Motley Fool Hidden Gems Investing - Motley Fool Money: 10.11.2013

Episode Date: October 11, 2013

The government shutdown continues.  Costco’s quarterly profit is better than advertised, while Yum Brands’ woes continue in China.  Google teams up with HP.  And the craft beer brewing industry comes to a complete stop.  Plus, our analysts share 3 stocks for your watchlist and senior columnist Chuck Jaffe talks mutual fund investing and how to find a financial advisor. Learn more about your ad choices. Visit megaphone.fm/adchoices

Chris Hill, joining me in studio this week from Motley Fool Supernova, Matt Argersinger, and for Million Dollar Portfolio, Charlie Travers and Ron Gross. Good to see you as always, gentlemen. We've got a surprising deal in the retail industry and some unsurprising earnings results for one major brand. We will talk mutual fund investing with MarketWatch columnist Chuck Jaffe. And as always, we've got a few stock ideas you can put on your watch list. But let's start with the big macro. And just like last week, guys, we begin across the Potomac River. The government shutdown continues, but we are seeing possibly, Charlie, some signs of progress on the debt ceiling. On Thursday, the Dow was up more than 2%

after House Republicans proposed a short-term extension to raise the debt ceiling for a few weeks. Where are we now? Seems like a little bit of a premature celebration on the markets part. I think so. I should make it clear, we are taping this on Friday, and anything can happen over the weekend. But I would really hope by the time we get to, say, Monday morning, there is a hard deal on the table that is signed and delivered, and we can go forward from there. I think the market's given these guys a pass so far, but if we start to trickle into next week in that October 17th deadline, all bets are off. I would expect volatility there. I'd be curious, going around the table, is there anyone of us that thinks we will

default, or that a deal won't get done? No. Not a chance. We're all in agreement, which means we're doomed. There you go, that's right. And I think that's the market sentiment as well. We're also seeing the shutdown, which has sort of been pushed to the side. I know from the market standpoint, there's greater concern about the debt ceiling.

But the shutdown is already affecting federal employees, obviously, who are unpaid. And we're starting to see some industries getting hit. I saw this morning that Delta, US Air, and JetBlue all have new jets that are sitting on a runway in Europe. and they can't take delivery, Matt, because the FAA can't register them. Well, that's terrible, first of all. And that's just one example, I think, of many is this thing drags on. And what I think is frustrating for most Americans, it's frustrating to me, is that it seems like the perception is that

we have essentially a few dozen members of Congress who are kind of holding things up. It's a little bit of the tail wagging the dog. Right, and there's just very little empathy for the true effects for what this government shutdown can do to the economy, to society, to people's lives. I mean, to people who just, gosh, just want to go visit a national park this weekend. It's just, there's a lot of things happening, and I just feel like they're focused on such a narrow part of what they really want to do here, and they're not understanding the true effects. And people are going to get more sick of it as it goes on. Sticking in Washington, D.C., history being made this week as President Obama officially nominated Janet Yellen to succeed Ben Bernanke as head of the Federal Reserve. I think you

can make a pretty good case she's going to be the most powerful woman in the world, assuming confirmation. But from the standpoint of her policies, Matt, Bernanke 2.0? It seems like that's the shorthand for Janet Yellen, is that she is seen as someone, unlike Larry Summers, who maybe was going to pump the brakes on the QE debt program, it seems like she's going to keep the free money going. Well, she's got a great stamp collection. Sorry for her. Is that true? That is true.

Yeah, that's true. She's a little tidbit about our next Fed chief. She's got an extensive stamp collection. So, I think it will be a little bit of Bernanke 2.0. In fact, it could even be more than that, only because she seems to be really focusing on employment. She's He's also talked in the past about the Fed's involvement on nominal GDP and other factors of the economy. So, yes, I think you've definitely got a dove in the Fed's chair office. But she's eminently qualified. She was head of the San Francisco Fed for six years, the Fed's vice chair for three years. She was the chair of the Economic Council for six months. She's

much more qualified than Bernanke coming in. And her husband's a Nobel Prize-winning economist, by the way. O' Family. I was going to say, what's Thanksgiving? O' And she's a philatelist. What's Thanksgiving dinner like in the Yellen household? We're talking supply and demand in Turkey. But I think she's definitely the right person for the job, and very highly qualified. As you said, besides her incredible

