The Most Important Question to Ask Your Financial Advisor

Last week, the Dave Ramsey conflict of interest issue raised a few concerns that investors should be reminded of. First, you can’t assume an expert’s advice is always right. Second, you must know how an advisor is paid. And third, it’s important to remember that, by and large, Wall Street is a rigged game.

Continue reading “The Most Important Question to Ask Your Financial Advisor”

What Are Robo-Advisors? And Why Are So Many Financial Advisors Against Them?

I was having lunch with a buddy I hadn’t seen in years. After catching up on ‘whatever happened to old what’s his name?’ the conversation naturally turned to the stock market, investing in general and retirement planning.

Hey, if you take a CFP to lunch—and you’re buying—why not get a little free advice?

He was thinking about changing financial advisors. Things were OK—he felt like the firm he was currently with did a good enough job, but they were raising their annual fees and frankly he wondered if he was still getting a good deal.

The firm he’s currently with is known for it’s home cooking: selling their own brand of under-performing mutual funds. In fact, about five years ago some employees sued the firm for stuffing it’s own 401(k) with mutual funds run by the company’s investment arm.  That’s when you know a financial advisory firm has a problem: when its advisors sue it for doing a lousy job of running its own retirement plan.

robo advisorI told my friend, “You should consider a robo-advisor.”

He looked at me as if I had just told him to get financial advice from a Star Wars character.

“What’s a robo-advisor?”

He almost looked like he was in pain.

So I told him. Robo-advisors are computer programs that put together an investment mix and monitor and adjust it automatically.

It’s doing what a financial advisor says he will do—but rarely actually does.

Here’s the thing. You hire a financial advisor and you think, “OK, he’ll keep an eye on things and make sure I stay on track for retirement.” But most of the time, advisors will steer you to some “model allocation program” made up of mutual funds or exchange-traded funds and charge you something along the line of a 1% management fee. And that’s in addition to the expenses built in to the funds or ETFs.

These programs are called “managed accounts” by the big investment and brokerage firms.

And that’s exactly what a robo-advisor is. A managed allocation program—without the 1% additional fee. Most of the leading robo-advisors—like Vanguard’s Personal Advisor Services or Betterment—charge 0.30% or less. And their mutual funds and ETFs have lower internal expenses than the average (or worse) mutual funds a lot of financial advisors recommend.

Vanguard claims the management fee difference alone can add over $90,000 of value to a portfolio over 20 years. Human financial advisors worry that robo-advisors will cut into their profits. And they should.

So my buddy took all this in and frankly seemed totally unimpressed. In fact, he sent me a text later asking about some investment plan that he had found online. A do-it-yourself allocation of mutual funds that he was apparently considering.

Maybe he’ll try to manage his own investments, or even stay with his current advisory firm. It doesn’t seem likely that he’ll go with the low-cost, machine-made investment option.

Perhaps I didn’t do a very good job of explaining robo-advisors to him.

So maybe he’ll offer to buy me lunch again.

Retiring on Real Estate: Perfect Passive Income or Pipe Dream?

“Mailbox money.” That’s what investors often call the passive income generated by real estate assets. It could be from rental income, house flipping profits—even dividends. The thought is, buy some property and wait for the checks to start rolling in. Can that still be done, or are such scenarios a pipe dream from a pre-recession world?

Big cash flow—and then a crash

Steve Olafson of Scottsdale, Arizona is a former plumber, auto mechanic and tech manager that now works real estate deals full time. The 2008 crash is still fresh on his mind.

“In 2007, I had over 1000 apartment units,” Olafson says on the blog. “The cash flow was very high.  All of that was wiped out by the crash.”

But it gets worse. After going on a major apartment complex purchasing spree in Phoenix during ’04 and ’05, he decided to geographically diversify. Olafson began buying units in Houston, Texas. A couple of years later, not only was the economy beginning to “drop a bomb” on Arizona, but a hurricane hit Houston.

