At Main Street Financial Solutions, we take pride in the fact that we have a growing and select group of educated, experienced and intelligent Certified Financial Planners serving as fiduciaries for our clients. We don’t force any of our financial advisors into one specific “box of investment philosophy.” When it’s time to get down to the granular level of which funds or ETFs or stocks or bonds in which asset classes or sectors or categories, we – as a group – will differ. And, we believe that’s a good thing, as it continues to allow us to learn from each other and to grow professionally.
At a high level, we have a handful of steadfast investment philosophies that we believe are key to helping the client achieve their financial goals:
1) The Financial Plan should always come first -- Most people (and many advisors) love to talk about portfolios and investments and performance. But, building an investment portfolio without first creating a comprehensive financial plan is not a prudent strategy. As we like to say - It doesn’t matter what type of car you're driving if you have no idea where you're going. A comprehensive financial plan is a roadmap to your financial future, and a proper financial plan will be a primary driver in every client’s investment decisions.
2) Asset Allocation is the dominant determinant in portfolio returns. Most people (and many advisors) love to talk about selection of funds or stocks or sectors, but in reality, the asset allocation – or the percentage of stocks to the percentage of bonds will be the dominant determinant in long term investment returns.
3) Determining one’s ideal Asset Allocation is primarily driven by two variables:
a. A clients’ “Need” to take on stock market volatility, which is determined by the financial plan, that we create together, and the ultimate accomplishment of the client’s personal financial goals
b. A clients’ “Willingness” to take on stock market volatility, which is more art than science. Having open, honest conversations around our clients risk tolerance, and – maybe more importantly – guiding clients through the tough seas when they approach, is a critical aspect of what we do.
4) Broad diversification is wise. To use a simple analogy, diversification is making a deal (a prudent one, we believe) that you’ll never own too much of anything to make an absolute killing but you’ll never own too much of one thing to get you absolutely killed.
5) Asset Location is more important than many think: In the end, it’s not what you earn, it’s what you keep. In a nutshell, when possible, your most tax-inefficient asset classes should be held in tax deferred accounts (such as IRAs) and your most tax-efficient asset classes should be held in your taxable accounts.
6) As important as investments are, behavior is more important: Think of your financial plan as your roadmap to get you where you want to go. Think of your portfolio as the vehicle to get you where you want to go. This is all well and good until you get stuck in a tunnel, and you’re not moving and you’re start to feel claustrophobic and you want to abandon your vehicle and your roadmap and jump! A bit dramatic, but you get the picture. The most important variable in succeeding in your journey is to make sure you stay disciplined and on path. More than anything, that is why we are here.
As your trusted advisor and fiduciaries, it is our responsibility to act in your best interest, and help you maintain a path that will allow you to realize your short, mid and long term financial goals.