resume, I do really like the fact that she's known as an unemployment hawk. She's really focused on unemployment. To me, that is the linchpin of what's going on here. We've got to put people back to work. We haven't really even talked about it that much lately, because there's so much other craziness going on. But people have to get back to work, and she understands that. And on the softer side of the scale, the big difference between the Bernanke Fed and the Greenspan Fed is in the clarity of the communications as to what the Fed was doing. You always know where things stand right now. And Janet Yellen is real big on transparent communication about future Fed policy, where interest rates are going, when QE will end, and how. And I think that's one

of the softer benefits alongside all the policy decisions. Yeah, great points. And I would just also pointed out that the Wall Street Journal actually did a study on Yellen, and actually showed that in recent years, she's had the best predictions of all the other board members on the Fed, in terms of economic direction and things like that. So, there's a lot going here. O' Earnings season officially kicked off this week. Costco's fourth quarter profits rose just 1%. Ron, some people were looking at the results and saying, this kind of seems like a mixed bag. You actually think it was better than that. It was. The headline was a little bit misleading

and the stock sold off immediately upon. But then later in the day we saw a nice rebound. And it's kind of an accounting anomaly in the sense that there was one extra week last year's quarter. So, it makes the comparisons off a little bit. It doesn't look as good as it is. Plus, operating expenses were up a bit. Some people were worried about that. But operating margins actually held steady, so that's fine. 86% retention rate around the world remains unbelievable. Comp sales up 5%, membership fees up 3%. So, yes, I think Costco continues to do what it does best with that great business model it has. They have about 640 warehouses around the world. As part of this earnings announcement,

they said next year they're going to open 36 more. That seems a little conservative, yet at the same time, they have a good track record on this, don't they? They do. They know how to do it. They're methodical about it. They go into areas where they know they'll have a great demand. Internationals, a little bit. The wild card here, how many stores can we grow? How many can we put in Australia, Japan, Mexico, what have you? We'll probably see a doubling of stores over time, at least. More than that, it's hard to say. This week, Google and Hewlett-Packard unveiled the HP Chromebook 11. It's an 11-inch laptop that runs the Chrome operating system.

Charlie, $279, they're sort of making a play for the lower end of the market. What do you think of this news, and do you think it moves the needle for either of them? Not this one specific product. I do think it's representative of bigger trends that do affect both of these companies, in that you are seeing capable devices coming way down in price. It used to be to get a decent laptop, you're paying north of $1,000. Now, these Chromebooks do have lower functionality than a comparable Windows or Mac product, but that's not really the point.

They're basically a gateway to get on the Internet and all of the services that you can get through Google. And this is actually in tablet pricing territory, which is pretty interesting. interesting. I don't see either of these companies making a whole lot of money here, but this is where the market is going for hardware. Exactly. So, my question is, I don't know the intricacies of the deal, but I guess Hewlett-Packard is going to be the one behind the hardware here. And again, I ask the question, if you're an investor and you're looking at companies who are really in the hardware space, I'd be less excited about those going forward, because I think it is a race to the bottom dollar on the hardware side. But on the software

side and the services side, of course, where Google, we know, does really well. That's kind of where you want to be. Although Hewlett-Packard stock has had a pretty amazing 2013. I mean, right up until the point that it was booted from the Dow, it was the best performing stock in the Dow. Interesting. Charlie, you were saying before we started taping that CEO, Hewlett-Packard CEO, Meg Whitman, a little steamed with Microsoft, maybe? Because of the Surface devices they're making. Microsoft used to be just a provider of operating systems and productivity software. And now that they've made their own hardware, they're rankling the feathers a little bit of their OEM manufacturers like HP. We'll see what happens over the next year. Coming up, if you think you

are not affected by the government shutdown, we are going to change your mind. Stick around. This is Motley Fool Money. As always, people on the program may have interest in the stocks today talk about and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool Money, Chris Hill here with Matt Argersinger, Charlie Travers and Ron Gross. Guys, shares of Men's Warehouse up 30% this week after the retailer got an unsolicited bid for the company from Joseph A. Bank. Ron, I was stunned by this news. I don't look at Joseph A. Bank as a the company with the coin to make a $2.3 billion bid, which Men's Warehouse very quickly rejected.

