Key Takeaways
Investment speculation is futile. The stock market is efficient and rewards investors over time.
Portfolio design is the most important decision when developing an investment plan.
Be disciplined and make informed decisions. Don’t succumb to impulsive actions based on emotion.
Your investment plan should be coordinated with your overall financial plan.
One of my favorite things to do during the summer is play golf. I’ve played for the majority of my life and have great memories of playing with family and friends in some of the most beautiful parts of the world. Another great thing about golf is the people you meet randomly on the course. However, I always laugh whenever a new acquaintance finds out what I do for a living. The first thing they usually ask me is: “Got any good stock tips?” This question shows how much confusion is still out there regarding the financial advisory profession. While investment selection is an important part of the service we provide, our strategy dismisses speculation in favor of research-backed strategies that stand the test of time. At Novi, we don’t sell investment products (or earn commissions on them). We provide comprehensive investment advice to our clients to help them reach their goals in a manner that aligns with their time frame, risk tolerance, and values.
One of the most important ways that we distinguish ourselves as comprehensive wealth managers is by first providing planning and advice to clients. Then we develop an investment strategy that delivers the returns they need to be successful. This is a far different approach than randomly selling investment products (i.e., stock tips).
For example, we recently started working with a successful couple in their early 50s. One of the first things they said to us was: “Wow, we make all this money; why don’t we have larger investment accounts? Despite their high combined income, their money wasn’t working as hard as it should have been for them since they had only randomly selected investments and no specific savings plan. We started by developing a cash flow plan first and then developed a growth-oriented investment plan consistent with their tolerance for risk.
Harry Markowitz, the father of Modern Portfolio Theory, recently passed away. His research was focused not on the “right” stocks to buy, but on how to create a portfolio of investments that work together to generate the returns you need given the amount of risk you can handle. Having investments that work well together and perform well at different points in time is essential for a successful portfolio. The returns generated from an investment portfolio are primarily a function of portfolio design. Choosing how much stock to own, and the right mix of underlying stock types is far more impactful than speculating on a stock tip from a friend.
A comprehensive wealth advisor will also act as a confidant who can help you manage your behavior when the stock and bond markets become more volatile than usual. One of the biggest challenges that investors face is managing their emotions, especially when the allure of quick profits looms large. Our firm understands the psychological underpinnings of investing. We provide invaluable guidance to clients to help them make informed decisions and not succumb to impulsive actions.
Conclusion
Remember investing is not a game of chance. It is a calculated journey that requires thoughtful planning, diligence, and a steady hand. We don’t gamble with the money we manage for our clients. We have professional solutions that have allowed us to serve our clients successfully for over 25 years. We encourage our clients to embrace a strategic approach that rewards patience, rationality, and long-term vision. If you or someone close to you has questions about their investment strategy, please don’t hesitate to reach out. We are happy to help.
RYAN M. VOGEL, CFP® is the CHIEF PLANNING OFFICER, PARTNER at Novi Wealth