How CEOs Scare Investors

When portfolio managers take a position in a company’s shares, or even think about taking a position, it’s a highly analytical process.  But interpersonal dynamics have an impact too. When a CEO makes an investor’s Spidey sense tingle, it can derail the investor’s interest.  Here’s some ways I’ve seen CEOs get on the wrong side of an investor.

Outsized compensation. Despite prevailing sky-high compensation for CEOs, it still makes investors jumpy.  Among S&P 500 companies, the CEO’s salary has less of an impact. But among small and mid-cap companies the impact is larger.   When a CEO is making $5 million a year, the investor will register a risk that the CEO might be fat, happy and overly motivated to maintain the status quo. read more

What Wealth Advisors Should Say To Clients Now

With a dip of more than 11% in the S&P 500 since July 20 and continued volatility, what can advisors say to jittery clients?

For long term investors, nothing applies a calming salve better than a discussion about dividends.

Remember, during almost any 10-year period, approximately 40% of the total return from the SPY came from dividends.

Given this, a swoon in asset prices is concerning, but if dividends remain viable, there’s much, much less for investors to fret over. In fact, there are significant profits to be earned from dividends in a correction. read more