We think that you may find this website to be different from other financial sites that you have seen, because LFM&P is different from many other financial advisors. We are a fee-only Registered Investment Advisor and Financial Planner. The site provides you with some of the essential concepts that you should know about retirement planning and risk-managed investing, so that you can determine whether your financial future is on the right track. Many advisors neglect to address some or all of these issues. We are sharing these ideas with you, because they can be truly important to your financial well-being. LFM&P’s primary focus is to help people secure their financial future by filling the gaps in planning and execution.
Are you nearing retirement and are worried about market volatility or high valuations? Have your retirement preparations been set back? Are you concerned that you have not saved enough? Are you faced with the prospect of having to catch up? Are you wondering how an employment change might affect your retirement? How should you approach the uncertainty that we face today?
The first thing to do is to recognize that the financial world is changing. In every change there is potential opportunity. You can resolve to work with the new environment and develop a new, better and stronger plan for your future.
At first thought, it seems like a stretch to say that something as arcane as your asset allocation will determine your financial future. But if you broaden the normal definition of asset allocation to include all of your assets, the concept and statement is not at all unreasonable. In addition to stocks, bonds, mutual funds and cash, your financial assets also include your ability to earn an income, social security, pensions and real estate. Each one of these assets has different characteristics of probable return and associated risk. The way in which you mix your assets will determine the total return you can expect, the volatility of your wealth, and the risk of falling short.
Over time, investments pay higher returns than checking accounts because they involve risk. Some risk is necessary. Some risk is not. Risk from a self-serving advisor can be avoided. Headline grabbing stories about Bernie Madoff and other scams publicize one type of advisor risk. More commonplace is simply an advisor who profits at your expense from arrangements like commissions that may conflict with your best interest. For an investor who understands the different types of advisors and is willing to inquire, this kind of risk can be minimized.
Just after the stock market peak in 2000, there were a number of man-in-the-street interviews on television asking people what they thought about their investments. Typically the response was either a proud or resolute "I'm in it for the long term", which they had been trained by their advisors to believe was the only correct response. We wonder how many of those people continued to believe it at the market bottom in 2003 and still thought so at the 2009 nadir.
In our opinion, at LFM&P, it is important for you to consciously know whether or not you are in it for the long (or short) term. While we may agree that it is important to be a long-term investor, we may differ from others about what that really means.
The financial community in general has promoted the “Buy-and-Hold” strategy for many years as the only acceptable approach to investing. The last two bear markets put Buy-and-Hold to the test as the fortunes of some who have followed it were cut in half. It may happen again in the next. This raises the questions:
|Is Buy and Hold Smart?||Sometimes|
|Should you use Buy and Hold?||Maybe|
|Is there another approach?||Yes|
David Linnard is a Certified Financial PlannerTM and NAPFA Registered Financial Advisor. Linnard Financial Management & Planning, Inc. is an independent, fee-only registered investment advisor serving Massachusetts and states in which it qualifies for an exemption from registration requirements. A sample of towns within a 15 mile radius of LFM&P includes Acton, Ayer, Bedford, Berlin, Bolton, Boxborough, Carlisle, Chelmsford, Clinton, Concord, Groton, Harvard, Hudson, Lancaster, Lincoln, Littleton, Marlborough, Maynard, Shirley, Stow, Sudbury, Wayland, Westford, and Weston.