“Everybody is a genius. but if you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid” – – Albert Einstein

All the notes were taken directly from the source mentioned! 

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High Fiduciary Guidelines

  • Previous Credentials (Not title based): Size of the money and clients
  • Team: CFP (Certificado Financial Plave), State planners attorneys, CPA: Tax Advise (Someone that helps you save in Mortgage, Insurance and taxes) (This can be 30-50% of what you retain)
  • Person to growth with (Not someone that has already a portafolio for you)
  • Someone you can relate in a personal level (Trust and like)
  • Aligned Financial Philosophy (Not having someone who wants to beat the market)

Questions for hiring a financial advisor

  • Are you a register investment advisor?
  • Are you affiliated to a Broker dealer?

(Go to advisor web site or business card: securities advised offered by advisors company name member FINRA and SIPC)

  • Active Mutual Funds or Separate managed accounts: Should say NO
  • Any third party gives you compensation for recommending particular investments?
  • What’s your philosophy regarding investing? (Don’t get someone who wants to beat the market)
  • What financial planning services do you offer beyond investment strategy and portafolio management?
    (Saving for kids College, Retirement planning, stock options and State planning) Investment to business to state planning)
  • Where my money is going to be held? Should be 3rd party facility, manage the money but not doing withdraw. You can fire your advisor without moving your money. Protects you too.

Core 4 Principles:

Long Term Investor without fearing bear trends.

Active Managed account overcharge for under performance

Excessive fees can eat all your profit

Find an independent advisor who will repay your trust

DON’T LOOSE; the more money you loose the harder is to get back to where you started

If you loose 50%, you need a gain of 100% to be back were you were. (100 pierdo 50, de los 50 (50% es solo 25, entonces toca invertir el 100 para recuperar))

Asset Allocation: Minimize risk

Protect the down side


5 to 1 Rule: 20% (80% of the time wrong and still you won’t loose) Double the money even if you are wrong 60% of the time)

Get at least 3 to 1.


Net number of what you keep

It can be up to 50% between Federal and state taxes

Selling an investment with less than a year, you will pay ordinary income tax, if not long term capital tax that can be up to 20% (Holding period)


Non Profit

Check: 401K or 403B (Nonprofit), Roth IRA’s, Traditional IRA, PPLI, 529 Plans for college savings

Brokers are not allowed to advise you in taxes

How tax efficient is the strategy going to be? Any thing that we can improve?

Is that Net or Gross?


  • asset classes
  • within asset classes: different industries
  • markets countries and currencies
  • across Time



Low Index funds:

US stocks, foreign stocks, and emerging market stocks, Real Estate Investment Trust (REIT), long term US treasuries, Treasury Inflation Protected Securities (TIPS)

Owning more than 15 assets that are uncorrelated can reduce your risk 80% and return can be 5 times better

Stocks, bonds, gold, commodities, real state etc


Carl Icahn (Targets underperforming companies and changes management)

Paul Tudor Jones (Bets on Macro View)

Warren Buffett (Long Term investment in public and Private companies that have competition advantage)

Ray Dalio (Awareness of ententering in an unexpected market)

Richard Branson

David Swensen

John Bogle

Howard Marks

J.P Morgan and Mary Callahan Erdoes

Strategies are different, core concept are the same

Bear market, 90% is preparation. Having enough cash aside.

Diversify portafolio

Silence the enemy within

Bonds: Treasury (Government), Municipal (City), Corporate, Junk?= LOANS

Safer than stocks, by law they need to repay it unless they declare Bankrukpt

Higher the risk, higher the interest you get

Alternative Investments: Might have higher profit, and doesn’t depend on stocks and bonds.

  • Real State Investment trust: Public trade investment trust (Low cost to diversify both geographically and in different type of properties)

You can own small size of a reed, you get the appreciation + a stream of current income

  • Private Equity Funds: Pool money to buy part of an operating company (Resell the company for a higher price) Down side Liquid, risky and high fees.
  • MLP: Master limited partnerships invest in energy and infrastructure

    Less recommended:

  • Gold: No income and no critical resource
  • Hedge Funds: Huge disadvantage in fees, taxes, risk management, transparency, liquidity and 2% fee per year + 20% investment profits


Design of the portafolio is based on your own needs!

