To Protect and Serve.

First responders are remarkable people and real heroes.  They charge into danger when others flee.  Police officers, fire fighters and military personnel live to protect us, so we can enjoy our freedom.

My family had (has) many friends who were members of the Los Angeles Fire Department and when I was young I loved listening to their stories of dramatic rescues and magnificent fire fights.  They appeared larger than life as they detailed their acts of bravery.   One of these mighty firefighters was Gary Nelson who passed away this year.  He was described as the “Wise Man of the Mountains” in a 1995 Los Angeles Times article.[1]

One of my roles as a financial planner is to protect my clients from greed and fear by managing their emotions.  I don’t want them to get overly euphoric or severely depressed when it comes to the performance of their investments.  Instead, I want them to follow their plan, so they can reach their financial goals.

During a rising stock market investors forget their risk tolerance by allocating more money to stocks.  Bonds and cash are considered villains because they curtail the portfolio’s rise.   When stocks are climbing my role is manage risk and curb enthusiasm to give them realistic expectations based on their financial plan.

When the stock market falls investors get depressed. It feels like the beginning of the end for most and all they want to do is sell their stocks.  At market lows they’ll abandon their financial plan and look for the nearest bunker. When clients are in this emotional state my role is to give them hope and encouragement.  I let them know that bear markets don’t last forever, and good times will be here again.

To be fair to first responders, I’m never in harms way.  I’ve never run into a burning building or exchanged gun fire with an enemy. I sit at a desk in a climate controlled office protected from the elements.  However, I have a strong desire to protect clients from making catastrophic or disastrous financial decisions.

I receive several investment requests from clients and if it fits into their financial plan and moves them closer to their goals, I’ll add it to their account. Of course, if it doesn’t make sense I’ll say so and give them better options.  Knowing my clients through the financial planning process, regular conversations and review meetings allows me to make decisions that are in their best interest.

How can you protect your portfolio in 2018?

  1. Complete a financial plan. It will be your guide for achieving financial success. Your plan will formalize your goals into practical and attainable items.
  2. Rebalance your portfolio. January is an ideal time to rebalance your portfolio because you’ve received all your capital gains, dividend and interest payments from the prior year. Following a year where the stock market did well your asset allocation has probably skewed more towards stocks.  For example, if you started the year with a 60% stock allocation, you may now have 70%.  In this case, sell 10% of your stock holdings and move the proceeds into your bond investments.
  3. Reduce your concentrated positions. If you own an investment that’s more than 25% of your portfolio, sell it down to a limit of 10% or less. This will reduce your concentration risk.
  4. Invest your cash. If you have a large cash holding, consider buying U.S. Treasuries. You’ll earn a higher rate of interest and your money will be guaranteed.
  5. Fund your tax deferred accounts like your 401(k) plan or Individual Retirement Account. If you have children, consider a contribution to a 529 plan. Tax deferred or tax-free growth will allow you to keep more of your hard-earned dollars.
  6. Update your family will or trust. The new year is an excellent time to review your estate documents.
  7. Review your beneficiary designations on your retirement accounts, insurance policies and benefit programs.  If you’re recently married, widowed or divorced, a quick review of your beneficiary designations will insure your money will be delivered to your loved ones.
  8. Work with a Certified Financial Planner® who’s a fee-only, registered investment advisor. An RIA is a fiduciary and legally obligated to act in your best interest unlike a broker.

As we roll into 2018 review your financial assets and documents to make sure you’re protected from harm.  An ounce of prevention is better than a pound of cure!  Also, the next time you see a first responder, say thank you!

Greater love has no one than this, that one lay down his life for his friends. ~ John 15:13

I’ve always seen first responders as unsung heroes and very special people because, when everyone else is running away from danger, they run into it. ~ Dwayne Johnson

Bill Parrott is the President and CEO of Parrott Wealth Management an independent, fee-only, fiduciary financial planning and investment management firm in Austin, TX.  For more information please visit www.parrottwealth.com.

December 26, 2017

Note:  Past performance is not a guarantee of future returns.  Your returns may differ than those posted in this blog.  Investments are not guaranteed.  Options involve risk and are not suitable for all investors.  Photo Credit: Marie Appert, Rose Parade, 2012

 

 

 

[1] http://articles.latimes.com/1995-02-12/magazine/tm-30931_1_county-fire, Patrick Goldstein, 2/12/1995.

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