Right. Well, it's interesting you say that, because they have about $300 million in cash, maybe a little more than that, and they're under pressure to put that cash to work by some investors. So, they can't obviously do it. So, all they had to do was borrow another $2 billion? Correct. And there'll be some other investors as well. A little odd to see the unsolicited part of this. Why they just didn't get into a room and hammer out a deal is interesting. I don't know why that's the case. They did immediately reject it and put a poison pill in place to insulate them from hostile actions. O' And by insulate them, you mean management

and the board, and not shareholders. Correct. It is a way to make sure you keep your job and your position, rather than enhance shareholder value, in my opinion. O' Well played, Men's Warehouse. But I will say, I do think this is the opening salvo, and it does get the parties in a room, and I do think a deal will happen at some point, but it has to be sweet and debated. It's a little light. It's not egregious, what they offered, but it's a little bit light. My question is, is the government getting involved, assuming it reopens? Just because if Joseph Van Bank and Men's Wearhouse truly merge, you only have one destination

to buy your next poorly fitting suit for $10. No, there's plenty of department stores where you can buy a poorly-definished suit. I just want to go back to the fact that this happened at all, because the story could have been the reverse. It could have been Men's Warehouse bidding for Joseph A. Bank, and I still would have been stunned. Are both of these companies better operators than I think they are? Because I don't look at either one of them as being in the position to do anything but just keep their own business afloat. You know, that dreaded word that we don't like around here is synergies. And there are

probably some costs you can wring out of the business if you combine them. And I've seen a lot of analysts comment, retail analysts, that say it actually does make decent sense to combine these two companies. But I do understand what you're saying. Young brands down 6% this week after third quarter profits fell 68%. They also lowered guidance in China, which makes sense, Charlie, given how bad China has been for them over the last, I guess it's now 10 months. Yeah. We're almost coming up on a year. Yeah. And we've been watching this story every quarter unfold. You know, management's line ever since the avian flu and poultry supply problems came to light starting last year was that there was going to be an adjustment period where sales were going to be down for KFC in China. But by Q4 of this year's, it was going to turn positive. That doesn't look like it's going to happen. The market gave management a pass all through the year. The stock was doing very well.

But I think that's finally starting to break with the stock down on this news that KFC sales were down double digits once again in China. And I don't think things are going to get better all that quickly. We've talked about JCPenney and the silver lining, if any, for JCPenney is that they've got incredibly low comps coming up in December. It really seems like Yum! Brands is in the exact same position. And my question is, what if it doesn't improve? I'm not a shareholder, but on one hand, I would be looking at the stock saying, well, they've got really bad result comparables coming up in December. But to your point, if it doesn't get any better, then I think we could really see the bottom fall out.

I think so. I think the stock would be a good buy somewhere in the high 50s. It's about $66 right now. Yum! Brands has some fantastic brands at its table with Pizza Hut, KFC, Taco Bell. We view these as American brands, I think. But actually, this is the largest by store count global fast food chain. And they are in a lot of countries besides the United States and China. And they're doing very well in a lot of places. So I think you look at China as a temporary problem.

We don't know when it will end, but it will end. And that's the catalyst to hopefully get a good price. Sure will be interesting when we talk about this in three months. As we talked about earlier in the show, the government shutdown has affected many people, many industries. And maybe you're sitting there thinking, it doesn't affect me. But if you are a consumer of craft beer, we have some bad news. The shutdown has closed an obscure division of the Treasury Department called the Alcohol and Tobacco Tax and Trade Bureau. The TTB.

I mean, the TTB. Yeah. These are the people who approve new breweries, also new recipes, new labels. So, Matt, that seasonal holiday beer you were expecting, guess what? It's on hold. It's not coming now. First of all, how are these employees not essential federal employees? I mean, let's throw that out there.

Call your congressman. Second, can I get a job there? I mean, think about it. If you could travel the country and you're approving new beer recipes and visiting these craft brewers and approving them, I think that's a great job. No, this is an example just of sort of the outlying effects of what this government shutdown can do. You just don't think about it.

