Investment Management Services
Fee-only investment management services are available to those who desire ongoing help in managing their investment portfolios and with retirement planning. For those who are nearing or in retirement, we also do retirement income planning and a retirement bucket analysis.
It appeals to clients who know they need to take risk to maintain their purchasing power and want ongoing help managing portfolio risk. They can't afford to have their portfolio go sideways for another 8 years. They believe sticking with a disciplined investment strategy is critical to protect and grow their portfolio and understand that this is "easier said than done" when stocks are very volatile. They appreciate working with someone they trust to help them do this.They need help preparing for retirement and value the importance of retirement income planning for when they are retired.
We meet on a complimentary basis to see if there is a good fit.
Fees are billed quarterly in advance and are based on the amount of assets under management.
One of the biggest risks retirees face is purchasing power risk. The 30+ year bull market in bonds is nearing completion. Allocating 40% to 60% to 80% of your portfolio to fixed income investments to reduce portfolio volatility won’t work as well going forward. A diversified selection of bond funds is unlikely to earn 4% to 6% or more like it did in the past. Many baby boomers and retirees are going to be forced to take more risk or make potentially painful cuts to their lifestyle.
The amount of risk you can afford to take is different for everyone. If you have a large pension or if one of you will continue to work longer, you may not need any of your retirement savings for 10 years or more. This enables you to take more risk (if needed and desired) than what many investment advisors who use the typical 40% to 60% allocation to bonds for retirees would recommend.
If one or both of you deferred taking Social Security to maximize your cash flows, you may need to withdraw a larger portion of your portfolio over the first five years to compensate for that. Allocating 40% to 60% to equities may be exposing you to more risk than you can afford. By preparing a retirement bucket analysis, we have better visibility each year as to how much and when you may need to withdraw money from your portfolio - including for taxes and large, nonrecurring expenses such as replacing your car. This helps us more appropriately budget the risk you can afford to take.
This risk budget should be the focal point of your portfolio design – not the typical asset allocation that many brokers and investment advisors use that is supposed to be "suitable" for moderate or conservative risk investors in retirement. If you decide to take more risk to pay for the lifestyle you want, at least you are making an informed decision.
| Risk Budgeting Helps Protect Your Principal, Purchasing Power and Sleep. | |||||
|---|---|---|---|---|---|
| Retirement Buckets | Investment Portfolio | Investment Strategy | Principal Protection | Purchasing Power Protection | Cash Flow |
| 1 to 2 Yrs |
Cash Flow Reserves for first 2 years of living expenses and 5 years of major, nonrecurring expenses | Use FDIC insured savings, CD or bond ladders, and other conservative fixed income investments | High quality, conservative, fixed income investments to fund next few years. | None. As low as bond and FDIC savings rates are, we earn negative real returns with this money. | These cash flow reserve investments are used to fund your checking account. |
| 3 to 5 Yrs | Conservative to moderate mutual funds and ETFs. | Use mutual funds and ETFs that own bonds or are hedged by other alternative investments. | Bond funds with moderate risk or balanced or hedged equity funds. During very high risk periods, may go to Treasuries. | Little. Could earn negative real returns if the US dollar drops 30% to 50% in value or we have stagflation. | These investments help replenish your cash flow reserves each year. |
| 6 to 10 Yrs | Asset Class Portfolio | Equal allocations both to asset classes that offer purchasing power protection and to asset classes that offer downside protection. | Longer term buy/sell signals for each asset class designed to keep you invested through normal corrections, but go to Treasuries when risk is high. Markets don’t go straight down so this worked well to reduce losses in the last two bear markets. | Higher than normal allocation to asset classes that protect your purchasing power with lower allocations to U.S. bonds. Similar to what the Harvard and Yale endowments do except they use less liquid but higher return investments in real estate, timber, private equity, and hedge funds. | We use the interest and dividend income and some of the profits to rebalance your portfolio to match your retirement bucket analysis and to replenish your conservative mutual funds. |
| Over 10 Yrs | Dividend Portfolio | Buy quality high yield and dividend growth stocks when cheap. Our goal is to earn yields that are much stronger than bonds that keep up with inflation. Owning individual stocks allows us to earn stronger yields with higher dividend growth than funds, but we have more event risk. | Use dividend funds and ETFs for the majority of our foreign dividend stock exposure and use long term buy/sell signals to reduce risk. Use money we don’t need for more than 10 years. | Dividend growth from multinational companies, commodity stocks and foreign dividend funds in regions with strong currencies and growth protects your purchasing power. Dividend growth from US stocks won’t work if the US dollar drops 50% in value over the next 10 years. | Dividend income helps replenish your savings each year. Our goal is to hold these stocks except in very high risk periods (e.g. bubbles, risk of major financial crisis). This is why we use money we don’t need for more than 10 years to invest in them. |
| Over 10 Yrs | Explore Portfolio | Select the ETF with highest momentum from 25 ETFs that have outperformed over time. Various bond ETFs and other defensive ETFS are chosen during down markets. | Larger maximum losses of 30% or more (especially if Black Swan) are possible. The potential returns are high enough to justify this risk and we only use money we don’t need for more than 10 years. | Back tests show it significantly outperformed the S&P 500 with a lower drawdown (maximum loss) during the last bear market. High returns help protect your purchasing power. | Profits taken when rebalancing your portfolio help replenish the other retirement buckets. |
Past performance is no guarantee that these strategies will perform as well going forward. The financial markets are constantly changing and evolving so we need to employ a flexible investment strategy that changes with market conditions. The above portfolio design is totally flexible. We can customize your portfolio by leaving out dividend stocks, by allocating less or nothing to the explore portfolio, and by making adjustments to the number and type of asset classes we use. The beauty of this portfolio design is that it should do well even if we do end up with deflation. If we entered a deflationary period, the 6 Asset Class Portfolio and Explore Portfolio would switch to bonds and we would continue to earn dividend income on our dividend stock portfolio.