financial planning

All or Nothing

© Can Stock Photo / agencyby

We keep hearing reasons why financial advisors should have 100% of every client’s invested assets, instead of some fraction. This theory is popular with… financial advisors.

You might guess we have a contrarian opinion on this subject, like most subjects. Our theory is that we end up with all the business we deserve. Since you who own the money are the judge of that, we are relieved of the burden of worrying about it. We don’t want any money in our shop that doesn’t want to be here, after all.

There are sound reasons to consolidate assets in one place – including lower costs through volume discounts. But some may prefer not to do that, for whatever reason.

Our investment approach is different than most. Rather than use the standard pie chart approach of owning a little bit of everything, or outsourcing investment management to some third party somewhere, we do hands-on research and our own thinking, using individual securities as appropriate. So our work is a useful diversification, something different, from run-of-the-mill conventional portfolio management using investment products instead of stocks and bonds.

When somebody wants to allocate a fraction of their wealth to our care, it is fine by us. We already know how much business we will ultimately end up with: all that we deserve.

It turns out that remembering whose money it is not only respects the people who engage with us, but also reduces our stress.

Clients, if you would like to talk about this or anything else, please email us or call.


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

20/20 Foresight

© Can Stock Photo / leolintang

The New Year is upon us. Like Opening Day of baseball season, the first day of school, or any other beginning, it is a good time for plans and planning.

We’ve been able to focus on strategic issues in recent weeks, ones that will shape our work for you in the years to come. The general theme? Build an enterprise that will serve you well, and be durable enough to outlive me.

While we work ON the business, of course, we also need to work IN the business, taking care of things for you. Fortunately, we know exactly what the stock market and the economy are going to do: go up and down, same as always. Time tested principles and strategies will always be the foundation of our work with you. They do not eliminate the ups and downs, but they improve the odds we will survive them and come out on the other side.

The items on our list are wide ranging. The more significant ones: finding and developing more good people to join the team, figuring out office space, determining whether we need to form our own Registered Investment Advisor, guiding the evolution of our offerings, and building a more robust financial planning process.

But enough about us. What about your strategic issues? If you want to talk about retirement, changing where you live, sorting out who should get what after you are gone, or simply where to invest for the long run, email us or call.

Hammer or Pliers?

canstockphoto14054970

Recently a client asked us a common question. With a little room in the budget, should more money be added to retirement savings, or a regular investment account? Which one is better?

Of course, the answer depends on the situation. In the early and middle career stages, one might not put funds to be used before retirement into a retirement account. Saving for intermediate term goals like buying or trading homes, or buying a boat or camper, perhaps should be done outside of a retirement account.

But getting it down to fine points, some retirement plans have provisions for using money before retirement without penalty. We believe you can gain an edge by paying attention to the fine points. We like to outline all the alternatives so you can make a good decision.

On the other hand, money to be devoted to growing the orchard – a pool of capital that you may someday live on – should almost always be sheltered from taxes, if possible. This typically means into some form of retirement plan. The tax advantages may make a big difference over the years and decades ahead.

And retirement plans come in different flavors. Individual retirement accounts, employer plans of various kinds, Roth… there are many options.

Just as one cannot know whether the better tool is a hammer or a pair of pliers, one cannot know the best way to invest without understanding the job the money is supposed to do for you. That’s why we talk back and forth! You ask us things about our area of expertise, we ask you things about yours. A meeting of the minds is just the thing to make progress, with a collaborative process.

Clients, if you would like to talk about this (or anything else), please email us or call.


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

 

Taking Stock

© Can Stock Photo / gajdamak

One of the things we do periodically with you is take stock. Having a periodic review helps us stay in touch with what is going on in your life. It’s also a good time to review your holdings, the economy and the markets as well. The items to discuss fall into these two basic categories.

  1. Planning – connecting your money to your life.
    1. Cash flow needs, saving, spending and lifestyle.
    2. Thinking on retirement.
    3. Plans for residence, if any, moving or major remodeling.
    4. Estate and trust considerations.
    5. Other objectives, special considerations, taxes.
  2. Investing – your portfolio and the markets.
    1. The role of volatility in long term investing.
    2. Risk tolerance discussion.
    3. Time horizon review.
    4. Our assessment of opportunities and risks.

Of course, we spend a lot of time working with you when a money question comes up. You can ask us anything, any time. If we don’t know the answer, we’ll do our best to find it.

Clients, if things are happening we should know about, please email us or call. Otherwise, we’ll be in touch by and by.

