, working it, winning it / Vern C. Hayden with Maura Webber and Jamie Heller. p.cm. Includes bibliographical references and index. ISBN 0-471-26392-3 (cloth) 1. Investments.I. Webber, Maura.II. Heller, Jamie.III. Title. HG4521 .H367 2003 332.6—dc21 2002191065 Printed in the United States of America. 10987654321 To Ruth Storm Hayden 1909–1998 My mother was a humble, loving, caring, hardworking minister’s wife, who, in tandem with her husband, my father, the late Reverend Clarence Hayden, affected the spiritual lives of many people. Her spiri- tual legacy of kindness and unconditional love left an indelible imprint on all who knew her, especially her grateful son. Foreword The investment game has changed over the past two decades. Histori- cally, the challenge facing investors has been to identify good invest- ments. While that’s obviously still important, investors increasingly recognize that that alone isn’t enough. Five good mutual funds can still make a bad portfolio, or at least one that’s inappropriate for a given in- vestor’s goals. It’s becoming clear that investors must move beyond good versus bad investments and toward appropriate or inappropriate usage of investments, taking into account their time horizons and risk tolerance. It’s a level of analysis that doesn’t transfer well to the sound-bite world of televised financial advice, but it’s where investors need to go if they are to succeed. In this new reality, investments are the easy part. Determining whether a stock or a fund is a quality offering with reasonable prospects is a fairly straightforward task in these days of widespread financial infor- mation. Knowing where a given stock or fund fits in your portfolio— that’s a much trickier task. Ultimately, however, the art of investing involves more than simply identifying good investments; it means find- ing the right match between investment and investor. It’s no easy job. Yet it’s what good financial planners do every day, and it’s the reason that I have such great respect for these people. When I first started tracking mutual funds in the mid-1980s, I knew of brokers who could sell you stocks or funds, but I knew little about the growing field of financial planning, which aimed to craft full-fledged fi- nancial solutions for their clients. Over time, however, I came to know a number of financial advisors and became a part of their discussions. Like most investors, I was thinking in words or phrases, but these advisors v vi Foreword were thinking in fully formed paragraphs. They understood, quite cor- rectly, that investments alone were not the full game. To succeed, you need to know how and when to deploy them; you need a game plan. Vern Hayden is as fine a planner as I know. He’s up on all the latest academic research, yet he retains a remarkable ability to translate the of- ten arcane language of finance into straightforward counsel that even be- ginning investors can understand. Not surprisingly, these traits have made him a favorite guest on CNBC and other financial media. But un- like some media favorites, Vern never opts for the sensational over the sensible. His advice is always on target and always well grounded. I think you’ll find this book valuable. It’s full of great ideas and tangi- ble examples that will show you how to craft a sensible investment plan. Whether you continue on your own or opt for the services of a profes- sional advisor to help you manage your money, this book will start you in the right direction with a game plan for the future. D ONPHILLIPS Managing Director Morningstar, Inc. Acknowledgments Looking back at the undertaking of this book, I’m reminded of my days when I was stationed at Kingsley Field Air Force Base in Oregon. Though the glory often went to the pilots, I was one of the many thou- sands of ground support people who played a part in getting the planes off the ground. This book is no different. We have a lot of people to thank for the support that they provided to make this book fly. It wasn’t always apparent that it would. For some time I knew I wanted to write a book to help people gain the financial means they needed to live out their dreams. Yet I wasn’t sure how to do it. I am ever indebted to all the folks at Wiley who did. I am particularly grateful to Joan O’Neil, Pamela van Giessen, and Bill Falloon. Their belief in me and the project brought my game plan to life. Bill Falloon had the vision to see the potential in my proposal and the courage to take a chance on a new author. I’ll never forget how thrilled I was to hear back from Bill after I’d left a cold call in his voice mail about my book idea. Ever since, Bill’s insightful editing and gentle guidance through the intricacies of the publishing process have been invaluable. Thanks also to Maura Webber, a gifted writer. Through evenings, weekends, and vacations, Maura listened to me explain the nuances of the investment process and helped me craft my thoughts into the mean- ingful language of a book. I am also thankful to have had the chance to work again with Jamie Heller, who previously hired me to write the Game Plancolumn for TheStreet.com. Jamie’s brilliant editorial sense ensured that the ideas and track of the book were meaningfully con- nected. From the big picture conception of the project through to the fi- nal details, Jamie led us to the finish line. vii