By David Guttery, Sponsored Content
I believe there are two parts to that answer, and I will begin with comments about the second most important of the two answers. So, to begin, let’s talk about execution. Most of the time, people believe that professional financial planning involves a primary focus on the execution of the plan. That isn’t the case.
Clearly, execution is important. To that end, over more than a year we have taken steps to expand, and refine sleeves of income producing bond assets, and we have also migrated heavily over to the side of the market where we believe that valuations are attractive, and we are able to generate income through the reinvestment of dividends. This has largely been found with value discipline stocks, of companies that make things that you will purchase in consistent quantities regardless of the disposition of the economy.
Said another way, we have focused more heavily on companies that manufacture toilet paper, toothpaste, and bars of soap rather than on designer cups of coffee and other discretionary items. That just isn’t the economic environment within which we find ourselves.
From there, the management of risk can also come with the construction of options collars, and holding options defensively in an effort to minimize the potential risk of loss.
We also look to alternative investments with clients for whom such instruments are appropriate. Again, this can provide us with a negatively correlated source of income and unique characteristics that assist in the management of holistic risk.
So, clearly execution is important, but first and foremost, the advice that we consistently render to our clients for the benefit of managing periods of time such as this is to remain true to the plan. If you think about it, if it weren’t for the plan, there would be no need of execution.
For most clients, we have mapped out the next 15 to 40 years of their lives. We have identified targets of income, and parameters of risk, and the objectives that we are trying to achieve, as consistently as possible, over time.
The key to making that happen is to not quit. We encourage our clients to invest through periods of time such as this, and take advantage of matching components within a qualified plan for example, and engage certain passive strategies to manage risk such as dollar cost averaging, and portfolio rebalancing. We encourage our clients to leverage periods of dislocation like this to their benefit. Make them work for you.
Clearly, that doesn’t guarantee that we won’t have down years. The objective however is to exceed the average annual targets that we have outlined in the plan, over the time that we have, and within the parameters of risk that we have identifying, for the achievement of long-term goals such as consistent income and other planning objectives, over time. Notice that I referred to targets that we’ve outlined in the plan. That does not necessarily imply that we’re experiencing positive returns year over year. It means that we’re proactive in the execution, of the implementation of the plan, with a focus on achieving the long-term goals of the plan.
As I have stated before, there are always areas of the market to which exposure is appropriate as the economy changes. When it comes to execution, my job is to help clients identify those areas and to do so as proactively as possible. At the end of the day however, this is about achieving a long-term plan, more so than it is about the day-to-day execution. When clients can see the importance of execution in light of the bigger objective, which is the achievement of planning goals, it helps to alleviate the angst that can come during periods of time such as this.
Let me offer this analogy. I have flown as an airline passenger on many occasions during my lifetime. The understood proposition is that the pilot will transport me from where I am, at point A, and deliver me to my desired destination, at point B. There has never been a time when I boarded the aircraft however that the pilot met me at the door and assured me that the journey would be without turbulence.
Sometimes, you can’t see the turbulence through which you are flying. When we encounter that air pocket, the pilot engages the means at his disposal to manage the turbulence. Among other things, he uses the flaps, the stabilizers, the rudder, the trim tabs, and other things to stabilize control of the aircraft, as he navigates the turbulence.
That doesn’t mean that we as passengers don’t catch our stomachs if you will, and sometimes grip the armrests. We are nonetheless making progress toward the destination though. We don’t find the nearest parachute and bailout of the aircraft.
Other times however, turbulence is readily evident. The pilot can see a thunderstorm complex 100 miles out on radar. The pilot does not fly to the thunderstorm complex and then bank sharply to the right however. At 100 miles away, the pilot begins to gradually tweak the course of the aircraft in such a way that over time, we can fly around the thunderstorm complex, and resume the original course heading.
Again, that does nothing to guarantee the absence of turbulence. It is the job of the pilot when concerning elements are visible, to adjust course, gradually, as we attempt to navigate what we can see in front of us.
Over more than a year, we have become increasingly aware of the effects of inflation, supply chain disruption, pandemics, and geopolitical risks. As these elements became increasingly worrisome, we as financial planners began to gradually adjust our flightpath, so that we could navigate these elements to the best of our ability, while making progress toward the destination of point B.
Again, I believe that when clients clearly understand that a holistic financial plan, that could literally span decades, is governing the day-to-day execution of that plan, it does much to alleviate concerns that come with sensational headlines, and volatile markets.
The tools that we use, and the exposure that we have to the markets, changes quarter to quarter, and year over year, but the plan and the approach to arriving at point B, remains constant.
I would encourage everyone to consistently engage your professional financial planning investment professional, and candidly express concerns, so that they may be in the best position to proactively address those concerns. Through such interaction, confidence in the overriding holistic plan should be solidified. This is a marathon, not a sprint. That’s not a cliché, it is the greatest amount of truth that I could share with you. Especially at times like these, you must find the intestinal fortitude to rise above the minute-by-minute noise, while remaining actively engaged with your financial planning professional, to navigate the turbulence that will almost certainly exist between your origination point and your destination point.
David Guttery and Brandon Guttery offer products and services using the following business names: Keystone Financial Group – insurance and financial services | Ameritas Investment Company, LLC (AIC), Member FINRA/SIPC – securities and investments | Ameritas Advisory Services (AAS) – investment advisory services. AIC and AAS are not affiliated with Keystone Financial Group. Information provided is gathered from sources believed to be reliable; however, we cannot guarantee their accuracy. This information should not be interpreted as a recommendation to buy or sell any security. Past performance is not an indicator of future results.