Investment Management
The biggest mistake people make with their investment portfolio is focusing solely on returns. Don’t get us wrong returns are important, but they are not the only factor to be considered in managing your investment portfolio. You must also consider fees, quality of investments, diversification, and risk.
If I were to ask you:
How much Risk are you buying in your portfolio?
Most people cannot answer this simple question. The Risk or Volatility in your portfolio will have a monumental effect on your outcome.
For example, look at these two portfolios:
| Portfolio A | ||
| Beginning Balance | Rate of Return | Ending balance |
| $100,000 | 10% | $110,000 |
| $110,000 | 10% | $121,000 |
| $121,000 | 10% | $133,100 |
| $133,100 | 10% | $146,410 |
| $146,410 | 10% | $161,051 |
| Ave ROR | 10% | |
| Actual ROR | 10% | |
| Portfolio B | ||
| Beginning Balance | Rate of Return | Ending balance |
| $100,000 | 15% | $115,000 |
| $115,000 | -5% | $109,250 |
| $109,250 | -10 | $98,325 |
| $98,325 | 20% | $117,990 |
| $117,990 | 30% | $153,387 |
| Ave ROR | 10% | |
| Actual ROR | 8.93% | |
Both have averaged a 10% return over 5 years but because of volatility Portfolio B’s actual rate of return is only 8.93%, thus the client’s volatility is costing them 1.07%.
Our process for Investment Management is to first establish the purpose or purposes for the investments. Here are the steps in our process:
- Establish purpose(s)
- Identify your risk tolerance using our risk tolerance questionnaire
- Analyze your current portfolio for the following factors:
- Risk cost
- Fees
- Performance
- Investment Quality
- Diversification
- Provide a Portfolio Comparison
Portfolio Comparison
This document will identify your Risk Cost and whether it needs to be adjusted to meet your risk tolerance. It will disclose the fees you are currently paying in your present portfolio which are not easily seen by most investors. Mutual Funds and Variable Annuities charge some of the highest fees. Advisory management fees from your current advisor will also be exposed. Your historical performance will show the actual returns you have received. Each individual investment holding will be graded for quality. Lastly a very important element of investment success is diversification. Most people are not as well diversified as they think. Just because you hold five different mutual funds in your account does not mean you are properly diversified. Especially if all five funds hold the same stocks and/or bonds in them. Our report will cross reference each holding to see if your portfolio is properly diversified.
We will provide recommendations to better structure your portfolio to meet its purpose(s). We will implement the recommendations should you wish to become a client.
Implementation
Once you are a client of ours your investment portfolio receives ongoing management and review to insure it delivers your expected results. We will keep you informed through regular one-on-one review meetings and with online access to your account through the client portal on our website.