A SavvyInterview – Mike

I met Mike through social media and soon learned that he is a former investment adviser and Certified Financial Planner (CFP) who transitioned into senior management of a large health insurance company.

Like me, he has been consistently amazed at the lack of financial knowledge the general public has about investments. I am pleased that he has agreed to ‘sit’ for an interview to share his wisdom and insights with us.

RetirementSavvy: What was the catalyst that started you on the road to fiscal fitness?

Mike Lewis: As the beneficiary of an industrial engineering degree and a unique 2-year training program on Wall Street, I was able to grasp the importance of financial matters early in my career. By age 35, I had founded several publicly traded companies, primarily in the oil & gas industry, providing me with a high 6-figure income and a net worth in excess of $10 million. In the oil bust of the early 1980s, I lost everything, declaring personal bankruptcy as a consequence.

 

Realizing that the acquisition (or loss) of wealth was a consequence of luck as well as effort and intelligence, I determined that knowing when to sell was just as important as the decision to buy, especially if you dealt in volatile investments. As Kenny Rogers sang in his song The Gambler, “You got to know when to hold ‘em and know when to fold ‘em.”

Those experiences forced me to examine my investment practices and realize that there are no guarantees in life or investments. It is, as Warren Buffett famously claims, the first Rule of Investing: Don’t Lose Money. Today, I always analyze the downside possibilities before I consider an investment.

RS: What is the one personal finance concept you believe someone seeking financial freedom should understand and practice?

ML: While a cliché, every investor should realize that the path to financial freedom is a marathon, not a sprint. Chasing immediate rewards requires assuming inordinate risks and increases the possibility and probability of loss. Wealth is built by the constant application of tested financial principles: consistent savings, diversification, tax minimization, and expense control.

RS: Tell us about the “Lew’s Clues” section of your website.

ML: I have been fortunate to experience one of the more dynamic eras in the socialization of investment opportunities, a time when the majority of Americans assumed responsibility for their own financial security characterized by an explosion of new and exotic financial instruments. In addition, I’ve had the opportunity to create companies, advise individuals and companies in areas ranging from investments to strategic competition.

 

My background includes tenure as a senior executive of the largest not-for-profit healthcare insurer in America. Finally, I’ve been married almost fifty years and successfully raised four kids, all of whom are better educated and more successful than me.

Lew’s Clues is a collection of almost 200 articles which I’ve written (and continue to supplement) over a broad range of subjects including explanation of the economy to teaching children humility. It is my effort to transfer the knowledge I’ve gained over a half-century of business and life.

RS: What was the best financial advice you ever received?

ML: While it is another cliché, the most pertinent advice I received early in my career, applied to investments or life, has been “There is no free lunch.” Every investment, every decision we make in our life, has consequences, most often unintended and overlooked until they appear. For example, if you invest your savings in the safest Government Note, you forego the opportunity to invest elsewhere; if you invest in a common stock, you assume the risk that the company may not profit and your investment will be lost.

Even diversification – which I heartily endorse – carries the consequence of diluting upside gains; if you had put your funds into the best performing stock, your returns would be higher. Most people fail to consider the potential outcomes of every investment before taking action, relying upon historical performance, the advice of a trusted adviser, and/or endless hours of exacting analysis. But there is always risk which cannot be managed unless you recognize the possibility initially.

I would be derelict not to mention equally important advice I received early in my career: “Live within your means.” It is easy for young people to fall into the trap of consuming, often using debt to acquire “stuff” that quickly loses value and brings no appreciable increase in happiness. Developing the habit of saving something from every paycheck is the key to long-term security.

RS: The worst? 

ML: The worst financial advice I’ve received and followed was making investments in Western art in the late 1970s. Convinced by a friend who was both an art aficionado and the manager of a regional brokerage firm, I invested thousands of dollars in paintings, sculptures, pottery and weavings with the expectation of a huge payoff in later years.

Much to my chagrin, I still own many of those assets, although I have regularly gifted them to my children over the years due to the lack of a liquid market or display space. My lesson: buy art or other collectibles because you enjoy them, not because you expect to make a killing. While they may appear to appreciate in value, a seller has to find a buyer eager to pay market price, an uncommon if not rare event.

RS: Which type of account is the foundation of your retirement plan?

ML: Having been self-employed for the largest portion of my life, my income today come from 401(k), IRA, and deferred compensation arrangements with previous employers. The assets within those accounts are not actively managed by me, being invested in market EFTs or Government bonds in the deferred compensation arrangements.

A young investor today should maximize his contributions into every tax-advantaged account possible as taxes significantly restrict the accumulation of wealth, especially during high earning years.

James
 

James retired in 2005 after serving 21 years in the United States Army. During the latter part of his career, James' interest in personal finance was piqued based on his own experiences and observations of the way most Americans plan – or more accurately, fail to plan – for retirement and the difficulty many face in starting the process. His most valued education has been lessons learned from personal experience and through conversations with smart, savvy friends.

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