As a financial advisor, speaker and columnist there is one fundamental goal I share with my many clients, audience and readers alike…the goal of creating very simple, very efficient and very powerful investment strategies. Everyone wants it. Everyone needs it. But where does one start?

For me, after spending years as a child helping family in an investment advisory business, my official start was in none other than Hollywood. It was within the powerhouse studios of Disney, Universal and Warner Brothers that I played a proud role in some of the largest movie productions around, working alongside actors, directors and producers such as Tom Cruise, Tom Hanks, Oliver Stone, Dolly Parton, Barry Levinson, Michael J. Fox and a long list of many others.

What I clearly found was that beneath the power of creativity, there was a very strong foundation of highly efficient financial strategies. Nowhere was this more apparent than when I later partnered with my close friend, the indomitable Oscar nominated actor James Woods to launch a successful production company at Universal Studios.

Having helped raise money, plan productions and obsess over every last detail to ensure profitability, I found that the road to success in Hollywood in many ways mirrors the prudent principles of successful investing.

The programs and movies we watch on TV or in theaters are examples of either prudent decision making based on proven principles or short-lived failures hastily born of poor planning. Ironically, all it takes is a little creative insight to realize that the movies, studio execs and high-profile actors can teach the public an awful lot about the universal laws of successful investing.

As you’re potentially seated in the comfort of your own private theater awaiting the Feature Presentation, I bring to you “The 10 Lessons Hollywood Teaches Us About Investing” with an extra bonus thrown in at the end.

So, raise the curtain and start the projector, because here we go…

LESSON 1 — DIVERSIFICATION IS THE KEY TO SUCCESS

Hollywood

The typical Hollywood studio releases somewhere around 20 films per year. Does Paramount release 20 horror films each year? Not quite, the studios are much smarter than that. Most studios cover all genres — romantic comedies, science fiction, drama, action, teenage comedy, etc. Why? They know it’s impossible to predict which genre will be hot at any given time. Some will win, some will lose, but one thing is certain: reducing risk through diversification always provides the best recipe for success.

Investors

Forget the line Oliver Stone wrote for Michael Douglas in ‘Wall Street’. Greed is not good. Greed can kill you. If you need proof, ask anyone who was too heavily invested in technology during the late ’90s.

Lesson Learned

Whether it’s the lineup for this year’s releases or a decision on where to invest, diversification among the standard asset classes is the first rule of investing successfully and consistently.

LESSON 2 — IT DOESN’T HAVE TO BE COMPLICATED FOR IT TO BE EFFECTIVE

Hollywood

Years ago, I pitched many film projects to studios and learned the hard way that if you can’t tell your story in a few minutes or less, you’ll never get one made, let alone make it through the pitch. Every classic movie can be summarized to a single, simple sentence. If you make it any more complicated than that, forget it; you’ll never get it made. Learn from ET: “it’s a story about a bunch of kids that help a stranded alien get back home.” One sentence, $756 million dollars… just the way Hollywood likes it.

Investors

Here’s a simple sentence: the S&P 500 index typically outperforms most managed mutual funds. Period. Statistically, those who invest in the S&P 500 and nowhere else have a better chance of consistently making money than those who invest in a phone book of individual stocks, which are typically complicated and quite difficult to keep track of. For those who think trading individual stocks by themselves or through professionals earns more dollars, I offer a humbling fact: there are thousands and thousands of mutual funds in the country. Each fund has at least one, two or even more professional money managers who trade stocks all day long, trying to pick the winners. Of those many managers, guess how many have successfully outperformed the static, untraded, mindless S&P 500 more than 10 years in a row? Answer: just one — the legendary Bill Miller from fund company Legg Mason, whose extraordinary streak just recently ended.

Lesson Learned

While it makes little sense to put all of your money in one place such as the S&P 500, the concept prevails: you don’t need a complicated portfolio for it to be effective. Some of the most successful and rewarding investment engines I have ever built or tuned up are extremely simple to understand, easy to monitor and more rewarding than most people can possibly imagine.

