Return on Investment

Defined as the ratio between net profit and cost of investment of some resources.

Return on investment, or ROI, is used to evaluate the efficiency of an investment and also to make a comparison of the efficiencies of different investments. The calculation is both straight-forward as well as versatile, and can be applied to many settings. Most often in the financial world, we might look at the ROI of our favorite stock holding (which is undoubtedly APPL or AMZN at the current time, right?). Say you bought AAPL at $100/share in July 2016 and about two years later it’s worth$222/share.

ROI = (Gain from investment - Cost of investment) / Cost of investment

ROI APPL = ($222 - $100) / $100 = 122% …Not bad!

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In the above example, the resource we invested was capital. However, one could argue that time is our most valuable resource. This morning I attended a great event hosted by Roswell NEXT, a local community organization which I am a part of. There, I had a conversation with someone about ROI.

It seems natural that with our finite amount of time in each day, we look to join organizations, attend certain events, or talk to certain people based upon our perceived (or desired) ROI on that time spent. It makes good business sense, and hopefully you will be able to measure that by way of landing a new account or signing a new contract.

But have you ever considered the importance of being involved with or doing something simply because of your interest in it? Volunteering with an non-profit you are passionate about; joining a local community organization; introducing yourself to the new neighbors who just moved in; or trying a new sport or activity.

Time is our most valuable resource. Time spent on personal pursuits should be considered independently of professional networking and business development, but they should hold equal weight. There’s an ROI to those personal pursuits, though it may not be as efficiently measured.

"Should I..." Series: Start My Dream Business, But Leave My Secure Job

Should I start my dream business while the economy is good?  I have enough money to get my business started, but I would be leaving a secure job.  What advice can you give me based on what you have seen from your clients?

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If you are even considering being an entrepreneur, then chances are you already have the work ethic and drive to be successful. If you are thinking of becoming a business owner, then surely a strong and growing economy can only help your cause. 

In addition to having enough money to start the business itself, you need to have money saved to replace the paycheck you are giving up. What if you can’t afford to pay yourself for 6 or 12 months? How will you pay your mortgage, car insurance, children’s daycare, or the multitude of other expenses that you have? Where will your health insurance come from? 

You also need to have a source of additional capital for your business. This may be additional savings you have, a loan from a family member, or a line of credit with a bank. One thing is almost certain, once you open the doors you will need more money at some point or another. 

Starting a business has infinite challenges and obstacles that must be overcome…there are entire books written on this very subject. The risks you take will hopefully lead to a great reward down the line. Make sure you are financially prepared before taking the plunge.

More About the S&P 500

Recently, we took a look at the S&P 500 which included a great visualization of the market cap of companies that make up the index. 

To many in the investment world, the stock market is still on its bull-market run (though there is some disagreement on the technical length of it). This means that companies which make up the index have grown in value as a whole. Individual companies have jockeyed for position with some being added to the list of largest 500 companies in the U.S. while others have fallen off.

Josh Wolfe brings us another great visualization comparing the 10 largest companies in the S&P 500, from March 2009 to August 2018. 

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Time surely flies, and there are so many historical lessons gleaned from market data. Arguably none more obvious than the rise of Amazon. But what about the tumultuous decade that Bank of America experienced? Or the fall of IBM, relatively speaking? Only three companies in the top 10 in March 2009 remained there in August 2018. 

Perhaps the most simple lesson learned from a chart like this is that we don't know what will happen in the future. What we believe to be the best companies at the current time may fall off in the not-too-distant future. Companies that we don't yet know anything about or are not evenly publicly traded may one day dominate the headlines and market share. 

"Should I..." Series: Interest-Free Credit Cards

Should I take advantage of a 0% interest credit card?  What are good rules to follow regarding these offers?

Full disclosure -- I have fallen for this before. When I was just out of college, I was making a big purchase and was offered to open a store credit card to give me 5% cash back and 0% interest for a period of time. I accepted, with the plan of immediately paying off the purchase with cash I had. In my mind, that was a free 5% discount. 

