Tag Archives: finding a financial advisor for the long term

Once you sell out, when do you get back in?

I recently heard about a 62-year-old who was scared out of the market following the dot.com crash in 2000.  For the last 17 years his money has been in cash and CDs, earning a fraction of one percent.  Now, with the market reaching record highs, he wants to know if this is the right time to get back in.  Should he invest now or is it too late?

Here is what one advisor told him:

My first piece of advice to you is to fundamentally think about investing differently. Right now, it appears to me that you think of investing in terms of what you experience over a short period of time, say a few years. But investing is not about what returns we can generate in one, three, or even 10 years. It’s about what results we generate over 20+ years. What happens to your money within that 20-year period is sometimes exalting and sometimes downright scary. But frankly, that’s what investing is.

Real investing is about the long term, anything else is speculating.   If we constantly try to buy when the market is going up and going to cash when it goes down we playing a loser’s game.  It’s the classic mistake that people make.  It’s the reason that the average investor in a mutual fund does not get the same return as the fund does.   It leads to buying high and selling low.  No one can time the market consistently.  The only way to win is to stay the course.

But staying the course is psychologically difficult.  Emotions take over when we see our investments decline in value.  To avoid having our emotions control our actions we need a well-thought-out plan.   Knowing from the start that we can’t predict the short-term future, we need to know how much risk we are willing to take and stick to it.  Amateur investors generally lack the tools to do this properly.  This is where the real value is in working with a professional investment manager.

The most successful investors, in my view, are the ones who determine to establish a long-term plan and stick to it, through good times and bad. That means enduring down cycles like the dot com bust and the 2008 financial crisis, where you can sometimes see your portfolio decline.  But, it also means being invested during the recoveries, which have occurred in every instance! It means participating in the over 250%+ gains the S&P 500 has experience since the end of the financial crisis in March 2009.  

The answer to the question raised by the person who has been in cash since 2000 is to meet with a Registered Investment Advisor (RIA).  This is a fiduciary who is obligated to will evaluate his situation, his needs, his goals and his risk tolerance.  And RIA is someone who can prepare a financial plan that the client can agree to; one that he can follow into retirement and beyond.  By taking this step the investor will remove his emotions, fears and gut instincts from interfering with his financial future.

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Three Ways to Stay Financially Healthy Well into Your 90s

Image result for living to old age picture

According to government statistics, the average 65-year-old American is reasonably expected to live another 19 years.  However, that’s just an average.  The Social Security administration estimates that about 25% of those 65-year-olds will live past their 90th birthday.  We were reminded of these statistics when we recently received the unfortunate notice that a long-time client had passed away.  He and his wife were both in their 90s and living independently.

People often guesstimate their own life expectancy based on the age that their parents passed.  Genetics obviously has a bearing on longevity.  Modern medicine has also become a big factor in how long we can expect to live.  Diseases that were considered fatal 50 years ago are treatable or curable today.  For many people facing retirement and the end of a paycheck, the thought of someday running out of money is their biggest fear.  And there is no question that living longer increases the risk to your financial well-being.

The elderly typically incur costs that the young do not.  As we get older, visits to the doctor – or the hospital – become more frequent.  There’s also the onset of dementia or Alzheimer’s that so many suffer from.  And, as our bodies and minds age, we may not be able to continue living independently and may have to move to a long-term care facility.

As we approach retirement, we should face these issues squarely.  Too many people refuse to face these possibilities, and instead just hope things will work out.  As a wise man once said, hope is not a plan.

