Here in Gaia Capital Management's Viewpoint you will find a selection from our weekly commentaries and Strategic Insight publications. Just contact us if you would like to receive these publications on a regular basis. They're complimentary, free of charge.

Saturdays With Jim

Closed-end funds (CEFs) are investing’s Cheshire Cat, mischievously grinning at the confusion they spark among investors. Why should we own investments that often separate the price we pay for them and their underlying value? Read the article for some insight on this topic.
We like to look at investing as a journey to a destination. There are many others making the same journey, but only yours counts because it’s the only one that truly affects you. Since few are investing in exactly the same thing, in the same proportion, few will experience the same journey.
Financial market direction – up, down and sideways – is the result of forces caused by the buying and selling activity of millions of investors. It is a rare person who can make sense of the markets day to day, week to week or even year to year moves. Taking a long, multiyear cyclical view of the markets, however, does reveal patterns that are mostly discernable and tradeable.
The bullseye in archery is the archer’s holy grail. The bullseye in investing is the long-term return. Both are hard to hit, while in investing the bullseye is almost never hit in a given year. It doesn’t take much expertise for the investor archer to get near the bullseye with bonds, especially shorter-term ones, but the archer aiming at the bullseye for stocks might as well be blindfolded.
We have often mentioned "policy" - what governments and central banks do in the performance of their functions - as a risk factor alongside other risks we know. We are now facing possible executive branch policy mistakes which could impact us as investors and savers more directly in trade policy and foreign policy.
Much chance-related risk can be assumed without great loss, prevented with adequate preparation or transferred to a third party. Investment risk, though, is another matter. Most often, investment risk is assumed by the investor, though it can be mitigated by careful attention to detail and unemotional execution of a carefully crafted investment policy.
As asset allocation (diversification) is the market’s “free lunch,” so is strong belief akin to faith the bulwark of investment success. Read on for the explanation...
Behind the Trump tariff action lies a problem simmering for years between the U.S. and China and one that has emerged over the last couple of years. China’s success has led to the second problem – how to avoid the middle income trap – to broaden activity from exporting to realize a vibrant consumer economy.

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Strategic Insight

Brushing aside worry closets of concerns, stocks and bonds – particularly those in the U.S. – have soared past their 2007 peaks. Stocks have done their two steps forward, one step back dance for over eight years now, the back step getting scary only twice (in 2011 and in 2016). The wheels are in motion for all the good times investors have had to endure an autumn, followed by a winter before seeing another spring, so to speak.
Eating snails? Yep, the French consider the escargot (sea snail) a delicacy. Flavored with enough garlic, they really aren’t too bad. And dividends? You don’t have to flavor nor cringe when you hear their name. Given that dividend income and growth forms the core of our investment strategy, we thought you would like to know more about these little building blocks of permanent wealth.
Most of us have seen our income from dividends and interest drop in the five years from 2011-2015. We have been touting growing income as a major objective of ours. Read on to find out why it can temporarily drop.
When we begin investing it is wise to think about the outcome we want to receive and the volatility or uncertainty we are willing to accept as our investment progresses toward our desired outcome. To illustrate outcome and investment experience, Michael Kitces, a noted financial planning thinker, ran a study of three retirement income strategies, each with thousands of investment observations over a 50-year period.
Diversification reduces risk, a widely known fact. But few agree on exactly how to diversify across investment types to achieve the promised low-risk land. The diversified model has the advantage of offering excellent risk-adjusted returns year after year, though one or more of its components may have soared or crashed. This is diversification in action. Read on...
If investing were only about accumulating an account balance, we would all go nuts as investment accounts wind to a peak, then give back some before rising again and repeating the process - with the effect that we are notably higher after some years of the back and forth movements. Those back and forth movements represent uncertainty more than anything else, as markets try to be predictors of the next six to nine months.
How do we get the high long-term returns stocks offer without the worry they cause when they fall hard every few years? Furthermore, how can we build a high, sustainable and growing income in our retirement years? Read On...
Our emotions are wired so that we smile when we make money per the report of a statement and growl, moan, shriek, cry or otherwise express anguish when we have had what seems like a serious paper loss. How can we keep our emotions from flaring up when we have suffered one of investing’s inevitable setbacks?

