- Transportation/Destination first
- Your financial plan represents your transportation and destination(s), while your investment portfolio (among other items) are your fuel. Most importantly, your plan is determined before you fuel the airplane. Otherwise, our investment selection is based on negative emotions, primarily fear or greed. Eye on the prize.
- Largely, I believe in passive ETF investing and individual securities. This study suggests that professional management can only beat the market well inside 10% of the time. If that sounds difficult, selecting which manager will complete that task can be even more challenging, as most don’t beat the market consistently. To be sure, stats like these are likely skewed after a long bull market. However, the stats are so far in favor of passive, the cost isn’t worth the highly unlikely upside.
- We invest to raise our level of income. This may not mean now, but at minimum, in the future. I believe in income producing investments. Typically, not categorically, they can provide a smoother ride and steadier growth. If you do not need the additional income from investments now, that income should be reinvested. This simple chart illustrates the power of income. According to Standard and Poor’s, the dividend represents approximately 44% of the S&P 500’s total return.
- I believe most diversified investments (i.e. ETFs) should be held in retirement accounts. Even if you hold some mutual funds, the turn-over and capital gains are inconsequential to you in most retirement accounts.
- Individual securities can be very beneficial in non-qualified, non-retirement types of accounts. When appropriate, tax-loss harvesting can be accomplished more effectively at year-end.
- I believe not in just limiting tax liability from year-to-year, but also tax planning. Meaning, specific planning should be done to diversify your income sources in retirement, which calls for a balance of tax liability now and in the future. These might be 5-6 figure decisions alone.
- Media – The media can produce news and content that helps us stay informed. The media also produces higher ratings (and makes more money) based on how we react to the drama. Be mindful of this narrative.
- Forecasting – We do not forecast or predict what the market will do. We make short, intermediate, and long-term plans together and develop portfolios accordingly. Those portfolios are trusted in good times and in bad times, with scheduled check-ins for risk tolerance.
- Systems over goals – Goals are important. They provide direction. The systems in place to get to those goals are more important and we choose those thoughtfully, so we can trust them during volatile times that will undoubtedly occur.
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