“Gross incomes on my properties dropped by more than 50%,” he says. “I was lucky to pay expenses for a while. There was nothing left to give the lenders. I fought like crazy for a couple of years and finally got the income back up to where the full payment could be made.  I had to put all my reserves into the property and had nothing left to catch up the arrears that had accumulated. This is when the lenders foreclosed.”

Travelling the world on investment property profits

But Chris Morley, founder of Bien Realty in Manhattan, still sees people who are willing to take on at least a little risk in real estate.

“I have sold investment properties [in the city] to people currently living in the suburbs,” Morley tells MoneyCynic. “Their intention is to rent it out and get it paid off so when their kids leave for college they can leave the high taxes in the suburbs and live in NYC with no mortgage and less taxes.”

And then there is Dale Degagne, a financial planner from Ontario, Canada, who travels the world with his wife—on his profit from real estate investments. Currently living in Thailand, he says he bought his first rental property at age 21.

“I have mainly stuck to rentals, but I have owned multi-units, single families and student rentals. I have also done flips,” Degagne tells MoneyCynic. “Currently, there’s little money in commercial [real estate] at my price range.”

He says he “retired” at age 28 with five properties, hired a manager and hit the road. But before jumping into the real estate game, Degagne says investors should consider three keys to success:

  1. Pay off the mortgages. “Assuming you purchase property that is profitable from the start, not having a mortgage every month can significantly increase your profit. I know for me, [my profit] will double in 20 years when all the mortgages are paid off.”
  2. Hold the real estate for at least 10 years and keep good books. “In real estate you have good years and bad years, just like you will in any business and almost any retirement investment strategy. In a 10 year time frame you should see a) A trend in your real estate — prices, costs, profit b) What your worst year was, and c) From there you should be able to figure out a solid number that you can rely on. This is by far the most important point.”
  3. Have an exit strategy. “This involves planning how [the properties] will be taken care of when you’re still alive, but don’t want the bother of making any decisions on them. For this, my suggestion is training someone who will eventually inherit them to make the decisions. Bookkeeping and day-to-day management can always be outsourced. There’s no need to be fixing toilets in the middle of the night at 70 years old.”

No toolbox required

But to invest in real estate you don’t have to have a tool box and plumbing supplies. In fact, in some cases, you’re not allowed to manage or perform maintenance on such investments. For example, property can be purchased and placed in a self-directed IRA but financial and maintenance matters should be handled by a property manager. Performing work related to the IRA asset yourself is regarded as a ‘prohibited transaction’ by the IRS.

And for those who aren’t hands-on handy, real estate investment trusts may be a way to gain exposure to property income.

“A real estate investment trust (REIT) is a company that buys, develops, manages, and/or sells real estate such as skyscrapers, shopping malls, apartment complexes, office buildings, or housing developments,” Thomas Marino, a financial advisor in Cherry Hill, New Jersey tells MoneyCynic. “Rather than investing directly, investors in REITs put their money into a professionally managed portfolio of real estate.”

REITs make money from rental income, profit from the sale of a property, as well as other services provided to tenants, Marino says

“Because REITs are required to pay out 90% of their annual income in the form of dividends, you can expect to receive income from your REIT investment,” he adds. “A REIT may trade on the major exchanges, just like stocks, or be what is called a ‘non-traded REIT.’”

While Marino says non-traded REITS can presently pay a monthly dividend between 6%-7.5%, depending on the quality and the assets held, they are not considered as liquid as exchange-traded REITs, and can be very difficult to sell on the secondary market.

“Because non-traded REITs may involve substantial redemption fees, they are best suited for long-term investors who will not need access to their invested capital in the short term,” Marino adds. “Also, distributions are not guaranteed and can be suspended or halted altogether.”

But no toolbox is required, either.

