Spinning for Dollars 15-Year Blues the Fiduciary Standard
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Ask the Fool The Fiduciary Standard What’s a “fiduciary” Qstandard? — A.H., Burley, Idaho Fool’s School • Does management impress you My Dumbest Investment The Motley Fool Take A fiduciary standard requires by communicating candidly (as in Apeople who might give you annual letters to shareholders) and 15-Year Blues Spinning for financial advice to act in your best Researching executing smart strategies? • What risks does the company My dumbest investment move interest, recommending or doing Companies Dollars whatever will serve you best and face? Many things could go wrong, was buying my house with a If you’re thinking about invest- such as losing a customer that Peloton Interactive (Nasdaq: avoiding any conflict of interest. 15-year mortgage. — A.V., online PTON) enjoyed a huge tailwind Some advisers (like broker- ing in a company, dig into it: accounts for a big chunk of its Learn enough to make a confident, The Fool Responds: That from the pandemic in 2020. With dealers) may simply abide by a business. (Companies’ annual wasn’t necessarily a dumb move gyms closed and social distancing in “suitability” standard, recommend- informed decision to buy or not 10-K reports typically list a variety place, demand for in-home exercise to buy. Here are some questions — both 15-year and 30-year ing or doing whatever is suitable of risks.) home loans have their advantages equipment soared. Peloton’s com- for their clients. What’s suitable, you might ask. (Don’t worry about • Does the company pay a divi- bination of hardware and connected unfamiliar terms — just start learn- and disadvantages. You though, may not be what’s best dend? If so, what does it currently didn’t explain why you’re exercise services got a huge boost ing about investing, and you’ll get and enjoyed stellar growth, but now — and it might earn them a sales yield, and how much has it been unhappy with your 15-year commission that a better move better over time.) increased over the past few years? investors are focused on figuring out • Is the company in a growing mortgage, but it’s likely that you which stocks are most likely to thrive for you might not. Indeed, among (Stocks without dividends can don’t like the higher monthly pay- industry? be great investments, but reliable in a post-pandemic world. your options for suitable invest- ments, which can leave you with As gyms start to reopen, the com- ments, a nonfiduciary adviser • What’s its business model income from a solid dividend payer — how, exactly, does it make its less money each month for saving, pany’s offerings could seem less might recommend the least suit- is appealing, too.) investing or spending on essentials essential. But while the exercise able one. (Of course, many nonfi- money? Does it require a lot of • Does the stock seem overvalued innovator’s growth might be a bit money to operate and grow (as in and treats. On the other hand, a duciary advisers are still ethical or undervalued? (Ideally you’d buy shorter-term mortgage will let you uneven in the near term, relaxing and may serve you well.) manufacturing) or not so much (as in shares that are undervalued.) Valuing social distancing probably won’t online marketplaces)? pay off your home and build equity Supreme Court Justice Benjamin a company is a subjective endeavor, much more quickly, while paying destroy its long-term opportunities. • How has it been performing? Meanwhile, Peloton is recalling Cardozo famously referred to the but undervalued stocks typically have a lot less in interest over the life of fiduciary standard by noting, “A Are its revenue, earnings and profit price-to-earnings (P/E) ratios below its treadmill due to safety concerns margins growing? How does it com- the loan. (A 15-year loan typically — a move which has depressed its trustee is held to something stricter their own five-year averages and has a lower interest rate, too.) pare with competitors? Is it growing below those of competitors. shares. Future treadmills should be than the morals of the marketplace.” Meanwhile, 30-year mortgages safer, and the company’s future still When you’re looking for finan- its market share? Next week we’ll offer some • What sustainable competitive have lower monthly payments but seems bright. cial advice, it’s smart to ensure that resources that can help you research higher interest rates, and you’ll pay Peloton’s stock price is already fac- your adviser is held to the fiduciary advantages does it have? Examples companies of interest. In the mean- toring in an economic recovery and include a strong brand, valuable a lot more in interest over the life standard, looking out for your best time, you might learn more in of the loan. A loan can help you the treadmill recall, recently trading interest before his or her own. Reg- patented technology, economies of investing books by Joel Greenblatt, down 51% from its 52-week high. scale, a big multinational presence qualify to buy a more costly home istered Investment Advisers (RIAs) Peter Lynch, Philip Fisher, John — but it’s generally better to buy The brand still looks very strong; and Certified Financial Planners and robust employee retention. Bogle and The Motley Fool. Peloton is a first mover in the con- a less expensive one so you have nected exercise equipment space, and (CFPs) are generally held to the wiggle room if you lose a job or fiduciary standard. still has a lot of room for growth. Name That Company suffer some other financial setback. The stock isn’t low-risk by any *** Also note that it’s best to build up stretch, but the business is executing What’s an 8-K report? — I trace my roots back to 1886, your credit score as much as you at a high level. For investors with QL.C., Lexington, Kentucky when I was formed in Pennsylva- can before borrowing money, so a buy-and-hold approach, Peloton that you’re offered better interest could be a winner. (The Motley Publicly traded companies in nia as a water and gas business. I Fool owns shares of and has recom- bought and sold many companies rates. Paying bills on time and pay- Athe U.S. are required by the ing down debts can help with that. mended Peloton Interactive.) Securities and Exchange Com- and then went bankrupt in 1913, but mission (SEC) to release financial reorganized and survived. In 1947, I reports every quarter. If certain LAST WEEK’S TRIVIA ANSWER reportedly had assets of $183 million I trace my roots back to 1932, when McGee Airways and Star notable things happen between when an eighth-grade dropout bought those reports that may impact the Air Service began flying in Anchorage. By the late 1940s, I was one of the world’s largest charter operators, having bought some company’s health or performance, me in an auction for $13 million. In 2008, I began trading on the New York Stock former military aircraft. I delivered food in the Berlin Airlift and then an 8-K, or “current report,” transported Yemenite Jews to Israel in 1949. Today, with a market must be filed. An 8-K might report Exchange. Today, with a market value value recently topping $8.5 billion, I’m an international operator; I a completed merger or acquisition, recently topping $28 billion, I’m America’s take more than 44 million customers to more than 115 destinations a bankruptcy filing, a change in top biggest and most geographically diverse in four countries annually. I was the first North American airline leadership, layoffs, or plant clo- publicly traded water and wastewater utility to sell tickets online. I bought Virgin America in 2016. Who am I? sures, among other things. You can company, serving some 15 million people in (Answer: Alaska Air Group (parent of Alaska Airlines)) look up SEC filings at SEC.gov. 46 states. Who am I? Want to Invest? Email us at [email protected], and we’ll Want more information about stocks? send you some tips to start investing. Sorry, we can’t provide Send us an email to [email protected]. Think you know the answer? We’ll announce it in next week’s edition. individual financial advice. © 2021 THE MOTLEY FOOL/DIST. BY ANDREWS MCMEEL SYNDICatION 5/6.