Investment Planning

<strong>How Should We Invest Our Savings?</strong>

How Should We Invest Our Savings?

Your investment portfolio can achieve incredible things on your behalf. When building wealth, each dollar invested today could double in 10 years1. In retirement, your investment portfolio can provide income for life. Since each client of ours has unique needs and circumstances, we build personalized, dynamic investment portfolios based on those desires.

Successful investment portfolios require an intense focus on outperforming while keeping costs to a minimum. While some advisors tout their "expertise", we emphasize the first principles of investing and identify what we can control. Whether you are seeking an income-focused portfolio or growth for the future or a bit of both, our goal is to create a resilient portfolio with diverse ways to achieve your goals.

1Assuming a 7.2% annual return, it would take 10 years to double an investment made today. 

"In the investment world, the rearview mirror is always much clearer than the windshield."

- Warren Buffett

First Principles of Investing

We like to think about the three “E’s” for investment markets – economics, expectations, and emotions. These three considerations help us understand how investments behaved in the past and where they may be going. We start our analysis with a fundamental understanding of the economic forces that drive returns – interest rates, growth rates, valuation multiples – but non-scientific forces also play a factor – fear, risk tolerance, expectation of loss. It’s impossible to fully comprehend the mood of the market, but this framework provides us with realistic guardrails as we move along the journey.

Using a fancy bit of mathematics, stock market returns can be decomposed into three components: dividends, earnings growth, and price-to-earnings growth. Investors are rewarded with dividends and profits from a company. Those profits can be expanded further into profit margins and sales growth – companies can either sell more or sell more efficiently. Investor's expectations can change as well, which means the market may pay more or less for those dividends and earnings over time. Using this framework, we aim to understand the forces in the market at any given time.

While this economic-based theory is all well and good, emotional forces also play a significant role. Prices of securities can sometimes reflect emotions of the day more than economic theory - the specter of bad news can often lead markets lower, even if the economic data doesn't support it. Managing these forces while keeping tabs on economics and market expectations is critical to build a resilient portfolio.

Putting It All Together

The most important aspect of an investment framework is consistency - we don't change our understanding based on the latest run up or plunge in prices. Instead, we focus on an evidence-based approach - combining data from economics, expectations, and emotions to help select investments that may outperform. However, this analysis isn’t a tool to bet on markets or predict when events may occur. We use it as a guide, like checking the weather before a trip, that we hope is directionally accurate but shouldn’t be trusted as perfect truth.

  • Objectives First: We start with why you are investing in the first place - growth for the future or income needs or both.
  • Aligned Portfolios: Your portfolio should reflect your objectives and we can help set your expectations on how to track your portfolio.
  • Evidence Based: We take our responsibility as fiduciaries seriously and manage the assets you've entrusted us with based on financial science
  • Keeping You Informed: Investing is a journey with ups and downs so we keep you updated along the way so you can stay informed
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Why Work With a Independent, Fee-Only Advisor?

Pine Harbor is an independent, fee-only financial advisor. What this means is that we are not affiliated with a major bank or investment firm, so the advice and guidance we provide is unconflicted, based on the best research and insights available. The investments we select for our clients are also conflict-free, we don't promote any particular investment firm over another and work with you, our client, to align your portfolio with the most appropriate strategy.

Fee-only means that we charge a our clients a single, transparent fee which is based on the assets we manage, not any products or strategies that we select. Since our fee is based on the assets we manage - we do better when you do better. We never get a commission or any other compensation to recommend an investment. Oh, also, we are fiduciaries, meaning that we always act in the best interest of our clients. Being a fiduciary is in our DNA and how we choose to work with clients.

Designing an investment strategy that aligns to your objectives takes time, care, and frequent updates. We are humbled to work with such great clients today that trust us to manage their wealth. Contact us today to learn how we can help you too.

<strong>Key Takeaways</strong>

Key Takeaways

    • Align your objectives with your investment portfolio
    • Focus on what you can control - there is a lot of noise out there
    • Rely on evidence - consider the economic theory and investment first principles
    • Ensure your best interests are at heart - work with an advisor you trust and who has your back

For more information about our firm and the services we offer, send us a quick email or call the office today. We would welcome the opportunity to speak with you.

davey@pineharborwealth.com

(240) 200-4950