Navigating Life

© Can Stock Photo / nicolasmenijes

I have never been what they call “an early adopter.” Even at the dawn of the personal computing age, my strategy was to figure out where the leading edge of technology was, and take two steps back. So it may not surprise you to know I am fairly new to the world of smart phone navigation.

The way those systems work reminds me of the way we approach life here at 228 Main:

1. Start where you are.
2. Proceed by way of your plans.
3. Arrive at your dreams.

When the phone maps a route for you, it never says “Gosh! There are a lot of problems where you are. It’s too far to go! Maybe you should wait for a better day to go.” It simply takes your location and starts to make plans.

Once underway, if you get off course, the phone figures out whether it is better to go back the way you came, or take a new route to the same goal. One way or the other, it wants you back on track. It won’t let you go mile after mile the wrong direction.

If you don’t know where you are going, any road will do. So one of the basic requirements is knowing your destination.

When we think about our work for you, there are many similarities. We begin by understanding where you are, your starting point. We invest time in learning your goals (or dreams), helping you clarify them if necessary. Where you are, where you want to go: it is about the same as using your phone to navigate.

Then we do the work. Sort out the best path to get you to your dreams. Check in and monitor it to make sure you are still on course. Provide midcourse corrections if needed. And communicate continuously with you.

Clients, if you would like to talk about this or anything else, please email us or call.

Letters To Our Children #6: Investing, A Tale of Three Buckets

© Can Stock Photo / kevers

We talked about human capital, the traits, characteristics and skills you possess which others value. This is the source of your earning power. When you spend less than you earn, you develop savings. Our topic today is how to manage those sums.

Think of having three buckets. The first one you have is short term. This is where you go to find money to deal with emergencies. You also use the short-term bucket to save for annual expenses like real estate taxes or insurance premiums. This bucket must be stable and liquid, to provide money when you need it. Returns are secondary.

On the other end, you have a long-term bucket. If you ever hope to retire instead of going to work every day, or accumulate wealth for other long-term goals, you need one of these. Unlike the first bucket, this one may endure more volatility in the hopes of garnering higher returns over a long time horizon. You should plan on not tapping this bucket except for those long term goals, short of an emergency which can be met no other way.

Naturally, the third bucket is in between. You may have goals for things that happen in a few years, on an intermediate time horizon. It might be for a major purchase like a boat or camper, to meet educational expenses for a child who is a few years away from college, a down payment on a home you intend to buy at some point in the future.

Not surprisingly, the third bucket may balance stability and higher returns with a middle of the road approach. This is in between the strategies of the short-term bucket and the long-term bucket.

There are other aspects of investing that we will explore in future letters. But the idea of three buckets is a helpful way to understand the functional purposes of investing. You will need to know something about the basic kinds of investments, styles of investing, some tax considerations, and the options available in retirement accounts.

Clients, if you would like to talk about this or anything else, please email us or call.


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

Letters to our Children #4: Create Your Own Adventure

© Can Stock Photo / dolgachov

Narratives, or stories, are how we understand the world and our place in it. They may play a powerful role in helping you form and reach your major aims. For example, my own narrative about working to age 92 has given our enterprise a vitality and dynamism that those coasting toward retirement may lack—among other benefits.

While your story is highly personal and unique, we often see these three patterns:

1. Younger clients are often aiming at building financial security, establishing homes and careers, within the longer term goal of becoming financially independent.
2. Some of our clients are retirees whose narratives involve being a good steward of their wealth, enjoying life by living modestly but well, and aiming at leaving a legacy to succeeding generations.
3. Others are more focused on travel or other things that were not possible during their working years, and having the cash flow to comfortably support those things.

The foundation of your narrative is your core principles, or what you are trying to do with your life. When your story connects with the most fundamental thing about you, it may be more likely to become true. What are the three most important things in your life?

Where and how do you want to live? What role will family play in your activities? How will you spend your time? Will you work at something you enjoy for pleasure in later years? Is entrepreneurship in your future?

You do yourself a big favor when you realize that life is your own adventure. You can create it.

Sometimes your story has to change because life happens. One chapter ends and a new one begins. We are almost never done with new chapters and new stories. Resiliency and adaptability, making the most of what you have to work with, are useful additions to any story.

Clients, if you would like to talk about your story or anything else, please email us or call.

Saving for a Successful Retirement

© Can Stock Photo / 4774344sean

When you picture a successful retirement, what does that look like to you?

