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The Path to Prosperity: How Defeat and Struggle Can Help Restyle Your Life

Multiple Paths -Long

Understanding what measures your success is not a simple equation. One individual’s metric may be different from the next. However, it is far less important how we measure our success than it is how we determine it. Simply put, our struggles determine our success.

Whether you are a corporate employee or an entrepreneur, one of the most common fears associated with transitioning in the professional world is the anxiety and pressure of setting – and exceeding — expectations. No goal can be met without the occasional struggle along the way; an important lesson that none of us are expecting to learn.

Transitions in life are difficult. There are no guidebooks to follow or direct paths to take. In fact, many individuals feel isolated when it comes to verbally recognizing the fears, anxieties, and apprehensions associated with the evolution of ending one endeavor and pursuing the next.

Applying the First Step

Even more confusing is knowing what direction your life is heading in. How can we be expected to define our success and goals if we aren’t even sure where we want our first step to lead us? Many of us assume that we will continue to find success simply by applying the same old formula that has worked in the past, but in order to create success, we must be willing to reinvent our concept of self-achievement.

In a recent article on transitioning in life, former NBA player Shane Battier dissects the idea that our lives are broken into three sectors. He discusses how often times, professional athletes maneuver talent and dedication into great success in the first third of their lives, thereby “winning” the first third. He states “Many individuals in this particular demographic seem content to rest on those accomplishments and don’t grow as individuals.”

We at Capstone believe this is what restylement is all about; reinventing yourself to win the next two thirds of your life in a completely different manner than the first.

No Pain, No Gain – Accepting Failure is Essential for Personal Progress

With this idea comes a plethora of questions clients must ask themselves. First, are you willing to make yourself vulnerable in order to identify areas of personal growth? Are you willing to try things and accept that some ideas may bring failure? What you are willing to struggle for is one of the greatest determinants of how your life can expect to turn out.

What we achieve in our life is not determined by the positive feelings we crave, but rather by what feelings of negativity we are willing to sustain in order to redeem the positive, happy emotions. Without a hint of risk and struggle, it is probable that you will remain in your comfort zone, stagnant, fixated on the past; a formula that is highly unlikely to win you the next third.

In other words, happiness requires some degree of struggle. In a recent article on the global economy digital news website, Quartz, author Mark Manson said it best, “Who you are is defined by the values you are willing to struggle for.”

If you are looking to restyle your life and are unsure of what the first step is, begin by asking yourself: what is the level of pain that you want to sustain? Understanding your willingness to accept struggle and defeat is the first step in the right direction. The answer to this question can change your life and help you win the next round.

Snowed Under! Getting a Head Start on Planning for Retirement

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Are we facing a retirement crisis? Absolutely!

This was the conclusion of the PBS Frontline segment on preparing for retirement, titled The Retirement Gamble.

In today’s world, most working individuals have busy lives and are not spending enough time focusing on retirement; however, what most people don’t realize is that it is their responsibility to know how to invest and identify how much money may be needed at any given point.

When broken down, it’s all incredibly confusing.

Most working adults no longer have a pension, unless they work for the state or federal government. There is also uncertainty about the current state of Social Security (although I would argue that it’s here to stay…just simply in a different form than we know now).

Most individuals feel dumbfounded as to what they should do. This is similar to the frustration I feel when the toilet clogs up — I truly don’t know what to do. This was the kind of maintenance issue my grandfather could easily fix, and he was a college professor. I on the other hand, don’t know the first thing about plumbing.

This kind of home repair situation also reminds me of a recent ordeal involving the roof on my 108-year old home. The shingles had begun to show some wear and a beam had split. Rather than deal with it, I let it go… Bad idea! After enduring a snowstorm already this winter, and two hailstorms earlier in the year, it was finally time to get the roof redone. But procrastinating did not act in my favor. I was snowed under, literally.

Acknowledging the Uncertainty in 401k Investing

Most individuals are overwhelmed by all of the knowledge needed to have in order to invest. Additionally, unlike other products and services, it is difficult to know the price or quality of what to invest in your 401k.

The risk of investing in a 401k lies with the individual. This is vastly different from the previous form of retirement saving, known as a pension, in which a professional was responsible for the actual investing. These experts were held accountable for knowing how much an individual should save, what areas he or she should put their money into, and how much could be safely withdrawn.

