Portfolio Design
In our opinion,the first step in any portfolio’s design is goal identification. Simply put, what are you going to use the money for?
The answer will guide every decision we make from that point on.
Are you saving for retirement? If so, when would you like to stop working, and what would you like to do with yourself then? This will give us both a target date and an idea of how much you will need (because some passions—like world travel-may be more expensive than others-like gardening.).
The same process holds if you’re saving for a child’s college expenses, a parent’s care, or your own legacy. To design a successful portfolio, we need a very good idea of how much you’re going to need and when you’re going to need it. On a map, this would be the “X” that marks your destination.
To get to that destination we also need to know where you are now. The design of your portfolio begins with a thorough accounting of your assets—IRAs and 401(k)s, social security benefits, stocks, bonds, annuities, money in the bank, real estate and businesses, even collectibles—and your liabilities. On a map this would be the arrow that says, “You are here.”
And finally, we need to know your risk tolerance. Markets have bad times just as they have good times. For instance, how did you react to the turmoil of 2008? If you were disappointed but philosophical, we might try one strategy. If you went without sleep for days at a time, we would try another. We want to build your portfolio, but we don’t want to make you sick from worry.
Once have these three pieces in place, we do the math and make your investments. Usually, we will want your investments to be as diverse as possible. We may also want to minimize your tax burden, for instance by concentrating on investments that deliver capital appreciation rather than a high dividend.
After that, it’s a matter of sticking with the wealth management plan. Building your wealth should feel like a ride down the interstate, not a roller coaster. There will be some bumps in the road, but our hope is that you will be well prepared for them.
