A Fresh Approach to Investment Planning
 As we think about improving our approach to investment planning, I'd like to suggest the following assumptions to guide us: 1) A significant percentage of the variance in our portfolio is determined by how our assets are allocated; 2) The upward and downward changes in the stock market require diversification approaches to portfolio strategy; 3) An investment platform that provides a mix of strategies is the best way to meet long term needs and diversify risk in portfolio management decisions.Regarding Point 1, I think most of us have been preached to about the importance of asset allocation, and it is very important. What 2008 demonstrated; however, was that no matter the allocation, unless it was only cash, our portfolios went down. We found out that no matter the allocation when markets go down our portfolios go down as well. So allocation, by itself, is not the answer to a successfully managed portfolio. That brings us to Point 2. We also need to create portfolios that allow a portion of our investment dollars the flexibility of moving between strategies, based upon our pre established risk tolerance, in order to take advantage of changes in the market place. Point 3. We can accomplish the above by working with a financial adviser who has access to an investment platform with different investment choices and strategies. |
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These investment platforms are available through a number of different
investment companies. In some cases l, but not all, these types of investment programs are provided on a fee based platform. This allows the asset managers the maximum flexibility of trading assets without any per trade costs or commissions for that activity. Instead, an annual fee is assessed on the value of the portfolio, usually in the area of 2% or less. These types of fee based programs do have investment minimums, some as low as $ 50,000.00 but more likely in the $ 100,000 to $ 200,000.00 range. The larger the investment is, the lower the fee. However; if your risk tolerance changes you can discuss with your financial adviser changing the allocation whether it be more conservative or aggressive. The reality is that to successfully allocate assets and employ diversification strategies that make a difference a certain level of dollars needs to be available to provide for the success of the investment plan. |
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So when you meet with your financial adviser ask about the different approaches to investment strategies that can allow you to better protect you investment capital, provide for a reasonable income upon retirement and, in the meantime, offer realistic growth opportunities within your risk comfort level. We are always available to discuss any investment questions you may have and will gladly provide an analysis of your existing portfolio and how its performance compares to your goals and objectives.
Richard M. Sandy |
