The real value is created by frequently coming back to your plan (at least annually) and making the changes that become necessary as life plays out. The plan itself reflects just one period of time - the planning process trumps the actual plan.
Why it's important to practice what I preach
Lifestyle financial planning is simple but not easy. What I plan for my clients is the same as I plan for myself, I have a plan built using the same software and assumptions.
I could sum it up as not wanting to wake up dead tomorrow and leave my family financially destitute (hence I have adequate life insurance), the same if I were to have a prolonged illness or accident. I would want to be financially protected (hence I have adequate income protection). I also wish to save as much as I can for my unknown future and invest according to what history has shown is wise (a well diversified global portfolio of high quality securities, costs to a minimum). Not become a burden on my family or the state in my later life if I enter a care home and to leave a meaningful legacy to the causes and people I care about the most, all delivered in the most tax optimal way.
Along with living a fulfilled, fun and active life, this is what I wish for financially. In essence this is the same outcome the families I serve want. I insure myself in the same way I preach, I invest in the same way I preach. How on earth could it be any other way? Our long term goals are the same.
In ensuring the financial lives of the families I advise, in turn i'm ensuring the lives of my own family. This is why financial advice is considered a noble profession. One that i'm very proud to be a part of.
The content of this article is for information purposes only and does not constitute a personal recommendation. You should always speak to an FCA regulated financial adviser when considering financial advice. Any recommendation made will be based on a full suitability assessment that will include a comprehensive review of your circumstances, needs and objectives.
An Introduction to The School of Life
Why my investment strategy for client portfolios will be the same in 2017 as it was in 2016.
As we reach the end of yet another fantastic year, it’s time to reflect on the further success of the mighty human race. The Olympics in Rio were spectacular; our dearest Queen turned 90; it was the 400th year death-anniversary of the planet’s greatest wordsmith ever, Mr William Shakespeare. There were countless amazing cultural and art festivals around the globe. We live in amazing times.
We continue to innovate, educate more people and lift more and more families out of extreme poverty. Modern media will continue to focus on the ‘negative’ events of 2016. Who knows if they are as negative as portrayed or if they are just changes or tweaks in time?
No self-respecting financial planner (truth giver) ever wants to talk about short-term (anything less than decades) market movements but at time of writing the major stock markets of this great planet are all approximately 10% higher than the start of 2016. We have a few trading days left but I expect this won’t change much in the remaining couple of weeks of this year.
However, had you listened to modern media’s greatest trick – trying to convince you the world is going to end and all of your client’s life savings would become worthless and that the investment markets are a vehicle to poverty rather than a vehicle to lifetime and multi-generational wealth creation – then it’s likely you would have ‘positioned’ clients’ portfolios as the events unfolded or worse still, taken them out of the markets altogether. That will never be the right decision. The advice to clients should always be the same: You invest forever and you never try to time the markets, the economy, or any other event for that matter.
Having exited the markets you would have then been left on the edge of the riverbank without a guide, boat or map, hoping in despair to catch the eye of a passing boat.
The rational, disciplined investor, who was under the caring stewardship of a smart, lifetime adviser, would have continued as normal. Knowing that the markets move, knowing the world moves from panic to crisis and back to panic. However, what they would not have done was ‘reacted’ or ‘positioned’ their portfolios for ‘coming events’. They and their portfolios were already positioned.
This is foresight planning and not impulse reaction planning, which are worlds apart in both intellect and also returns.
Clients’ emotional wants and financial needs are in full-out war and they are simply not equipped to deal with this kind of conflict. Any that don’t have an adviser who offers an ‘invest, sit tight and forget’ strategy, should seek one out.
So we will march forward, post the Brexit vote and post Trump’s election, with our sights firmly set on the prize, i.e. continued innovation, development and wealth creation for decades to come.
As I write this the media are trying to create new sound bites for the next (illusionary) Armageddon towards which, they would have us believe, we are heading. Usually containing the words, recession, cliff, bust, boom, bang-crash-wallop. Remember they’re there to sell pages, clicks and eye balls. Not to serve you, your clients or your clients’ families with investing truths.
Positioning for 2017
So how do we position our investment portfolios heading into 2017?
The history of the stock markets shows that we have absolutely no idea how the markets will perform/react/move. If anyone tells you differently they are lying to you. This is not a mistake on their behalf; it’s an outright lie. And we should be afraid of liars. No one knows what even the short-term market ‘movement’ will be – that is an investment wisdom and truth.
What’s needed for clients is a well-crafted, globally diversified, lifetime investment portfolio, built with foresight in mind – in that it is well spread geographically and also contains thousands of individual securities (stocks, bonds) to weather all market storms and absorb the latest panics and crises which will be thrown at it. Reacting to current noise and ‘positioning’ a portfolio is a fool’s errand.
The pessimist can never be a successful investor; they will continually seek positive confirmation of their negative world views. The optimist will move from crisis to panic and back again, with a confident smile, knowing they are strong and capable enough to deal with anything and everything the world throws at them.