This article was originally published on

Retire Before Age 40: How This Couple Made the Retirement Dream Come True

KaderlisIt’s the opposite of working till you drop. Retire before 40. There’s no shortage of blogs stating just such an intention. The writers share their own personal mantra of how to pay off debt, save more money and begin life after work while you’re still young enough to enjoy it. Some are working toward the goal, others claim to have achieved it. Most are only a few years into their effort either way, so whether they achieve long-term success or just a huge resume gap, remains to be seen.

But Akaisha and Billy Kaderli retired at age 38 – and that was 25 years ago. To say they have achieved proof-of-concept is an understatement.

“We’ve got enough that if we can control our spending a bit, we can live anywhere we want.”

Coming to a crazy conclusion

Billy, a French chef, and his wife Akaisha bought a Santa Cruz, California restaurant in 1979. Later he became a financial advisor while she continued running the popular eatery. After six years of her serving hot dishes to customers and him cold-calling prospective clients, things were getting a little tense at home.

“It got to a point where ‘Kaish and I weren’t seeing each other anymore,” Billy tells Money Cynic. “She was running the restaurant and working nights — and in California the stock market opens at 6:30 in the morning and I was done at one o’clock. I’m at the beach, and she’s just going in to do the dinner shift.”

Being a “numbers guy,” he took stock of their assets and came to a seemingly crazy conclusion.

“All of a sudden it just clicked. I said, ‘We’ve got enough that if we can control our spending a bit, we can live anywhere we want.'”

Running the retirement numbers

She was not so sure.

“I was 36 at the time, and that wasn’t in my plan at all,” Akaisha admits. “I figured that I’d work until I was 55, and that would be ‘retire early.’ And he comes with this harebrained idea that we’re just going to chuck it all.”

It took a little convincing, to say the least.

“We were tethered to our jobs, to our bills,” she says. “And the idea that we could chuck it and live comfortably really was appealing. Once I calmed down.”

They analyzed their spending — so much of it was work related. Two cars, a house near the beach, insurance, meals out; the usual American overhead. The Kaderlis took two years to “test the waters” before making the leap in January 1991. Their nest egg? $500,000.

$500,000 to last a lifetime? Seriously? Can that work? It does when you spend just $22,000 a year in living expenses. As of the end of 2014, after 24 years – 8,760 days, Billy notes — the Kaderlis have spent an average of $22,040 annually or $60.38 per day. Basically the Kaderlis are living on the 4% withdrawal rule.

“2008 did rock our boat”

“The S&P 500 on the day we retired was 312.49,” Billy tells Money Cynic. “And if you do the math on that, up to last year, that’s about an 8.18% return, plus dividends. So with a couple percent for dividends, you’re right at the 10% level.”

Don’t you love the way he says “about” and then quotes a hundredth decimal point return? When it comes to numbers, this guy is not guessing. But after a sustained bull market, isn’t he a bit leery of a long-overdue correction?

“2008 did rock our boat,” Billy admits. “At this point, we’re a little more conservative in our investments because we’re now 62. We’ve gone through three or four of these down draws in the market. So, am I nervous? I’m always nervous.”

But Billy says it’s not just what you make, it’s what you spend.

“The key to this whole thing is: How much are you spending today on your lifestyle? If you’re spending level is $100 a day then you just have to have the assets — the net worth invested — to support that. That’s all.”

Retirement living in ‘cost beneficial countries’

Kaderlis-2However, it’s a safe bet that many Americans, at least those contemplating retirement, are living on much more than $100 a day.  And will require a large enough nest egg to support their current rate of spending. The Kaderlis admit that part of their strategy is living in “cost beneficial countries” such as Mexico, El Salvador, Vietnam, and Thailand. When we spoke via Skype, they were living in Lake Atitlan, Guatemala, one of their favorite stops.

“Housing is one of the largest expenditures in any budget. So if you work on getting  your housing down to an affordable amount per month, you can live just about anywhere,” Akaisha says. “It’s housing, transportation, taxes and food — but housing is your biggest [budget item].”

