Did your portfolio suffer significantly in 2000-2 and 2008-9? Our Seasonal Investment Approach seeks to reduce our clients' equity investments in seasonally weak periods and increase equity investments during strong seasonal periods. The Seasonal Approach had a positive return in stocks in the three years 2000-2002, rather than losing money. Ask about our actions in 2008 and 2009. Long-term, we believe the Seasonal Approach can help offset the effects of multiple bear markets. It cannot, however, guarantee that profits will be made or that losses will not occur.
Are you disappointed in your investment returns? Have your stock and mutual fund portfolios matched the returns of the S&P 500? The S&P 500 earned nearly 19% in the five years ending December 2000 and -2.3% in the five years ending December 2004.* Studies have shown that most individual investors earned far less than the market averages during that time. Many lost more than the cumulative losses of the S&P 500 of 40% over 2000-02.
Do you have an investment discipline that will guide you through future bull and bear markets? We expect that we are back in a period of normal bear markets which occur every 4 to 5 years. In addition, there are weak and strong seasonal patterns that occur each year. You may allow these patterns to hurt your portfolio or you may position your portfolio to potentially benefit from these patterns. We try to help clients take advantage of these patterns. (Although no advisor can guarantee against losses, including RIS, we believe a careful evaluation of your goals and investments can help prepare for future bear markets.)
In the next 40 years, you are likely to experience 8 to 10 stock bear markets as well as the potential for 8 to 10 bull markets. Is your portfolio and are your emotions prepared for these investment trends? What, if any, changes should you make to your investments?
Have you changed your investment strategy in light of the potential for rising interest rates? Many people have used a basic buy and hold investment approach. Buy and hold investing was popular and a potentially effective investment approach in the 1980's and 1990's when interest rates were falling. With interest rates poised to rise in the future, the keys to investing have changed, and buy and hold investing is likely to lead to unacceptable returns. In order to realize their desired returns, investors may want to consider using a different, more active investment strategy than they have used in the past, while maintaining proper diversification.
Do you have a plan to inflation-protect your retirement income during retirement? If you expect to live 25 to 30 years in retirement and inflation averages 4 or 5%, then you will need to triple or quadruple your income over your retirement lifetime to maintain equal purchasing power.
Would you like to estimate whether you can retire on your expected retirement date and live a long and comfortable retirement? Would you like a plan for investing and living in retirement? Most people have never received a professional retirement plan to see if they can retire comfortably when they want to retire. Preparing one doesn’t take a lot of time, and it may give you great comfort. If the plan shows that you can’t retire on your schedule or at your living standard, an advisor can tell you what to do differently to help improve your situation.
Some of the best investment managers have high account minimums up to $5 or $10 million or more. Are you interested in an approach that would enable you to use services similar to those at lower minimums?
If you die tomorrow, are your heirs in a position to manage your investments and handle your complex financial and estate matters? These are difficult issues even for people experienced with investments and financial matters. Some advisors may step in and help your family during such times.
Would you be interested in an investment advisory team that can help you coordinate your stock, bond, mutual fund investments, IRA, 401k, 403b accounts, stock option exercising and other financial issues such as refinancing your home, on leasing or buying your car, whether to obtain long term care insurance or increase or decrease your life insurance? Most brokers and investment advisors cannot or will not help investors coordinate and manage all their investments and also advise on insurance and other financial matters.
Are you unhappy with the lack of personalized attention and service from your current advisor or broker? We try to return phone calls the same or next day. If you want to meet, one of us will try to meet that week or the next.
Are you comfortable that your current broker is looking out for your best interest, or are you concerned the broker is motivated by his or her compensation? If you don’t trust, or are uncomfortable with, your investment advisor, you should consider a different advisor.
What portion of your portfolio is destined to lose money over time when you consider the impact of inflation and taxes on those returns? Certain investments have historically earned negative returns after the effects of inflation and taxes are considered. You should know about better alternatives.
What risks are the most important for you to consider in investing – the risks of the stock market or the risks of outliving your assets? While the risks of stocks and bonds are important, most investors should focus on the risk of outliving their assets and invest accordingly.
The traditional approach to diversifying against stock market risk is often ineffective. Are you relying on that approach to diversification, or are you using multiple approaches? There are five basic ways to help diversify, and you can use all five of them. In some cases, we suggest four additional means for diversification.
Do you have an effective strategy for exercising your company’s stock options? Your existing options may represent your greatest opportunity to create wealth in your lifetime. The prices of many stocks vary nearly 50% to 100% each year. Would you benefit from a professional, second opinion on when to exercise and sell those options?
Do you have too much invested in your company’s stock when you combine direct family ownership, unrealized stock option gains and stock in the stock savings plan or 401k? These are tough decisions that often require dispassionate, independent advice. If you do have too much, which investments should you sell first?
Before you sell your company’s stock in your stock savings plan or 401k, you should consult a good advisor. You may lose significant tax advantages. This is an issue unknown to many employees and advisors.
What estate planning approaches should you consider under the expected new tax laws? After review and discussion, do you need a recommendation for an estate-planing attorney? Or a CPA to help with your taxes? A good advisor has these contacts.
Do you have a plan to pay for the college education of your children or grandchildren? With the new college funding plans and the expected high cost of college, you need to begin funding for college early. You should re-evaluate UGMA accounts and parental "college investment" accounts. Many of these accounts probably should be closed out.
Are you too busy with your career or doing things that you enjoy to deal with today’s complex financial issues? Or, are you not experienced enough to deal with these issues? Competent advisors can help you deal with these important issues in a rather easy and direct manner… and without a lot of work on your part.
Are you satisfied with your answers to these questions? There are very few advisors in Southeastern Michigan that can help you answer all of these questions. We have, for years, specialized in only this area of financial and retirement planning and, as a result, offer one-stop financial advice for clients. If you would you like to learn more about these issues without an obligation to commit yourself to an on-going relationship, then call Retirement Income Solutions (734-769-7727) to talk to or set up an appointment with one of the advisors.
We believe the selection of a financial advisor is of critical importance. It should be made carefully and with as much information as possible.
We are interested in long-term relationships that are mutually beneficial and built on the highest levels of integrity, trust and service. If this kind of relationship appeals to you, a member of our team would be happy to sit down with you to discuss your financial needs and goals. There is no cost or obligation for the initial meeting. At that time, you can also see why our clients are so pleased with the investment services and financial advice we provide.
* The S&P 500 is made up of 500 common stocks representing major U.S. industry
sectors, and the Dow 30 is made up of 30 large company stocks. All indices are
unmanaged, and one cannot invest directly in any index. Past performance does
not indicate future performance. Source: Ibbotson & Barrons
Retirement Income Solutions, Inc. is an independent Registered Investment Advisor.
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734-769-7727 | 800-360-1953