BMJ Stone
EZG Manufacturing
Federated Insurance
Fraco USA, Inc.
Hohmann and Barnard, Inc.
Hydro Mobile, Inc.
iQ Power Tools
Kennison Forest Products, Inc.
Mortar Net Solutions
Non-Stop Scaffolding
Pullman Ermator
Tradesmen's Software, Inc.
February 13, 2003 7:58 AM CST

Preserving Your Wealth in Turbulent Times


Whether your investment capital was earned from hard work, an inheritance, or even winning the lottery, you want to preserve and see it grow, even in times like these.

During the "Roaring '90s," preserving and growing your wealth was, obviously, much easier than in today's economic environment. But, as the 20th century ended, so did "easy" investment-management. Short-term-minded advisors and stockbrokers were left without solutions as client portfolios plummeted. Non-diversified portfolios, heavily weighted with technology holdings and "hot stocks," were exposed to great risk of loss.

Many highly-trusted investment-managers and brokers lacked the knowledge to steer through these troubled waters and couldn't prevent the elimination of years of investment growth. Investors were left to worry whether their wealth would be preserved. Some were even forced to confront the possibility that the lifestyle they had become accustomed to might be compromised.

What should my 'Wealth-Manager' be doing?
You need a "Wealth-Manager" and that person should be able to understand your financial situation and design and maintain a portfolio (and comprehensive investment plan) that will ensure the realization of your financial dreams and desired lifestyle. Your "perfect portfolio," if designed correctly, will be conducive to growth and be able to reasonably sustain its value through anything the markets can throw at you along the way.

Here are some tips that, if applied, will ensure that your investment-manager preserves your portfolio while positioning it for maximum growth at the same time:

Make sure you include bonds and cash in your investment strategy. Say it is your nature to be extremely aggressive when it comes to investing. Maybe you are very young or can simply withstand more market ups and downs (and you don't mind those roller-coaster rides) in pursuit of big gains. You still must have an income-stream to ensure that the value of your portfolio is maintained through all market conditions. By mixing income-generating investments with growth-oriented investments your portfolio will be poised to grow in good markets and to sustain value in rougher markets.

Make sure you include stocks in your investment strategy. Say you are the type of investor who believes that you must have "safety" above all else. By avoiding stocks completely, you will be, in essence, losing as inflation eats away at your buying power significantly over time. The fact is you need greater growth than the inflation rate just to keep the buying power you have now. While your age is a factor in determining your proper amount of stock holdings, you must have some stocks in your portfolio, even if you are the most conservative of investors.

Diversify! If your portfolio is diversified properly, it will withstand turbulent markets and can provide double-digit returns in good times. There are so many different sectors of the economy to invest in, both domestically and globally, that by staying diversified, you should have no trouble avoiding the types of losses we have seen "the markets" experience over the last couple of years.

Make sure that investment-related fees and expenses are extremely low to avoid seriously impacting portfolio growth. The effect of how those "little" fees and expenses cut into portfolio earnings over time is staggering! Don't be victim to paying exorbitant fees for your money-management. Study after study has proven that you can achieve the same, or better, returns over time with low-expense-related investments as you can with high-expense-related investments. Don't make someone else rich at your expense!

Make sure that all investing-related costs charged by your investment advisors are strictly fee-based, not commission-based. The commission-based advisor will make money by simply taking you into and out of any investment regardless of how the investment performs for you. These "advisors" usually push a particular product that brings them the highest commissions. Sadly, whether the investment performs well for you or not is inconsequential to them. In fact, if the investment does not perform well, these advisors may actually be happier than if it had. Why? Because they get to move your money again into something else... bang, another commission earned!

Fee-based advisors, on the other hand, will charge you in one of two ways: either a one-time fee for planning or an ongoing fee for assets under management. As your portfolio grows, their fees grow. If your portfolio goes down in value, their income goes down accordingly. Which type of advisor do you think would work in your best interest?

Stick with a conservative, long-term, portfolio-management approach. Forget about market timing and believing that your wealth-manager can pick market tops and bottoms. It has been proven time and again that this simply cannot be done over the long-term. If you are diversified properly, and rebalance periodically, you will never have to worry about "catching" tops and bottoms. Your investment capital will always be in the proper place: poised to catch rallies automatically. You will also avoid all those nasty transaction fees incurred when you are "trading" versus investing.

Your portfolio should be as unique as you are. Everyone has different standards of living and lifestyles to maintain. And all investors have different goals, as well. Your portfolio should be tailored to accomplish your financial goals, taking into account your age, income needs, portfolio size, life situation, and future needs. Also, your financial plan must be adaptable to change should your life-situation change.

You're in the driver's seat
Your wealth-manager can put you in the winner's circle if, at the very least, he or she uses the basic guidelines you learned here to plot your course. Under this system, you can trust that even a few bad market years should not seriously impact what you have accumulated nor should your present lifestyle or plans be threatened. Remember, we've had these markets before and this system has brought prosperity to those who stood by it. With this system, you also get a bonus side-benefit: when you read your account statements, you'll feel peace of mind. After all, isn't that really what your investments are supposed to bring you?

About the Author

Carl Sanger is the owner of Serenity Wealth Management, LLC in New York. Sanger is a Registered Investment Advisor and has been managing investment-capital for 10 years.


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