Every year we hear multiple reasons why we should not invest in the stock markets; this will not change. But neither will the fact, as shown historically, that markets do move in a positive direction. As financial planners we can accept this and apply it in helping our clients manage their wealth and financial affairs, or we can be controlled by the journalist who’s job it is to emphasise catastrophe or trivia. The truth is boring and never changes.
I wish you well for 2017 and rest assured, my end of year article in 12 months time will make for very similar reading.
The content of this article is for information purposes only and does not constitute a personal recommendation. You should always speak to an FCA regulated financial adviser when considering financial advice. Any recommendation made will be based on a full suitability assessment that will include a comprehensive review of your circumstances, needs and objectives.
If Warren Buffett was your Financial Adviser
How to invest for success following the US election result
Assuming the presidential election took place yesterday, this is how to position your portfolio.
You will all now know that yesterday (8 November 2016) was a historic day for our planet. The new leader of the free world was announced. So how should you position your portfolio in the light of the fact that President Clinton/Trump is now at the helm?
Winner: Hilary Clinton
After a close battle with Mr Trump we can now confirm Mrs Hilary Clinton won by a close margin and will now be running the most influential country on planet earth. Here’s how I think you should position your portfolio.
Winner: Donald Trump
After a close battle with Mrs Clinton we can now confirm Mr Donald Trump won by a close margin and will now be running the most influential country on planet earth. Here’s how I think you should position your portfolio.
How to position your portfolio under the new President:
What we really want to know is how will the markets react to this Trump/Clinton win?
If you have any understanding of history and markets you will realise that we have absolutely no idea how the markets will perform/react/move.
If anyone tells you differently they are lying to you. I’ll repeat, they are lying to you. This is not a mistake on their behalf; it’s an outright lie. You should be afraid of liars. Certainly when it comes to the long-term financial and life success of you and your family.
The markets my friend may go up, may go down, may stay the same. The short term ‘movement’ is unknowable, always was, always will be. This is wisdom and an investment truth. No one knows where the market will be heading in the short term. If it heads in the direction someone thought or claimed it would, this is an example of hindsight bias, waiting for something to happen and then claiming perfect foresight in hindsight.
A well-crafted globally diversified lifetime investment portfolio (which you should already have) is built with foresight in mind – in that it is well spread geographically and also contains thousands of individual securities (stocks, bonds) to weather all market storms and absorb the latest panics and crisis which will be thrown at it.
Reacting to current noise and, God forbid, ‘positioning’ your portfolio is a fool’s errand.
The talking heads will be shouting down the house and trying to get your attention with what they think you should now do with your portfolio. A sure fire strategy to misbehave yourself to poverty would be to make long-term investment decisions by listening to an ‘expert’ on the big flat screen panel.
Remember they’ve probably never sat in a room with a family, looked into the whites of their eyes and asked them about their hopes, dreams and fears for the future. They’ve never guided a family with care and consideration and told them how to invest their family’s life savings. The only people qualified, from an intelligence and emotional point of view to guide you are caring, compassionate, lifetime financial advisers.
If you don’t have one, seek one out. It’ll be the best investment of your entire life, period. The bulk of the fee (investment) you will pay is for them to be rational during times of irrationality. And thereby keep you rational too. Periods of irrationality are increasing in both frequency and intensity.
The end of the world (your investments) is happening more frequently and expert financial advisers are having to talk their clients off the ledge or away from the loaded gun more frequently then we would like. This is because the echo chamber of modern media and expert opinion has been amplified to an unprecedented level.
If ever there was a time for a professional to have clarity over history and understand the capitalist machine (the stock market) it’s now. If you had Warren Buffet as your financial adviser he’d tell you to put your money into a low cost index fund and never react to the markets. He has said this on many occasions. If the world’s most successful, intelligent investor is consistently telling you this, then common sense says that it pays to listen.
If you haven’t got the gist of this article yet, I’ll make it abundantly clear. Come 9th November 2016, whoever’s name is on the Oval Office door will have zero impact on your 20/30/40 year investment plan.
How to truly invest for success
Expect a lot of noise and panic prediction from the mainstream and financial media in the wake of the Presidential election. It is in their interests to do so and they will do all they can to derail the clarity in your thinking and as a result, your financial plan. It’s their agenda they’re working to – not yours.
But that is the way to destroy your family’s long-term financial success. Acting on impulse is a sure fire way to investment hell; foresight, strategy and belief is the only way success will be possible.
My advice is to block out this noise by seeking out a caring, compassionate financial adviser who will guide you with tough love and sound financial and investment thinking to ensure you behave yourself to wealth and not misbehave your way to poverty.
Please reread this post on the 9th November, as I guarantee you, most ‘experts’ will be lining up to advise you on how to (incorrectly) ‘position’ your portfolio (family’s life savings) when no earthy soul knows how the market will react.
The content of this article is for information purposes only and does not constitute a personal recommendation. You should always speak to an FCA regulated financial adviser when considering financial advice. Any recommendation made will be based on a full suitability assessment that will include a comprehensive review of your circumstances, needs and objectives.