When Accidents Occur – Preparing for Medical Expenses In Retirement

Measuring your 401k options is only the retirement side of the equation. To properly prepare, we must also look at the medical side of benefits.

A couple of years ago, Fidelity came out with a study that indicated a couple wanting to retire in 2012 would need more than $240,000 to cover medical costs alone. This study suggests that medical costs are increasing much faster than other costs.

This information forces us to wonder: do we have enough to pay for our medical expenses?

Medicare is responsible for aiding retirees in paying for healthcare costs. But Medicare payouts are declining. Individuals are now living longer, and the last few years of life are typically much more expensive in terms of healthcare. This places a heavy burden on the individual to make both financial and medical decisions at the same time.

In addition to the decrease in payouts, Medicare also does not cover most long-term care, which forces many retirees to dip into retirement savings more quickly than they may have anticipated.

Proper preparation for a comfortable retirement doesn’t have to be an intimidating ordeal. Rather than postponing your retirement planning like I did with repairing my roof, start constructing your plan today. Don’t get snowed under.

Retirement is Your Responsibility

Preparing for retirement can often be difficult. As individuals, we have very limited ability to see ourselves in the future, including what our healthcare expenses may be or any hiccups that may occur, such as a job loss.

Because we lead such busy lives, most individuals don’t really think about retirement.

It becomes our responsibility to know how to invest and identify if we are going to need that money at any given point. PBS Frontline discusses this and more of the struggles of retiring in a segment titled The Retirement Gamble.

Essentially, the video segment concludes that if you’re going to die at 69 years of age, you will need to save a heck of a lot less money than if you plan to make it to 95.

As grim as it sounds, it truly becomes the individual’s responsibility to know the amount that will need to be saved and how long he or she is planning to live.

The Demise of Pension Plans – Controlling Your Own Retirement Fund

In the past, pension plans were much easier for the individual to comprehend and help to prepare for retirement. These type of plans were automatic, companies funded the plan for you, and even hired someone to manage it.

In the 1990s, companies underfunded pension plans because the stock market was rising higher. Many companies thought they could use their pension plans to fund other projects. This led to the pensions being underfunded and too costly to continue. This drove greater use of the 401k.

With companies out of the pension business and 401ks being the more suitable retirement option for working individuals, more Americans are facing the difficult process of having to prepare as early as possible for a comfortable quality of life in post-working years. We must face the reality that it is our responsibility to plan for retirement.

A Fine Whine


By Ted Schwartz

This week I met with two very bright individuals who parroted the CEO cry that we “need certainty” before the economy will improve and companies will hire people. At the same time, I am reading Taleb’s, Antifragile. His whole point would be that things in life are not predictable and actual results often do not even approximate the outcomes we think are possible. Taleb would argue that certainty is a bad thing, making us more fragile to the problems that will inevitably crop up in the future.

For me, the whole notion of certainty being a necessity goes against the grain of everything I know. The rationale for why entrepreneurs can earn more than employees is that they are taking a risk. The reason equity investors make more than fixed income investors is referred to as the risk premium. You expect to earn more due to the increased risks you take. Now, the cry is that we have to be assured of future results and of what taxes we will owe on our profits. We now refer to things like “making the tax cuts permanent.” The chart below shows the changes in the maximum marginal rates since 1913. Does this look like we offered “certainty” and low taxes up until President Obama arrived on the scene?


Let’s not forget that we experienced a huge amount of growth during the period since 1913. During this time frame we also experienced almost 20 recessions. Yet, we did not have entrepreneurs constantly saying they would not hire or invest unless they were given certainty of results. It is the cry of the 21st century entitled, “the successful class must be assured results before taking any risks.” It really can’t work that way.

Musings for a New Year

By Ted Schwartz

We begin the New Year with a market surge due to clearing the lowest hurdle imaginable. The “Cliff” agreement pleases almost nobody and solves almost nothing. Yet, the markets are right to rejoice this very small step. My belief is that the vote really tackled only one question, one not relating to wither revenue or expenses. This was an up or down vote on whether public officials were willing to compromise in order to do the people’s business. In the Senate, 90% of both Republicans and Democrats voted yes to this very simple and basic notion. In the House, we passed this on a much closer vote and almost refused to vote on it at all.

The question of whether we can move from this very simple vote to ones that actually address revenue and expenses in a meaningful way lies ahead. It is not very heartening that this first step was so difficult to get behind us.