LESSON 3 — IT’S THE DETAILS THAT COUNT

Hollywood

James Woods once told me that while shooting the epic ‘Once Upon a Time in America’, legendary director Sergio Leone shot a few dozen takes of a dinner scene just to get a spoon in the right place. Screenwriter Peter Shaffer wrote a few dozen full-length drafts of his masterpiece ‘Amadeus’, then another dozen or so to refine it. Writer/Director Cameron Crowe once said he spent well over a year doing absolutely nothing but writing one of the truly great screenplays in modern years — ‘Jerry Maguire’.

Investors

A financial advisor touts an appealing investment. It sounds decent, so without checking the facts, you agree to move money in, only to realize a month later that it’s an illiquid limited partnership managed out of Estonia that can’t be sold for another 18 years.

Lesson Learned

The fine print of any investment is more important than the window dressing itself. Ask questions and be sure to read the details; and if the spoon isn’t in the right place, take your time to get it right.

LESSON 4 — COSTS COUNT

Hollywood

An actor’s last movie grossed more than the Gross Domestic Product of Norway. He pitches his pet project and the studio green lights it. While everyone works hard for it to be a hit, the budget skyrockets out of control and the movie ends up $250 million in the hole before anyone ever lays eyes on it.

Investors

A star money manager with a fantastic track record takes over the reins at a popular mutual fund. The offices are filled with expensive furniture, great food, good looking women, a couple of espresso machines, fine art and a magnificent pool table. Who is paying for all this stuff? You are — whether you realize it or not, they are taking it right out of your account. It doesn’t matter whether the money manager makes or loses you money, it’s you who’s funding his salary and lavish overhead, and that’s not a very efficient use of your money.

Lesson Learned

Fees kill returns. The less they take, the more you make - a simple, yet extremely important rule for investment success. Take, for example, an investor I recently met who couldn’t understand why he wasn’t making much money. A review of his holdings led him to conclude he was paying a whopping 6% in annual fees and taxes on an investment portfolio worth $600,000. Over the seven years he’s been in it, that’s over $250,000 in fees and taxes alone. Ouch.

LESSON 5 — PLANNING IS KEY

Hollywood

Once “green lit” into production, a screenplay is broken down into extremely precise, line-item movie making elements: costs, schedules, camera shots, make-up, hair, costumes, props, scenery, stunts, transportation, and a thousand other things. On the set, minutes can cost tens of thousands of dollars, if not more. Regardless of how good or bad the script is, a well-planned production is an incredible, well oiled machine of extremely intelligent efficiency, with thousands of people who often know exactly what they are doing every moment of the day all building towards one definitive, concrete goal — the date of release.

Investors

A few years from retirement, you suddenly wake up wondering how you are going to generate enough income off your savings to support the lifestyle you always wanted. After a few last minute calculations, your advisor realizes you’re not going to make it. In a last ditch effort to save you, the advisor moves your money into the risky stuff and starts rolling the dice. Throwing for a high rate of return, unlucky 7 comes up and you unfortunately find yourself crapped out. Dejected, you realize that your working life is going to drag on a few years longer than you anticipated.

Lesson Learned

Most movies take many years to plan. The smart guys realize that success just can’t be rushed, it has to be nurtured. If your investments are to end up with an Oscar, hardcore planning always provides the greatest chance for success. Remember, this is your life we’re talking about, not some trashy two-hour drive-in movie.

LESSON 6 — CUT THE LOSERS, RIDE THE WINNERS

Hollywood

By 7 p.m. on opening night, movie studios can predict with incredible accuracy the revenue a film will likely generate. Even more startling is the DVD market. Due to sales tracking systems at Wal-Mart, it’s possible for the studio to accurately predict how much revenue it will earn by approximately 3 p.m. the day the DVD is released. What will the studio do if the film is looking like a dog? Do they pour endless money into advertising, hoping everyone will start loving it as much as they once did? No way. Advertising and marketing expenses are immediately cut, and in some cases, they are completely eliminated.

Investors

You buy a stock because you just love the company. For a while, it climbs… then the downward slide begins and it dips, and dips, and dips even more. You sit back and watch it do nothing but drop some more. But you just love that company. Your broker reinforces your emotions and keeps telling you “it will come back,” but it rarely quite does.

