Investment Planning - NUTS & BOLTS

ASSET CLASS INVESTING – OPENING YOUR MIND TO ALL ASSET CLASSES AVAILABLE TO YOU

We provide this service to individuals and companies. Many clients do not have retirement plans. We have a separate fee structure that depends on the complexity of your current assets, and on the number of people involved in the process – for example, we recommend you and your spouse be a part of all conversations, and you may wish to involve your heirs or have a separate training program for your heirs.

We believe your goal is not an accumulation of assets, but rather the availability of a significant annual income.

We recommend including your spouse in all meetings.

Consider separate asset management training sessions for your children/heirs.

DEVELOPING YOUR PERSONAL RISK TOLERANCE STATISTIC FOR EACH DIFFERENT ASSET CLASS
We ask you to bring us your history of investments. We want to know your investment decisions in the past 10 years. We ask you a number of questions designed to help us understand your attitude towards making changes in your investments, which in turn helps us develop a “risk tolerance” statistic for you in each asset class. Your risk tolerance is unique to you. Risk tolerance increases slightly as wealth increases, but increases significantly as satisfactory exposure to an asset class increases. Risk tolerance tends to decrease as we get older, and decreases significantly if wealth is reduced significantly, or if an asset class loses money.

If the economy goes bad for a while, your personal risk tolerance goes down, and you may make sell decisions because your risk tolerance has gone down. Perhaps you would do better in an asset class where you can’t sell without some difficulty. A second factor may be that if an asset class produces ongoing income, you will be less likely to sell it in bad times. Some stocks produce high dividends, and you will find many holders of those stocks hold on to them in bad economic times. Real estate produces rent in bad times, and so many people hold on to their rental income real estate in bad times. Many professional money managers trade much less frequently than you do. Wild ride, or income – you choose.

PROJECTING YOUR ASSETS AND REALIZED INCOME 5, 10, and 15 YEARS INTO THE FUTURE
We use your personal risk tolerances to help you select transitions into the asset classes you have chosen, over a period of time. We use you savings from all sources (employment income, as well as investments) to project available cash each year. We project rates of return from the income portion of your asset classes. The total of these amounts is your investible savings for the year.

Our projections start with current market value, projected with 3% annual inflation (historical average). We include all of your current assets, including your home and the HUMAN value (the value of you working through retirement). Since the real result you need is your realized income per year down the road, we focus on realized income values rather than the market values – market values fluctuate a lot, and distract you from the realized income results – do you want to live on market values, or on realized income?

PUTTING IT TOGETHER – INVESTMENT PLANNING TOOL
Using the inputs from above on your personal risk tolerances, as well as your current chosen asset classes, and the asset class transition points you have chosen for the future, we use our INVESTMENT PLANNING TOOL to project asset class values, and realized income by asset class. The INVESTMENT PLANNING TOOL is a set of calculations to get future values; we use straightforward inputs and realistic rates of return.

We then pick out the asset class and income values at 5, 10, and 15 years to discuss with you and your spouse. You will want to run the programs with different projections, different asset classes, etc, and we will accommodate you. However, please bear in mind that many people decide that they can tolerate lots of risk; in fact, many of these same people will choose to sell of their investments in a particular asset class if the going gets rough for a while.  So, our focus is on future realized income including inflation, rather than on market value fluctuations.

WHAT YOU CAN DO WITH THE RESULTS
We can point you to courses for managing investments in asset classes you are not familiar with, such as income producing real estate or high dividend stocks. We can give you general advice on where to look for professionals in several asset classes – BE AWARE WE HAVE NO INTEREST IN, AND RECEIVE NO COMPENSATION FROM, ANY BUYER OR SELLER OF ASSETS.

You can take the report we produce to asset class managers

ANNUAL UPDATES/NEW PLAN
We can help you update your profile each year, using your actual updated asset list and actual savings for the year. Once in a while, say if your life situation changes, you really need to go through the entire process again.