Category: Portfolios

  • Uncommon Wealth Building Wisdom – The Benchmark

    Uncommon Wealth Building Wisdom – The Benchmark

    There is a common trait that shows up on the road to building your wealth. This trait shows up as you continue to add to your investment portfolio. You do have an investment portfolio don’t you? And don’t even start the blame game when this trait is revealed in just a moment.

    Here is what this is all about: in a word, Benchmarks. In and of itself, a benchmark would seem to be an important part of evaluating the performance of your investment portfolio. And, truth be told, if there were actually one accepted benchmark that could be universally applied, that might actually work. But the reality is that investment performance is not so simple.

    Get a better benchmark

    Instead of always trying to play catchup with an industry benchmark, there is a better strategy. A strategy that will allow you to grow and expand your portfolio over time without freaking out every time you see your portfolio statement.

    Lessons From The Diet World

    You are barely into the entryway of the store before you notice the section with the largest selection of books. Yep, it’s weight loss.

    Here’s an analogy that illustrates the point being made here. Head into any neighborhood Barnes & Noble or similar bookstore. You are barely into the entryway of the store before you notice the section with the largest selection of books. Yep, it’s weight loss. The point for you to see here is that if there were one diet that worked for everyone and every circumstance there would not be such a wide selection of diet books on those shelves.

    The exact same concept applies to the world of investing. You can prove this for yourself with a quick Google search. Search for investment benchmarks and you get something like 26 Million Search Engine result pages. Obviously there are not that many ways to measure the performance of your investments, but still, the point should be glaringly obvious.

    What “They” Say

    Now take a look at the world of investments. Suppose you have a diversified investment portfolio that you have been funding for a few years. What do “they” tell you to look at? Most often, investors are told to compare the performance of their portfolio to that of a major benchmark. You might even discover that your financial advisor is using this benchmark to demonstrate how well you are doing. Suppose your portfolio is being compared to the S&P 500.

    Actually, the S&P 500 is a commonly used portfolio performance comparison benchmark. How does this show up in the real world? Suppose you pay for the services of a personal financial advisor. Your advisor might send you a glowing report this quarter indicating that your investments outperformed the S&P 500. Wow! Your advisor is a genius. How about if you send in some more money?

    Hold on a sec! What about the other side of this equation? Suppose, the next quarter you get a different letter. This time your advisor is lamenting the fact that for some inexplicable reason your portfolio lagged the S&P 500. Now what? Is your advisor an idiot? Or is there something else happening?

    Wrong Benchmarks

    You see, the reality is that if the last scenario turned out to be true, you might not have reacted so well. In fact, you may have found your self dialing your advisor to find out what the_____ is going on here?

    What’s going on here is you are engaged in a comparison game that does not make sense over time. As you have probably noticed by now, the market goes up and the market goes down.

  • Advisors: Top Ways to Find Your First Clients and Grow

    Advisors: Top Ways to Find Your First Clients and Grow

    Becoming a financial advisor is a challenging endeavor with many requirements. Beyond potential education courses, you may also need to become certified as a certified financial planner (CFP) or chartered financial analyst (CFA) to set yourself apart.

    This is not to mention the competition in the field. The United States Department of Labor reports there were 249,000 financial advisors in 2014 and that they are expected to occupy one of the fastest growing sectors of the labor force over the next decade. While the pay can be good, getting those clients and building a solid book of business can be a challenge. If you’re a new financial advisor, consider some of the following methods to secure your first clients.

    Cultivate Your Influence

    As a new financial advisor, you need to get outside your inner circle. This allows you to build a growing network that can provide ongoing referrals to the services you provide.

    You can either do this through social media marketing or through personal relationships though the latter tends to be the most effective.

    Don’t limit yourself in growing your network. “My advice to any new financial advisor just starting out is to try to employ ‘leverage’ through the use of centers of influence such as accountants, attorneys, HR directors, business roundtables, as well as through social media. Such relationships with various accounts and attorneys take a lot of time, and, therefore, should be cultivated early in one’s career,” says Donald Reichert, Partner at Capital Design Associates Group, LLC. Reichert’s advice to cultivate that network early in your career is important because you never know who you will meet through networking and making connections earlier spurs career growth sooner.

    Serve the Underserved

    Retirees, or those near retirement, can be a great source of clientele for many financial advisors. That will only increase as the number of those over 65 is set to double over the next few decades. While that number provides a lot of opportunity for financial advisors, it also provides a challenge – increased competition.

    Instead of focusing on the clientele that is over served, consider focusing on demographics that are underserved. “Most advisors work with individuals in or nearing retirement with lush portfolios, but I’m focusing on serving the underserved young professional space. I’ve spent some time focusing on getting in front of advisors to tell our story and how we can help clients,” says Matt Cosgriff, CFP, founder of Lifewise Advisors.

    By networking with other advisors, he’s able to not only target those who might be underserved but also breed awareness among the advisor community of how he can help those in need.

    Become Involved in the Community

    One of the best ways to get your first clients as an advisor is to become involved in your community. Whereas traditional marketing methods require money, community involvement largely requires only time. You may not realize it, but community involvement provides a natural avenue to network with those around you.

