Investment Advisory Cornerstones

“Certified Financial Planner, Certified Investment Management Analyst, and Chartered Financial Analyst all have strong requirements, but the CFA is the strongest for investors."
- Business Week, Dec 18, 2008

No One Can Predict the Future

Click for larger image.Repeated studies have shown that when taking fees into account, extremely few people can beat the market over the long run (see chart to the right). We avoid market timing and stock picking, and instead employ strategies that have withstood the test of time, such as strategic asset allocation.

Discipline

During the 20-year period ending in 2009, the S&P 500 returned an average 8.1%. According to a study by Dalbar Associates, the average stock investor earned roughly 3% a year during the same time. Subtracting out taxes and inflation, the average investor actually lost money. Removing the emotional element is essential to investment success and financial peace of mind. We follow a disciplined approach, involving dollar cost averaging and periodic rebalancing, consistently applied through all market conditions.

Investments Should Reflect You

Your situation and goals are unique, and your investment portfolio should reflect that. Investment choices should be driven by your goals, to better address your needs and the risks you face. Flexibility is important - as plans can always change.

Costs Matter

Click for larger image.Morningstar recently acknowledged that expenses have been more reliable at predicting relative fund performance than their popular star-rating system. Despite this, many advisers still sell expensive investments along with the promise to outperform the market. For our clients we recommend the same types of low-cost investments we use ourselves - the type people are not paid to sell.

Get Time on Your Side

Time is important to financial planning because of the power of compound interest. The key concept to compounding is that the earlier you start saving, the better off you’ll be in achieving your goals. No matter how large or small the amount, now is the best time to get started.

Here's a quick illustration:

Mary and Bill, each 22 years old, have an extra $4,000 to either invest or spend as they choose. Mary decides to start saving, and Bill spends his $4,000. Mary saves this way until she is 30 and then never saves anymore. Alternatively, Bill didn’t save anything and then starts saving $4,000 per year beginning at age 30, and saves every year until he retires at age 65. The chart below shows the value of Mary’s and Bill’s savings from the time they were 22 until they are 65, assuming they both earn 10% per year.

Age	Mary	Bill
22	$4,400	$0
23	9,240	0
24	14,564	0
25	20,420	0
26	26,862	0
27	33,948	0
28	41,743	0
29	50,318	0
30	59,750	$4,400
35	96,228	26,862
40	154,976	70,125
45	249,590	139,799
50	401,967	252,010
55	647,371	432,727
60	1,042,597	723,773
65	1,679,112	1,192,507

The difference time can make is huge. Notice that Mary invests one quarter of what Bill invests, and she still ends up with more. Waiting to catch up later can make the financial planning process much more difficult and expensive.