They don’t live by a budget, but to this day track their spending diligently. The Kaderlis spend 21% on housing, 24% on medical expenses (a spend rate that has been impacted by some recent health issues), 20% on transportation, 22% on food and entertainment, 8% on miscellaneous, and 5% on computer expenses. These are net expense amounts, after taxes.

Their housing costs have been reduced almost in half by house sitting. The couple says these stints can include spectacular beach views in well-appointed homes with maid service. Otherwise, they find monthly rates for apartments or hotels.

Low-budget living in the U.S. 

Can such low budget living work in the States? The Kaderlis say you have to get creative, look for low cost-of-living areas and consider renting out a room, a floor — or owning a duplex and leasing out half of that to a tenant.

Health insurance is also a major consideration. In the beginning, they bought a high deductible, catastrophic coverage plan. Now, when they visit the U.S., they take out a traveler’s policy. Day-to-day, living outside of the States, the Kaderlis are exempt from the Obamacare health insurance mandate.

“We’re self-insured,” Akaisha says. “We pay out-of-pocket for all of our medical expenses.” The couple also relies on their own version of medical tourism, visiting favorable foreign locales for healthcare.

And they don’t own a car. They used to own a vehicle, but now use local mass transit, walk, bike, share rides with friends, or hire a driver. It’s a debt-free lifestyle built on frugality – and freedom.

“The financial industry is not doing their job,” Billy says. “Debt is the killer. You’re a wage slave when you have debt. And if you can eliminate that, it frees up a whole lot of options.”

Check out the Kaderli’s website:

This article was originally published on

Would You Trust Investment Advice from Snapchat?

Runner-up social media networks, like Instagram and Tumblr, are struggling to find ways to make money. Ad dollars are tight and subscription fees even tighter. Recently, a Reuters report claimed Snapchat was looking into providing their mostly Millennial base of users with investment advice, in the form of robo-advisory services.

Robo-advisors, like Betterment and Wealthfront, with their machine-made investment strategies, are gaining popularity. Perhaps Snapchat sees an opportunity to gain a foothold into the future investment portfolios of their 100 million young users.

Will my money disappear too?

OK, maybe you’re not all-in with a company that specializes in making your photos disappear managing your money. Your money might disappear too, right? But remember, Snapchat’s not all that reliable in making your snaps vanish anyway. However, your skepticism is well noted.

But what about Facebook? The site garners nearly half of all social network visits (45.4% according to Statista). And people are already using Facebook for payments; why not invest your money with a social network run by a billionaire? Maybe some of that Zuckerburg money mojo will rub off on you.

Remember the Facebook phone?

At least a couple of industry observers are skeptical about the prospects.

“It’s sort of like trying to buy a cell phone… from Facebook,” says Alex Tabb, partner of the Tabb Group, an investment management industry research firm. “I don’t think that worked out too well for Facebook. They’re an amazing social media company but would you trust them to build your cell phone? It’s not a challenge of scalability, it’s not a challenge of ability — it’s a challenge of consumer confidence.”

Though Tabb is not completely ruling out the possibility: “I’m just saying it is a challenging prospect,” he tells the MoneyCynic.

“I like McDonald’s for hamburgers. That doesn’t mean that I’m going to all of a sudden buy McDonald’s for soufflé. Just because I like Facebook to update my friends on the status of my daughter and show cute pictures, doesn’t mean I’m going to put my retirement savings in their hands.”

And social network services are free, Tabb says. Even low-fee robo-advisors aren’t giving their services away.

“It is one thing to use a service for free. I may use Facebook for payments, but I’m just using it as a mechanism that takes money from my bank and buys me something over here on EBay or at this [online] shop. I think it’s a totally different thing to say, ‘I’m going to give Facebook my money and let them invest it for me.’”

