Category Archives: Mark Matson

Three Components of Free Market Portfolio Theory

Businessman is drawing on virtual screen. free market concept.


When it comes to the financial world, not everyone understands the intricacies that go into its daily operations. Even though the markets close every afternoon, the financial never really closes down. There are still moving parts around the clock that keep our money, investments, portfolios, assets and other property moving forward. Free Market Portfolio Theory is part of the power of three principle from Mark Matson, which means it has three components.


Efficient Market Hypothesis


One of the most important components of the Free Market Portfolio Theory was first explained in 1965 by Eugene F. Fama in his doctoral thesis and is known as the Efficient Market Hypothesis. Fama’s doctoral thesis stated the following: “In an efficient market, at any point in time, the actual price of a security will be a good estimate of its intrinsic value.” The sad part of the world today is that many people believe the stock market is inefficient, largely in part due to the behavior of the stock market itself as well as the media, popular culture and other factors.


Modern Portfolio Theory


The second aspect of Free Market Portfolio Theory is Modern Portfolio Theory. Harry Markowitz, Merton Miller and William Sharpe won the 1990 Nobel Prize for their collective work known as Modern Portfolio Theory. In short, Modern Portfolio Theory shows us that diversification may allow for the same portfolio expected return with reduced risk.


Three-Factor Model


The third and final component of the Free Market Portfolio Theory is the three-factor model. Professors Eugene Fama and Kenneth French conducted a study in 1991 that found when you expose a portfolio to three simple, yet diverse risk factors, you can determine the majority of results. The three factors include the market factor, the size effect and the value effect.


What Does The Walking Dead Have in Common with The Market?

Are you a fan of the hit TV series The Walking Dead on the cable TV channel AMC? The popular American horror show, based on the comic book series of the same name and already renewed for a sixth season, first made its appearance in 2010. Viewers follow the fictional character Rick Grimes, a sheriff’s deputy who is faced with the task of surviving in a Zombie-filled apocalyptic environment. So what does The Walking Dead have in common with the stock market? Zack Shepard gave us his take on a recent episode of After The Bell.

Zack Shepard of Matson Money recently appeared as a guest on the Fox Business channel show. The co-host of the show raised some concerns people are having about the value of the dollar bill, noting that some worry that the job market as well as the financial troubles in Greece could negatively affect it. This leads to the question: are investors panicking too much?

Shepard answered the question with an analogy to The Walking Dead TV show. He noted that trying to predict how the dollar will perform in the future is like trying to predict which character in The Walking Dead will turn into the next zombie: you can’t figure it out. Since trying to predict the market is inherently impossible, it is an exercise in futility. Shepard went on to explain that investors can actually lose money trying to predict what will happen in the market.

Instead, Matson Money recommends that investors keep calm, own a well-diversified portfolio, focus on the long-term and avoid predictions. Of course, investors should keep in mind that this is a suggestion from the Matson team and that no investment strategy can guarantee future results. See more of the After The Bell segment by watching the video!

Can Economic Troubles In Greece Affect Portfolios?

With the latest economic troubles going on in Greece, some are getting worried about their portfolios and how they could be possibly affected. In one of the latest segments of Matson Money Live! Mark Matson and his team break it down by the facts, stats and historical data to review the possible impact. But before Matson and his team get into the figures, everyone must first understand what’s going on in Greece.

The Crisis

Over the last 10 years or so, Greece has borrowed money from the central banks and governments of many European countries. According to BBC news, Greece “used the money to run the country, pay for the 2004 Olympic Games and also for things like big pay rises for people who are paid by the government.”  The same article also noted that Greece has “found it hard to pay it back because when you borrow money, you have to pay what’s called ‘interest’: meaning you pay back more money than you borrowed to begin with.”  In early July 2015, the European Central Bank the European Central Bank refused to provide more of the emergency loans that Greece had been relying on to stay afloat, because Greece couldn’t reach a repayment agreement with its European creditors.

For a period of two weeks, this action rippled into a big problem for Greece. Greek banks shut down and restricted the amount of money that could be dispensed to bank customers – people were only allowed to withdrawal 60 Euros per day, per person. This caused Greeks to worry that their money would disappear. On July 13, 2015, the European Union reached a new bail-out deal with Greece, which ended the immediate crisis and the situation is beginning to stabilize. However, the underlying problem continues because according to the BBC article, Greece still owes 323 billion Euros to various countries and banks within Europe that could all lose their investments if Greece is unable to repay the loans. This situation can obviously affect other economies, but what implications could it have on investors?

