Great Minds. Great Wealth. Great for Your 401K.: How to Raise Your Return, Reduce Your Risk and Cut Your Cost

By Rodney Schulz

Wouldn’t you rather spend more time on the golf course, relaxing on the beach, or enjoying your children and grandchildren?

You may think any investment book can help you achieve these goals, but you’d be wrong. In fact, most investing guidance—if acted on—would end up hurting instead of helping you.

But not this investing guide.

Rodney Schulz, founder of Schulz Financial, provides easy-to-follow advice for investing pros and novices alike. His guidance will help you navigate emotions that are sure to go haywire as the stock market swings up and down.

From index funds and annuities to allocating capital, evaluating financial advisers, and overcoming false beliefs (such as the idea that the past predicts the future), he shares tips and strategies so you can build wealth and sleep better at night—all while cutting costs so you have more money to spend on all you’ve been missing.

Filled with easy-to-follow examples, insights from top investors (think Warren Buffett and John C. Bogle), and figures to promote understanding of hard-to-follow concepts, this guide is the perfect resource for anyone seeking to build wealth over time.

• Language: English
• Publisher: iUniverse
• Release date: Mar 16, 2020
• ISBN: 9781532069451

Rodney Schulz

Rodney Schulz has more than thirty years of investment, financial management, and financial analysis experience. Prior to starting Schulz Financial in 2003, he worked as the financial director and chief financial officer of a large organization. He earned a master of business administration, focusing on investment finance, from Duke University’s Fuqua School of Business and a bachelor of science in petroleum engineering from the University of Kansas. He has been married to his wife, Pam, for twenty-three years. They have two children and live in Houston, Texas.

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Copyright © 2020 Schulz Media LLC.

The Schulz Investment Pyramid used throughout this book is a registered trademark with the United States Patent and Trademark Office.

All rights reserved. No part of this book may be used or reproduced by any means, graphic, electronic, or mechanical, including photocopying, recording, taping or by any information storage retrieval system without the written permission of the author except in the case of brief quotations embodied in critical articles and reviews.

The information, ideas, and suggestions in this book are not intended to render professional advice. Before following any suggestions contained in this book, you should consult your personal accountant or other financial advisor. Neither the author nor the publisher shall be liable or responsible for any loss or damage allegedly arising as a consequence of your use or application of any information or suggestions in this book.

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ISBN: 978-1-5320-6946-8 (sc)

ISBN: 978-1-5320-6944-4 (hc)

ISBN: 978-1-5320-6945-1 (e)

iUniverse rev. date: 03/16/2020

Contents

Introduction

Chapter 1: The Efficient Market

Chapter 2: The Three-Factor Model

Chapter 3: Risk

Chapter 4: Diversification

Chapter 5: Investment Vehicles and Performance Examples

Chapter 6: A Closing Summary

Addendum I: A Word on Financial Advisors

Addendum II: Thoughts on the U.S. Debt Situation

Addendum III: Annuities

Addendum IV: Global Allocation

Addendum V: A Suggested Financial Plan for Retirement

Addendum VI: Selected Articles, Papers and Presentations

Introduction

Whether you’re a novice investor with a small portfolio or a seasoned investor sitting on millions of dollars, you’re likely inundated with financial opinions. Unfortunately, when it comes to our personal wealth we’re all vulnerable to emotions. Therefore, most financial writers target emotions instead of explaining the facts in a way that is fun and interesting to read.

Nevertheless, there is hope and the cure is painless. In short, this book:

A. Presents an easy-to-understand, non-commercial, sound, concise body of pragmatic investment knowledge to help you; and

B. Does this in a way that is highly informative for the seasoned investor while not overwhelming to the novice investor.

Putting this information to work will allow you to:

1) Raise your return to ultimately make you wealthier.

2) Reduce your risk to immediately decrease your investment heartburn.

3) Cut your cost so that you have more money to spend on the fun things of life.

An Added Bonus. Wouldn’t you rather spend more time on the golf course, relaxing on the beach or enjoying your children and grandchildren? Enabling you to do this is another objective of this book, as most individuals have better things to do with their time than read and study mounds of information that has little or no value to their personal wealth. In fact, most investment news and information, if acted on, hurts, rather than helps, the investor. As you can see, this is a real win for you and those around you.

My Unique Position to Help You

Smart and well-educated finance professionals are a dime a dozen. They’re everywhere, and investment books are ubiquitous.

The thing that makes this book different is my ability to decipher what really matters and put pragmatic Nobel Prize level financial knowledge in common terms for your application and benefit. This information will get you the maximum return for the amount of risk and cost. Moreover, it will help you understand and assess your risk while knowing the likely limits of your portfolio.