(Where you are, how much are you willing to save, how much do you need the money and when for)

  • Asset allocation drives your return
  • Index funds for core of the portafolio (broad diversification, low costs, outperform active managed accounts, all market caps)
  • Fund for emergency so that you don’t need the money
  • Rule of 7: 7 years of income aside in income producing investments
  • Explore additional strategies
  • Rebalance once a year

Questions for investments

  • Is this truly the hard trade
  • Is there asymmetric trade reward (5 to 1 or 3 to 1)
  • Where is entry point where are your stops

Don’t process orders during the middle of the day

Buy assets at low value and sell in the highs

It’s all about disciplined saving and compounding interest

Ask better questions and information that differs from you to get new educated perspectives. The power of thoughtful disagreement

Know your limitations to be able to adapt

Physiology 80% and mechanics 20%

Common Mistakes:

  1. Seeking confirmation of your believes, while not welcoming opinions that contradict your own. Rather, ask better questions and find people that disagree with you. (Where can I be wrong, what am I not seeing, whats the downside, what am I failing to anticipate, who else should speak with to sharpen my knowledge.)
  2. Recency bias: Mistaking recent event for outgoing trends. leads to Buying high and selling low… Don’t resale rather rebalance, stick to your plan and share it with your advisor. Stick to the asset allocation, rebalance one a year. Forces you to buy high and sell low.
  3. Overconfidence: overestimating our knowledge and our abilities. Excessive trading is a disaster.
  4. Greed, gambling and the quest for home runes. Rather be obsess with no loosing. Solution: Marathon, not a sprint (How can you silence your speculator and try to be a long term investor). Check portafolio once a year, don’t check stock or fund prices every day (becomes addictive behavior, stop doing it). No financial TV and careful filter information in wall street firms review which always want to advertise a product or a service, not to share wisdom, as they want to generate activity) Rather study the wisdom of legendary investors. Staying in USA market, rather expand horizons, diversify in different asset classes and countries. Discuss it with financial advisor.
  5. Negativity loss of vision (known as Negativity bias), corrections happen once a year and bear markets occur every 3-5 years. Remember market crashes are a great opportunity to build long term wealth. Rather: preparation is key, self aware to the negativity tendency, understand how each market class performed in previous bear markets, selling conservative investments like bonds to buy more stocks at low prices. Right asset allocation (Why do you own each asset and how they contribute to your longterm goal.)

    Transfer and Protect Wealth:







    “Probate” term court decides distributions of goods if there is no will and how to pay taxes and debts. The court take control of the assets, time might take 6months to a year, expenses, privacy is public)

    Durable power of attorney for healthcare, finances (someone you trust) and a living will (wishes stated in writing)

    State Planning: setting up the will (beneficiaries, guardians for kids under 18, who is going to be the executive in the will, distribution to recipients or trusts: testamentary trust) IRS allows you to transfer 5.45millions during the lifetime without taxes. Over that, the tax is 40%… to avoid you can pass 14,000 per year per person without taxes (annual exclusion) and still making the 5.45 donation without paying tax. Strategies: pay for children and grandchildren college tuition expenses for tax benefits (gift) 529 college savings plan or direct payment to the school. You can pay medical expenses as long as the payment is done directly to the health care provider. Revocable living trust (legal arrangement to hold your assets) and irrevocable living trust (annual gifts, holding life insurance. Certain asset that costs 5.45million can increase over you life time life stocks in a company or a piece of land, if you give the asset to a trusty, they will get it tax free no matter how much it grows

    Life insurance: term insurance (ensuring life for a specific time), permanent insurance (entire life) it can be part of your state planning by creating an irrevocable living trust. Second to die policy: policy for 2 individuals. Variable life insurance: cash value is te invested in mutual funds (fees and huge commissions) rather get “Private place life insurance” (at least one million dollar or more) – Purchase a life insurance equal 5 times your income. Customize the solution to your situation. Get financial advise. – Disability insurance: protect you ability to earn. You can get a short term or long term, check with employer – Long term care policy (home care, assisting living, adult day care, nurse care, Alzheimer facilities) for someone that is 45 on for $100. – Home-motors insurance (protects home from damages) (How much Cover you need? Evaluate the replace value your home ($ to rebuilt it) It will cover 80% of the damage. -Umbrella insurance (asset protection insurance)

    Leaving a legacy: donating to charity (leave the right assets to a charity: retirement account to charity and land to you children for example to be tax efficient) (donating a stock to a charity don’t need to pay capital gain tax). – Donor advised fund (public charity helps find organizations, segregate the funds into different charities) -Establishing a private foundation


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