But for something like this, which does affect, by the way, a lot of people around the country, a lot of, I mean, the craft brewing industry has grown by leaps and bounds. I know that really because I follow Boston Beer Company very closely, who makes Sam Adams, really the largest and kind of first mover in the craft beer market many years ago. And, you know, Jim Cook is always going around the country helping these sort of startup breweries grow and prosper. And man, just to see how it can hit with the TTB closing, man, it's just brutal. Yeah, you were saying before we were taping that they have a financing arm? I mean, is

Sam Adams going to get into the mortgage business next? Well, they kind of are a little bit, because they do lend money, Jim Cook and Boston Beer lend money to brewers all around the country to start up and get their operations going. It's a little bit philanthropic in a way, but yeah, it's good. Yeah, but if they start moving into credit default swaps, that's going to be a red flag. I get a little worried. I should mention, before we get to the stocks on our radar, we are hiring summer interns for 2014. So, if you are a college student or know a college student interested in interning

here at The Motley Fool, go to our website, which is culture.fool.com. All the information is there, the application. We have a little video about what it's like to be an intern here at The Fool, and please apply. Ron Gross, what do you got on your radar this week? Going to Google. G-O-O-G, they report next week. Last quarter, they missed analyst expectations, both on the sales and earnings lines. Stocks sold off. We are not short-term investors, but I'm still curious to see how this quarter looks. The shift to mobile continues. The ever important metrics of cost per click and paid click volume will be on my mind. So I'm looking forward to that. We own a nice position in MDP and like the company very much.

I know that they are the gold standard when it comes to search and making money off of search. But, to what extent, if any, do you look at Google and think, I'm really hoping they come up with a viable alternative revenue stream? I think that actually will happen. I think they talk about it a lot. They're spending a lot of money to make a number of things potentially happen. They'll continue to be the big boy in search, as you said, but there will be other things down the road, I'm sure of that. Alright, Matty, what do you got?

I'm looking at the Washington Post, ticker WPO. They don't report for a couple weeks, but this is the Washington Post, by the way, which no longer owns the Washington Post newspaper. Jeff Bezos of Amazon purchased the newspaper about a week ago, closed on the deal. This is now a company with some pretty good assets. They own Kaplan, which is a big for-profit education company. They own some TV stations. They own a cable network. Don Graham is the CEO. He's been the CEO for going on three decades, I think. He's a little bit of a Warren Buffett Disciple. So, you have a company with a great balance sheet, making acquisitions, buying back stock, good management. You know, something I'm looking at as a potential good

asset play, maybe a good value play. Maybe Ron can look at it, I don't know. No pressure. Charlie, we've got about 40 seconds. What do you got? I'm looking at McDonald's, Chris. Actually, ticker MCD, hasn't been a great year for McDonald's, but this is a great business. You get a dividend yield of 3.4%. They've raised the dividend every year since 1976, which is an impressive run. And so if you just want one of these, you know, large cap blue chip companies that lets you sleep well at night, McDonald's is worth a look. And they report earnings on October 21st. I know he doesn't like their food, but that's the kind of dividend that James Early just loves. All right. Charlie Travers, Ron Gross,

Matt Argersinger. Guys, thanks for being here. Thank you. Up next, how to find a financial advisor and what to look for in a mutual fund. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. For many Americans, their first investment is a mutual fund, whether buying direct or through a 401k plan at work. And it adds up. The U.S. has the largest mutual fund market in the world, somewhere in the neighborhood of $13 trillion worth of assets. So, who better to talk about this subject than our guest this week? Chuck Jaffe is a senior columnist for MarketWatch. His work is nationally syndicated, and his Your Funds column is the most widely read feature on mutual fund investing in America.

He joins me now from Massachusetts. Thank you for being here. Oh, thanks for having me, Chris. There's a lot of ground I want to cover, but I want to start with your sense of what the landscape looks like right now for investors. We are five years removed from the 2008 financial crisis. And even with the uncertainty of the debt ceiling situation, the looming deadline on October 17th, 2013 still been a really good year for the market in general. How are you feeling about it? Do you get excited as an investor? Do you get nervous? What is your sense these days? Well, you know, talking to as many people as I do, because I'm usually in your chair,

i excited is the wrong word about it and fearful is the wrong word it's not really i i don't have those kinds of reactions if anything right now i'm very intrigued the word would be intrigued because i keep doing interviews with folks who are all very smart you could recommend their firms and say nice things about them and what have you but they keep going in different directions You know, on the one hand, disagreement makes a market, right? You need to have divergent opinions because if I'm buying something, well, somebody else is selling it to me, and presumably if I'm buying and they're selling and we've agreed on a price, we don't think the same thing's going to happen. We agree on the price, but we disagree on what's about to happen to the security that we're trading

