As volatility has been spiking in the equity market, I just have to ask, do you have a strategy? Often when I meet with potential new clients this is a question I pose. More times than not they look at me as if I am speaking a foreign language that they can’t quite understand. As a Certified Financial Planner I have the utmost conviction in the discipline of financial planning. How can you get to your destination without a map, or at least an address? But how many times have you plugged that address into your GPS just to re-route because you knew a faster route? You see, there was some knowledge applied over the route that the computer just didn’t know. That my friend is making a strategic decision to change the course for a better outcome.
Risk Management in your portfolio is the same discipline. Using a research process to overlay the price and rate of change data that the market is giving you on a daily basis is how we manage risk in markets. This is where passive investing for the “long-term” has always puzzled me. I read a great quote this morning.
“We all live under the same sky, but we don't all have the same horizon” ― Konrad Adenauer
I have worked with hundreds of individual clients, and I can attest to the fact that this saying is completely true. What clients want for their lives could not be more different. Why then is the same passive fund right for you as it is for all the people in your company? Passive funds were designed for the small investor to have access to managers. To be able to pool their resources to get a manager that would not take less than a million dollar minimum. But once you have built up enough money in your accounts, say $250,000.00 or so, that method of investing offers you little in the way of growing and protecting your wealth.
For our clients at AMJ Financial we are proactive investment management asset allocators. We believe that you should be diversified, but we don’t believe that you should own all asset classes all of the time. The market, through its price movement will tell you where you should be allocating, if you have a process to follow the indicators. It will also tell you when risk is building to levels that would be unacceptable, if you know where to look and how to use that data. The data can also point you to better risk adjusted buying opportunities in the markets. Because if you are willing to sell, you also must be willing to buy. So next time you are looking over your statements and wondering if your outcome is what it should be, ask yourself this question: What is your Risk Management Strategy? If you don’t have the answer, I hope you will consider letting us be your guide.
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