How do we pick the right investments to recommend? Personalize it


Hi, it’s your Money Mavens, and we need to get personal…

…With how we pick investments that are worthy of belonging in our clients’ accounts.

We previously shared about how we use data to find the right type of investments, and that we always shy away from those that speculate (read: gamblers).

Once we’ve got a list of candidates, we evaluate them in much the same way you might evaluate shoes.

You can find the right look and style (cute shoes, by the way), but it’s all about the style and fit.

No Cinderella wants a stepsister stock (or shoe).

When the stock market gets bumpy, you want to know you have the right fit to help you keep a good financial foothold.

We’ve found that either mutual funds or ETFs (exchange traded funds) are the right fit and size for the vast majority of our clients.

However, like shoes, you want a good variety of shoes that can stay with you for years and still look great.

When you start considering more expensive and illiquid investments like annuities, hedge funds and other alternatives, you run into additional complications and overhead that most investors simply do not need. BTW: an “illiquid” investment doesn’t allow you to access your principal or returns for sometimes up to ten years, so it’s one you literally cannot spend, sometimes for a long time.

You deserve to be in the investments that are right for your expectations, plans and timeline. Anything less is a disservice to you and your financial future.

That’s where personalizing your portfolio comes into play.

So, how do we select the ideal investments for your personalized portfolio? We started with data in Step 1. Now, we focus on the fit with Step 2.

Step Two: Personalize It.

There’s no end to the shiny packaging of so many tempting opportunities everywhere you look. That’s also the case with investing, especially considering how some product providers present their offerings.

There are traditional and closed end mutual funds, ETFs, hedge funds, target-date funds, annuities, indexing accounts of every shade and size you can imagine, private partnerships, the list goes on and on.

And that’s just the professionally managed side of investing!

DIY investors can wade far beyond the buoys into cryptocurrencies and trading platforms like Robinhood to select and manage their own investments.

(Another topic for another time…)

However it’s wrapped, the initial challenge stays the same: is the investment opportunity constructed with an appropriate, evidence-based approach that’s the right fit for your financial future?

We always avoid investments that are overly leveraged or expensive.

So, How Do We Incorporate “You” Into Your Investment Portfolio?

Even world-class investments may not be the best for you if they don’t align with your unique financial circumstances.

There are several details that can influence the specific investments we recommend for your portfolio:

  • How long do you have to invest toward your various goals?
  • How much volatility will your emotions allow you to tolerate?
  • What are your cash flow wants and needs?
  • Are you a business owner?
  • What are your legacy plans?

These can influence not only how we structure your investment accounts, but also, which specific holdings to consider.

There are also larger influences we keep in mind when incorporating more of “you” into your investment accounts.

1. Risk Tolerance is Essential for Personalizing Your Portfolio.

Are you comfortable taking risks in pursuit of greater rewards?

Conversely, will you be able to achieve your goals if we select a more conservative basket of investments for your accounts?

Maybe you prefer only the most tried-and-true solutions, backed by decades of dependable performance data on record.

Your portfolio can be tailored in either direction while maintaining an evidence-based approach either way. This is largely accomplished through careful consideration of the quantity of and types of bonds we buy in your accounts.

2. Planning for a Better Tax Situation – We Have an Answer for You.

Most investors arrive with existing investments—good, bad, and ugly. Capital gains taxes can be punitive depending on what state you live in, so we carefully plan for the costs of transitioning toward a more appropriate portfolio.

This includes accounting for the ‘space’ in your existing, tax-sheltered accounts, as well as the tax implications of selling less-desirable taxable positions.

A unique advantage we have compared to other advisory firms is our extensive in-house tax specialties.

Instead of needing to search for a tax specialist that may not fully understand your investment situation, we have a collaborative, informed team who can perform detailed analyses and make strategic recommendations.

3. Understanding How to Best Manage Your Overall Net Worth.

How we make recommendations also depends on the types of accounts and other investments you have access to through your employer (or, if you’re a business owner, your own sponsored accounts).

Even if your company retirement plan doesn’t offer ideal selections, it may still be among your best, most tax-wise investment vehicles—especially if your employer is matching your contributions.

After all, free money is hard to beat!

For the income you’re directing to your retirement plan, we’ll make appropriate recommendations based on what’s available in the plan.

Also, sometimes our clients have extensive equity compensation holdings – such as ESPP, RSUs, stock options and ESOPs. So our recommendations always take those concentrated holdings into account as they increase your overall risk.

4. Invest in Alignment With Your Values.

Do you want to incorporate an “ESG” (Environmental, Social, Governance) or similar values-based element in your investing?

The right solutions for you depend on where your priorities stand. What will you be proud to tell your children, best friend, or successor that you invested in years from now?

These four factors help guide how we personalize your portfolio, but we’re not done yet.

There’s a key mindset you need to have as an investor when life changes, when things don’t go the way you always expect.

We’ll cover all of that in Step 3.

To your prosperity,

Your HWM Money Mavens


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