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The unfortunate reality for most people is that store cards will end up costing them more in the long run. Even if they start with good intentions, many people do not fully pay the purchase off before the deadline.  If you can’t pay it off quickly before the interest charges kick in, it will cost you more over time. 

Many store credit cards carry interest rates of 20% or higher. A good question to ask is, would I be willing to pay 120% of the retail price for that item? Stick to cash or debit cards, or credit cards you already have if you are capable of paying them off each month. 

One last thing:  never open a new credit card if you are in the process of getting approved for a loan, or think you may in the next 3-6 months.

About the S&P 500

The S&P 500 is an index of the 500 largest U.S. companies. It is market-capitalization-weighted based on those companies' values. When people talk about "the market," they are often referring to the S&P 500 (other times the "Dow" which is an index of just 30 stocks).

Michael Batnick, Director of Research at Ritholtz Wealth Management, took the finance world by storm recently by putting together the following chart and data. He points out that the market cap of the top 5 S&P 500 companies is $4,095,058,706,432 while the market cap of the bottom 282 S&P 500 companies is $4,092,769,755,136 (as of July 2018). 



What we can learn from this is that there are a few select companies that can control the narrative of "the market." These are companies that we all know, recognize, and may even love. But that should not dictate how we invest.

It's true that FAANG and other mega-cap stocks have performed well, but so have companies in other deciles of the S&P. It is just as important to remember that there are about 3,000 other publicly-traded companies in the US and thousands more abroad.


"Should I..." Series: Buy a House Now or Wait

Welcome to my “Should I…” series!  In this series, I will answer questions that I hear frequently from my clients.  I would love to answer your questions too.  So leave any questions you may have in the comments below and I will answer them in a future “Should I…” post.

Should I buy a house now?  I have a down payment saved up but I know home prices are high right now.  Should I wait and hope they fall?

You know what they say about trying to time the market, right? Well, the same can be true for real estate. As a buyer, you are obviously looking for the best house your money can buy you, and right now, houses are expensive. But don’t let that deter you from purchasing a home…if you are ready. Instead of focusing as much on the perceived “hotness” of the housing market right now and what you think it may or may not do in the future, turn your attention to the other factors that matter just as much. 

First, get pre-approved for a loan before you even start to look. Even better, after you’ve been pre-approved, look at your budget to determine what you can actually afford, not just what the bank will lend you. Where do you fall within the Housing Expense Ratio and Debt-to-Income Ratio? In addition to a down payment, will you need additional capital up front to update anything before you move in? There are ALWAYS unexpected expenses that come with owning a new home.

Second, find a reputable realtor that will help you with your buying process. Most often, the seller pays real estate commissions for both sides of the transaction, so there is no cost to you in having a good realtor. It could, however, be costly if you don’t. 

Third, determine where you want to be. You may envision yourself in a specific neighborhood or part of town because it fits your life right now. But have you considered the schools in that area (even if you don’t have kids)? Have you checked out the property taxes there?  How about traffic and your commute, growth of the city and surrounding areas, parks and community resources, or other variables? These may not necessarily matter to you now, but they may in the future and can also affect re-sale down the road. 

Buying a home should not be done solely based on the purchase price. It is one of the biggest purchases one will make in their lifetime. Be pro-active, and when the time is right for you, you will find a great place to call home.

"Should I..." Series: Sell My House to Realize the Equity

Welcome to my “Should I…” series!  In this series, I will answer questions that I hear frequently from my clients.  I would love to answer your questions too.  So leave any questions you may have in the comments below and I will answer them in a future “Should I…” post.

Should I sell my house now to take advantage of the equity while prices are still high?

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You can certainly cash in the equity you have to move into a house that is bigger, in a better neighborhood or school district, or just better meets your family’s needs. 

