Barnett Financial Planning offers ongoing asset management services in addition to financial planning. For those clients who would prefer not to manage their own portfolio, Barnett Financial Planning will perform a risk-tolerance survey and develop a custom-tailored, goals-based Investment Policy Statement prior to recommending and implementing any investments on behalf of the client.
AT NO TIME WILL BARNETT FINANCIAL PLANNING HAVE CUSTODY OF THE FUNDS. ALL FUNDS ARE HELD IN THE CLIENT’S NAME AT AN OUTSIDE BROKERAGE COMPANY.
In general, there are only three ways to invest money: (1) security selection; (2) market-timing; and (3) asset-allocation. “Security selection” involves investing in specific stocks or funds with the intention of making a profit when the securities go up in price. Market timing involves being in the market when it is going up, and getting out before it starts going down. Asset-allocation involves owning a diversified portfolio of all asset classes at all times, and rebalancing back to the target weightings at fixed intervals. Numerous studies have repeatedly shown that over 90% of a portfolio’s long-term return is due to asset-allocation, not security selection or market timing. At Barnett Financial Planning, we only use asset-allocation as our investment strategy.
ASSET ALLOCATION METHODS
At the beginning of the client-planner relationship, client goals are written down. A risk-tolerance survey is done, and an Investment Policy Statement (IPS) is formulated. The IPS is a written “game-plan” of how the assets are to be invested. Once the IPS is agreed upon, the investment strategy remains constant until there are changes in the client’s life situation, at which point a new IPS is developed to more closely align with the new circumstances. Having confidence in the IPS allows both the client and planner to ignore the day-to-day “noise” of the market.
After the client agrees to the Investment Policy Statement, the portfolio is designed and weightings are assigned to each asset class. Examples of asset classes are CASH EQUIVALENTS (money-market funds, CD’s, treasury bills, etc.); BONDS (government, corporate, Ginnie-Mae, high-yield, inflation-protected, etc.); STOCKS (domestic or foreign, growth or value, small-cap or large-cap, etc.); and TANGIBLES (real estate, commodities, energy, precious metals, etc.). At pre-set time intervals, the portfolio is analyzed and rebalanced, bringing the current weightings back to the original target weightings.