Fee-Only Retirement Planning, Financial Planning & Investment Management

Investment Management Services


Michael does not promise investment returns, rather he focuses on planning for the achievement of client financial goals.

Portfolio Design

Investors typically seek to have a moderately conservative allocation, and desire that their portfolios stay ahead of inflation over the long term.

When talking about portfolios and investing strategy, two of the main topics discussed are portfolio design and asset allocation. A moderately conservative allocation could nominally be described as 50% in equity investments and 50% in cash and bonds (that is, a 50/50 allocation).

Note: Other investment asset sectors exist, of course, but this is the basic portfolio allocation nomenclature.

Portfolio Allocation and Investment Market Status

Into which investments should money be placed to generate a decent portfolio return? The answer is, in part, dependent on what investment returns the market is offering at a given point in time.

Cash and Bonds

Investment returns for cash and bonds have been very low for several years, and it appears they will remain low for the near future.

Equities

Investment returns for domestic equities were generally very good from 2010 through 2014, rebounding from the 2008-09 Fiscal Crisis to the current historically high price levels.

Investment Environments

There are 3 general equity investment environments:

1. Upward Trending Equity Market.

The most recent example of which is 2010-2014:

Upward Trending Equity Market

2. Downward Trending Equity Market.

The most recent example of which is 2007-2009:

Downward Trending Equity Market

3. Sideways Range-bound Equity Market.

This is the current environment. Since equity valuations are about 50% higher than in 2009, there is the likelihood that prices of investments could be range-bound for some time:

Sideways Range-bound Equity Market

Investment Strategy Background

In an Upward Trending environment, decent investments options are generally readily available.

In both Sideways Trending and Downward Trending market environments, investments that have a substantial income component improve the odds of receiving a positive, desirable investment return.

In general across all market environments, dividends have been responsible for about 50% of the equity investment returns over the last 100 years.

In Sideways Trending and Downward Trending market environments, dividends have been responsible for over 75% of investment returns.

With this in mind, my client portfolios target investments with relatively high dividends.

Investment Asset Selection

Investments in several sectors with medium-to-high dividend yields can be targeted for purchase in the current investment climate. Additionally, certain income-oriented investments produce non-taxable income, or tax-advantaged income when held in taxable accounts, which can be used to lower one's tax bill.

Volatility Can Prove Advantageous

In some cases, income-oriented investments can experience relatively high price volatility due to market conditions. From time to time, the prices of certain investments will drop below their recent/customary price level (such as in an equity Bear market).

Such volatility is a fact of life. Rather than trying to avoid it, investors can advantage of volatility by purchasing additional shares when they are "On Sale".

When an investment's price rises back to (or above) its recent/customary price level, investors will own a higher quantity of income-producing shares. This is the concept of Dollar Cost Averaging, which works especially well with income-producing investments.

Strategic Swaps

Not all investments experience price declines at the same time. Thus, strategic shifting between investments in a portfolio can also be a productive strategy.

Shares of an investment which has had a price increase over the original purchase price can be sold, and the proceeds used to buy shares of a different investment which has experienced a price decline.

Sell high, Buy low; Repeat.

Target Investment Returns

Portfolios can be structured to have an overall dividend yield of 7% to 8%, for example. Regardless of share price fluctuations, steady income can be deposited into one's account, month after month, which is very satisfying.

In contrast, typical portfolios have a dividend yield of 2.5% to 3%. Thus, my client portfolios have an income yield that is more than double that of other portfolios.

My goal is to create portfolios for clients which produce a long-term investment return higher than they would obtain by investing on their own. If successful, there would be no net cost to my clients for utilizing my services.

Availability

Michael is not taking on new client work at the present time. He apologizes for his current lack of availability.