As we look to the New Year, we are cautiously optimistic. Not being in the business of forecasting, we can none the less check the current conditions of the economy. Things are slowly improving on most fronts. Housing and other economic measures show slow improvement at this point. The stronger positive for the market is the relative rewards offered investors for owning stocks versus other investment opportunities. Stocks are somewhere around their long term average expected returns while safer investments continue to offer their lowest returns by historic measures. It is not a stretch to say that safe investments (CDs, Treasuries, etc.) offer a negative return when you factor in inflation. So, we believe investors have to accept the risks of owning equities in order to attempt to have positive growth from their investments.


In terms of our Tortoise (the well diversified portfolios that we endorse) and Hare (the equity market as represented by the S&P 500 Index) last year, the Hare won by a convincing margin. Despite a small loss for the fourth quarter, the S&P closed the year up over 15%. That far outpaced the returns for commodities and bonds for the year. The Dow Jones Moderate Portfolio Index (representing a well- diversified portfolio) was up just over 2/3 of the S&P for 2012. For two years, it is up a bit less than 2/3 as much as the S&P 500 Index. For three years, the diversified portfolio trails the S&P by about 20%.

So, isn’t it time to hitch our trailer to the S&P and take off? We think not!! The tortoise still wins by not losing as much. For five years, the Dow Jones Moderate Portfolio Index doubled the return of the S&P 500. For ten years, it has outperformed by almost 20% (and that excludes the bear market of 2000-20002). The Tortoise wins and… avoid a lot of ulcers on the voyage. If you truly believe we have finished a secular bear market that began in 2000, you might advocate increasing risk in order to capture more returns. We see no evidence that we have begun a bull market, so….we will continue to be a Tortoise in 2013 and the foreseeable future. The Tortoise has many more ways to succeed and win the race.

The name Capstone was chosen many years ago and was a very purposeful choice. The name was selected because we wanted to convey the idea that what we offered was quite necessary (“a crowning achievement”), but was not sufficient in and of itself.  Money and its accumulation are very important to our clients, but they do not define their success nor are they equivalent to a successful life. A well-managed group of financial goals and a sturdy plan to implement them help a person be “anti-fragile” to borrow an idea from Nassim Nicholas Taleb. A super-diversified group of assets helps you avoid vulnerable economic outcomes as you age.

Since selecting this name many years ago, we have only seen more and more of society concentrating on money as the only issue of merit. Financial cliffs, political squabbling, education as only vocational training, etc. give us a short sighted view. As we look to the future, we must not lose sight of the more important things in life. Let’s relook a quote from Robert Kennedy in 1968:

“Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile. And it tells us everything about America except why we are proud that we are Americans.”

That is the essence of why we chose Capstone as our name. We help you add a crowning piece on your life plan, but we do not deal with the areas that truly define you and your value. We believe our service is of great utility, but we cannot replace those moments that make your life a joy. We wish you a very happy and prosperous New Year as you head a bit further down your path. We look to the New Year with considerable hope for the future. Things continue to improve slowly (with far too little help from our public servants).

A look ahead to 2013

By Ted Schwartz

Well, it turns out the world did not end on December 21. Shocking, isn’t it? So, we have to look ahead to what we might expect in 2013.

Dr. Doom here is actually mildly optimistic. We are not in the business of forecasting, but we think taking the patient’s vitals does give you an idea of what his condition is. So, we have many risks due to the inability to agree on public policy as I pen this. However, even the lowest expectations that I have for our public servants does not entertain the likelihood that they will plunge us into a recession on purpose as opposed to finding at least a half-baked solution to the fiscal cliff.

Once that is behind us, I see a slow positive momentum building. Things are getting better, though not quickly. Housing is showing signs of having bottomed and that should help along with generally improving conditions elsewhere. The biggest threat to the markets may come from over confidence and high expectations rather than actual problems. The backdrop that I see propelling markets is a beginning of money flowing towards rather than out of equities. They are fairly valued while bonds are way overvalued. We believe this will cause investors to realize the equity risk is more appealing at this point than the risks of bonds given their extremely low yields. Despite the fears around taxation of dividends recently, we believe that investors will find those dividends appealing versus the yields they can get in fixed income.

Unfortunately, we think we will not see serious solutions to our long term problems discussed or implemented in 2013. That means the next “Black Swan” will continue to lurk in our future and may even find some nourishment next year.