Economic events of the past several months have left all of us confused, distrusting of many entities we have come to rely on, and in some cases, flat out angry! No one truly expected the extent of the market decline, but it happened. And there is nothing we can do about what has occurred. So the question now is: “Where do we go from here?”

 As you know, one of the fields our firm works in is financial planning and my daughter sits in with me on various appointments with clients and prospects. Lately I have noticed her chuckling at my bulldog personality. The truth is, I’m fed up. Our job as a Life Planning Firm is to protect our clients from the “what ifs?” of life. Well, the “what if” we never asked was whether or not the entities we have put so much faith and trust in would mislead us.

 It is more critical than it has ever been to know these three things:

• Each of your investments independently;
• Each of your investments in relation to how they work in your overall portfolio; and
• Your investment plan.

 We speak with money managers representing well-respected companies on a regular basis in order to gain perspective from several angles. Each of these managers has their own style and usually the answer to a specific question is slightly different from what the next manager will give you. An interesting commonality, though, is that upon asking each of them what they suggest we do now; they all give us the same answer: “Keep everything you LOVE and get rid of what you don’t.” Not just ‘like’ – ‘love.’

 One mistake we have seen repeatedly when clients first came to us was the overlap and gaps in each of their overall portfolios. Whether it was because their current advisor was held within limitations of what he or she could sell or because their portfolio was spread across multiple advisors, overlaps, gaps or a combination of both were present.

What is overlap? Just because a mutual fund is titled as large cap, mid cap, small cap etc; it does not mean this is what the fund is made of completely. Many mutual funds of a specific company overlap another fund of the same company. In other words, stocks held in the mid cap fund might be also held in the large cap fund. And guess what…you own both. This exposes you to greater risk by owning a less diversified portfolio.
What are gaps? What is missing in your portfolio to help you meet your goals? Do you own investments that are not correlated with the markets? In other words, do you own investments that may not be affected if the market goes up or down? Do you have investment vehicles designed to provide income if you were to need them in the future? Do you have principle-protected assets? Do you have investments designed to help you outperform inflation? It is surprising how many portfolios we see today that are only invested in stocks and bonds! Can you imagine the hit these portfolios have taken over the last months? Wow!

 We are really working backwards here…your investment plan should be known before the types of investments are chosen. And the types of investments needed to achieve your plan should be deciphered before each individual investment is chosen. But… you get the picture.

 Odd as it may sound, most individuals that we meet with for the first time have investments, but don’t have an investment plan. Whether you are in your 30′s, 50′s or retired in your 80′s, you must have a plan that fits your unique situation, future and goals and feelings about risk. Retired or not, do you have a disciplined process to help you buy low, sell high and rebalance. Or, is your portfolio sitting stagnant? Do you have a plan to ensure income for the next five years in the occurrence of another bear market? Or will you have to pull out your principle for income? These are all issues that must be addressed.

 Every one wants to know, “Where do we go from here?” We don’t plan to disregard any ‘what if’ risk again. We are helping our clients implement a recovery strategy with strong disciplines. Is someone helping you with your recovery strategy?