The News Star columns

Question: How do I pick the best mutual fund amongst all those available? I read about so-called actively managed mutual funds and some people like them. Others think passively managed funds are best. I’m afraid I’m a bit confused by the whole discussion. Which is the best kind of fund to choose?

Answer: Have you ever watched an all star game?

The concept sounds great. You get the best players on each team in the league, split them into two teams made up of these all-star players and let them compete. Every major sport has an all-star game of one sort or another. It’s a great idea.

Unless you’ve ever watched one.

Question: I just got a significant raise in my income at work. My wife and I are not budget people. We’ve tried and failed every time. But we don’t want my extra income to just go to frivolous stuff. What’s the best way to make sure we save my increases in income?

Answer: Reverse the way you do your banking.

Question: What do you think they will do with the estate tax law? I have put off estate planning since I keep hearing about changing they are considering, including elimination of it.

Answer: The current estate tax law is in a fog with visibility limited to about two to three years out. In fact, that’s the way its been for most of my career. I’m not looking for that to change any time soon.

Q: I have an employee that is key to the success of my business. I pay him very well so that he doesn’t have any incentive to leave. But if we lost him, we would be up a creek. Beyond just more money, what other things can I do to tie him to us?

A: In George Orwell’s political satire Animal Farm, one of the characters quips, “All animals are equal, but some animals are more equal than others.”

Q: I was always taught to pay my bills on time and avoid debt like the plague. As a business owner I try to practice these values. When I started my own business, I took out a large loan amortized over 15 years, but I am trying to pay it down as fast as I can – maybe a soon as five years. The business is profitable, but sometimes the rate at which I am paying down debt can create cash flow issues for me. What’s the balance?

A: How long could you last without oxygen? When it comes to breathing, do you think in terms of balance or unlimited access?

In business, cash is oxygen. Other than that, it’s no big deal.

Q: I had a really bad experience with a so-called financial advisor several years ago. Since then I’ve kept my affairs pretty simple and done everything I could for myself. Because of that man I really don’t trust anyone any more. The problem is that things are getting complicated enough where I do need some help. What’s the balance between being gullible and getting the help I need.

A: The word you are searching for is trust, and it’s something a bad person caused you to discard as too dangerous to handle when it comes to money.

When I was about five years old, I stuck a safety pin in an electrical socket and quickly discovered the conductivity of metal and the shocking power of electricity. I thought I would never go near a light socket again!

Q: We started a business a few years ago. It was rough at first, but we finally got our act together. We’re making plenty of money now, but I’m feeling restless. I can’t imagine walking away from what I’ve built, but frankly I’m a little bored. What have you seen others do in this situation?

A: Sometimes I’ve seen them to some really stupid things. Other times, I’ve seen them just continue to do the same things.

But I’ve seen a few do some significant things, and I think they are the happiest with their choices.

Q: My business partner and I bought insurance on each other years ago in case something happens to one of us. Somebody told me we need a buy-sell agreement to go along with that. If it’s just the two of us, do we have to get that formal?

A: When was the last time your sister-in-law had access to your bank account?

If the answer is “never,” you might want to re-think your affinity for informality in this instance.

Q: I have a friend who really likes to talk about his investments. He has an account he manages on his own, and he also has an account managed by a professional. He’s always saying he can beat the pro, but he never fires the guy. I think my buddy may be full of hot air. But shouldn’t a pro be able to beat an amateur? Otherwise, what’s the point?

A: A professional should always add value. Otherwise, as you say, what’s the point?

But whenever I hear someone speaking of investment returns using competitive terminology (so-and-so “beat the market”), I’m most often hearing the opinions of the inexperienced.

Q: Last week you wrote about somebody who hates their job and wants to get out. Well, I don’t so much hate my job as I feel I am not reaching my potential. I work with nice people in a nice environment, but I don’t feel super useful. I don’t really want to leave my job, but I want to feel better about myself in my job. Does that make sense?

A: Totally. 

You may recall in last week’s column I drew from David Covey’s four secrets to a successful and fulfilling career: making enough money, making a contribution, having passion and making a difference.