Family Investment Center
Dan Danford is a gifted communicator. He has written hundreds of articles and several books. He has taught classes for high school, college, and community groups. He speaks often and served as commentator for a local ABC affiliate television station.
Dan founded Family Investment Center in 1998. In total, he’s been a successful senior officer in five different banking or investment firms since 1984. He earned a Master’s degree in Personal Finance from Kansas State University and an MBA from Northwest Missouri State University. Today, Family Investment Center manages well over $100 million for clients in a dozen states.
Dan is quoted extensively about investing. He’s written for or been quoted in the Wall Street Journal, New York Times, Chicago Tribune, Kiplinger’s, U.S. News & World Report and dozens of other newspapers, magazines, and media outlets.
Dan has served in numerous leadership positions for civic and professional boards including the Missouri Western State University Board of Governors and as treasurer of the St. Joseph Area Chamber of Commerce. He was Chairman of the Friends of the Free Clinic, a support group for the Social Welfare Board in St. Joseph.
Dan has been president of the Missouri Western State University Alumni Association and was honored in 2003 with the Missouri Western State College Distinguished Alumni Service Award.
MS, Personal Finance, KSU
BS, Marketing, MWSU
Assets Under Management:
Dan Danford / Family Investment Center
An analyst’s “target price” is his/her best estimate of a stock’s future price. Since the stock market is an auction where buyers and sellers transact business, the analyst is trying to determine a solid estimate of future price based on company financials, industry trends, and economic factors.
Analyzing stock prices is not an exact science. Ten different analysts will arrive at ten different target prices depending on each one’s weighting of various factors. For traded stocks, they should each be starting with the same set of public financial data, but that entails a hundred or thousand data points for each stock. Plus, each analyst will apply their own process, experience, and judgment to that data.
Additionally, at least part of a stock’s value lies in future (estimated) data. Financial records necessarily look backwards, but the value to a new buyer lies in the company’s prospects. Will sales grow faster or slower in the future? Are margins in the industry rising or shrinking? Does the company have any product innovations in the pipeline? How about their competitors?
So, setting a target price is a judgment call. An informed analyst weighs all the past and future data with their own personal knowledge of the company and industry. From this, they set a target that they expect sometime in the future. Buyers or sellers can then use this target for their own decision-making about the stock.
Let’s say that a certain analyst sets a target for ABC stock at $25 per share. The stock is trading today for $20 per share. If you think this analyst is credible, then you might choose to buy ABC because you could make $5 per share (a whopping 25%) when the share price hits that target (again, timing of that price change is an estimate, too). Or if you question this analyst’s credibility, you can search to see what other analysts estimate for ABC before deciding.
An analyst sets the future target price with little regard to the price today. So, they might set a target price for ABC at $15. If you find that analysis credible, you’d probably decide to wait before buying (until the price falls to $15 or less) or sell if you already own it. Again, this is just one person’s judgment about the future price. You can use the information however you choose.
Importantly, really importantly, no one knows what will happen next with stock prices or any company. The fact that someone is an analyst following a stock does not make them right. They are simply an informed party doing their best to understand the company and landscape. Even the best analysts will be wrong sometimes.
As an investor, you are the final decision-maker. Learn as much as you can, choose credible people or companies for information, and exercise your own judgement when buying or selling. There are a million moving parts and it is impossible to predict the future.
Anything by these four writers: Nick Murray for inspiration. Jonathan Clements for financial insights. Michael Kitces for business savvy. Michael Gerber for systemizing your own business model. There is a vast difference between investing and the business of investing. A lot of people enter the business because they like investing ... it takes a lot more than that to prosper as a professional. Going forward, success will depend less on personality and more on credentials, communications, and processes.
I could go a lot of ways with this, but I’ll let others riff on that a while. From a purely legal standpoint, a fiduciary must serve your best interests. That means that any solutions they offer or products they recommend must meet a very high standard of best for your situation. Now, several fiduciaries might disagree on what is best based on their own experience, education, and assessment of your circumstance, but those are professional judgements. In all cases, though, the fiduciary’s judgement won’t be tainted by a commission or financial gain. With a doctor, you pay for an office call, but she’s prohibited from accepting commissions from the medicines she prescribes … I think that’s the right system for financial advice, too.
I agree with you and not the lawyer. Still, is there a will or trust document with investment instructions? If so, you should do what that document says. Odds are good that a diversified portfolio (with ETFs or similar options) will do better over 10 years than a “no risk” option. In fact, most states and trust “best practice” guidelines could chide you for using a “no risk” strategy for young beneficiaries and 10-year horizon. It’s important to note, though, that any future criticism will be raised by the beneficiaries … there are no fiduciary police. Matters of prudent investing and family stewardship are civil matters, usually raised by a beneficiary against a trustee. Without knowing the details, it seems unlikely that your sons will sue you over the management of this money. If there is not a will or trust document specifying an investment approach, I’d go with a diversified growth portfolio. Chances are high that your sons will thank you later.
Well, I'm a CFP® professional advisor so I'm obviously biased. I'm also a NAPFA-registered Fee-Only® advisor, so I've taken a visible stand against commissions. This really depends on what you want. Vanguard and other groups will offer some services and good products. But it is still a telephone consultation from a distant city. If you want someone to sit with you sometimes and answer questions or brainstorm ideas, you probably won't be satisfied with a distant relationship. I'd also suggest that you may be more comfortable having an investment professional at your side with this much in investments. Some people are highly confident and big numbers don't bother them, but most lay people I know are intimidated by large portfolios. Let's pretend that 30% should be allocated to blue chip stocks; that's $800,000. How comfortable are you in making an $800,000 investment decision? Active management or passive? no-load mutual fund or ETF? Vanguard or Schwab? What if the market tumbles 25% in the weeks after you buy? How good will you feel discussing that with someone in Boston or San Francisco? In any case, you can always find a lower-cost option (always!) but a good advisory firm proves their value to clients over and over. If the relationship doesn't provide ongoing value, it will end.