Lesson Learned

As much as the studio execs might love a film, they rarely let their emotions get the best of them. If something isn’t working, they just cut their losses and move on. When it comes to your investments, you need to do the same. A stock doesn’t know who you are; it could care less about you and it certainly has no emotional bond with you. Only you do. And as soon as you let your own emotions get in the way, bad things typically happen.

LESSON 7 — EXPERTS FOCUS ON REDUCING RISK, NOVICES FOCUS ON RETURN

Hollywood

Many films have nearly bankrupted their creators. ‘Hudson Hawk’, ‘The Last Action Hero’ and ‘Cutthroat Island‘ are just a few examples that come to mind. As a result, partnerships on expensive features are now the norm. Take ‘Titanic’, for example. James Cameron wakes up one day with an idea to make a film about two people that fall in love on a sinking ship. One short sentence, over $200 million to produce. So what does Fox do? They partner with Paramount to reduce the risk. It’s easy to look back and say they should have taken all the risk so they could have received all the return, but who would have thought Titanic would go on to become the most successful film ever made?

Investors

A few years back, The New York Times ran a feature article reporting where retired Federal Reserve Chairman Alan Greenspan invests his money. He stated that he invests 95% of his money in U.S. Treasuries. In another interview, Suze Orman said most of her money is tucked away in triple-A rated insured government municipal bonds. Each is focused on only one thing: keeping their money, not losing it.

Lesson Learned

It’s simple: If you don’t need the return, why take the risk? Don’t ever forget that. It could be one of the most important lessons you’ll ever learn.

LESSON 8 — DON’T REINVENT THE WHEEL

Hollywood

In the 1940s, writer and scholar Joseph Campbell wrote a legendary and timeless thesis entitled “The Hero With a Thousand Faces.” His exhaustive study concluded that regardless of plot, all great stories throughout history share a very distinct and common structural foundation: the hero is introduced in his ordinary world; he receives a call to action; he refuses the call; a mentor convinces him to cross over the first threshold into the unknown; etc. Whether the story is from the Bible, ‘Star Wars’, ‘Beverly Hills Cop’ or ‘The Lion King’, Conrad ingeniously demonstrated how every timeless story can be reduced down to a small handful of common elements.

Investors

Warren Buffet, along with many others including myself, consider Benjamin Graham’s timeless book The Intelligent Investor, the bible of investing. In it, Graham teaches us to invest not to maximize profit but to minimize loss; to use discipline, research, and analytics to make unpopular but sound investments in undervalued stocks. It is these principles that have fearlessly withstood the test of time and created significant wealth for Buffet and those who avoid the frenzy and stick to Graham’s most basic, timeless fundamentals.

Lesson Learned

The foundations of movie magic and intelligent investing were developed a very long time ago. Whether it’s your next screenplay or stock pick, following the tried and true while avoiding the “get rich quick” schemes hands-down gives you the best chance for investment success.

LESSON 9 — COMPLACENCY IS THE MOTHER OF ALL DISASTERS

Hollywood

The studio and production team can easily take a year to plan the shoot. However, when it comes to filming on location, anything can happen. My personal experience on a film I once produced include: stolen cameras, violent weather, an actor nearly overdosing on diet pills, an angry mob wielding machetes, a generator falling off a cliff, food poisoning, stray horses and a misplaced wardrobe truck a galaxy from civilization. Some of the sharpest people I’ve ever worked with have saved entire productions by anticipating, thinking ahead, taking action, and making rapid-fire decisions.

Investors

Check out Morningstar’s fund rankings. Take a look at the list of last year’s top performing funds, then look at where they are today. With rare exception, yesterday’s top performers are often this year’s Reservoir Dogs. Like a good film crew, the sharp investor understands that monitoring, rebalancing and updating a portfolio is essential for continued and rewarding success.

Lesson Learned

Stray horses and misplaced wardrobe trucks won’t kill you, complacency will. Whether it’s producing a movie or investing to make money, anticipation, action and quick decisions are the golden keys to anyone’s success.