But keep in mind that chances are the new house you’re looking at has also increased in value and thus your equity may not get you as far as you think (or hoped) it would. Crunch the numbers to be sure you will be able to afford the new monthly expenses associated with a larger, more expensive house and that the equity you take out of your home will cover the down payment for a new one. And will you have to use any of that equity for moving expenses, new furnishings, or remodeling?

Conversely, we get the question all the time of whether it makes sense to sell your current house to downsize to something smaller, and keep that equity. In all likelihood, downsizing to a smaller house in the same area may still require all of the equity you get out of your current house, after paying off any mortgage.

Some people consider selling their home, investing the equity and renting until housing prices come back down. But can you truthfully say you know when that will be? Not to mention, you give up a fixed monthly mortgage payment for the risk of paying increasing rents which are beyond your control.  


You CAN Have Too Much Money in the Bank

Diversifying your financial portfolio is the best way to ensure you are protected in all kinds of economies.  That means your investments in the stock market should be diversified, but it also means your money should be working for you in several different sectors.  Easily accessible savings or money market accounts, stocks, bonds, retirement accounts and real estate are all important to have in your repertoire.  Finding the proper balance is key.  This piece from explores the risks of avoiding risks.  When you keep a large percentage of your net worth in the bank rather than investing it, you miss out on returns that could mean a much more comfortable retirement.  It's worth the read.  Please feel free to contact me if you would like to discuss your own financial portfolio and whether it is setting you up for the future.

"Should I..." Series: Sell My Business

Welcome to my “Should I…” series!  In this series, I will answer questions that I hear frequently from my clients.  I would love to answer your questions too.  So leave any questions you may have in the comments below and I will answer them in a future “Should I…” post.

Should I sell my business while the economy is up?  I had planned to sell in about two years, but I am wondering if I should do it now while the economy is good, since we don’t know what the future will bring.


One thing I can say unequivocally is that it takes longer to sell a company than most business owners envision it will. There are so many factors that go into a successful sale or transition of ownership. In fact, research from the Exit Planning Institute has found that 70% of businesses that are put on the market do not end up selling. So what can you do if you plan to sell in two years or 10 years? Start planning now! 

Ask yourself important questions like:

·     When do I want to exit?

·     How much after-tax income in today’s dollars do I need?

·     What would an ideal transition look like to me?

·     Do I have a transition plan in place?

·     Could my business operate effectively if I wasn’t here?

The truth is, this simple question requires such a complex analysis and answer that you should speak with an advisor who can help you through this process. To get you started, I have written a book called One Shot that can be a great resource for you. You can click here to read it.  hen you’re ready, let’s discuss an action plan to maximize the wealth you generate from the sale of your business.

How Do You Choose An Advisor?

You may have never worked with an advisor before and are exploring how to go about finding one that is right for you.

You may be working with an advisor you like, but wondering if you are getting the best advice.

Either way, watch below to see how working with the right advisor can help position you for long-term success!

"Should I..." Series: Sole Proprietor

Welcome to my “Should I…” series!  In this series, I will answer questions that I hear frequently from my clients.  I would love to answer your questions too.  So leave any questions you may have in the comments below and I will answer them in a future “Should I…” post.

As a sole proprietor, should I open a SOLO 401k plan?  Or is an IRA or a Roth IRA a better idea?  I am just starting my consulting business and expect to gross roughly 200k this year with a 140k income.

Solo 401k

I recommend you open both a SOLO 401k and a Roth IRA.  With a Roth IRA, you invest after-tax dollars and get the benefit of taking out the money free and clear (with no taxes) when you retire.  You are also able to withdraw the money from your Roth IRA should you need it pre-retirement with no penalties. If your adjusted gross income exceeds $120k (assuming you are single), you cannot fully contribute to a Roth IRA, so talk to a financial advisor about a backdoor Roth IRA, which is a great option.  If you want to save more than the Roth IRA max ($5500 if you are under 50; $6500 if you are over 50), opening a SOLO 401k is a good way to do it.  It will allow you to contribute up to  $18,500 if you are under 50, and $24,500 if you are over 50.  Plus, you can contribute 25% of your salary up to a maximum $55,000 (or $61,000 if you are over 50).  There are lots of factors and regulations to consider, so please let me know If I can help!