Besides, it might be a bad business move

While consumers may or may not warm to the idea of a social network offering to invest their money, Jeff Fromm, president of FutureCast, a Millennial marketing consultancy, and author of the book “Marketing to Millennials,” believes such a move would be a bad business move for most social networks.

He says offering investment services, robo or otherwise, would likely “dilute the brand value” for a SnapChat or other platform that doesn’t have even a distant correlation to investing — or consumer purchases.

“I don’t think it fits most of the social media platforms,” Fromm tells the MoneyCynic. “I think there are a lot better ways to monetize than to enter into categories that are dilutive to their brand. And in a world where Millennials want customization and personalization today — and they will want individualization tomorrow — that wouldn’t be the route that would make sense to me strategically.”

But he believes there are some interesting alternatives.

“I could see it for Google or Apple — maybe for somebody like Pinterest,” he adds. “I could see maybe, for example, Pinterest, which is where people express what they desire to purchase and is a great view towards ‘things I desire to own,’ potentially being a fit for [such a service].”

So maybe you won’t snap your assets – but pin your portfolio.

5 Things You Should Expect from Your Financial Advisor in a Market Like This

All the red numbers on the stock market heat maps can be unsettling. You’ve seen this before and know it’s not time to panic. Still, you’re not paying all those fees to go it alone. Here are five things you should expect from your financial advisor in markets like this.

A phone call

We’re not talking about an email blast, blog note or Facebook post. A real-time, one-on-one phone call. All that other stuff is fine but financial advisors are calling their best clients this week, so if you don’t get a call — then you know where you stand.

You might get a call from a member of your FA’s “team,” and that’s OK too, but in times like these, it’s important to hear from whoever was in charge and sitting across the table from you when you were being pitched to open an account. If you appreciate someone personally touching base with you when the market goes south – and don’t get a call – then it might be time to consider moving your business to someone that will make you a higher priority.

Not to sell you anything

Your advisor shouldn’t be trying to sell you anything right now. If it’s such a good idea now, why didn’t you hear about it before the market plunged? And for the long-term investor, a good idea today will be a good idea six months from now.

An allocation review

Maybe you just had a year-end review to discuss tax-loss selling or to rebalance your investment mix. Doesn’t matter. What you want to know right now is, are your investments still properly positioned for the amount of risk you’re willing to take?

Just knowing that someone is watching your holdings and making sure they’re well positioned for this market – and the next — can give you peace of mind.

If your investments are way out of whack: over-weighted in a sector or asset class — or missing positions in markets of opportunity — you’ve got to ask why. When things take a sharp turn – up or down – it’s not the time to find out that your portfolio is misallocated.

And here’s a true reality check: If you’ve insisted on maintaining some over- or under-weighted position and you’re paying the consequences now, own up to it. An FA without trading authority can only advise. If you’ve been ignoring the recommendations, commit to a plan to move to a more suitable investment mix when the time is right.

To let you talk

When markets tank, the Wall Street buzzwords start flying. Advisors bring out the best jargon and clichés — and that’s to be expected. Clichés are often born of truth; that’s why they’re clichés. But if you find yourself just listening to the same old song and dance, your advisor may be on auto pilot. Just telling every client the exact same thing.

You should be hearing a discussion about your particular holdings and goals. How the market relates to your specific situation. And yes, in times like these, often the best thing to do is nothing. But you need to know that standing pat is part of a plan, not just a pat answer.

Most of all, a good advisor will let you do most of the talking.

To set an appointment for another visit

Fine. You’ve been reassured that all is well, at least for now. Your advisor should take the next step and set an appointment for another discussion. Maybe in a month — or next quarter, it all just depends on how time-critical your financial situation is. Perhaps you’ll wait for the next scheduled account review. Whenever it is, make sure you have a firm date and time to talk again, whether it’s on the phone or in person.

That will allow you time to see how things develop and how you feel about what’s going on – beyond just today and this week or the next.