because I think the stock is going up if I'm buying it, and he thinks there's something better to do with his money if he's selling it. And while that's an oversimplified version, you know, they say that Wall Street climbs a wall of worry. I've heard everything from people saying, hey, this is a tremendous buying opportunity that's being presented because of the shutdown and everything that's happening. It's just going to pop prices lower, and then we're going to go right back to where we were at record highs to, are you kidding me? There's no reason to think that we're going back to record highs. And the answer is, I don't know. But I do know that we're living in a time, and maybe we have always been in these times, but we are living in a time where we really just move from one crisis to the next. And the truth is that most of them are fairly forgettable. I don't believe there are too many people out there who are going to look back in 10, 15, 20, 30 years,

whatever it is between now and when they reach retirement, and say, darn it, I had to work a couple extra years because of that federal shutdown. Now, that may even include the folks who were furloughed and actually missing salary. But I think that's the way it is with everything. I mean, let's go back and let's recognize that for any investor alive today, the worst day they ever lived through on the market was Black Monday of 1987, October 1987 crash. And I say that, I know people say, well, 1929 was worse, but let's be perfectly honest. How many people do you know who are about 105, which is how old you have to have been to have been an investor back in 1929? So for investors who are alive today, it's 1987.

Now, that's now 25-plus years in the rearview mirror. And I don't know a single person who was 40 in 1987 who got last year and said, dang it, I can't retire now because I was in the market through Black Monday of 87. It's quite the opposite. They basically didn't allow it to mess them up. So I think for the vast majority of people, while you certainly want to make your hay where you can, And the flip side of it is it all winds up being noise, and you kind of have to ignore it. And yet, when you think about days like Black Monday in 1987 or periods of time like we saw in 2008,

those have a chilling effect for a lot of individual investors. And this is something you wrote about recently, that a lot of people missed out on the ride from 2008 to 2013. There are a lot of people who have been sitting on the sidelines. Does that trouble you, or do you just look at that and say, you know what, that's unfortunate for those people, but that's in some ways human nature? Well, it's distinctly human nature, and it's unfortunate for those people, but it happens again. I did write a piece that was looking at the five years, but I also took a look back in 1988. In fact, this is one of my most recent columns. In 1988, the market off of Black Monday had been horrible, and then it got fine.

I mean, you know, it recouped very quickly. And so in the fall of 1988, if we're looking at the one-year anniversary, I had my cat pick stocks. Wait, I'm sorry. You had your cat pick? My cat, yeah. My cat was named Millie Schembechler for the wife of the legendary Michigan football coach, my wife and I both being Michigan grads. And yes, I had my cat pick stocks. And it was an experiment that we did in the newspaper. Now, you have to go back to 1988 and think about the mindset.

We didn't have the Internet. So if you really want to know where I was ahead of the curve, it was that at that time I had not recognized it, whether it's, per se, your audience, either on the show or my audience, etc. If you think about our audience and how you have to break down the segments, well, there are those folks who can't do without us and they have to get their business news every day and they're going to listen under any circumstances.

And then there's the folks that listen to us sometimes or occasionally, you know, as their time allows because they're interested. And then there's the rest of the world that really only gets their financial news or any news today as it comes in videos featuring stupid or fallen cats, right? So I was actually ahead of the curve. I just didn't know it. And I was ahead of the curve in two ways, because not only was I reaching out to this huge demographic of people that are why cat videos go viral in seconds, I was also, I created what was called the Million Index, which was the stock that she picked in the month of September of 1988.

If you want to know how she picked them, I'll tell you in a second. And I tracked them two ways, one which was basically a share of everything, and one of which was $1,000 invested into everything. And who heard of equal weighting an index back in 19, remember in 1988, indexes, you know, the S&P, Vanguard S&P 500 index was 13 years old. didn't even have a billion dollars in it yet so who heard of equal weighting back then and by the way over the 12 months that we tracked it my cat crushed the market and that's sometimes what you need to remember it wasn't entirely what i expected to happen

truthfully i would have thought you know you'd like to believe that that an educated monkey with darts actually can't beat you if you're a savvy investor but uh you know sometimes that's What you have to remember is that maybe, and the piece that I wrote was sort of taking a look back going, you know, I hear a lot about newfangled ETF products, and every now and again I sort of hear one, and it's got some sort of marketing idea, and I kind of look and go, okay, well, if I had run the Millie Index today and it was successful, trust me, somebody would be saying, let's license an ETF off of this. So you might as well look at most of the new ETFs you're hearing about and go, okay,

