Don't Put All Your Goals in One Bucket

The first step in investing is to determine your goals. We like to think of each goal as a different bucket. We can help you determine a budget amongst the different buckets so that savings can then be earmarked toward each bucket. Here are some examples of common investment goals / buckets that we can help you with.



Ultimately, you have the option to view all of your buckets separately or as subtotals in acompletely aggregated online financial profile. This means that even though you are diversifying your funds, you can still securely view them in a consolidated online report center that is updated daily. You also have the ability to include other accounts such as your checking, savings, 401(k) from work, other non-managed investment accounts, mortgage, credit cards and more. This powerful tool will aid you in monitoring your complete financial picture.


Once the investment goals / buckets are determined, the next step is to decide on is what to invest in. Our core investment philosophy centers around diversification, because over the long run, we believe that is what keeps investors in the game. The lack of diversification usually leads to volatility that very often results in investors panicking and selling when the market is low. This may result in losses and premature abandonment of investment strategies. We believe that diversification, however, is much more complicated than simply determining a stock to bond mix. The following are types of asset allocation strategies that we feel should be considered when developing a diversified investment plan.



Our Investment Philosophy of Diversification

Asset Classes 
The most obvious type of diversification is amongst many different asset classes. Broad asset classes include stocks, bonds, real estate, commodities, managed futures and cash. These can be broken down further between domestic and international investments (large-cap, mid-cap and small-cap for each).

Investment Managers 
Rather than micromanaging the day to day investment decisions in your portfolio, we believe in teaming up with pre-screened investment managers who have teams of specialized investment professionals. We maintain strict independence when selecting appropriate investment managers from a comprehensive array of options for our clients. Different managers specialize in different areas and they also have different investment styles. Therefore, it is also important to diversify amongst investment managers.

Strategic vs. Tactical
In ancient maritime civilizations, a boat known as a trireme was often used because it had both sails and oars. In the sea of investment options, some are more sailing oriented and some are more rowing oriented. A strategic model can be thought of as a sailing strategy because it invests within a relatively static asset allocation. The performance in a strategic model is therefore to a large degree dependent on the direction the market winds blow. Strategic models can make a lot of sense in a bull market, but watch out for volatility in a bearmarket. Tactical models, on the other hand, can be thought of as rowing strategies because they attempt to manually change course amongst asset classes depending on the market environment. Tactical models have good days and bad days relative to strategic models because by definition they are notgeared to be correlated with the markets. In hindsight, sometimes tactical managers’ decisions are great, and sometimes their decisions are bad. Due to the investment discretion thattactical managers have, it is difficult to measure their performance against benchmarks. Therefore, their performance should be measured over a longer time period of at least 3 – 5 years. Also, it may be prudent to use multiple tactical managers for further diversification of tactical investment decisions. Ultimately, a healthy mix of strategic (sailing) and tactical (rowing) strategies helps to steady the ship.

Investment Formats 
There is also a comprehensive array of investment formats, including fee-based money managers, mutual funds, exchange trades funds, stocks, bonds, annuities, money market, etc. An appropriate mix of these different investment vehicles varies from client to client, and from bucket to bucket.

Dollar Cost Averaging 
By spreading out your investment horizon, you essentially diversify when you invest. Over time, a dedicated dollar cost averaging strategy can even out the ups and downs in the market. Consistent dollar cost averaging also helps to ensure you pay yourself first so that your goal indeed gets funded. Also, the sooner you start investing, the smaller the monthly installment you will likely need to make. Systematic investment plans can easily be implemented by establishing monthly ACH transactions from a checking account.

Risk Management 
For each investment goal (bucket) you have, a specific risk tolerance level should be assigned along the conservative to aggressive spectrum. Then various strategies can be employed to help manage to that risk tolerance. Such strategies include: traditional stock/bond mix, introduction of non-correlated asset classes, various hedging strategies, and annuities. A diversified mix of these risk management techniques should be considered because they may perform differently in different markets.

The management of taxes you pay over your lifetime is a critical factor in your financial success. It is therefore important to factor in the tax ramifications of your investment plan. Your investments can be further diversified by tax attributes. Some examples include: taxable vs. tax deferred vs. tax exempt investments, qualified retirement account vs. non-qualified account, Roth IRA vs. Traditional IRA, AMT friendly investments, state specific municipal bonds. Each investment goal / bucket could have different tax considerations. Our unique ability to provide integrated tax and investment solutions can help to design your overall wealth management strategy.


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Check the background of this financial professional on FINRA's BrokerCheck