Broker Check

Your Investments May Not Need an A+

| February 13, 2017
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Ok, before I even begin, I want you to know that I believe your investments are important, that their results are important, that we should spend a lot of time making sure your investment strategy is appropriate for your goals. There I said it…

But, for all of the focus we put on our investments, one would think that it was critical that we get a grade of A+ when it applies to them. By A+, I mean off the charts investment performance. Certainly investment advisors who want you to hire them think that. Certainly, companies who manufacture investment products want you to think that. But, as a previous mentor of mine used to say, “it may not be the main thing.”

You see, there are so many decisions that we make throughout our lifetime that have a far greater impact on our financial results than simply our investment results. For example, at what age we start saving and how much we save is critical. Decisions around how much house to purchase are important – too much house, much less to invest and grow. Having no plan to pay for our children’s college and having to withdraw money from an IRA and losing a big chunk to taxes. Buying that beach house thinking it is going to increase in value, only to see the housing market crumble and no one wanting to rent it. Putting a bunch of your investment funds into your company’s stock and watching the company go bankrupt.

During my career, I have seen these decisions made - along with countless others; all of which had a bigger impact on families than their investment results. So why do I bring this up? Because your ability to plan your financial future (set goals and develop a plan to move toward them), assess and manage risk, make sound decisions along the way and have a process to determine if you get off track are the critical processes necessary to work toward optimal financial results.

Now, let me come back to your investments. The world of marketing wants you to think you need the newest, most beautiful, most flashy, most trendy…everything! Including companies who want to sell you their investment products. They want you to believe that, if you buy their product, you will get an A+ on your “Investment Project.” Well, maybe you will. But, I think that’s the wrong focus.

We like to match a client’s investment strategy to their financial goals, to their investment time horizon, to their need for income, and to their ability to withstand the ups and downs of the market. We think things like diversification, lower expenses, low levels of trading, tax management and disciplined rebalancing are important. Not many of our investments are what the world of marketing wants you to buy – we tend to shy away from flashy. We think investment process is “the main thing,” the vehicle to help you move toward your goals.

My Father always used to say “Strive for the optimum and achieve what is attainable.” So, let me encourage you to strive for an A+ in the processes that you can control: Financial Planning, Investment Management, Risk Management, Decision Making and Goal Monitoring. If you do this well, you may very well find that you receive an A+ on your “Investment Project.” But you may also find that you were able to get an A- on your “Investment Project” but an A+ on your “Achieving Your Goals Project.” Which grade would you rather have?

And, what is your second half strategy?

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