"Should I..." Series: Close to Retirement

Welcome to my “Should I…” series!  In this series, I will answer questions that I hear frequently from my clients.  I would love to answer your questions too.  So leave any questions you may have in the comments below and I will answer them in a future “Should I…” post.


Should I come out of the stock market when it fluctuates if I am 5 years from retirement?

At five years out from retirement, your portfolio should be diversified to provide both safety and growth.  You will be withdrawing money from your retirement fund a little at a time over as many as 20 – 30 years.  So, some of your funds should be in safe investments and readily available and some should remain in growth stocks so the money you won’t need to access for 20 years or more will still be working for you and taking advantage of market upswings.  If your portfolio is well-structured and diversified, there is no need to panic when the market fluctuates – even if you are five years from retirement.

Not sure if you are invested correctly? Click here to find out.

"Should I..." Series: 401k

Welcome to my “Should I…” series!  In this series, I will answer questions that I hear frequently from my clients.  I would love to answer your questions too.  So leave any questions you may have in the comments below and I will answer them in a future “Should I…” post.

Should I invest in my 401k beyond the employer match?


Yes!  I know that sometimes a financial advisor will suggest that you should just invest in your 401k to the point of the employer match, and use any remaining money you have earmarked for savings in an investment account, Roth IRA or traditional IRA. Unless you are a seriously disciplined investor who will, consistently and without question, invest additional money monthly into an investment account, I say put it in your 401k.  It’s simple, it’s done automatically, you don’t have to think about it and you won’t be tempted to skip a month or two to spend that money on a vacation.  Being a disciplined investor is the only way to set yourself up for a comfortable and worry-free retirement.  

Enlightening Summer Reading


There are a lot of light summer reads out there for your beach vacation. But if you want to read a book this summer that will inspire you as your run and grow your business, take a look at Mark Cuban's summer reading list, as told to

They aren't light, but they are enlightening. 

And, if you are a small business owner who is thinking about selling your business, take a look at the book I wrote specifically on that subject. It is called One Shot, and you can read it here

One Shot is about a process that all successful entrepreneurs can go through to ask the right questions, pursue the appropriate conversations, and ultimately implement the best solutions for you and your business.

Inspiring Podcasts - You Owe It to Yourself to Listen


Part of what I do at Baer Wealth Management is work with business owners to help them determine the right time to sell their business and maximize their profits from the sale.

I often recommend that they listen to this podcast: Built to Sell

The Built to Sell podcast focuses on business owners who have recently sold their companies and takes an excellent look at the good, the bad, and the ugly of the selling process.  It works so well because those interviewed are honest and open about the challenges they faced and give insightful information about the decisions they made along the way.

If you are thinking about selling your business, I think you will find the information valuable and suggest you first listen to the episode with Sue Hrib, who recently sold her consulting firm.  

And, if you get inspired by listening to podcasts like I do, take a look at this piece from, which suggests several other podcasts that business owners and entrepreneurs might find interesting.  I know I will be checking some of them out this summer!

Pay Yourself First

Every time you order chicken breast and roasted vegetables instead of lasagna, you are making a healthy choice that, if you are consistent, will pay dividends to your future self.

Every time you decide to go to the gym, even though you are tired and would prefer to spend the time with Netflix and your couch, you are taking a step toward a healthier future.

But ask yourself this:  Are you taking steps to be sure your financial future is healthy?  

If the answer is no, the most important thing you can do -- consistently -- is very simple.  Pay yourself first.

When you work up your budget, the category at the top of the list should be SAVINGS.  This includes 401k and/or IRA if it is not automatically taken out of your check, an emergency fund savings account, an investment account, and a traditional savings account.

