Monthly Archives: July 2016

All about invest that you should know it first

As a financial planner and fiduciary investment advisor, I work with people with varying goals and vastly different levels of education, income, assets and comfort with technology. I’m often worried by similarities I see among investors of all stripes.

Many people simply have no plan when they start investing. Others follow the latest hot investment tips from a stranger online, on TV or in a magazine. I’m surprised by how many investors think they’ve done well, but don’t know how to measure their true rate of return for the risk they have taken. Few investors even know how much risk is in their portfolios.
These issues arise because investors generally don’t use a consistent methodology — a repeatable, rule-based process — to build or monitor their portfolios. That often leads to portfolios that aren’t well-diversified, don’t have the appropriate amount of risk for the investor and aren’t tax-efficient. What’s more, many investors don’t review their portfolios and haven’t thought much about how their investments fit into a bigger overall plan.


Are you ready to invest?
What can you do to make sure you aren’t in this camp? First, determine whether you’re really ready to invest on your own. Based on my experience, there are a number of essential tasks to complete and issues to understand before you start investing.
Completing the following investing assessment can help you determine how prepared you are and whether you’d be better served by obtaining professional assistance from an objective, fee-only advisor.
1. I have a written list of my short-, intermediate- and long-term financial goals and know how much I need to save and the required rate of return to fund each of those goals.

2. I have completed a trusted risk assessment questionnaire tool (such as this one from FinaMetrica) and understand how my risk tolerance fits in with the required rate of return to fund my goals.

3. I have a written investment plan (investment policy statement) that spells out the asset allocation to be used in my portfolio along with the expected range of returns.

4. I understand the importance of asset allocation (the mix of stocks, bonds and other investments) and follow a methodology to identify and create a portfolio that is designed to provide the highest return for the level of risk that is appropriate for my situation.

5. I utilize a methodology to select the investments for each asset class.


The benefit when you choose about investing

Evidence increases by the day that more consumers are moving towards a plant-based diet. How can the average investor take advantage of this trend?

Low-cost index investing has become a popular approach to achieve market returns and will continue to be used by more individual and institutional investors. On the other hand, sustainable investing is also a growing trend, as more investors recognize that an “all-of-the-above” index investing strategy conflicts with their worldview. Index investors are accepting the status quo by owning companies as they are. Sustainable investors are driving change by using fund managers who engage with companies to adopt positive changes or by simple divestment (i.e. avoid investment in the company or sector).

I envision three groups of individuals who would find plant power investing attractive – vegans, vegetarians and advocates of a healthy eating / living lifestyle (ironically, HE/LL for short). The majority of individuals in this category, however, are not in a position to take on an extraordinary amount of investment risk. Investing in “pure play” meat or egg substitute start-up companies is beyond their financial reach.

The growth in the number of mutual funds that divest from fossil fuels provides an example that plant-based investors might want to follow. Why not simply avoid companies that are in obvious conflict with your worldview? Truth is, there are sufficient large, established companies to choose from in order to develop an investment portfolio that may satisfy both financial and personal goals.

As I point out in my book, Low Fee Vegan Investing, there are currently no mutual funds targeted to plant-based investors. This is unfortunate since, without this option, most investors are not in a position to take on the effort or cost to implement a strategy that would otherwise meet their needs.

I believe there are two easy steps plant-centered investors can take to encourage the development of a suitable investment tool (e.g., mutual fund, plant-based index fund). The first step would be to contact their investment professional and state an interest in having a portfolio which reflects their worldview. If sufficient demand develops, this will be noticed by financial service providers (again, recall what happened with fossil fuel divestment – many mutual funds and ETFs options were developed in a fairly short amount of time). Second, participate in the short “Plant Power Survey” that I developed to start counting the number of plant-based investors interested in this concept and, equally importantly, develop a consumer preference data set that might help the community of portfolio managers generate a set of filters for use until investor demand warrants the expense of more rigorous research.

Average investors can, collectively, use the tools of sustainable investing to exercise their power and achieve the extraordinary.


Personal Financial Planner

As I wrapped up a financial planning presentation with clients last week, we laughed when we realized we were all going to buy Powerball tickets on our way home that evening. With the jackpot at over $600 million at the time, a lot of us who might not normally play the lottery had already started counting our Powerball “chickens.”

I found particular irony in a personal financial planner buying lottery tickets, but rationalized that I could freely admit to my purchase as long as I set a reasonable limit (two tickets), had already paid my monthly bills, and wasn’t borrowing from my 401(k) to buy the tickets. As I drove home, I imagined all of the things I would do when (not if) I won the jackpot. I quickly emptied my bucket list and then I started dreaming really big!

This folly reminded me of the importance of making time to dream but also following through by acting on your dreams. Use the ongoing Powerball frenzy as an opportunity to start a conversation with your spouse, partner or even yourself. What is important to you? What do you want your life or retirement to look like? What more do you want to achieve and what’s keeping you from doing it?

We all need personal and financial goals and can benefit from planning for how we will achieve those goals. While playing the lottery should not be a formal part of your retirement plan, it is a fun reminder to spend some time thinking about what (and who) makes you happy. You don’t even have to buy that Powerball ticket to put a plan in place and act on your dreams…but you might be surprised at how doing so can help you push beyond any restraints on your imagination.