In my last few blogs and podcasts, I’ve discussed how a good financial advisor, operating to the fiduciary standard, can help co-pilot your financial journey into retirement, and prepare you for accompanying changes to your taxes.
But how do we begin mapping your flight at Keen Wealth Advisors? What are the philosophies and strategies we use to maximize our clients’ investments and make your trip as turbulence-free as possible?
Our firm believes that diversification and asset allocation are the best ways to reduce volatility and increase return on investment. Stocks, bonds, liquid exchange traded funds, and in some cases, institutional class mutual funds are the tools on our instrument panel that we use for navigation.
These six principles help us select and tweak these tools for our clients:
1. Keep an eye on the long-term outlook
We evaluate all our investments based on their long-term outlook. The stock market can be unpredictable, and trying to time the market is an additional risk we don’t think our clients need to take. Yes, some investments will go in and out of favor, but if your portfolio is diversified, and if you’re meeting regularly with your advisor to rebalance your investments, you should be in good shape to adapt.
2. Diversify as much as possible
The portfolios we recommend are exposed to a variety of asset classes and styles. Large, medium, and small stocks and bonds from various sectors, US and international, will usually be represented. Diverse assets diversify your options, giving you another way to adapt your portfolio to market fluctuations.
3. Adjust when necessary
When a portfolio adjustment is warranted, we try to rebalance assets with a tactical analysis of misalignments in asset classes. We don’t believe in static rebalancing based on anniversaries or other unreliable time-based metrics. Instead, we watch for assets moving outside of an optimal range and try to take advantage of those opportunities. Sometimes that means redeploying appreciated capital into another asset that is currently below that optimal target range. We check our clients’ portfolios often to see what kinds of moves, if any, we can and should make.
4. Analyze key features of investable companies
Quantitative analysis tools help us examine the stock portions of our clients’ portfolios. We want our clients investing in companies that spend their cash on what’s in the best interests of their shareholders. Paying dividends, buying back shares of stock, and paying down debt may all be signs of a company worth adding to your portfolio. Companies that reinvest in themselves or buy other companies usually aren’t as solid. In fact, a Harvard Business Report from 2011 pegs the failure rate of mergers and acquisitions between 70 and 90%.
We also rank companies periodically based on criteria we feel is important to their investment potential, such as shareholder yield and earnings yield. We hold onto companies as long as they maintain a high ranking in these categories. When they slip, we may redeploy capital into another business.
5. Take in the big picture
Things look a lot different 30,000 feet up than they do on the ground. We like that big, macro view of stock and bond weightings. We evaluate the health of the whole economy, not just individual products. Retail sales, unemployment, wage growth, housing starts, auto sales, earnings per share growth, industrial production, the Federal Reserve’s monetary policy – these big picture issues can have big effects on individual portfolios.
6. Stay on course
At Keen Wealth Advisors, we provide our clients with an on-going financial planning experience. We coordinate with our clients’ tax and estate planning advisors. We host learning events. We publish blogs and podcasts to help educate our clients. We encourage our clients to stop in at least once a year to go through their portfolios. And we believe that financial planning and life planning go hand-in-hand. Effective investment management, steered by expert advice and sound principles, combined with keeping investment expenses low, can help improve both your finances, and your life in retirement.
Bill Keen is a Chartered Retirement Planning Consultant® and independent financial advisor with more than 24 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
Keen Wealth Advisors is a Registered Investment Adviser. Nothing within this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Keen Wealth Advisors manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed here. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.