Your Investment Portfolio - Why You Don't Need A Financial Planner

Alexander Green
by Alexander Green, Chief Investment Strategist, The Oxford Club

Your Investment Portfolio - Why You Don't Need A Financial Planner

by Alexander Green, Chief Investment Strategist

Friday, February 15, 2008: Issue #764

If you need bypass surgery, you should find the most qualified surgeon available. If you're getting sued, you should hire the best defense attorney in town. Likewise, some people argue that if you're planning to live well in retirement, you should hire the most expensive financial advisor you can find to manage your investment portfolio.

I'm not one of those people.

My basic premise was this. If you're an investor who is seeking long-term capital gains, it's crazy to pay a lot of money for a high-priced financial advisor who gives you an economic outlook and short-term market forecast with all sorts of commission-based solutions attached.

Nor do investors generally need a "personal investment plan" based on their individual circumstances...

Your Investment Portfolio Should Have Only One Objective

A long-term growth investment portfolio has one objective - to keep you from outliving your money. It should give satisfactory returns for a 25-year-old just beginning an investment plan, as well as a 65-year-old whose retirement may realistically live three decades or more... before he goes to that big retirement home in the sky.

Last week I was a speaker at the World Money Show at the Gaylord Palms in Orlando. (Over 14,000 people registered to attend.) And while I spoke on everything from momentum investing to insider buying, I got the biggest response from a talk I gave Wednesday afternoon called "The Gone Fishin' Portfolio: Get Wise, Get Wealthy... and Get On With Your Life," about how you can effectively manage your long-term investment portfolio yourself.

As the fund manager John Templeton once said, "For all long-term investors, there is only one objective - maximum total return after taxes."

Of course, some financial advisors are taking generic advice and selling it as customized plans. For that reason, whenever I hear an investment advisor tell a client that he is drawing up a long-term growth portfolio based on that client's "unique profile," I'm invariably reminded of the comedian who tells his audience, "Never forget that you're special... just like everyone else."

I don't want to tar all advisors with the same brush. Some actually give good investment advice at a reasonable cost. But, as my buddy Scott Whitmore at Morgan Stanley is fond of saying, "It's 97% of investment advisors that give the other 3% of us a bad name."

Part of the problem, too, is that investment advisors have a lot of overly burdensome regulatory requirements. Brokers and other investment advisors are supposed to "know their customers." That means they have to ask a lot of nosy questions about your financial circumstances. But that doesn't mean you need to pay for a customized solution.

And, quite frankly, this is generally true for income-oriented investors, as well as growth-oriented ones.

Keeping An Eye On Your Investment Portfolio

If you want to make sure your investment portfolio doesn't kick the bucket before you do, look at expected asset returns, not your personal circumstances.

Need proof? Jim Otar is a certified financial planner, independent advisor and the author of "High Expectations and False Dreams: One Hundred Years of Stock Market History Applied to Retirement Planning."

In June 2002, he wrote a column on "Client Strategies" for Financial Planning, a journal for investment professionals. He says that, "The optimum asset allocation for an income portfolio has nothing to do with your client's risk tolerance, his investment knowledge or many other countless questions that your clients are forced to answer during your initial interview. Other than fulfilling the regulatory requirements, the ritual of risk assessment has no significance to the optimum asset mix."

In short, if your goal is long-term growth - and you want to minimize the time you spend fooling with your investments - you can get satisfactory returns by doing the same thing the country's top institutional investors are doing: asset allocating, rebalancing and keeping a sharp eye on expenses and taxes.

The right asset mix is the key. Not fancy advice with high fees attached.

Good investing,


Today's Investment U Crib Sheet

  • What's the right mix of assets?Below, please find the Asset Allocation Model that Alex recommends for maximum long-term results:

Alexander Green's Asset Allocation Model

  • Proper asset allocation - holding a combination of non-correlated assets - will determine much of your long-term success. But there are three more "rules" that can improve your total return: proper position sizing, following a strict sell discipline, and keeping your costs to a minimum. To be sure, successful investing isn't just about picking the right stocks. It's just as important to know how much to buy, how to keep as much of your profits as possible... and knowing precisely when to sell.
  • Combined, these Four Pillars of Wealth will increase your overall return far more than some financial advisor's "needs analysis" quiz.

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