Paying yourself can easily be done by a direct deposit that you set up with your bank.  If the money goes out of your check and into savings automatically, you won't see the money, you will learn to live on the balance of our paycheck and you will be financially able to handle unexpected expenses that happen to all of us.  You will also be setting your future, retired self up for a comfortable life without having to worry about when your next social security check will arrive.

Let's take a look at each category:

401k/IRA - It is critical to be good to your future self by saving for retirement while you are in your early and peak earning years.  If you start early, the money you put away has decades to compound.  Most employers will match a certain percentage of the money you save.  Don't leave this free money on the table!  

Emergency Fund - Put money aside in an emergency fund for the unexpected -- your roof springs a leak, your hot water heater dies, you need expensive dental work.  Without an emergency fund, many people put these expenses on their credit cards and wind up paying that debt down for years.  In addition, a longer term goal is to save at least 3 months of living expenses in the emergency fund in case you lose your job and your income is interrupted.

Savings Account - This is for expected expenses that may not be included in your monthly budget.  For example, your twice yearly car insurance payment, saving for a vacation or for a new car. 

Investment Account - Watch your money grow when you invest in mutual funds and bonds.  It is simple to set up an investment account with a brokerage house like Vanguard or Fidelity, and if you deposit even a small amount each paycheck, you will see your money grow over time.  The stock market offers a potentially higher return on your money than a savings account and will help you keep up with inflation.

Investing In Gold - What Does Warren Say?

I talk to my clients all the time about the need to grow their wealth by investing in companies designed to generate profits for their shareholders, being consistent with investing and resisting the urge to take money out when the market goes through inevitable downturns.  


A few weeks ago, Berkshire Hathaway CEO Warren Buffett crystalized this advice with an example that I think is worth sharing.

Buffett talked about the difference between investing in stocks and investing in gold.  Gold is often considered a "safe" investment and one many people turn to when the markets are volatile.  

Here is what he found:

If you invested $10,000 in a S & P Index Fund in 1942 (the year he began investing), your investment would be worth $51 million today.

If you invested the same amount in gold in 1942, your investment would be worth $400,000 today.

"For every dollar you could have made by investing in American business, you would have less than a penny of gain by buying into a store of value which people tell you to run to every time you get scared by the headlines," Buffett said.

This example perfectly illustrates why it is so important to invest as early as possible and remain disciplined about staying in the market for the long haul.

Your future self will thank you.

Five Healthy Money Habits To Teach Your Kids

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Our two children, Sunny who is six, and MJ who is three, don’t understand what their dad does for a living quite yet.  But my wife and I have started to teach them some good habits and instill some simple principles that we hope are sinking in.  Good money habits begin with the basics and, hopefully, lead to a way of thinking about money that will last a lifetime.  Here are some ideas you may want to teach your kids:

1.       Understanding needs vs. wants.  Your child may think they “need” a new toy, but as parents, it is our job to help our children understand it is actually a “want.”  That is a very important first lesson that can be applied throughout a lifetime as a foundation of smart money management.

2.      Nothing in life is given – if you want something, you have to work for it.  Working hard is how you get what you “want.”  Start your kids on an allowance at an early age and help them understand that to be able to do the things they want to do, they need to earn that right by working for it.

3.      As your children get older, teach them that money is earned by providing a value.  The value can be in creating a new product that people like to use or simply by providing a service that people are willing to pay for – washing cars, moving lawns, etc.  Almost all successful entrepreneurs got their start by figuring out how to earn money from their neighbors and friends.

4.      Pay yourself first.  Teach your kids that every paycheck you earn is a way to secure your future.  It is important to contribute 10 – 20% of what you make to yourself in the form of automatic savings.  If you wait to save what is left after you pay your expenses and satisfy your “wants,” you most likely will not save anything at all.

5.      Illustrate the power of investing and compounding interest.  Earning money on your money is the most powerful way to compound wealth and is how the wealthy get wealthier.  It can best be illustrated to a child by asking this question:  If you were given a choice to receive $1 million dollars in one month, or a penny doubled every day for 30 days, which one would you choose?