LESSON 10 — DEFY CONVENTIONAL WISDOM AND TAKE SMART RISKS

Hollywood

Many of the most successful “breakout” films ever made have been the ones that crack the mold of conformity, think outside the box and go against the grain of conventional wisdom. ‘Pulp Fiction’ turned the standard three-act narrative structure inside out. ‘Memento’ ingeniously told the story backwards and ‘Unforgiven’ was one of the few films to successfully pull off making the villain the hero. Time and again, Hollywood has taught us that to stand out above the rest, you sometimes have to defy conventional wisdom, follow your gut and have the courage to stop thinking like everyone else.

Investors

Emotions typically get the best of us. When the market is crashing, many people sell their stocks, but guess what? For every stock that gets sold, someone on the other side has to buy it. Who are those beings buying your stock when the market is crashing? Aliens from another planet? Not quite. They are investors clearly going against the grain of popular wisdom, defying the masses and for better or worse, thinking outside the box. Likewise, there are many alternative investments - those that fly high above mainstream thought that could be a tremendous addition to a diversified portfolio, yet many people shy away from them simply because they are not “traditional”; the guy at the pool never heard of it, the accountant laughed at it or a bunch of people on TV said bad things about it.

Lesson Learned

If you enjoyed unconventional films such as ‘Unforgiven‘, ‘Pulp Fiction’ and ‘Memento‘, then you have a distinct appreciation for a willingness to take educated and intelligent risks. When it comes to investing, some of the very best “stories” out there defy mainstream thinking. Often, riches are made when thinking outside the box and educating yourself on ideas that are not otherwise in the mass mindset. Having guts is not about taking unnecessary risk, it’s about educating yourself and occasionally investing in things that sometimes the guy at the pool never heard about.

AND ONE MORE FOR THE ROAD — LESSON 11 - IF THERE’S A WILL, THERE’S A WAY

Hollywood

While making ‘Apocalypse Now‘, Francis Ford Coppola overcame a civil war, Martin Sheen’s heart attack, personal bankruptcy, unimaginable shooting conditions and a potentially distracting thing called “death”… yet, he defied mass adversity and somehow managed to get his classic film done. Then there’s Spike Lee who was literally dirt broke when he made his breakout film, She’s Gotta Have It. Lee’s book on the making of that film is a lifelong lesson in intense perseverance, fearless courage and laser focus. With only a few pennies in his pocket, Lee’s tenacity amazingly found a way to get actors, a crew, film, cameras, locations, costumes, sets, music, editing, and a truly fantastic finished product. End result: a stellar career filled with an extremely impressive body of work.

Investors

Some of the most successful investors I’ve ever met started out with nothing. I’m not talking about Trump the Billionaire, I’m talking about some truly incredible people such as Henry the Electrician, Kyle the Cop, Debbie the Mom, Lou the Barber, Stan the Piano Teacher and a long list of many, many others. Although they basically started with nothing, year in and year out they somehow found a way to stash a little money away, taking one tiny baby step at a time by investing in smart, tax efficient and low cost investments. End result: a fantastic retirement with an impressive standard of living most people would be extremely satisfied with.

Lesson Learned

Like most great film directors, Spike Lee “saw” his completed film far before it was finished and nothing stopped him from getting it done. Likewise, envision your movie the way you want it to play out, recognize there are no shortcuts without taking big risks and with the lessons above and the knowledge you’ll hopefully get from this, do whatever it takes to make sure your road towards or through retirement is nothing short of a happy ending.

Fade lights…

With the previews over, it’s now time to sit back and await further blog posts where I’ll get busy exploring the concepts above in greater detail so that your money can end up with a few Oscars of its very own.

So, stay tuned. There’s no time to waste and lots of money to make.

Close doors!

Lock set!

Roll sound!

… Lights – Camera – Action!

The feature presentation is now ready to begin …

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(The above is an excerpt from my book “You Can Never Be Too Rich … essential investment advice you cannot afford to overlook” that is due for nationwide release, November 2007, John Wiley & Sons, NY)

Free downloads from iTunes? … Is it possible? With a little extra attention to your investments, it most certainly is.