To some people a successful retirement means luxury cruises, European vacations, and a big house with a pool for the grandkids. To others a successful retirement might mean a quaint cabin with a porch to watch the wildlife from. Some people picture retirement as never having to work again, others might view retirement as a new stage in their working career where they can focus on their hobbies and passions.

The answer to this question is going to have a lot of impact on your retirement planning. If you want to build your dream house and have a second vacation home on the beach, you will need to save a lot more than if you just want a quiet cabin near the fishing hole.

When you go looking for financial planning advice some sources will recommend saving as much as 25% of your earnings for your entire working career. We have known some impressive savers in our day and watched them build incredible nest eggs through the magic of compound returns. We know many more who saved far less than that, though, and not many of those would consider their retirement a failure.

A cynic might conclude that financial planners have a vested interest in trying to convince you to save and invest as much money as possible with them. A more charitable interpretation might be that they want to make that luxury retirement lifestyle possible for you. That takes a lot of money, and if that is the retirement you want you would do well to heed those aggressive saving recommendations. But you might also consider whether that is the retirement lifestyle you want or need and adjust your financial plans accordingly.

There is no one size fits all plan for retirement, and you might not even know what you want to do with your retirement at this point. Obviously, the more you save, the more options you will have in retirement. But we think it is also important to have a little fun every day. You never know how long you have left, and it does you no good to live like a monk to fund a retirement you may not get a chance to enjoy.

Clients, if you would like to discuss your financial planning, please call or email us.


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

Letters To Our Children #3: The Outlines of Planning

© Can Stock Photo / gina_sanders

The object of planning is to figure out your primary aim or goals in life, and what you need to do to get there. The habit of rethinking these things from time to time and assessing your progress keeps you on track.

It is helpful to think in terms of narrative – stories – that describe what you are thinking about. For example, if your story involves retiring to a home in the mountains, your life between now and then will be shaped by that goal. You might vacation in your intended destination, get a feel for the lifestyle, the real estate market, activities, how your life might look in retirement. The narrative may motivate you to do what you need to do to make it a reality some day.

No matter how distant your goal, you’ll be better off if you know how much wealth you might need to get where you want to go. So there is some arithmetic and financial planning to do.

Getting down to details, we think there are several broad categories that need attention in a comprehensive plan. People are better off when they think about and manage:

• Human capital, or earning power, and careers.
• Investing wisely, managing financial assets.
• Spending well, managing the budget and liabilities.
• Residential plans, where do you want to wake up every day?
• Educational funding plans for children or other relatives.
• Retirement intentions.
• Exposures to loss.

In subsequent letters, we will get down to details in each of these areas. Clients, if you would like to talk about this or anything else, please email us or call.


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

Letters to Our Children #2: The Journey

canstockphoto4993676

This project is rewarding, from our perspective. We are crowd-sourcing the topics for these letters to our children about money and life. Your response has been terrific.

A wise person among you suggested ‘enjoy the journey’ is key. It makes sense to talk about this early in our series, since it has everything to do with how we go about life. The implication is that the journey, not the destination, is the important part.

When you think about it, arrival at a destination (or achievement of a goal) is a temporary thing. Once the goal or destination is reached, you’re there. Then what? A new goal, a new destination. We spend far more of our days on the way than in actually arriving.

In financial terms, the satisfaction of saving something every payday is a way to enjoy the journey. The destination, perhaps a pot of wealth big enough to retire on, is a long way off during the early and middle phases of your career. It is hard to focus on a destination that may be decades away. It’s much easier to get in the habit of enjoying small steps along the way – the journey.

Recently, in the security screening line at the airport, a fellow traveler in an adjacent line loudly inquired why the conveyer belt on the baggage scanner up ahead was stopped. The identification checker replied they did not know. “Well, don’t you think you better go find out?” Of course, the belt frequently stops when additional scrutiny of an item is needed.

The traveler immediately in front of me got to the identification checker, who asked “How are you today?” The fellow quietly replied, “Terrific. I’m grateful I’m not THAT guy,” nodding toward the foot-tapping, sighing, unhappy person. All within earshot were smiling; the dyspeptic was unconscious of his role in the conversation.

This vignette is a case study in literally enjoying the journey—or not. It’s about making the most of where you are, what you are doing, who you are with.

Our focus in this series will be more on the process, the getting there, the journey, not checklists of goals one ‘should’ accomplish. We believe this is the happier path.

If you have questions about this or anything else, or more topic suggestions for this series, please email us or call.