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 are a few questions I would ask.
First, does your financial advisor charge the fee on the value of your account or on the market value of the invested assets? Unless the advisor specifically excludes cash balances, you are being charged on the total value of the account, including the cash.
Some investment managers consider cash an asset class and will devote a certain percentage of a portfolio to that class. Others do not. You should ask your advisor. Whether cash “motivates” your manager depends on the answers to the previous questions. It your planner keeps large amounts of cash on the sidelines because he doesn’t have any good ideas and does not view it as an asset class that’s part of his strategy, you should look for a new advisor.
You can buy and sell the same stock any number of times; it’s called trading. I would caution you that simulations and real life are not the same. In real life there are transaction costs which erode profits. In real life there are bid and ask spreads, and they are usually much bigger than fractions of a penny. And in real life stocks don’t conveniently go up and down, giving you riskless opportunities to make a profit. I suspect that the only one who will profit from you interest is the company selling you the trading strategy.
That’s a great question. Like all good questions, the answer is “it depends.”
There are advantages and disadvantages to annuities. The advantages include:
- If you can annuitize you and your spouse can receive a guaranteed income for life.
- Annuities guarantee against loss of principal … but you must die to collect on that guarantee.
- Annuities are tax deferral vehicles, like IRAs. But you must pay taxes when you withdraw.
But there are the disadvantages:
- Variable annuities much higher expenses than the same mutual funds outside the annuity.
- Fixed annuities currently pay relatively low interest rates.
- They have redemption fees that can run into double digits and last for more than 10 years.
The feature I like about annuities for retirees is that they can provide lifetime income - if you annuitize - like a pension, for those who don’t have enough steady income during retirement. They provide an income safety cushion that is not dependent on the stock market. However, if you are using annuities as a substitute for an investment portfolio of mutual funds or CDs, I don’t think this is the best way to go.
That’s an interesting question and it depends on who you ask. I will answer with a focus on losses rather than gains because, for most people, risk implies the chance that they will lose money rather than make money.
In my view, risk tolerance is your emotional capacity to withstand losses without panicking. As an example, during the financial crisis of 2008/2009, people with a low or modest risk tolerance, who saw their investment portfolios decline by as much as 50% because they were heavily invested in stocks, sold out and did not recoup their losses when the stock market began its recovery. Their risk tolerance was not aligned with the risk they were taking in their portfolio.
Risk capacity, on the other hand, is your ability to absorb losses without affecting your lifestyle. The wealthy have the capacity to lose thousands, millions, or even billions of dollars. Jeff Bezos, founder of Amazon, recently lost $6 billion dollars in a few hours when his company’s stock dropped dramatically, leaving him with a net worth over $56 billion. His risk capacity is orders of magnitudes greater than most people’s net worth.
There are some new tools available to measure your risk tolerance and determines how well your portfolio is aligned with your risk number.
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?