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Adding Value with Investments

During initial meetings, I explain that I’m not able to help anyone beat the market – i.e. predict when the market is about to go up or down. Some are familiar with this topic and are happy to hear it, while some are confused after being told by the industry that this is exactly how financial advisors are supposed to help.

For anyone convinced their advisor should be able to sell stocks before the market drops, I recommend books about investing by authors such as William Bernstein, Rick Ferri, Jack Bogle, Larry Swedroe, or Andrew Hallam.

Instead of trying to beat the market, here are 5 ways NFP adds value with investments for people saving for retirement:

  1. Suitable Asset Allocation – together we look at your time horizon, risk tolerance and goals to figure out a strategic balance between stocks, bonds and cash. When reviewing your risk tolerance, we focus on your personal circumstances - such as job stability, financial dependents, and prior investments knowledge/experience. Changes in your personal circumstances can drive changes in your portfolio; changes to your asset allocation are not driven by market expectations.
  2. Cost Effective Implementation – we focus on keeping costs down by avoiding expensive products and funds. NFP primarily uses index funds and is also approved to use Dimensional Fund Advisor (DFA) funds.  
  3. Rebalancing – over time, portfolios will drift away from original weightings – which means that the market increasingly dictates your portfolio’s risk. As much as possible, we rebalance with new savings and portfolio income to try to minimize your tax and trading expenses.
  4. Behavioral Coaching – strategies like rebalancing and staying the course can be difficult. Human instinct pulls you to do the exact opposite (if the stock market is in a panic, holding onto stocks – or buying more is typically the last thing anyone wants to do). Behavioral coaching offers the greatest potential value, as the mistakes people make during market peaks and sell-offs can be disastrous.
  5. Tax Optimized Asset Location – as an example, it can make sense to hold taxable bonds within retirement accounts since interest is taxed as ordinary income; and holding stocks in taxable accounts helps take advantage of lower tax rates on long term capital gains and qualified dividends.

Overall, my goal is to provide clients with financial peace of mind. Besides looking for ways to save you money on investment expenses and taxes, another significant part of our work together is education - reviewing the reasoning behind your recommendations so that when the markets become turbulent – you can avoid making financial decisions based on emotions.