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Will people really retire from the paycheck and seek a radically different life – one of leisure, community service or whatever? Today’s person of retirement age has far more options than those who preceded IF they have enough saved to replace the paycheck. Since most don’t, they continue to work.
Are you limiting enjoyment because you need to have something “now”? Do you struggle mightily with your instincts to flit from one thing to another – and back again? You might be pleasantly surprised if you could escape the “get it now” trap – enjoying fewer things more deeply.
Success creates its own aura, but digging deeper into its sources we find good fortune to be at least its handmaiden. Good fortune can be cultivated. Here are some general rules to place yourself in the path of good fortune.
Credit cards are the proverbial two edged sword. They can be very useful as a fairly short-term loan from an issuer (yes, credit card purchases or advances are loans) or they can be a sieve out of which money flows to pay for past purchases (plus generous interest to the card issuer). You might consider the ideas presented here.
Here in Brazil many consumer goods are priced as if they will be bought on credit, with a small down payment and several periodic payments to complete the purchase. Parcelando, as they call it, is popular in no small part because services here are cheap and goods are expensive. In the States, credit cards are the equivalent of parcelando as you get the bank’s money up front. Unfortunately, you end up paying substantially more than the cash price by the amount of interest you pay...
Personal money management starts with two simple questions: “How long will the purchase I am considering give me pleasure?” and “How much joy will I receive by having it?” Multiply your happiness by balancing consumables with durables even as you progress toward the day when your savings will be your paycheck.
Today we discuss what today’s “retirement” really is and why even at an early age it will serve you well to envision the day when you can be self-sustaining.
While it’s true that a penny saved is a penny earned, it is also true that a penny left to invest at 7% for 100 years is worth $10.96. How can something so small grow into something useful when nothing is added (or taken away)?

Gaia Investment Process

Why invest in funds of securities rather than the securities themselves? To mitigate the “business risk” inherent in one company or a few of them, professionally managed funds were created. The fund investor gets instant diversification to reduce business risk, the buying power of a larger portfolio and professional management of their invested money.
“The Market” is common parlance for the stock market, or the place(s) where stocks are originated, bought, sold and (sometimes) die. But what is “The Market” really and why is knowing important to investors like us?

Getting Ahead

Today we continue a new series called Getting Ahead Financially. Should everyone who can qualify own a home? Do the benefits of owning a home outweigh the benefits of alternative uses of the significant chunk of money that must be committed to owning a private residence? The bottom line – maybe, for some. Read on...
Financial planning for most people seldom proceeds successfully when planning steps and outcomes are dependent on goal setting at the outset. Today we discuss an alternative framework which is more process than goal oriented, in which goals flow in a natural, unforced way.

Uncommon Knowledge for the Common Good

Accumulating a pot of money for later use involves 1) saving, setting aside money from current income, and 2) investing, putting the savings to work earning a return. What we earn on our money is far more important than how much we save; however, the amount we save is also a key component to long-term wealth.
Looking beyond such obvious requirements as having adequate savings for emergencies and health care, enough retirement capital to meet at least our minimum retirement income requirements and our expected longevity from the date of retirement, there are three investment-specific drivers of our retirement income. Read on...
Reaching for maximum returns magnified timing risk, the risk that markets would be overvalued when we begin our program, resulting in perhaps a large initial loss for us as markets return to normal valuations. Here we discuss how we can moderate the risk of underperforming our potential returns.
This is the first in a series which discusses how the interplay of savings rate, investment return and investment time horizon should be considered as we set out to invest. We will examine how the three factors work in a long-term (35 year) program. Afterwards, we will consider how they combine in a shorter program (15 years).

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All material presented in this section is for the enrichment of the viewer and is not meant to be a solicitation to purchase or sell any security or service that Gaia Capital Management, Inc. may offer.

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