Gain Clarity, Calm Emotions, and Reach Your Financial Goals by Taking Advantage of Our 5-step Investment Process

How can you grow your portfolio to provide the income you will need in retirement?

How can you generate the income you need from your portfolio once you are in retirement?

How can you preserve your capital and avoid downside risk?

How can you stop worrying about the stock market and its impact on your financial goals?

The answer is our 5-step process which ensures each of our client’s investment portfolios is aligned with their financial goals and optimized to provide the highest return possible while considering the risk that is being taken.

Step 1 – Goal Identification

We understand that every investor has unique financial goals that they want to achieve.  However, many investors have only a vague idea of what they want to accomplish with their investments.  The first step in our process is to help you determine what you are trying to achieve and putting these specific financial goals down on paper.  This step allows you to rank your goals in order of their importance, determine the reasonableness of achieving them, and provides a road map to understand if you are on track to achieve them.

Step 2 – Time Horizon

The next step in our process is to establish a clear time frame for each goal.  We have analyzed market returns dating back to 1926 and the message is clear – stocks are great long-term investments but can have very poor short-term returns while bonds provide safety in the short-term but generally below-par returns for long periods of time.  Common sense says that investment portfolios designed for goals with a long time horizon should differ substantially from those intended to achieve short-term goals.

Step 3 – Risk Tolerance

Once we have established a time horizon, we determine an appropriate risk tolerance for each goal.  We believe there are three basic aspects to risk management that all investors should consider before investing – the willingness, need, and ability to take risk.

  • Willingness – some investors are not willing to see much fluctuation in their account values.  These investors can achieve their goals but their path will be different from investors willing to take on more risk in search of higher returns.
  • Need – If you are ahead of schedule in funding a particular goal, you may not need to take additional risk and can accept a lower return in order to preserve your capital.  On the other hand, if you are behind schedule in reaching a goal you may need to increase the risk of your investments in order to earn higher returns.
  • Ability – If your goals are in the near future, you may not have the ability to take added risk in order to seek higher returns.  If you still have plenty of time until the goal date and your portfolio is not on track to attain the goal, you may have the ability – and need – to take on additional risk to allow your portfolio to grow.

Step 4 – The Bucket Strategy

Once your goals, time horizons, and risk tolerances are established, we separate each goal into its own bucket.  We open a separate account for each goal – what we call a Separate Goals Account™ – for each one.  Each account is then invested using the appropriate asset mix given the details of that particular goal.

The Bucket Strategy provides two main benefits:

  • First, it dramatically reduces the typical emotions that plague investors and cause them to buy and sell at precisely the wrong times.  By keeping money needed in the short-term safe, our clients are able to not panic when markets decline and are confident that they can wait for their long-term portfolios to recover.
  • Second, you can track each goal separately so that you always know where you stand relative to achieving your goals instead of having all of your money in one account and not knowing if you are ahead of or behind schedule.

Step 5 – Portfolio Management

The last step in the process is on-going management of each account.  We consider several factors when managing each portfolio.

Proprietary Glide Path

Over time, as our client’s financial goals approach, we gradually lower the risk of their portfolios by selling stocks and buying bonds. Our Glide path provides long term investments time to grow and assures money needed in the short run is invested more conservatively.

Diversification

We diversify our client’s portfolios both between stocks, bonds, and cash and also within each category.  Diversification reduces the risk that any particular investment will have a large adverse impact on the portfolio.

Fund Selection

We add value by choosing several proven active managers for our portfolios and utilize managers that employ different yet complimenting strategies. We select the best managers from each asset class and utilize many fund families to diversify strategies, processes, investments, and economic outlooks. Our managers typically have:

  • Over 10 years of solid performance
  • Repeatable and understandable strategies
  • Flexibility in each asset class

Rebalancing

As prices change in the stock and bond markets, the asset allocation of a portfolio can veer off track.  Rebalancing the portfolio when market movements cause these changes is an important part of portfolio management.  We monitor our clients’ accounts for deviations from the intended asset allocation and, when they occur, sell some of the investments that are up and buy some of those that are down – a systematic way to buy low and sell high.

By Completing the Five Step Process, You Can:

  • Establish an easy to understand investment plan tailored to your specific situation
  • Clarify exactly what you are trying to achieve with your money
  • Determine if you have (or when you will have) enough money to retire
  • Evaluate your willingness, ability, and need to take risk in your investments
  • Adjust your plan to ever changing circumstances
  • Improve your financial situation
  • Avoid financial setbacks
  • Transfer assets to heirs while avoiding unnecessary tax burdens
  • Stay on track to achieve your financial goals

The care and thoroughness of our proven, research-based Investment Planning Process provides answers to your financial questions.  To get your own answers we invite you to schedule a free, no-obligation consultation by contacting us at (904) 248-9871 or via our contact page.