And finally, if you aren’t worried about getting a call from your advisor right now, and you’re not wringing your hands over the stock market, maybe you don’t even need a real-life financial advisor.

Top 10 Income Sources: How Many Are You Tapping?

Saving for retirement is hard enough, especially if your nest egg is fed by a single income source. Developing multiple income streams can help deliver a life-after-work cash flow that lasts. In its annual analysis, the nonprofit Tax Foundation considered all of the sources of personal income as reported to the IRS in tax filings for the year 2013.

Perhaps there are at least a couple of income streams that you can add to your retirement savings strategy.

The core income       

Of the total $9.2 trillion income reported on over 147 million individual tax returns in 2013, 70% of American income was derived from employment.

“For most tax filers in the U.S., the largest number on the 1040 comes on line 7, the very first line pertaining to income,” Alan Cole, economist for the Tax Foundation says in the report. “It is on this line that taxpayers mark wages, salaries, tips, and other compensation for their work. The amounts reported on the 1040 reflect most, but not all, labor compensation. Firms also pay for employee health benefits and make contributions to Social Security.”

So that’s our W-2 income – and it’s what we rely on most to float our everyday expenses as well as feed our future retirement revenue. Now to consider the other income sources we might tap.

Buying a future income stream

You can purchase a future income stream by diverting some of your income to a pension – in the off-chance that your employer offers you one – or by purchasing an annuity. Pensions and annuities accounted for $639 billion in income for taxpayers in 2013 and were the second-largest income source for Americans.

Annuities have been given a pretty bad rap in recent years, mostly because financial advisors make so much money off of them, leading to aggressive and sometimes unscrupulous sales tactics. But buying a low-cost annuity from a respected and highly-rated provider can provide an additional source of guaranteed retirement income.


Income from S corporations and partnerships can be based on business revenue or from investments. Energy investments – such as oil and gas, wind, solar and other alternative energy plays — often use limited partnerships to gain investors. This is another area where potential buy-ins should be carefully considered and thoroughly vetted.

Of course, partnerships and S-corps can also be used for investments such as equipment and real estate rentals, land and timber, royalty-driven concerns, farms and ranches or timeshares – just to name a few.

Partnerships can provide a valuable income stream with little or no involvement on your part. Of course, finding the right business or investment is the key.

Capital gains

Ah, the precious profit known as a capital gain. How sweet it is: Buy something and sell it for more than the purchase price. Simple, right? If only it was so easy. But capital gains accounted for $483 billion in taxpayer income in 2013.

A capital gain can be profit derived from the sale of a stock, house, property – anything. It’s not usually a recurring income stream, but a one-time sale. As stock investors know, it’s a matter of timing and discipline: Buy low and sell high is harder than it sounds.

Business income

Having a little business on the side has become a thing. Whether it’s freelancing a talent, skill or service, or working some kind of ecommerce angle, it’s easier than ever to start – and yeah, fail at – generating a side income.

It might be something you do after work or on weekends: consulting, repairing, creating or selling. Nearly all (95%) of U.S. businesses are “pass-through” entities, meaning they aren’t structured as corporations but as firms where the income passes through to the individual owner. The majority are simply sole-proprietorships – one-man bands.

So, it doesn’t take much to test an idea to see if it flies. While small business failure rates are high, if you’ve got a full-time job and start a little venture on the side, your risk is low.

Take Craig Newmark for example. He threw together a little website in his spare time when he moved to San Francisco for a new job. He started by listing local events — and then job openings — and his side hustle hobby really took off: it’s called Craigslist.

Social Security

Who knows where Social Security is headed 10, or 15 years down the road? Only 41% of 18 to 29-year-olds and 29% of 30 to 49-year-olds Americans have confidence that the system will be around for them in the future, according to an AARP survey last year.

