Investments don’t have to be complicated! We believe that you should understand the investments that you own, why you have them, and how we came to recommend them.
Most people want a portfolio that provides assets with the potential to benefit when the markets rise, while mitigating loss during the inevitable downward periods. Investing in a mix of stocks (for growth), bonds (for stability and income), and cash (for liquidity and safety) generally can help maximize this dynamic over the long term.
Process, Not Product
Instead of trying to time market fluctuations, finding the top market sector or picking a "hot" stock or mutual fund, we spend more of our time up front, designing a diversified portfolio that’s appropriate for our clients’ goals.
To that end, through various conversations with a client or a couple, we work our way through the following process, which helps us determine the best way to structure an account or a portfolio:
- Determine the purpose and time frame for the funds in question. Common goals for investments are to provide for retirement or college, or to save for the purchase of a home.
- Discuss and set a reasonable target growth rate, and compare that to the risk level needed to achieve it. For this we use both measurement tools as well as comprehensive discussions.
- Design and implement the portfolio, typically using mutual funds as the building blocks of our portfolios. This is because mutual funds, used correctly, can provide diversification, low expenses, and professional management.
- Monitor the portfolio over time for appropriate growth or income, and compare the portfolio’s behavior to our original expectations.
- Rebalance or adjust the investments as necessary, usually no more than once a quarter, and often only once a year.
Pro-Active, Not Reactive
Most of the hard work is done on the front end of investing an account or portfolio, as we work to understand how the funds in question need to grow or to create income in order to support a client’s goals.
Creating a diversified mix of cash, bonds and stocks and then monitoring this mix is the key to a portfolio that can grow or create income over the time period needed.
Once successfully structured, a well-diversified, thoughtful investment portfolio should be able to weather the inevitable market fluctuations over a long period of time, so that it achieves the goals that clients set for it.
