Which Comes First: the Plan or the Portfolio?
Despite the energy and attention people generally devote to investments as the core of their financial futures, we argue that a strong financial plan is in fact the most important determinant of success. It’s not a chicken-and-egg scenario, but rather a scenario where one clearly should precede the other for maximum impact on your financial future.
Investing, when approached with a strategic financial planning perspective, can serve as a powerful tool for building wealth and achieving long-term financial goals. Let’s dive into the fundamental aspects of investing from a financial planning standpoint.
Setting Clear Goals
Before investing your first dollar, it's important to understand your aims in doing so. You need to establish clear financial goals. Perhaps you’re saving for retirement, purchasing a home, funding a child’s education, or embarking on a post-retirement adventure.
Every successfully executed plan starts with an objective, and having well-defined goals will serve as a roadmap for your investment strategy. Your financial planner plays a pivotal role in helping you articulate these goals, and perhaps most importantly, determining the time horizon for each goal, and factoring in the level of risk you can comfortably assume to achieve it.
Risk Tolerance Assessment
Your ability to stomach the risks of the market is central to formulating an investment strategy that serves your needs. At The Advocates we employ a variety of tools to assess an individual's comfort level with market fluctuations and potential investment losses. This step is crucial in determining the appropriate investment vehicles and asset allocation for each client, especially on time-specific goals.
Asset Allocation
Asset allocation is a cornerstone of any well-rounded investment strategy. The Advocates thoughtfully allocate assets across different investment vehicles such as stocks and bonds, based on an individual's risk tolerance, time horizon, and financial goals. We strive to choose an allocation that fits our clients’ goals.
Tax-Efficient Investing
Minimizing tax implications is a key consideration in financial planning and investing. Well-planned asset location can improve returns. Contributing to tax-advantaged retirement accounts like 401(k)s or keeping high-growth assets in Roth IRAs can significantly enhance their after-tax investment returns. The Advocates adeptly navigate complex tax landscapes to optimize investment outcomes for their clients.
Regular Monitoring and Rebalancing
Investing is not a one-time event; it’s an ongoing process that demands regular monitoring and, at times, rebalancing of the investment portfolio. The Advocates continuously assess market conditions like valuation and momentum, track investment performance, and rebalance portfolios to ensure they remain aligned with the client’s allocation, financial goals, and risk tolerance.
Seeking Professional Guidance
While some find the allure of do-it-yourself investing tempting, seeking professional guidance from a financial planner can provide invaluable insights and expertise. The Advocates bring a wealth of knowledge, experience, and industry insights to the table, ensuring that investment strategies are tailored to individual circumstances and objectives.
At The Advocates, we guide our clients through our investment process, a deliberate and strategic endeavor to realize long-term financial goals while navigating the complexities and uncertainties of the financial markets. And we do it with their specific circumstances in mind, and in deference to their financial plan. Remember, when it comes to investing, a well-thought-out, disciplined plan is the cornerstone of financial success.