There are times I encounter a familiar face and will get asked - "what did the market do today?"or "the market went up (or down), why?" Now, this may simply be an attempt to start a conversation, but these questions, in essence, put an equal sign between investing for long-term financial security and the equity markets such as the S&P 500 and the Dow Jones Industrial average.
From my perspective there should be no equal sign between these two. As an independent fee-only financial adviser my purpose is purely investing for the long-term financial security and is a much broader topic than simply the markets.
Having a belief that the equity markets are investing, and not part of a broader design, can be very limiting, and in some cases, dangerous to meeting an individual or families long-term financial security objectives. With the equity markets being driven by the emotions of fear and greed too many feel that they are not in control of what happens. If they are investing simply "in the market"investor's feelings about not being in control can be accentuated. What investors do have control of however is the design of their portfolios. With a well-crafted, multi-asset portfolio containing assets that exhibit low correlations to each other, and have "the market"as a component of the overall capital, the daily impact of "Mr. Market" is dampened for funds deployed for long-term security.
Independent financial advisers have been a key driver in the offering of a more comprehensive approach to portfolio design and construction. With a broader offering of investment products it allows advisers opportunities to provide options that are not entirely tied to "the market". The emergence and growth of the independent financial advisers is driven by no less than three factors:
- The ability to freely choose from the entire universe of investment products rather than the limited universe an organization has chosen. (Often these investment products pay the large financial institution for the opportunity to be made available to their sales team.)
- The ability to see an opportunity to cut costs for their clients and thereby improve the clients overall net results.
- The ability to provide other services that are not directly investment related. (In most cases, large financial institutions will not have as part of their offering.)
Investors would be better served to consider "the market"as part of their investing universe and not the "be all end all" option. An independent advisor is best positioned to provide a complete package of components for a portfolio that will focus on the investing rather than the market.
To learn more about Bob Klosterman, view his Paladin Registry profile.
Previously posted on Paladin Registry.
About the Author: Bob Klosterman CFP® is CEO and Chief Investment Officer of White Oaks Investment Management, Inc. and its predecessor R.J. Klosterman & Co, Inc. Bob has been a Certified Financial Planner licensee since 1989. He has been listed as one of the Top 250 Financial Advisors in the United States by Worth Magazine. He has also been recognized as one of the top 150 Financial Advisors by Mutual Fund Magazine, Medical Economics and Bloomberg's Wealth Manager Magazine. Bob's published quotes appear frequently in dozens of local and national publications, including USA Today, the New York Times, Minneapolis Star Tribune, CFP Today, Barron's and Fortune. Follow Bob on Twitter @BobKlosterman.