            I think even most adults would be surprised to learn that a penny doubled every day for 30 days would be worth more than $5 million after 30 days.  That is the power of compounding interest.

Day 1:  $.01                                                            
Day 2: $.02
Day 3: $.04
Day 4: $.08
Day 5: $.16
Day 6: $.32
Day 7: $.64
Day 8: $1.28
Day 9: $2.56
Day 10: $5.12
Day 11: $10.24
Day 12: $20.48
Day 13: $40.96
Day 14: $81.92
Day 15: $163.84
Day 16: $327.68
Day 17: $655.36
Day 18: $1,310.72
Day 19: $2,621.44
Day 20: $5,242.88
Day 21: $10,485.76
Day 22: $20,971.52
Day 23: $41,943.04
Day 24: $83,886.08
Day 25: $167,772.16
Day 26: $335,544.32
Day 27: $671,088.64
Day 28: $1,342,177.28
Day 29: $2,684,354.56
Day 30: $5,368,709.12

Get Inspired by Sylvia Bloom

There was a news story a couple weeks ago about Sylvia Bloom, a legal secretary from Brooklyn, NY who died at the age of 96 after working at the same law firm for 67 years.  Her 67-year run is notable, but friends and family were astounded to learn shortly after her death that she had amassed more than $8 million dollars on a secretary’s salary.  Sylvia left some money to relatives and friends, but he bulk of her estate was donated to fund scholarships for needy students.

Reading about Sylvia’s story reminded me of another, similar story from a few years ago.  Ronald Read was a janitor who lived frugally and, seemingly, within his means.  He passed away at the age of 92 with a fortune of more than $6 million dollars, that he donated to a library and a hospital in his home state of Vermont.

What Sylvia and Ronald both had in common was smart spending and investing habits.  Neither one had a crystal ball.  What they did have was discipline.

Let’s break down Ronald’s potential investment timeline to see how his discipline paid off in a big way.

1945 - Lets say Ronald started investing in 1945 with $1,000.

Thereafter, he invested $50 a month, every month, until 2014.

1967 - It took Ronald 22 years to grow his investment account to $100,000.  That was in 1967. 

1965 – 1975 - Between 1965 and 1974, Ronald kept adding $50 per month, but the stock market was fickle and his account had ups and downs.  His account stagnated -- it totaled $93k in 1965 and $98k in 1974. 

Many people would have been afraid of the market fluctuation and gotten out during those years.

1989 - Ronald stayed the course.  By 1989, his investment account was worth $1 million.

1999 - Just ten years later, in 1999, it had grown to $5 million.

2002 - When an economic downturn hit, Ronald’s account shrunk to $3 million in 2002.  Many investors were spooked and got of the market at that point.

2007 -  Not Ronald.  He stayed the course and his account doubled, to $6 million, just five years later in 2007.

2008 - Another downturn followed, and he lost $2.2 million.  In 2008, his account had shrunk to $3.8 million.  Ronald didn’t flinch. 

2014 - He kept investing and in 2014, his account was worth $10 million.

I know most of us don’t have 60+ years to invest at this point, but Ronald’s trajectory illustrates the importance of consistency and of staying the course even in down markets.  After the time periods when his portfolio took the biggest hits, the largest gains followed within five years.

Take a look at Ronald’s chart below for some inspiration! 

1945 - $1,000

1965 – $93,000

1967 - $100,000

1974 - $98,000

1989 - $1 million

1999 - $5 million

2002 - $3 million

2007 - $6 million

2008 - $3.8 million

2014 – $10 million

The best investment advice you can follow is this:  start early and stay consistent.  History has proven that even investing small amounts – consistently – and staying the course in down markets, will pay off in the end. Let the market work for you!

So think of Sylvia and Ronald, and get started.  If you want some investment advice, please don’t hesitate to contact me.