is this something that is actually good, or is this something that maybe could be managed by a cat? and think of it that way. And unfortunately, I think investors sort of make things unnecessarily difficult on themselves. We feel like we have to do something. That is where human nature is. And far more often than not, staying the course, having a solid plan and staying the course, maybe playing on the fringes makes sense, but wholesale changes? Now, the folks who pulled out because they couldn't recover

or couldn't take any more pain, they're the ones that have had the toughest time recovering. They're the ones for whom 2008 is still a very strong emotional event. You're listening to Motley Fool Money, talking with Chuck Jaffe, nationally syndicated mutual fund columnist, and that's only because I couldn't get his stock-picking cat on the phone. As I mentioned at the top, a lot of people invest through their 401k plan at work.

That's how they get into mutual funds. help me with our listeners, sort of arm them with a question when they go into work next week after hearing this interview. What's a question we should be asking our plan administrator at work about whatever is our 401k plan? Well, it depends on how you're going to be as an investor. I would like to think that your audience being fairly smart about this stuff, my audience as well, perhaps is not just investing in their 401k, they're investing inside their 401k and outside their 401k. And if that is the case, then the question that for many people is the right question is, which of these funds is

the least damaging? And I know that sounds horrible, because it makes it sound like all funds are terrible which is not the truth but in so many 401k plans you are investing into high cost funds or high cost structures now that's not necessarily always the fund's fault my sister runs a small business and a couple of years ago started a 401k plan for her employees and running a small business well one of the ways that you help share the cost with your employees of giving them this benefit is you say, we'll take a higher cost plan. And that's acceptable. But if I were one of her employees, I would want to make sure I'm getting the very best thing for what I'm doing with that money, because you'd want to take advantage of any sort of matching funds. But

then I might be saving everything else outside of it. So I think for a lot of people, it's really examine the plan and determine, can I build a real retirement portfolio entirely inside of my 401k plan? Or should I be buying the best of what's here, making sure I capture the benefits of the savings and any matching benefits, and then save whatever else I can outside in better vehicles? Coming up, more with Chuck Jaffe. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here talking with Chuck Jaffe, senior columnist at MarketWatch. Now, since 2005, the SEC has required mutual fund managers to report how much they have invested their own money in their own funds. And according

to data from Morningstar, only 49% of funds have a manager who's invested in the fund at all. So, just slightly less than half are actually eating their own cooking, as we say. I was sort of struck by this, Chuck, and maybe you were surprised or maybe not. You look over the last five years, funds that have high ownership by managers have done better as a group. Should we be surprised by that? And if not, is that as good a data point as any when you're shopping for a mutual fund? Is that as good a question to ask as any other? Well, it's a great question to ask.

You have to recognize that it's answered in the Statement of Additional Information, which is technically part two of the prospectus, which is the legal document between you and the fund. Nobody reads their prospectuses. Nobody even gets a Statement of Additional Information unless you ask specifically for it or you go look for it online. So it's not necessarily information that is easily found. And then you have to discount a little bit of it because you definitely have some managers. I mean, I know a number of guys who run bond funds, and they are in their 20s and early 30s. And for them to be heavily loaded up on a bond fund just because they run one would be inappropriate, right?

It's not what you would expect of anybody of that age, let alone somebody who's young and fairly aggressive and what have you. So you sometimes have to look, and same thing. I mean, these guys in some cases run multiple bond funds, and some of them are state-specific. Well, you certainly wouldn't expect them to be buying a bond fund for a state that's not their state where they're not getting the tax benefits. That would be truly nutty. In fact, you'd probably hold it against them. But if the manager is your driving reason for buying the fund, then it's an important question.

I mean, if you've got a manager who it's not necessarily about eating their own cooking, it's about where is their attention focused. if you know that a manager and the manager's family have their assets wrapped up in that fund well you know that while they may or may not care about you they do care about their mom and i think there's something to be said for that but at the same time i would tell you just as important would be to know where their incentives lined up right if a fund manager is managing multiple accounts, they're doing separately managed accounts, they're doing hedge funds, they're doing whatever else they want to do, you want to get an idea of how important

