Welcome back. In our last message to you, we introduced our three-part series on how we choose the funds we use—even in volatile markets like the kind we’ve been encountering lately. We eliminate the speculative, or traditional active product providers, weed out selections that simply do not align with the patient perspective we take for building or preserving durable wealth and keep only the best of the best. Then we inspect the way they package their investment opportunities.
Who are you, and what is your money about? Having described our best practices for identifying quality investments built to last through volatile markets, we arrive at Step Four, which is about identifying solutions that aren’t just ideal in general, but are also expected to be ideal for you.
Step Four: Incorporate Your “You” Into Your Investments
As our next step, we need to get to know you very well, so we can identify where you are planning to go. Even world-class investments won’t do, if they don’t align with your personal tastes and unique financial circumstances. For example:
Personal Circumstances: There are any number of details that might influence the specific selections we’d recommend for your evidence-based portfolio. How long do you have to invest toward your various goals? What are your cash flow wants and needs? Are you a business owner? What are your legacy plans? These and other fundamentals can influence not only how we structure your investment accounts, but which specific holdings to tilt toward or away from.
Risk Tolerances: Are you comfortable taking big risks in pursuit of greater rewards? Conversely, you may prefer only the most tried-and-true solutions, with decades of dependable performance data on record. Your portfolio can be tailored in either direction, while maintaining an evidence-based approach either way.
Taxable Tradeoffs for Existing Wealth: Most investors arrive with existing investments—good, bad, and ugly. In pursuit of perfection, we must carefully account for the costs of transitioning toward a more cohesive portfolio. This includes accounting for the “space” in your existing, tax-sheltered accounts, as well as the tax ramifications of selling less desirable taxable positions. Upfront and ongoing, we perform cost/benefit analyses to identify when our preferred investment selections should be in your best interest, and when tradeoffs may have to do.
Ideal Application for Your Income Streams: Different selections also may make more or less sense for assets you’re adding to your investment portfolio. For example, even if your company retirement plan doesn’t offer ideal selections, it may still be among your best, most tax-wise investment vehicles—especially if your employer is matching your contributions. After all, free money is hard to beat. For the income you’re directing to your retirement plan, we’ll make appropriate recommendations based on what’s available in the plan.
There is one more important step to discuss before we wrap. Even for patient, long-term investors, things change. Then what? That’s where Step Five will come into play. Stay tuned.