You see, other than someone who enjoys great pain, most people I know are always interested in ways to get higher returns on their investments without taking additional risk.

While I can talk all day long until the cows come home about the value of diversification or some “hot” stock tips I think will work out well in the near future, one area that gets far too little attention is how much you are paying on your investments.

Controlling performance is nearly impossible, but controlling how much you pay for your investments most certainly is. Unfortunately, for most people, this area is all too often ignored. Quite simply, reducing how much you pay for your investments increases how much money remains in your accounts. Therefore, it is tough to argue that if you reduce your fees, you automatically increase your returns without taking additional risk.

I was well reminded of this in the BusinessWeek interview I just did. Having a nice conversation with writer David Bogoslaw once again reminded me of how important paying attention to fees really is. An example I provided David was right out of the Vanguard website.

On that site, Vanguard offers a very simple example demonstrating the impact fees has on your investments. The hypothetical example shows how the fees on a $10,000 dollar investment will affect future account values. The example compares two mutual funds over a twenty year period of time: one fund has an annual fee of 1.3% and the other has an expense of .3%. Assuming both funds earn 8% per year and $5,000 dollars is added into each fund each year, the difference at the end of the period is $28,194. Put another way, the lower cost fund will have saved or earned the investor an extra $28,194.

To some people, $28,194 might not sound like a lot, but personally, I and many other people I know wouldn’t mind having an extra $28,194 laying around. The way I look at it, the extra $28,194 in my account basically gives my children a few years of free education or any number of other things I can attribute that money to such as a year of free Pizza, a lifetime supply of Jelly Bellys, a few months traveling around Europe, or, as the title of this blog states - 28,194 free downloads from iTunes.

Have you taken any time to research the fees you are paying on your mutual funds? Do yourself a big favor: check the fund’s expenses at www.morningstar.com, or, better yet, Lipper’s Personal Fund that shows the total and complete cost of ownership. PersonalFund also does a great job showing similar funds at a lower cost.

Taking some time to do this and making adjustments where necessary will no doubt have great impact on your investments, especially over time. If you are investing in managed mutual funds, consider lower cost index or managed funds offered by fund families such as Vanguard or Fidelity.

So, whether it’s Springsteen, Mozart, Elvis or anyone else your ears desire, do yourself a big favor: check those fees and maybe U2 will earn a couple of free downloads for yourself.

Ever taste court commissary food? The chicken is pitiful and the burgers would serve mankind much better if they acted like a puck at the next NY Rangers ice hockey game. Adding insult to injury are the prices. Toss in a few extra dollars and you can easily afford a few Spicy Tuna Rolls over at Nobu.Perhaps you’re thinking, “why is an article about financial advice discussing court commissary food?” I don’t blame you for thinking that, but the type of food I’m talking about isn’t just any court commissary food, it’s the food found at the worst type of court imaginable: Probate Court.

Have you ever heard of “Probate Court?” What a nightmare. Probate Court is the place where estates of the deceased are settled. While it’s by far not the most pleasant subject to address, if you are a parent or have parents, it’s something you at least need to think about now so that later on no one has to experience bad food or more importantly, the painful process known as “Probate.”

In most cases, when someone passes away, a Will dictates who-gets-what. The assets of the estate then get distributed and everyone goes home. But in some cases, “who-gets-what” may not sound as easy as you may think. All it takes is for one jilted minded person to step forward and say “I should have got that” for things to go bad. If matters escalate, the estate can then get sued and this is where one may find themselves in Probate Court.

Probate can be very time consuming, frustrating and quite expensive in terms of legal and other fees. Imagine: a parent passes and all it takes is for one person to come forward and lay a claim to the estate. Although it’s certainly not the norm, I have witnessed many cases where the transfer of assets has long been upheld in the Probate Courts.

To avoid loved ones having to experience Probate Court, one of the greatest gifts you or your parents could leave behind is something called a “Living Trust.” A Living Trust is a legal entity created by an estate planning attorney that owns assets that are fully controlled by the parent during their lifetime. At death, the Will nested within the Living Trust then dictates who-gets-what. If someone isn’t happy with their inheritance or an unscrupulous stranger lays claim to the estate, then that’s too bad - assets passing to heirs through a Living Trust generally cannot be contested, which is by far one of a Trust’s greatest attributes.