is the fund to this manager. Obviously, if they've got their own money in it, that does typically make it important. But even if whether they do or they don't, if it's a few dollars invested in the fund, and oh, by the way, the bulk of their compensation is coming from something else, well, they can be pretty well distracted by that too. Now, in addition to your writing, you host a daily podcast, Money Life, with Chuck Jaffe, and one of your recent guests is, frankly, one of the legends of the investing world, and that's Jack Bogle. I'm curious what you think his legacy is going to be, because I'm guessing that more people have heard of and are aware of Warren Buffett, but do you think Jack Bogle has perhaps had a greater impact on individual

investors? Well, I think he undoubtedly has from the standpoint of the dollars that are at work in index funds. And, you know, Jack gets credit for starting the first one, and people thought he was nutty. I'm pleased to say that Jack Bogle will not be remembered as the guy who gave us the 401k fee, but he is the one who gave us the 401k fee. It's something that even he sort of really doesn't like to acknowledge um you know i think that jack's legacy and i love jack and i've known him for many many years i think jack's legacy is going to be one that says you can do this simply and that convinced a lot of people that they want to ride along that they don't have to beat the market they just have to participate in it and for a lot of folks those who are frustrated with

a lot of the things that can come when you're trying to outperform the market. That is really the message that I think is resonating. Look, we're at a time where Jack is a bit anachronistic, as I might add am I. I am constantly telling people that my way would be to keep everything simple. Jack Bogle's way is keep it simple. Jack basically says factor Social Security into the mix as if it were a bond, but take your age subtract it from 100 and your answer is the piece of your money that should go into stocks so here's jack who's not got a lot of his money in stocks and then it's going to be

you know total bond market fund total stock market fund and maybe a little bit to play around the edges for a lot of folks a whole lot of folks that is a perfectly acceptable way to invest And if you're doing it, Jack Bogle is the patron saint of index investing. And that's how he, when his time comes, should be remembered. But I hope his time doesn't come for a long time. You've also written a couple of books. Your most recent one is entitled Getting Started and Finding a Financial Advisor. What are a couple of key questions that people really need to ask?

Because it seems like a financial advisor can be incredibly helpful. and, at the other end of the spectrum, incredibly damaging? Well, I think you have to start by knowing what it is that you want. You know, most folks turn to a financial advisor when they've achieved some measure of assets, and they finally make the decision that they need one, and then they go about picking them all wrong because they bump into somebody at a cocktail party and they meet a financial advisor, and they're like, oh, Providence has smiled on me. It has brought me an advisor at just the point where I need them.

And then they go to interview that one person, and no matter, it could be the worst advisor in the world, but when they ask, well, what are you going to do for me, the person kind of lays it out, and it's like, ah, this is just what I needed. Well, of course, because you have no basis for comparison. So I think that, A, the biggest mistake people make in hiring advisors is that they only ever interview one. The vast majority of people who I have talked to over the years on this subject and having written two books on choosing advisors and working with advisors, I've given a lot of talks on this. The vast, vast majority of folks have done no more than one interview before they wind up picking their advisor.

It's a horrible mistake to make because you have no basis for comparison. And then I think it's the other side that says, what do you want? Because people will tell you that they're hiring an advisor because they want guidance and they want counsel and they want someone to give them emotional discipline here's my plan here's how we're going to achieve it and oh by the way when the market's going through 2008 or 2000 anything i'm going to be able to weather the storm because my advisor has got me positioned smartly and away we go and then they wind up firing the advisor the first time performance is bad and oh by the way performance like you had in 2008 is not necessarily so terrible it's what

the market was doing to everybody back then. So I think the biggest thing is know what it is that you want. If you're looking to hire somebody to manage your money and goose your returns, well, go hire somebody that does that. But if you're looking for somebody to be a financial advisor who's going to help you reach your goals and make sure that you're properly insured and you're properly trusted and you've got some estate planning done and you've got an idea of what you need to save and you're putting it to work in the best ways possible well the market is secondary to all of that and then you hopefully can find somebody where you have the right connection and that's again an emotional connection because again it's about that emotional discipline

whether you acknowledge it or not what you're really looking for is for somebody who's going to help you figure out that you've got it and you can then protect it or you don't have it but here's what you need to get it, and here's how you go about getting it, regardless of what happens. When it comes to covering mutual funds, there is no one better. You can read more from Chuck Chaffee at marketwatch.com. Check out his show, Money Life with Chuck Chaffee. Thanks so much for being here. Thanks for having me. Anytime. That's going to do it for this week's edition of Motley Fool Money. Have a great week. We'll see you next time.