Copyright © 2013, The BAM ALLIANCE. This material and any opinions contained are derived from sources believed to be reliable, but its accuracy and the opinions based thereon are not guaranteed. The content of this publication is for general information only and is not intended to serve as specific financial, accounting or tax advice. To be distributed only by a Registered Investment Advisor firm. Information regarding references to third-party sites: Referenced third-party sites are not under our control, and we are not responsible for the contents of any linked site or any link contained in a linked site, or any changes or updates to such sites. Any link provided to you is only as a convenience, and the inclusion of any link does not imply our endorsement of the site.
The holidays are coming, and a similar scenario will play out all over the country as adults return to their childhood homes to celebrate with their parents and grandparents. The baby boom generation is now on the precipice of retirement. Yet, thanks to healthier lifestyles and medical advances, baby boomers are witnessing their family members’ longevity and a variety of age-related physical, cognitive and emotional changes. These tips can help those who want to start an honest conversation with family members about caregiving options.
Finding Clarity
First, it is essential to have clarity to see the situation as it is, meaning not better or worse than it is, but actually as it is. Without this clarity, making a plan to help a family member maintain his or her independence is compromised. Most adults pride themselves in maintaining their independence, and this applies to older adults who fear that any deterioration will lead them to a nursing home. For this reason, parents are often reluctant to talk to their adult children about these issues.
It is important not to jump to conclusions about the condition of a loved one. For example, consider changes in memory or cognition. Forgetting names or losing keys is not dementia. We have all misplaced our keys at one time or another, and the more chronic stress one carries, the more likely it is that memory can be affected. However, not knowing what the keys should be used for is the other extreme.
Not all memory loss is because of Alzheimer’s disease. According to a 2013 report by Alzheimer’s Association, one in nine people 65 and older has Alzheimer’s, so it is critical to seek evaluation before assuming a diagnosis. Sometimes, confusion can be a result of a vitamin deficiency, an infection or other problems that when treated can bring about the return of normal functioning. Geriatricians, neurologists or geriatric psychiatrists are the specialists to see in these cases.
Starting a Conversation
Once a family is ready, the conversation should move forward with the intention of helping those in need of care, allowing them to maintain their independence for as long as possible. If problems already exist with mobility, medication or self-care, the first step can be to reach out to a professional social worker. After that evaluation, the family can review those recommendations and begin to put together a plan.
Each family member may feel differently about what those next steps should be, but it is important to structure a plan that, first and foremost, takes into consideration the care recipients’ wants and needs. The plan can then take into account the family members’ abilities to help as well as the resources and community professionals who can best guide the family.
When adult children step up to help their parents or grandparents, they may find themselves sandwiched between numerous obligations, including their own children’s demands, responsibilities at work and home, and new problems experienced by those receiving care. This kind of burnout can decrease caregivers’ energy and health, increase conflict at home and lessen the quality of care they are giving. Burnout is inevitable if caregivers do not take the time to care for themselves. That may mean hiring a professional nurse or asking another sibling to assist.
The holidays are about to arrive, and family discussions that center on identifying needs for care may be just beginning. With one common goal in mind, families can collaborate to find appropriate care that is suited to their specific situation.
Sylvia Nissenboim
Sylvia Nissenboim has been a counselor and coach for LifeWork Transitions for 25 years. She focuses on coaching and counseling adult children of aging or disabled parents and the parents of disabled children. She also has a private practice focused on providing supportive counseling and strategic coaching in the areas of career, health and family transitions. She runs caregiver groups and widow support groups as well as training professionals on a variety of topics ranging from aging parents to stress reduction techniques.
Copyright © 2013, The BAM ALLIANCE. This material and any opinions contained are derived from sources believed to be reliable, but its accuracy and the opinions based thereon are not guaranteed. The content of this publication is for general information only and is not intended to serve as specific financial, accounting or tax advice. To be distributed only by a Registered Investment Advisor firm. Information regarding references to third-party sites: Referenced third-party sites are not under our control, and we are not responsible for the contents of any linked site or any link contained in a linked site, or any changes or updates to such sites. Any link provided to you is only as a convenience, and the inclusion of any link does not imply our endorsement of the site.
No investor's portfolio should consist of just one company -- even if that company is Berkshire Hathaway (BRK.A) and its CEO, Warren Buffett, is donned an oracle. For those investors thinking I'm wrong, I hope you'll consider four logical reasons why you shouldn't create a portfolio consisting only of Berkshire shares, or even allocating more than a small percentage of your equity allocation to it.
The first is that investing in any single stock, even a company like Berkshire, is taking on what economists call unsystematic, idiosyncratic risks. An unsystematic risk is one that can be easily diversified away. And while the market provides compensation in the form of higher expected returns (risk premiums) for systematic risks (such as the risks of stocks compared to Treasury bills, or small stocks compared to large stocks, or emerging market stocks compared to developed market stocks), it doesn't provide any premium for risks that can be diversified away.
Prudent investors accept only those risks for which they are compensated for taking. Since you can easily diversify away the idiosyncratic risks of Berkshire's common stock, you're not compensated for owning it with a higher expected return.
A second reason is that Buffett, who's responsible for Berkshire's investment strategy, is now 83 years old. His long-time partner, Charlie Munger, is almost 90. As we discussed earlier, there are many who have tried to imitate Buffett, but very few have come close to succeeding. How much longer can Buffett run the company successfully? Will his successor do as well?
A third reason, also noted earlier, is that Buffett himself has warned that he can no longer generate the type of returns he did in the early years because of the huge amount of assets he must invest. The last 18 years make a pretty compelling case that Buffett was right.
And thanks to the research of Robert Novy-Marx, we now have a fourth reason to avoid the idiosyncratic risks associated with Berkshire's stock. Marx discovered Buffett's "secret sauce" -- and it's not stock picking.
A June 2012 study by University Rochester finance professor Robert Novy-Marx, "The Other Side of Value: The Gross Profitability Premium," provided investors with new insights into the cross-section of stock returns. His key finding was that profitable firms generate significantly higher returns than unprofitable firms, despite having significantly higher valuation ratios (higher price-to-book ratios). Using this insight the authors of the study "Buffett's Alpha," found that Buffett's superior performance was mainly explained by two factors:
In other words, it's Buffett's strategy that generated the "alpha," not his stock selection skills. Once you accounted for the cheap leverage and Berkshire's exposure to the style factors of style factors (market, size, value, momentum, low volatility, and quality), Buffett's alpha was statistically indifferent from zero. That's important, because today there are low-cost, passively managed mutual funds that buy stocks with these same type characteristics. And that enables you to diversify away the idiosyncratic risks of Berkshire's stock for which you aren't compensated.
The bottom line is that given the performance of Berkshire's common share over the last 18 years, and the four reasons we have discussed, there doesn't seem to be much reason to consider owning the stock -- except perhaps for the entertainment value, and the passport it gets you to attend the annual meeting!
Copyright © 2013, The BAM ALLIANCE. This material and any opinions contained are derived from sources believed to be reliable, but its accuracy and the opinions based thereon are not guaranteed. The content of this publication is for general information only and is not intended to serve as specific financial, accounting or tax advice. To be distributed only by a Registered Investment Advisor firm. Information regarding references to third-party sites: Referenced third-party sites are not under our control, and we are not responsible for the contents of any linked site or any link contained in a linked site, or any changes or updates to such sites. Any link provided to you is only as a convenience, and the inclusion of any link does not imply our endorsement of the site.