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“It’s important that people deal with someone to make sure to prove and provide that guaranteed lifetime income.”
Did you know that 1 in 5 investors know which funds they own? And that’s pretty unbelievable. The Retirement Architect, David Reyes , every weekend here with you. Thanks for listening. If you want to reach to me personally call our office at (858) 597-1966 or go to our website.
So, again, only 1 in 5 investors can actually name their funds. And that’s actually a high number. I think it’s closer to like 90% have not only not know the funds they own, but they have no idea about their portfolio, their portfolio risk and really the composition. And it’s kind of scary. When I do initial meetings, initial consultations where I’m getting to you know as a client, as a perspective client, I really focus – the first thing I always talk about is your portfolio. I will spend a lot time – sometimes it can be 45 minutes, half an hour, could be an hour. It depends upon the time it takes to teach you what you have, because for some of you it could be much more difficult that are really not involved in the finances directly.
But either way, I would say 1 in 10 maybe have a good idea about their portfolio. So it’s very low. And that’s concerning to me because how are you going to make good financial decisions if you have no idea what’s in your portfolio? It sounds kind of crazy, doesn’t it? But it’s just the way it is. So it’s a big part of what we do is breaking down your portfolio.
We do a whole stress test, we call it. We take every one of your securities and we’ll break them down in to how much you own in stocks, how much you own in bonds, what the risk of your portfolio is if we have another Financial Crisis, which we will again. I’m an optimistic guy, so I’m not a doom and gloomer. But, unfortunately, you know, we’ve had two in the last in the 18 years. We’ve had a 10-year bull market. We’re definitely overdue time wise. It doesn’t mean it’s going to happen tomorrow. This market could last another one or two years, or longer. I mean, I don’t know. But it is now officially the longest bull market ever.
So you really need to know what you own.
So I’m going to share a story with you with a brand new client. And I went through all the things that I’m talking to you about first, we analyze her portfolio. Her name is Susan. And we went through her whole portfolio. And broke down how much she owed in stocks and bonds.
And one of the unfortunately things about you as an investor, is that that’s the only two assets classes that are available to invest in. And that’s just not the case. So not only is there other things to invest besides stocks and bonds, but there’s other things to invest in that can actually reduce the risk of your portfolio that have nothing to do with the stock or bond market, which is a true diversifier. Because we don’t want all of our investments to rise up and down with the stock or bond market because then we’re really just relying on the whim. If the market gives me this money, then we’ll make money. If the markets not, we’re losing money. We’ll talk more about that as we go along.
But I want to focus on Susan and her portfolio. So we spent, I would say, 30-45 minutes getting her up to speed. She was pretty quick about understanding.
So when I educate somebody I have to feel comfortable that you understand, or I can’t take you on as a client. If I don’t feel you understand the basic concepts of what you own, and also what we are proposing, I can’t work with you because I’m responsible. Now, that doesn’t happen very often because I’m patient and I will sit down with you and educate you, not only what you have but what we are proposing.
And so Susan had her portfolio, again, it’s 50% stocks, 50% bonds. And she’s really concerned about the stock market. She has about a million dollars and it’s all she’s ever gonna have. She saved her pennies and, you know, she is ready to retire. And she really needs income right now. So I looked through her portfolio. And she was complaining because she hadn’t made any money, literally, over the last like year plus. And she was really upset with her adviser. She said, “Look, I haven’t made any money. So I wanted to figure out why.”
Here’s the problem. Bonds have been a difficult asset class for two years now. The rates have been rising really since 2016, July of 2016. So if you own bonds in your portfolio, you’ve actually lost money. And, unfortunately, most advisers are only investing your money stocks and/or bonds. So why would you want an asset class that has been losing money? The Federal Reserve is raising interest rates. And as rates rise, the value of your bond portfolio is going to go down.