A Living Trust can also do many other things as well including, but not limited to (a), helping reduce estate taxes, if any, (b), provide other important legal documents such as Living Wills that grants designated third parties the legal authority to carry out the wishes of the incapacitated and (c), help ensure assets being passed remain in the bloodline of the family and not to anyone else such as son and/or daughter-in-laws.

Eliminating the possibility of probate by creating a Living Trust is one of the most important estate planning concepts you and/or your parents should strongly consider. And while I’m at it, here’s a few other things you and your parents should be thinking about as well:

1. Where are those documents? Needless to say, the pain of death is obviously quite devastating. Making matters worse is having to find important documents left behind. Do yourself a favor: if you or your parents don’t have all the important documents in one easy to find, well-organized and fire protected safe place - get it all together and secured as soon as possible. One never knows what tomorrow brings and mercy on the person that has to go through the hardship of trying to find important documents while going through the devastating pain of loss.

2. IRA and Qualified Plan Designations: the transfer of IRAs and other qualified plans such as 401ks can be a real mess for the person receiving the accounts. For IRAs, make sure the beneficiary designations are current. I’ve seen many cases where the IRA beneficiary designations were outdated, making the transfer of the asset to the new recipient not only a very frustrating experience, but one that sometimes caused harsh and unnecessary tax ramifications as well. As for qualified plans such as 401ks, I would strongly urge most people to consider transferring the 401k to an IRA to avoid many of the pitfalls that could come up when a beneficiary receives the account. Although new laws have made the inheritance of these qualified plans a bit more liberal, they still can be quite complicated and cause unnecessary taxes. In almost all cases, the tax-free transfer of a 401k to an IRA is one of the most basic essentials of a highly efficient estate plan.

3. IRAs Part II: if you have an elderly parent(s) and you are the beneficiary of their IRA, ask yourself what you plan on doing with the account after you receive it. If you plan on maintaining the IRA as your own, then that’s fine. Chances are likely that you can maintain the inherited IRA “as your own” and only have to withdraw what’s called a “Required Minimum Distribution” every year. Doing so will allow you to “stretch” the IRA over your lifetime and thereby reap the magical rewards of compounding interest through the tax deferred accumulation an IRA provides. But if you plan on cashing out the account to take care of various needs, then I would highly advise you and your parent(s) to seek council with a qualified financial and/or tax advisor. In some cases, cashing out an IRA or converting it to a tax free Roth IRA might make much better sense. There are many reasons to consider either or other possible directions not listed here, all of which should be addressed with a qualified tax and/or investment advisor.

4. Speaking of taxes, there are other Taxation Issues to address as well: within nine months following a death, beneficiaries of an estate have to file one last tax return for the deceased. Understanding taxes that could be owed at death and how they are going to be paid for is a very important part of the planning process that also should not be ignored.

5. Lastly, Long Term Care should be an essential part of any parental plan. If an elderly parent is to get sick, or require prolonged long term care assistance, then one must ask “who’s going to pay for it?” Perhaps a Long Term Care policy should be considered. But if a parent is elderly or not in great shape, those policies will usually be cost prohibitive. Will one have to use their own assets to pay for their assistance? It’s typically quite possible. Are there enough resources to take care of this? What about government Medicaid programs? There are many laws surrounding Medicaid and it’s possible to shelter assets from what is commonly referred to as “the Medicaid spend down” that requires a parent to basically go broke before the government steps in to help. Protecting assets against the Medicaid spend down is a highly complex process and one that requires the attention of a skilled elder care attorney. Failure to plan is a plan to fail and I would highly recommend this important subject be addressed so that there’s no surprises or unnecessary frustration later on.

It is often said “nothing could be worse than death.” I say, “the only thing worse than death is having to food at the Probate Court commissary.” All bad humor aside, do yourself a big favor: address the issues above with a qualified advisor and/or an estate planning attorney so that a potentially painful process will be a bit easier to endure thanks to a little planning that will no doubt go a very long way.