First, coverage of the economic situation in Greece has been over-hyped, causing more panic than necessary.  Investors need to understand what’s really going on. One of the first things to note is that everything portrayed on the news isn’t always doom & gloom needs to be put in perspective. Michele Matson points out that Greece isn’t the biggest impact on our economic structure.

Investors should note that, historically, there have always been bankruptcies and defaults occurring from time to time. More importantly, a default doesn’t necessarily mean no repayment.  It may mean that the defaulted debt will be restructured and paid back over a different time frame or subject to different conditions. This has happened right here at home. For example, the city of Detroit declared bankruptcy and entered into a restructuring plan in 2014 and three cities in California are having big financial problems. Financial bankruptcies and defaults happen more that you might realize and it’s not just foreign countries that struggle with the problem.

In fact, the credit default risk associated with municipalities and emerging markets is a reason why Matson Money doesn’t invest in municipal bonds or emerging market bonds. This strategy reduces the risk of holding those types of investments. But it should be noted that this strategy is not a guarantee of results and is one of the many different ways investors could strategize their own portfolios. Mark Matson and his team want investors to know that the news about Greece isn’t as bad as it seems.

Watch the segment about Greece below:

Avoiding The Hot Performance Chase

When it comes to investing your money in the stock market, Matson Money and co-advisers who follow the Matson philosophy consistently advise investors to stay diversified and focus on the long-term because what could be ‘hot’ today may be, as the rock group Foreigner might say, “cold as ice” tomorrow. Given the hype around the S&P’s recent record-breaking performance, it’s important not to chase after hot performing picks for that limited time rush. It should be noted that not all investment strategies are the same, but Mark Matson can share his opinion on what to look out for from his recent appearance on After The Bell airing on Fox Business.

Trying to predict the future on short-term picks is always a losing game.  Sometimes, investors can be emotionally driven to make certain changes to their portfolios because the outlook on the market can bring feelings of prosperity and what former Federal Reserve Chairman Alan Greenspan called “irrational exuberance” with respect to the future value of  equities. However, letting emotions play a factor in managing your portfolio  can be detrimental. Strategic portfolio management requires  looking at the bigger picture.

It can be a great thing that the S&P and Dow are at all-time highs, but investors should still seek out microcap stocks and international stocks to diversify and rebalance portfolios. This means buy when the market  is down and ignore  emotions and instincts because they can cloud your judgment. Matson’s tip:  Only buy the stocks that are down; ignore  the ones that are up.

And, speaking of long-term picks, Matson is surprised that some investors during the past year appear to have forgotten the fundamentals of investing: owning equities long-term, diversifying and then rebalancing your portfolio. Equities should generally be held for 20 to 30 years.  Gambling,  forecasting or attempting to predict  short-term performance can seriously erode the value of your portfolio.. Matson also suggests investing in  small companies because they  have the potential to offer about 3 to 4 percent more  return compared to growth stocks. Not all stock market strategies may work and it should be noted that this is not a guarantee of positive gains.

Real Estate Vs. Stocks

‘Money with Melissa Francis’ airing on Fox Business hosted Mark Matson to talk about polls that showed investors opting out of equities in favor of real estate. Speaking in terms of numbers, according to the National Association of Realtors, median home prices were up 11.2% since March of 2009. Meanwhile the Dow was up 150% and the S&P up 175% in the same time period. Matson makes it clear that choosing real estate over stocks is a bad idea because the market is a difficult-to-almost-impossible thing to predict. In addition, you could potentially be stuck with a piece of real estate for a long period of time if you can’t sell that property.

Take for instance you are in retirement and you look at the previous 15 to 20 years of the last 30 years. Based on historical market data, real estate has only seen about a 7% increase while the S&P did 11%. Just by going off of those numbers, you could potentially have made more money on stocks than in real estate. While real estate may come with tax benefits, you must take into consideration the maintenance of a property. Routine maintenance is something that adds to costs out of your pocket like roof repair or electrical work. Real estate has many other associated costs like homeowners insurance, utilities, natural disasters – the list can go on.

As we saw in the past with the housing market bubble, it can be difficult to get out while you still can and even then you may take a dive in your investment. Avoid real estate because of all the costs and avoid trying to predict the market because it fluctuates greatly. Stick to long term investments, diversify your portfolio and avoid the real estate game.

Let Matson Money Work For You!