In the meantime, Social Security benefits accounted for $243 billion dollars of reported income in 2013, according to the Tax Foundation report, the sixth-highest income source. It’s a critical revenue stream for many of today’s retirees. For the rest of us? Maybe little more than a trickle. The latest estimate, released by the program’s trustees last July, estimates that after 2034 Social Security will only be able to pay about 75% of scheduled benefits.


Some stocks, mutual funds and exchange-traded funds pay out dividend income to shareholders. Finding such investments that offer some growth potential in addition to paying a dividend is practically portfolio nirvana. But dividends offer sweet, sweat-free paydays.

Retirement account distributions

This is down the list but a high priority for just about all savers: retirement income from our tax-advantaged accounts. Retirement account distribution strategies are often debated but never once-and-for-all decided. But you’ve got to build a balance first.

“America’s system of retirement accounts, while fragmented in several different programs, is taxed in a neutral way that removes the bias against saving,” Cole’s Tax Foundation report says. “Furthermore, it actually works fairly well at providing people income in their retirement. Notably, the income from retirement accounts is now a little bit larger than the investment income earned outside of that system.”

Retirees pulled $214 billion from their retirement accounts in 2013. You’ll want to make sure you have one to pull from too when the time comes.


Ah yes, that blast from the past: interest. Remember that? It’s been a while since any of us have actually seen interest paid on savings, and that’s why it’s at the bottom of the list. The $101 billion in interest income claimed by 2013 filers works out to about $690 per taxpayer. With the average savings account paying only about 0.06% interest in 2013, you’ve got to wonder: Where the heck did this interest income come from? Well, there is corporate and municipal bond interest to consider, too.

These days, typical savings accounts are paying a little bit more – around 1% — and interest payments may start getting closer to relevance as the Fed hikes the ball up the long and winding yield curve.

All the rest

Alimony, gambling proceeds, state income tax refunds, unemployment compensation and other sources of income are little more than ripples in the giant pool of American income sources. And a bit harder to initiate on your own.

But with a goal of creating as many income streams as possible, every little bit helps.

The Market Crashes, Then Rebounds: Why Trading Fever Follows Fear and How to Invest in Today’s Market

high frequency tradingWall Street thrives on churn. The institutional money runners, high-frequency trading algorithms — and to a much lesser degree, misguided retail investors — practice a feverish “reflex investing.” Last year, the Securities Exchange Commission estimated that trading triggered by algorithms accounted for more than half of all market volume for U.S.-listed equities. No wonder the market burns to the ground one day and resurrects the next.

It’s important to remember that in a world of lightning-fast trading, there is always an “expert” on both sides of each buy and sell. So the wise guys who sold in fear yesterday are desperately trying to get some of their money back today.

For an individual investor, treading water in a market pool managed by machines, the challenge is to swim among the sharks when there’s blood in the water. What is the right investment mix for such a volatile market?

Go with the flow and avoid a crash

Think of it this way. It’s a bit like driving in a traffic jam. No doubt, you’ve seen the impatient drivers in the loud and low-to-the-ground cars who punch the accelerator into narrow openings ahead — and then slam on the brakes to avoid a collision with another high-speed traffic gamer jockeying for the same position. Meanwhile, you just go with the flow – making just as good time, without running the high risk of a wreck.

For those of us who are merely carbon-based investors, the principal is the same. Ride with, not against, the market and take what it gives you.

An investment portfolio built to last

That means the best investment mix in a down market is the same as the one built for a rising market. Because from one day to the next, no investor – not one with a pulse or merely plugged in — knows which way the market will swing next.

An investment portfolio built to last extracts a fair profit in good times and offers sufficient protection from loss in bad times. You can’t have all of the upside and none of the downside. Nobody can.

If your investment strategy considers your needs, comfort with risk and reward, and balances expectations with intentions, then it’s the right portfolio for today. And, when adjusted only for tangible changes in your sensibility or situation, it will be the right one for tomorrow.

Reality-based, not reflex, investing means you had the right portfolio for the last six years of the bull market — and have the right one for the next six years, whatever comes.