So here is a three step plan to help you remain financially healthy even if you live to be 100:

  1. Create a formal retirement plan. Most Financial Planners will prepare a comprehensive retirement plan for you for a modest fee.  We recommend that you choose to work with an independent Registered Investment Advisor who is also a Certified Financial Planner™ (CFP®).  Registered Investment Advisors are individuals are fiduciaries who are legally bound to put your interests ahead of their own and work solely for their clients, not a large Wall Street firm. CFP® practitioners have had to pass a strenuous series of examinations to obtain their credentials and must complete continuing education courses in order to maintain them.
  2. Save. Save as much of your income as possible, creating a retirement nest-egg.  Some accounts may be tax exempt (Roth IRA) or tax deferred (regular IRA, 401k, etc.), but you should also try to save and invest in taxable accounts once you have reached the annual savings limit in tax advantaged accounts.
  3. Invest wisely. This means diversifying your investments to take advantage of the superior long-term returns of stocks as well as the lower risk provided by bonds.  While it’s possible to do this on your own, most people don’t have the education, training or discipline to create, monitor and periodically adjust an investment strategy that has the appropriate risk profile to last a lifetime.  We suggest finding a fee-only independent Registered Investment Advisor to manage your investments.  They will, for a modest fee, create and manage a diversified portfolio of stocks, bonds, mutual funds and/or exchange traded funds designed to meet your objectives.

The idea of saving for long retirement should not be avoided or feared.  With the proper planning and preparation, retirement gives us the opportunity to enjoy the things that we never had time for while we were working, and, can indeed be your Golden Years.

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Financial Planning in the Shadow of Dementia

Alzheimer’s, the most common form of dementia, is an epidemic. More than 5 million Americans are living with Alzheimer’s. It’s irreversible and fatal although some may linger for up to 20 years. And the number is expected to soar.

The Alzheimer’s Association has created a list of the 10 warning signs. These range from memory loss, through confusion to severe mood changes.

Because of the widespread nature of this disease, for people with Alzheimer’s and their families there are a number of things that should be done. Plans should be in place well before the onset of the symptoms.

• Review your insurance policies, especially your Long Term Care policies.
• Talk with your family and your financial advisor to make your wishes known.
• Review your wills and trusts.
• Appoint an advocate who has the legal authority to act on your behalf.
• Make sure you have provided for an appropriate Power of Attorney.

Research shows that declining financial skills is one of the first symptoms of the early stages of Alzheimer’s. This includes anything from difficulty in balancing a checkbook to being victimized by criminals who prey on the elderly. This usually leaves family members to take responsibility for the individual’s finances.

In some cases, people assume these responsibilities without having experience handling money or dealing with financial issues. This is the time to bring in a trusted financial advisor. We can provide practical guidance on both day-to-day and long-term financial decisions.

For a report on this subject, contact Korving & Company – the Financial Planning and Investment Management experts.

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The Unexpected Question

In the three decades I have been a financial advisor, there is one question that will remain in my memory forever. It was early in my career. I was meeting with a young couple who were making long term plans. Near the end of our discussion the wife asked me “What will happen to us when you die?” I was momentarily stunned. I mumbled something about not being that old.

Actually, while the question is unusual, it’s actually a good one. Advisors and clients beginning a relationship should expect it to last a long time. It’s often like a marriage: “till death do you part.” But what does a client do when someone who has been providing financial advice retires or dies?

When looking for advice, most people look for someone with experience. When I look for a doctor, I prefer someone who has been practicing for a while. I like my surgeons to practice and make their mistakes on someone else. A good financial advisor doesn’t have to be old, but it helps to know that he has been through several market cycles. Experience is mostly gained with time and that can be a problem. According to a recent study, 43% of advisors are nearing retirement. That means that if you are middle-aged, there’s a good chance you will lose your financial advisor at the very worst time: as you and your spouse enter retirement.   That’s not the time to have to find someone new.

There is an answer. If another couple were to ask me the same question I was asked nearly 30 years ago, I’d have a great answer. It just happened that my interest in investing carried over to my son, Stephen. He attended Virginia Tech, majoring in Finance with an emphasis on risk management. Upon graduation he became an analyst for one of the top investment management consulting firms in the world: Cambridge Associates. They provide advice and portfolio guidance to some of the country’s largest institutions and ultra-wealthy families.

I was able to persuade him to join me 10 years ago and put his expertise to work for my clients. We have been a great team ever since.   As a team, we manage money the way institutions do, with individual goals and emphasis on controlling risk. At Korving & Company we offer our clients a rare combination of age and experience that won’t be found at other investment firms.

Call us for our White Paper: “Eight Steps for a Better Retirement.”

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