My Early Years. Unlike 99 percent of all top-tier MBAs (I got my MBA through the full time, day time program at Duke University’s Fuqua School of Business), I grew up in a family where neither parent attended any college. My father was a blue-collar oil field worker and my mother drove a school bus. I honestly don’t know if any of my grandparents even graduated from high school. My father’s father was a life-long farmer in central Kansas, while my mother’s father spent his working life as a blue-collar worker in the oil fields of northeast Oklahoma and central Kansas.

No, my parents definitely weren’t stupid. However, I can still remember many typical family dinner conversations where Dad ranted about his frustration with engineers who don’t have any common sense and my mother always being uneasy around people with money.

Nevertheless, I must have inherited some degree of cerebral capacity from them, as an engineering ability test I took in high school put my mechanical aptitude in the top 1 percent and my ACT math score was in the top 2 percent. Ten years later I scored a perfect 35/35 on the Analysis of Business Situations section of the Graduate Management Admissions Test (GMAT) and my combined math and English skills were in the top 4 percent of all college graduates. But again, and I truly mean this, smart and well-educated finance professionals are a dime a dozen.

After paying 100 percent of my way through a petroleum engineering degree at the University of Kansas I soon, like just about all engineers, found myself surrounded by other smart and well-educated people. As a young petroleum engineer I often worked on things as abstract as oil, gas and water flowing through the pores of rock thousands of feet underground. Another problem I worked on was to calculate the amount thousands of feet of steel pipe would stretch (due to weight, heat and external pressure) and shrink (due to internal pressure) when put in operation. I ran computer simulations on the above challenges, as well as many other situations. Things could get complicated quickly.

However, my ultimate job as a petroleum engineer was really quite simple:

1) How many dollars went into the hole?

2) What were the associated risks?

3) How many dollars would we likely get out of the hole?

This is very simple and very much like your financial situation; i.e.,

1) How many dollars should go into various segments of your portfolio?

2) What are the risks of each segment?

3) How much can you reasonably expect to get out of your portfolio over an unknown period of time?

In answering the three questions above concerning oil and gas situations countless times in just a few years, I realized there must be more to financial management than what I learned in one three-credit engineering economics course. Thus, I chose to invest much of what I had saved in five years of petroleum engineering work to finance an MBA from Duke University’s Fuqua School of Business through their full-time, day-time program.

An Abrupt Turn of Events

A few years after graduating from Duke my wife and I moved to Pittsburgh, PA, her hometown, for a variety of personal reasons. Not long thereafter, I found myself interviewing for the position of Financial Director/chief financial officer (CFO) for a 25-year-old college campus ministry organization with 150 employees in six states. Although it was a non-profit organization, we had a multi-million-dollar budget for operating expenses and a multi-million-dollar endowment fund invested in stocks and bonds.

To be sure, I really didn’t want the position when I first interviewed for it. In fact, I went in to the interview hoping they would find someone else. But they made it clear: They wanted me. Their finance department was a mess (much more-so than they disclosed or anyone realized), and I had a track record of fixing things with an eye toward good financial management.

Again, this was NOT a position I initially wanted. Working in the shadow (literally) of a housing project high-rise apartment building in Pittsburgh’s second roughest neighborhood was not what I had in mind when I left a major oil company to pay my way through Duke. Having an office in the shadow of a housing project is not what top-tier MBAs aspire to do. Working 55 to 65 hours a week for $25,000 per year (approximately $8.50 per hour) was not what I had planned, especially when the agreement was for 35 hours a week. But it was in my Maker’s cards, and His purposes trump my purposes. Thus, the work began.

How this Experience Applies to You

After starting at the campus ministry organization I soon realized the key challenge. No, it wasn’t having a $4 million balance sheet that was $98,000 out of balance. No, it wasn’t the ten IRS fines levied on the organization in the five years before my arrival. And no, it wasn’t a long list of other problems of similar alarm level and urgency.

What was the key challenge? No one understood anything about finance or accounting. And as long as they got their paycheck on time, they really didn’t care.

Our employees had a wide range of interests and talents that included playing the guitar, sharing their faith, leading outdoor wilderness experiences and making people laugh. However, most of them were mathematically challenged and really didn’t care, as long as they had enough money to pay the rent in a low-cost apartment and buy enough food to survive. This is good, as it’s what college campus ministers are generally made of.

Nevertheless, nothing happened without money moving and I often found myself having to explain why various things were necessary to run the organization’s finances in a way that were prudent, responsible and efficient. Hence, in communicating I had to be simple, relevant and concise. I had to boil my every move down to why it mattered to the individual I was dealing with.

That’s just like this book: I’ll make it simple, relevant and concise, boiling it all down to what matters to