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Retegy

Save Money on Taxes, Invest the Difference, Retire Happy!

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Investment Management

Our investment management philosophy is built around you and is designed to help you achieve your goals. Here are the questions we will discuss to help you with your investment strategy.

What return potential do you need in your portfolio to meet your financial goals?

We all want the highest possible return on our investments with the least amount of risk. The question is how much return on your investments do you need and over what period to achieve your goals? Here is why it is so important. Investments that generate higher profits over time may give your portfolio higher volatility. It may not be a problem when your investment portfolio has time to recover from a downturn. The problem starts when you need to withdraw the money when the market is down. When you sell your investments low, you may not have enough capital left to recover from the downturn. We call it the “sequence of returns” risk. Dial the portfolio volatility too high, and you may increase the risk of missing your goals. Keep the volatility low, and you may not generate enough return to meet your goals. We start our process by understanding your goals to get the portfolio performance you need to achieve them.

How much volatility can you afford?

Now that you know how much return you need, let’s find out how much volatility you can afford to have. There are a few simple rules.

First, we use investments that are supposed to increase in value or generate income over time. Occasionally, some investments fail. We help you diversify your investments to reduce this risk. Here is an example. That shiny BMW that your friendly car dealer said is a good investment does not qualify. Its value drops from the moment you drive it from the dealer’s parking lot. Nor does investing in a single stock like shares of Bayerische Motoren Werke AG. That still exposes you to too much business risk should something happen with the brand. Buying a basket of automotive manufacturer stocks would be a better choice. It would be even better if the stocks you buy are not only of automotive manufacturers. Even better would be to invest in an even wider variety of companies. You get the picture.

Second, occasionally, markets stage a downturn and many investments go down simultaneously. Diversification helps but may not be very efficient in this situation. Remember, those market downturns come and go. Markets grow over time, and a well-diversified investment portfolio should follow the market. The key here is to have enough time to let your investments recover and work for you. As you are getting closer and closer to taking your money out, you may need to dial down your volatility risk.

How much volatility can you handle?

The next step is to understand how much volatility you can manage. You worked hard to save your money. When markets go down, it can be very stressful to see your life savings going down in value. It is not about how much volatility you can afford to take to keep your sequence of returns risk low. It is about how stressful it would be to see these losses in your investment portfolio.

When the market is down, the worst thing you can do is to sell your investments low and then miss the recovery. You must trust your sound investment strategy and not panic. If events like this can keep you up at night, it may be a good idea to dial down volatility risk. This way you would sleep better in any market condition.

There is no one-size-fits-all solution to investment management. Everybody has different goals, time horizons, and tolerance levels for risk. Sometimes goals may contradict each other. A good example is retirement goals in the period close to retirement or early in retirement. On the one hand, you need to reduce volatility to keep the sequence of returns risk low. On the other hand, you still may have a few decades to go. Your investments need to keep working hard for you to help you meet your long-term goals. Sometimes it makes sense to design a multi-solution approach to achieve all your goals.

Start today! Schedule a short online strategy session where we can share with you top financial strategies that can help you achieve your financial goals in any market conditions.

Schedule Now

We are looking forward to working with you!

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Market Update (December 4th, 2019)

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Copyright © 2019 Retegy LLC. All Rights Reserved. Retegy LLC is a Registered Investment Advisor.

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