    Find an organization you support, or an event you enjoy and become involved. This will connect you with like-minded individuals that can potentially turn into clients for your practice. Like the networking mentioned prior, you never know who someone may know, and community involvement is a great way to grow and develop that sphere of influence.

    What Provides Little Return

    Getting clients as a new financial advisor is a numbers game. You’ve likely heard of, or done some of the following things to get new clients:

    • Cold calling
    • Providing free meals to encourage attendance at a presentation
    • Knocking on doors
    • Fish bowls with business cards at trade shows

    Those practices, and many others, will provide numbers. However, they can be difficult to build a solid network of clients. “For the first ten years as an advisor, I struggled with the client acquisition process. Cold calling, door knocking, seminars and hoping for referrals were my only solutions. While these methods worked, they were painfully slow, says Devin Carroll, founder of Social Security Intelligence.

    This isn’t to say the above-mentioned tactics won’t work. They will work, to a certain extent, but advisors who focus on relationship building and becoming involved in the community can build an organic book of business that spurs the growth your business over the long haul.

    The Bottom Line

    When people hire a financial advisor they often look to those they see as credible and that can be done best through forming relationships. Through getting out into the community and networking, you can build a firm that will grow with you for years.

  • Ease Your Way In To The Global Stock Market This Year

    Ease Your Way In To The Global Stock Market This Year

    Heads up, you know darned well that you have to do something with your money. Something besides enjoying your weekends and getting your hands on the latest electronic gadget. That something, as you have probably already figured out is about getting up close and personal with the world of investments.

    Yeah, it may look like a bit of work. It may even not look so appealing with all of those pundits on TV jumping up and down and screaming at the market gyrations. Yet the fact remains that taking care of your personal financial future is your responsibility and yours alone. Unless and until you happen to hit the Big One with the Powerball lottery or some sort of odd windfall, the reality is you need to start putting money away, like right now.

    Not under your mattress

    The only sure thing you can count on is our friends at the Internal Revenue Service (IRS) doing what they do to make sure you pay your fair share.

    Now it goes without saying but better we just go ahead and say it anyway; putting money away does not mean stuffing it under your mattress or throwing your hard earned money at a company stock your pal insists is a “sure thing”. Nope, not so much. The only sure thing you can count on is our friends at the Internal Revenue Service (IRS) doing what they do to make sure you pay your fair share. The point of all this: strategically putting your money into the market is a recognized way to help fund your retirement.

    Fund the 401(k) first

    Now that being said, for the purposes of this article this investing stuff is going to only ever be done after you have maximized your 401(k) plan options at work and after you have also set up your very own Individual Retirement Account. In other words, maximize the retirement plans and options you already have first and foremost. Then, its time to dip your toe into what the pro’s refer to as the equities market.

    Reality of investment returns

    And lest you should be thinking that there are better options out there, well to be blunt, you would be wrong. You see, the truth of the matter is that any investment can show off and have a stellar performance for a short period of time. The bigger and better question is what is the long term return of the investment option you happen to be looking at?

    With just a little bit of homework, okay not even that much, you can easily check this out for yourself with a quick Google search.

    What you will find is that over the long term, equity investments (think stocks) consistently return an average of 7%. Yes, that includes good years and not so good years. The point is that 7% number is actually pretty high compared to other “so-called” investments.

    Ease In Plan

    Which brings us to the focus of today’s article: how can you ease your way into the market without taking a beating. Taking a beating would mean something like handing over $2,500 to your online broker only to discover that the value of your portfolio (the stocks you bought) has suddenly and without warning plummeted to like $1,374.00. Ouch! No wonder so many would be investors shy away from the market.

    Yet, do not lose sight of that 7% long term return number discussed above. So let’s see where we are. You understand the need to get into the market. Yet at the same time you are leery of investing your hard earned money and risk losing some or all of your cash. Is there a way out of this quandary? Thankfully there is.

    The Answer

    The solution is to use a strategy referred to as Dollar Cost Averaging (DCA). Although the term itself may sound esoteric, the strategy is ridiculously easy to understand and put into practice. Essentially dollar cost averaging works by you only ever investing a certain fixed amount on a regular schedule. For example, suppose at the end of every three months, you put $325.00 into the market.

    In other words, you are funneling $325.00 per quarter into your investments. But, that is NOT the same as putting in a lump sum at the end of the year. The point is to put in the same amount at a regular interval.

    What happens is that when the market prices are high, you end up with fewer shares. That’s okay though because the same thing works in reverse. When the market is low, that same amount of money invested will get you more shares. Do you see how easy this is?

    A side benefit of dollar cost averaging that could end up saving you from making a catastrophic decision is your investments are on cruise control. That is, Dollar Cost Averaging takes the emotional highs and lows out of the investing thing. Sadly most investors who aren’t up with DCA do the exact opposite of what successful investors do. That is, they buy high (when the market rises) and sell low (usually in a panic when the market drops).

    Conclusion

    You owe it to your future personal financial situation to get into the market like right now. Knowing and understanding the strategy of Dollar Cost Averaging is an easy way to get started and to keep it going. Now it’s on you. Have you considered something like dollar cost averaging as a way to ease into the market?