Investment planning begins with identifying one’s financial goals, and then developing a plan to achieve those goals. In doing so, it usually involves evaluating their investments. In short, if one were to obtain a high rate of return, their portfolio will provide remarkable growth over time. However, if you want a high rate of return, you need to be prepared to take a lot of risk. Conversely, if you want little to no risk, then you won’t get very much for a rate of return. Well, most people are somewhere in the middle.
In fact, the single largest component of risk is time. For example, if you don’t need to access the money for 20 or 30 years or more, then you can afford to take market risk. However, if you need the money in less than 2 years, you can’t afford to take risk. After all, wouldn’t it be silly to invest money that you need in a year, and half of it has been lost when you need it?
When it comes to investing, it also needs to incorporate tax planning. Remember, it’s not how much you make, but how much you keep. Beyond the tax planning component, we also believe in the development of balanced, well-diversified portfolios that are fundamentally constructed to meet the client’s financial goals, as well as their risk tolerance and time horizon. Oftentimes, we meet clients who have portfolios that contain seemingly 5 different investments, but upon further analysis, they have five different versions of the same investment and are subsequently not diversified.
In conclusion, we review our clients’ portfolios whether they are held through our firm or are held at their company’s 401K. Oftentimes, we find ourselves guiding our clients so that their 401K accounts are coordinated with investments held at our firm.