Business • Estate Planning

Want To Earn An Extra 3% Annually On Your Investments? It’s Time To Get Help

You Need A Partner

Whether Atlantic Wealth Partners or another Fiduciary, you need an advocate to help position you to stay on track to meet your goals and provide guidance to avoid common, investor biases and pitfalls.  As a result, advisors are often able to mitigate risk and enhance the growth of your capital.  Such investor biases include:

  • – Over concentration of a single stock or specific type of investment
  • – Following the latest investment fad
  • – Allowing emotion to override reason
  • – Taking too much or too little risk (either financial or emotional)
  • – Hindsight, short-term memory & status-quo biases
  • – Over-confidence

A 2016 Vanguard Study estimated that the value an advisor can provide their clients is “about 3%” on an annual basis through a combination of portfolio construction, wealth management and behavioral coaching. This is in addition to any value that an “expert” in the Florida Retirement System and your Local Agency’s Municipal Pension plan can add through effective financial planning.

Because of the unique circumstances of your family, a comprehensive and holistic financial plan is in order and your investment portfolio should be designed with considerations to your family’s complete financial picture, retirement & lifestyle goals, and your financial and emotional volatility tolerance.  It should not be a ‘set-it and forget-it’ approach, nor a daily meddling strategy, but rather a vetted and deliberate approach that sails steadfast through the market fluctuations.

The Greater The Risk, The Greater The Return

This old cliché is an accurate statement; one cannot achieve greater returns without taking on additional risk. What most people fail to realize, however, is that their portfolio is often taking on more risk than necessary to provide the same rate of return. This imbalance is often created by:

  • – Poor asset allocation
  • – Poor underlying investment selection
  • – Failure to keep score and rebalance your account to Capture Accounts (the prudent, proven approach to “buying low and selling high”)

You can’t time the market. Rarely can anyone beat the market, consistently. Anyone who claims they can usually ends up broke or behind prison bars – or both.

Keeping Score

Keeping score is important. After all, the name of the game is to either: a) grow your capital or b) create income.

To effectively keep score, you must benchmark the risk you’re willing to take against the portfolio itself and then compare the portfolio to the appropriate benchmark – which is typically NOT the S&P 500, DOW or NASDAQ Indices.

Why not?

Where most people fail – and create undue and unnecessary anxiety – is by “chasing” the market returns of their friends, family and what they see in the media. The reality is, your portfolio is likely deliberately not positioned to realize the same upside or the same downside. Your returns will not typically look the same – and nor will the drawdowns.

Reaching Your Goal Through Contributions – The Value Of Dollar Cost Averaging

When should you choose to purchase individual stocks or mutual funds?  Daily fluctuations in prices can often make it difficult to decide when to buy. Rather than attempting to time the market and make a single purchase, many investors use a method called ‘dollar cost averaging.’

Using dollar cost averaging, an investor buys the same stock or mutual fund at regular intervals at a fixed amount (i.e.  $100/month).  When the selected stock or mutual fund declines in value, the investor’s $100 will buy a greater number of shares.  Conversely, when the market price increases, the investor’s $100 will buy fewer shares.  Over a period of time, as market prices fluctuate, the average cost per share to the investor will be less than the average price per share.

It’s Time For Income

The closer one gets to retirement, or to utilizing their assets to generate income, it is generally prudent to reduce the risk of the portfolio. We make your portfolio more income-focused on dividends rather than bond yields due to the low, but rising, interest rate environment.

Historically, the market has not seen more than 2-3 years of negative performance since the Great Depression. This means that if strategic asset allocations are maintained, the investments, historically, have returned to, and then grown above, their values prior to entering the recession. Therefore, we need to make preparation to have 2-5 years of income in a ‘safe place’ (depending on your risk tolerance and other family variables).

A ‘safe place’ can include:
– Cash or CDs
– Short-term bond funds that have minimal volatility
– Laddered Corporate Bonds
– Fixed Annuities (Currently paying as high as 4-4.25% annually – higher than most 457(b) Stable Value Accounts)

How Likely Is Your Plan To Succeed?

We run a Monte Carlo Analysis to ensure a sound strategy. This analysis compares your portfolio and withdrawal/income strategy to every scenario that has happened in history as well as hypothetical scenarios. We are looking for at least a 90% success rate through age 95 (unless you have a health situation that would dictate lower mortality). This analysis will then be updated annually to ensure that we remain sustainable over the long haul.

There’s No Time Like The Present

Don’t wait – don’t delay. But, also – don’t let your advisor focus on selling you a “proven, winning investment strategy.” And remember: timing the market doesn’t work. Make sure you get what you’re paying for and that you know who is compensating your advisor (you or the product they’re selling you).

Steve Olson CFP ®, AEP ®

CEO | FAMILY WEALTH ADVISOR

Steve Olson’s experience spans over a decade of focused tax planning, legal strategy interpretation, investment management, and advisory services to wealthy individuals and families throughout the U.S.

Over the course of his still young career, Steve provides counsel and management on individual assets and portfolios—encompassing a combination of securities, real estate, privately held businesses and other alternative investments—ranging in value from $5 million to over $400 million in value.

Steve is currently the Founder and CEO of Atlantic Wealth Partners in Jupiter, FL.

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