After 16 years as a High Net Worth Private Banker I opened my firm in 2011 to create an unbiased and client-centered wealth management firm. As an independent advisor I can now solely focus on helping clients define and pursue their unique goals. Read More
Balanced Money | Balanced Life
Published in Bradenton Herald: November 16
By GARDNER SHERRILL |Investor’s Column
November 16, 2014
What would the perfect investment portfolio look like? On a scale of 1 – 10, I believe it would require high numbers in the following areas:
The key ingredients:
Taxes – The perfect portfolio would need to be tax efficient
Fees – It would need to keep costs down to a minimum
Growth – Exceeding inflation would be a minimum objective
Income – Stabile and high income is preferable
Liquidity – It would be able to convert to cash quickly with little to no transactional costs
Safety – As Roy Rogers indicated we all want a return of our investment
Simplicity – Having a good understanding of what we own gives us confidence when we need it most.
Obviously the perfect portfolio does not exist. There are tradeoffs to all things in life, even our money.
Over the past 20 years, financial institutions have become very adept at creating model portfolios and products that cater to the average investor’s needs. These portfolios attempt to address common concerns of risk and return. They have a good mix of the above ingredients, they are usually well designed, and thoroughly back tested. I whole heartedly believe these models are less riskier and more client centric than the stock picking business from which I began my career.
There are 2 primary concerns I have with relying on models. It has been my experience that they are often based on the assumption that the next 30 years will look like the past 30 years. My 2nd issue is that I have rarely come across the average investor. My clients often have some common traits but also have unique characteristics that could benefit from incorporating a more tailored approach to addressing their goals.
Often combining the elements of a model as a core position complemented with some more targeted ingredients can provide you with a hybrid approach that is well balanced and customized your specific situation.
If you ask for a good car and fill out a questionnaire – there’s a good chance you’ll get a recommendation to buy a midsize sedan. This is not a bad thing per se as it is a safe bet that addresses the question of what is a universally good product. These cars are safe, fuel-efficient and well-priced.
The problem arises when you get out on the road and find it doesn’t have the acceleration you had desired and you prefer a more comfortable cabin space. You were planning on holding this for at least the next 10 years and you recognize you made a tradeoff or two you would rather not have made.
As you look to build the perfect portfolio – review the ingredients list and work with your advisor to recognize the tradeoffs. Have a deeper conversation and make sure they understand you and what you are trying to achieve. Talk about more than just your investments. Speak to goals - retirement, estate, and tax planning objectives. The more time spent on the front end the more likely you will find a strategy that can work towards your unique needs and tastes.
Investing involves risk including the potential loss of principal. No strategy can assure success or protects against loss. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
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