Korving & Company LLC
Arie Korving spent 20 years in industry before deciding that investing was his true passion. As an Honors graduate from Michigan Tech with a degree in Chemistry, he took his analytical skills to unravel the intricacies of the stock market. Not long after entering the investment industry with Kidder, Peabody he experienced “Black Monday,” the stock market crash of 1987, which still ranks as largest one-day market crash in history, the Dow losing 22.6% of its value on October 19th 1987. It taught him a very valuable lesson: be very skeptical of Wall Street’s promises and always carefully examine what can go wrong. During his time as an advisor and portfolio manager he has experienced a number of other market cycles and has developed an investment philosophy that attempts to control risk while obtaining a fair rate of return. Prior to establishing his own investment firm, he was a Vice President and Senior Portfolio Manager for a major Wall Street Investment firm.
He believes in keeping it simple and educating his clients. He believes in transparency, with simple, easy to understand fees and no hidden compensation. As an independent RIA (Registered Investment Advisor), he is able to perform services for his clients that go beyond financial issues. He has gone car shopping for them and helped them decide on an appropriate retirement home. He is the trusted advisor for numerous widows who have lost husbands that managed the family investments. His experience in helping widows who lost their husbands prompted him to write his popular book BEFORE I GO, PREPARING YOUR AFFAIRS FOR YOUR HEIRS designed to make the passing of a loved one less traumatic for those left behind. He believes in consistency, telling his clients what he is going to do and then delivering on his promises.
He has been joined in the business by his son, Stephen Korving, a graduate of Virginia Tech with a degree in finance. Before joining his father, Stephen spent years with Cambridge Associates, one of the country’s premier investment management consulting firms advising foundations and wealthy families on asset allocation and manager selection.
Arie lives with his wife, Mary in Chesapeake, Virginia and is the proud father of his daughter, Marianne, his aforementioned son, Stephen, and his four grandchildren. He is an avid reader and amateur historian.
BS, Chemistry, Michigan Technological University
There may be a failure to communicate here. When I discuss goals with clients, we talk about things in their lives that they would like to achieve. These may include goals such as a comfortable retirement, or intermediate goals like home ownership, or paying for college.
Debt is one of those things that obstruct or interfere with the attainment of those goals. If the debt is large enough and the cost of that debt is high enough, it can make those goals unattainable. Think of debt and debt service as the inverse of saving and investing. If debt service is high, such as the interest rate on credit card debt (often in the 20% range), paying off that debt is like getting a 20% return on the amount you are indebted.
Without debt, you are not experiencing the “drag” that is the cost of servicing that debt which is interfering with the attainment of your financial goals. That does not mean that people can’t save, invest, and accumulate assets before they have paid off all their debts. They may want a home because they need a place to live, and take out a mortgage because they can’t pay cash. They may buy a car and take out an auto loan because they need transportation. Credit card debt is one of the most common types of debt, and the worst, because the cost of that kind of debt is so high. It may well be an indication that people are living beyond their means. Credit cards should be used as a convenience, not as a way of living large.
As those debts build up and servicing those debts takes a larger portion of your income, it makes it much harder to accumulate wealth.
Does that make sense?
The financial crisis that began in 2008 decimated the banking sector. A number of banks went under, others had to be bailed out by governments and still others were forced into mergers with stronger partners. The common stocks of banks got crushed, their preferred stocks were also crushed, dividends were slashed and lots of investors lost part or all of their money.
The reasons for this were more complex than generally realized. The simple answer was that it came about because the housing bubble burst, but that’s the surface of the problem. Part of the problem was a liquidity issue due to “mark to market” accounting required by the government and part was the number of bad mortgage loans banks held on their books. The lesson for shareholders is to diversify. Unfortunately, many people had much of their investments in bank stocks because they were paying such high dividends.
It sounds as if you are concerned about pretty much everything. For most people that level of worry causes paralysis because there are so many things that can go wrong with anything you can think of.
Mark Twain is supposed to have said: “I am more concerned with the return of my money than the return on my money.”
I’m not sure what someone really means when they say they want a “safe return.” If that means being 100% sure to get all money back, when you want to spend it, at any time, I can suggest looking for a safe place under your mattress. Of course the risk is that burglars break in and find it. A more realistic risk is that the price of everything goes up (Inflation) and your “safe” money buys you less and less as time marches on.
Here is what safe money look like: if you’re asking for really “safe” places to stash cash you should try the banks, but stay under the $250,000 FDIC insurance limit in case the bank fails. I believe banks are paying less than 0.1% annually today. Or you could buy US Treasury bills which are currently paying about 0.25% annually, but stay away from anything longer than 12 months because if interest rates go up and you need your money now you may have to sell them for less than you paid.
Nothing in life is risk free, including getting up in the morning. When people tell me their over-riding concern is safety I often ask if they can live comfortably if they did not have the money they are looking to protect. In other words, what are your guaranteed income source: pensions, social security, etc. that are out of your control? If the answer is that they will be fine, they can stop obsessing about an illusionary “safety” and start thinking of what they want their money to do for them. And that is also the point to sit down with a competent, experienced financial advisor who will take the time to go over the risk-reward trade-offs that people always have to make as they begin to retire.
One final point. People who seek high rates of return with no risk are often the subjects of scams that promise them what they want. Only later do they find out they have been cheated but by that time their money has disappeared. Bernie Madoff was just such a scam artist who promised a steady, predictable, monthly return and managed to steal over $65 billion over two decades. Things that are too good to be true always are.
When you buy a security, like a stock, the price will fluctuate. If it goes up from your purchase price, you have a gain, if it goes down you have a loss. While you own the security, any gain or loss is just on paper and the term “unrealized” is used to define that fact that you have not actually booked a profit of loss until you sell. Once you sell a security for a gain or loss it’s classified as “realized” and you now have to figure out if you owe tax on the sale or if you can take a deduction for the loss.
I hope that answers your question.
A credit card is a useful tool if used properly, but like any tool it can be abused. The proper way to use a credit card is to only use it for items that you would buy for cash. Then pay the credit card balance off every month so that you never incur any interest charges.
People who use credit card improperly are those who buy things on credit they cannot afford. There is a huge temptation to use a “credit limit” which is the amount a card issuer allows you to spend. But if you don’t pay the charges off every month, the card company will begin charging you very high interest rates, typically in the 20% range. And once those interest charges begin, they are added to what you owe and the interest gets compounded.
Unfortunately many credit card users get caught in this cycle of debt. That is the risk that your personal finance teacher is warning you against. Credit, like drugs or alcohol, can become a trap and many people are caught in it. Decide if you want to use a card as a substitute for cash. If you want if to buy things you can’t afford to pay for right now, avoid credit cards. You may want to look at debit cards instead.