Investment Planning

Investment Planning

A key part of building wealth is your investment portfolio.  Beginning with an initial investment planning session we take time to get to know our clients and their situation.  This helps determine financial goals and investment objectives, identify key financial resources, and a client’s overall tolerance for taking risks.

Risk is a very important variable in the investment process and some investors are unable to match their investment portfolio with the level of risks they are capable or willing to accept.  Other investors can focus on short-term risks and become too distracted by exterior noise, unable to see the benefit of time.  This is where we can help.  Due to our years of experience, including periods of volatile and declining markets, we are able to help clients better identify and deal with investment risk, and in turn help them give time a chance to work in their favor.

As we get to know our client it typically becomes crystal clear what their portfolio needs to accomplish.  For instance, some may need a certain amount of income blended with some growth to make their assets last.  This type of client may have very little investment time remaining and wants to avoid exposure to major losses.  Others may need growth and may have the required time necessary to accumulate wealth.  Each of these desired results dictate certain investment strategies and skills to accomplish.  From all of the information gathered in our investment planning session, asset allocation and investment selection is crafted to eventually develop a sound investment portfolio.

Asset Allocation

Asset allocation is an important stage in the investment process that some investors will skip, thinking they can simply pick the “hottest” investment at the moment.  However, history shows that approximately 80% of an investor’s return comes from allocation.  So, the time we spend crafting a client’s overall asset allocation can be key to their investment success.

To help mitigate downside risk we pay attention to the investment correlation of various investment sectors and market movements.  For instance, when internal risk-return assessments for the market and other variables change, one strategy is to tactically adjust the strategic allocation to broader asset classes which may be undervalued and provide a more efficient, risk-adjusted return.  Another strategy is to insert alternative assets into the portfolio.  This category can help offset inflation as well as possibly reduce the correlation of the overall investment mix during times of market volatility.  We believe that keeping the allocation process dynamic can add value (ALPHA) to the investment portfolio.

At the end of the day, asset allocation is a key element of our client’s overall investment strategy.  As investment advisor, we monitor issues in the market and economy as well as other variables on a regular basis to maintain an appropriate allocation.  When indicators dictate we will periodically suggest changes that we believe may help a client improve return and possibly reduce investment risk over time.

Investment Selection

Another important step in the planning process, asset selection can add “ALPHA” for our clients.  Once a strategic asset allocation has been developed the client then needs to select the appropriate investments for the portfolio.   This step is the “nuts and bolts” of our investment process and is where we can find opportunities for our clients that can strengthen their portfolio over time.

Whether mutual fund, ETF (Exchange-Traded Fund), stock, bond, REIT, or futures contract, we use a variety of techniques and strategies to find the assets that can be purchased at the right price to provide an attractive risk-adjusted return for a portfolio.  As a firm, we maintain internal preferred investment lists for all asset classes.  For example, within the mutual fund category we maintain a list of over 300 mutual funds across 30 different asset categories that we rank with our proprietary investment metric system.   Within this system, we utilize approximately 15 various weighted metrics to develop our own investment rankings with the appropriate investment managers.  As opportunities arise in certain broad asset categories, we know which specific mutual funds to purchase to capitalize on market changes and to hopefully generate ALPHA.  Conversely when “active” managers can’t add value we are flexible enough to insert “passive” investments such as indexed mutual funds or ETFs to the portfolio.

We believe over time this active, ongoing process of finding and selecting the right assets helps our clients control their investment risks and adds value to their portfolio.

Portfolio Monitoring & Reporting

As most of our clients are long term investors, we believe sticking with an investment can be prudent.  We also realize that sometimes assets and investment strategies have run their course, are fully valued in the marketplace, and are in the process of consolidating or reverting back to the mean.  As a result, we may suggest taking profits within a portfolio so a client can reallocate to tactically capitalize on other asset opportunities.

Regarding reporting back to our clients, we have been hired to help our clients accomplish specific goals and objectives and we want to stay accountable to them and their desires.   Therefore, we monitor our client’s investment portfolio performance and provide periodic “investment updates” or reviews.  For comparative purposes benchmarks can be provided to help gauge investment results.

During these client meetings we discuss the performance of the portfolio, suggest any tactical investment changes, and find out if client goals or investment objectives have changed.  Good, open communication is encouraged and is important to this process.  We have also found these meetings serve as a very good time to review someone’s overall financial situation and possibly suggest other financial planning strategies that may help our clients stay on track, avoid costly mistakes, as well as take advantage of financial planning opportunities that sometimes arise.