Mark Matson is the founder and CEO of Matson Money, Inc., an investment advisor firm created in Cincinnati in 1991 that manages close to $5 billion dollars for investors across the U.S. Through Matson Money, Mark has spoken up for the implementation of the Free Market Portfolio investment strategy, which he claims has “helped thousands of investors nationwide to take a more prudent, long-term approach to investing and growing their wealth.”

Matson Money is an RIA (Registered Investment Advisor) firm that offers a family of mutual fund “funds of funds” that take advantage of the management skills of independently managed mutual funds. The Matson Money team boasts an approach to investing that is based off of Nobel-Prize winning financial and economic principles. Mark feels that “every investor should understand and feel confident about their investment approach.” Let’s review some of the core values that Mark Matson relies upon when striving to get the most for your investment:

1.  Integrity – Matson Money is founded on the principle of consistency in actions, decisions, and in everything they do.

2.  Education – According to Mark, “we never want to stop learning, growing, and creating new ways to help investors. It applies to our investors who we continually develop new tools and educational programs for every day. And it applies to our advisors who we constantly provide new educational tools and training for on an ongoing basis.”

3.  Entrepreneurial spirit – As a small business, they understand that individuals and their unique creativity are catalysts for true change in the world. Matson Money encourages the entrepreneurial spirit of not only its own team, but the independent advisors they work with as well.

Mark’s team wants to dispel the belief that you need a lot of money in order to effectively meet with a financial advisor. While there are plenty of “do it yourself” investment strategy websites, Matson Money does not believe that this is the best method, especially when handling money management for a family, cashing in your social security, or readying yourself for retirement. There are coaches and experts, not just in the Matson family, that are much more equipped to guide you through these situations. According to Mark, “while 23 percent of people seek help through a financial advisor, only 27 percent of that number actually follow through and invest in that strategy.” You shouldn’t pay an advisor and then ignore them, so if the trust isn’t there – it’s time to find a new team to help you.


Capitalism 101

When you talk about educating investors, Matson Money believes that Wall Street does a terrible job of it. They teach people how to buy stocks, how to do this, do that, but nobody really talks about what’s underlying all this: Why would you even want to invest?

So I’ve created a little talk that I call Capitalism 101, which I could paraphrase by saying, “how is wealth created?” And I’m talking about true wealth, like the wealth, GNP of a country. Not “moving this guys’ money from his pocket to your pocket.” You might get rich but that didn’t create any wealth. So when you really stop and think about it, you ask, “Well, what is really needed in a country’s economy to make that economy grow and create this wealth?”

And the one that comes to mind first is skilled labor. We take countries like a lot of the Asian countries, but China is a great example over the last 20 years. A lot of skilled labor, allowing them to produce a lot of product quickly. Next, you’re going to need every economy needs, raw materials. That’s why China needs those raw materials from Australia and vice versa. Canada, Australia, Chile, Norway, these countries generate a lot of wealth just by having natural resources and selling those resources to the latter.

The third thing that’s needed is money, financial capital. And where and who is supplying financial capital to this whole system. It’s investors. So by supplying this capital to the whole system and the wealth being created, you as an investor, are entitled to your share of that increase in wealth. Now, unfortunately most investors don’t get what is truly their fair share. And that’s a big part of what my message has been over the years is, “how do you go about getting that?”

Advisers have a huge role to play because of their job. They’re not there to create wealth. And we know they’re not there to pick stocks, you know, or time markets or do those traditional things we call active management – none of that is creating wealth anyway. The adviser’s role is to make sure the investors, who are supplying the financial capital, are getting their fair share. So I call it a defensive strategy. The economy creates the wealth, the adviser structures the investment solution that enables the investor to get a fair share and then brings discipline to the whole process.

Is Your Financial Advisor a Con Artist?

While most financial advisors out there are trustworthy, there are those select few who will do anything to get their hands on their clients’ money. Think of the many people who suffered at the hands of Bernie Madoff and those like him. How are people supposed to avoid scammers like that when making investments? Mark Matson encourages prospective investors to closely vet their financial advisors. Mark Matson and his company want all investors to understand that financial advisors may be people who have no qualms about ripping off their clients.

This issue is more prevalent than most people realize, and investors want to know how and why this happens. They find it hard to believe that others are willing to take advantage of them and make the mistake of trusting advisors enough to hand over their money and expect that it will be handled with integrity. Investors assume that everyone is just like them; they want to believe all money managers are normal, empathetic, average people who will handle their money with the same care that they would take with their own. However, con artists do not see the world this way.

Mark Matson says that, “40 billion dollars a year is lost to people whose money is getting stolen, not just mismanaged.” Industry con artists are only interested in stealing their clients’ assets, and what they are doing is essentially a crime. However, as Matson advises, there is no end in sight. It will continue to happen over and over again if people do not become more prudent in choosing who handles their hard-earned cash.

Mark Matson’s mission is to put this to a stop and he reviews the best way in which that can be done. Matson says, “If you aren’t careful and don’t take the time to understand prudent investing, you will set yourself up to be a victim.” This couldn’t be truer. In addition to the con artists, there are many legal ways for financial advisers to gamble clients’ money away. Since many of these people can’t be held accountable or brought to justice, it is up to the investor to be savvy enough to say no to shifty risk takers and fraudsters. Matson feels that it is “a horror movie all on its own” and that investors are the only ones with the power to put an end to it.

For Mark Matson, the Complaints in Real Estate Could Be Many

Are you in the market to make money? If so, you might want to stay away from real estate – that’s at least according to Mark Matson, founder and CEO of Matson Money, INC, a Cincinnati-based investment adviser firm. Mr. Matson was recently on Fox Business’s “Money with Melissa Francis,” where he argued that choosing real estate over equities could possibly be the worst investing mistake one could ever make. His contention goes against popular opinion among investors, who believe that real estate represents the more favorable investment opportunity. However, he does have a few points that support his argument. Let’s take a look at some of the reasons Mark Matson has complaints about real estate:

Real Estate has not performed as well: Since the Bear Market Bottom, the median price for homes has gone up by 11%. Do you know how much stocks have increased in that same time? The Dow Jones Avg. has actually gone up by 150%. Those who invested in equity around this time made a ton of money. And that’s not an acute trend.

Liquidity is dependent on the market: Getting out of stocks is one thing. Even if you do lose money, you can usually get out. On the other hand, getting out of a housing investment requires another player. While a home might be a more fun investment, you do have to put money into the home for upkeep. You are also dependent on demand. If you have a down market, like we saw in the mid-2000s, you might not be able to get the price you want for your home – if you get an offer at all.

Millenials are not buying homes at the same rate as other generations: Many Millenials were badly hit by the recession. Between not being able to get a job because of a down market to incurring huge amounts of debt to finance their degrees, many Millenials are hesitant or unable to purchase that first home. Additionally, many are bypassing home purchases to remain flexible in their careers and other life pursuits. The home may not be the American dream anymore, and if the demand isn’t there, neither are the prices.

Is Mark Matson right? Is choosing real estate over equity the worst investing decision you can make?

One of Mark Matson’s Biggest Complaints Is Investors Caving into their Fears

Fear can be a good thing. It is a product of evolution. When our ancestors perceived an actual threat, their bodies responded in kind. Their brains when into a hyper-focused state that allowed them to better perceive their surroundings. Their heart rates went up to increase oxygen flow, and the Fight or Flight response kicked in to best react to the threat. This was a means for survival against predatory animals or other humans. When there is danger, fear is a good thing. However, this might not always be the case, especially when investing.

Complaints Mark Matson often has concern fear-based investing. We can become influenced by our fears of what might happen next rather than staying in the present and allowing our actions to dictate our futures. One case of this is the worry many investors had after a rather dull first quarter of 2014. A few months ago, Zack Shepard joined several other investors in a panel discussion on the first quarter on Neil Cavuto’s show on Fox Business. His main message was for investors to feel the fear but invest anyway.

Mr. Shepard pointed out the fact that, historically, there is no set direction for the market to go in after a flat first quarter. Each time it has happened, there were different variables that influenced where the market would go. He, therefore, told investors to listen to the fears they might have about the market, but think about what makes the most sense long-term. Investors should take a look at their portfolio and make smart long-term investments in equity that have the potential to sustain them twenty years from now, rather than worry about what happens next month.

Investing wholly based on fear is a self-fulfilling prophecy; it will only cause you to lose focus of what you should be doing to sustain long-term growth. In the appearance referenced above, Zack Shepard made the case that we shouldn’t worry as much about what might happen after a flat quarter, because each instance of a flat 1st quarter is different. Historically, equity investments have helped make investors a lot of money. Investors should remember that as they make moves to create their own little American Dreams.

A little fear is great in many situations. However, it sometimes isn’t when it causes you to take your eyes off the prize. In the case of this first quarter lull, it makes sense to acknowledge the fear but to invest anyway.