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10 Tips That Will Help You Get (and Stay) Financially Fit

While swimsuit season may be ending, financial fitness stays trending year-round. According to a recent study, “save more and spend less” was the top New Year’s resolution for 2017. In fact, financial resolutions have cracked the top five year over year, and hold steady behind losing weight.

So, why aren’t we all walking around with smaller waist lines and larger wallets?

Well, because maintaining financial health requires a lifestyle change – just like maintaining your physical health. The changes you make to get yourself on the right path need to become positive lifetime habits that are part of your daily routine.

10 Tips That Will Help You Get (and Stay) Financially Fit

Here are 10 tips to help you get started living the life you want:

1. Know your “why” behind money. Your specific reasons for working, investing, spending, and saving. If you don’t have that figured out, you don’t have anything to fight for. You can’t live intentionally with your money, because there’s nothing guiding your behavior.

2. Set goals and assess them regularly. Three years from now, what has to have happened for you to feel successful, both personally and professionally? From your answers, pull out your top five goals – and write them down! Categorize them into short, medium and long-term goals. You can also use the SMART method to help you define your goals further:

  • Specific – Don’t set broad goals.
  • Measurable – Track your progress.
  • Assignable – Take personal accountability.
  • Realistic – Only do what you know you can do.
  • Timeline – Give yourself a deadline.

Related: 5 Goal Hacks to Help You Achieve More

3. Know your expenses. Between lifestyle creep and fixed expenses, most people don’t fully grasp how much they’re spending. Every year, you should sit down and reevaluate your expenses versus your income – no matter how much money you make. That way, you can gauge your spending habits, and see where your money is being allocated. This can help keep your net worth out of the red.

Related: Why High-Income Earners Are Living Paycheck to Paycheck

4. Know your current financial position. To be able to get where you want to go, you have to understand where you are today. You then have to be able to optimize your current financial position as your information changes. Without being able to see your entire financial life in one place, and evaluating how everything is working together, you may not end up living the life you want.

5. Avoid drastic changes. Crash diets aren’t solutions for long-term success. Rather, slow and steady wins the race. Identify all the changes you’ll need to make to reach your goals, and work through them gradually. This way, your focus is on creating lifetime good habits – not clicking the instant button.

LIFE HACK: Saving 1% more of your income each year is a small change that can produce big results down the road.

6. Tune out the noise. There is more financial noise than ever in our media today. That’s why you need to adhere to a disciplined, rules-based approach to your financial life, based on your most important values. Like Warren Buffett said, “Market forecasters will fill your ear, but never your wallet.”

Related: Investment Noise: Know It and Forget It

7. Make sure your financial strategies align with your most important values. The only constant in life is change. As your life changes, your strategies should then be updated based on what matters to you most at this moment in time.

Related: Do Your Financial Actions Support Your Most Important Values?

8. Know the difference between risk and volatility. Risk simply means the probability that your investment will lose money. It has no direct effect on your returns. Volatility is the amount of fluctuation a portfolio can experience. The higher the volatility, the more erratic your compound returns can be. Volatility is one of the biggest wealth eroding factors you’ll encounter. That’s why you have to mitigate it.

Related: Volatility Gremlins Are Killing Your Bottom Line

9. Practice cost and tax management. Investing costs and taxes matter – they can erode your returns just as much as volatility. Your strategy should work to lower the cost of expense ratios and be tax efficient. Remember that a good advisor can be worth a reasonable fee. Just be sure they’re providing you with value-based solutions, not selling you products.

10. Create an Investment Policy Statement. Even the best investors can get nervous when the market moves. But when the market moves, you need something that reminds you why you’re invested a certain way – that reminds you of your most important values, and stops you from making poor decisions. That’s when you pull out your IPS. If an investment decision doesn’t meet this criterion, you shouldn’t invest in it.

Related: The Best Way to Guide Your Investment Decisions

Why Does It Matter to You?

Being able to live the life you want is the ultimate goal. But, let’s take that one step further – being able to life the life you want, at every stage of life, is the ultimate goal. That’s why maintaining your financial health is so critical. Not only will it ensure that you remain optimally positioned for success today, but it can increase your chances of success in the future.

Compound Interest – Myth or 8th Wonder of the World?

Einstein is credited with saying compound interest is the 8th wonder of the world. While I’m nowhere near as smart as Einstein, I have good reason to believe there is only partial truth in his statement. Specifically because of two myths surrounding compound interest that we will discuss here.

Myth #1: I will earn 7% consistently.

Mathematically, the power of compound interest is incredible. The financial industry consistently tells you to save early, save often, save (then invest) as much as you can. At an annual growth rate of 7%, you will be a millionaire at retirement. You’ve seen the graph. Just save a little each pay period, and it will growth exponentially. And they’re right…to a point.

To maximize the effects of compounding interest, two elements must exist: 1) Time. 2) Consistency.

To get the exponential growth Einstein was referring to takes years. How many years? Most likely 20+. If you are in your 20’s and methodically saving for retirement, compounding works in your favor. If you are 55 and want to retire in 10 years, it won’t help you. Most people don’t realize this until it’s too late.

Another big problem with compound growth is figuring out where you’ll get that consistent return. Interest rates are near zero and bonds aren’t returning anywhere near 7%. The stock market is the only place to achieve an annual growth rate of 7%. At least that’s what the market has delivered over the past 20 years. But does that mean you’ll get a 7% compounded return? Probably not…but, why?

The type of compounded return from the market is only seen over very long periods, at least 20 years or more. So, for long-term savings like a 401k, you can expect to achieve this type of growth as long as you leave it there. The problem is when you have to take distributions on that account. You never know what the market will be doing at that time. If it’s in a bear market, you better have another source of funds to draw from, otherwise you’ll start eating principle. This is called sequence of returns risk. You can see the grand fluctuations in the chart below.

Myth #2: It’s easy to withstand wild market fluctuations.

The other problem is whether you have the stomach to weather large drawdowns. Large, and even not-so-large, market drawdowns have a direct impact on your ability to compound returns. In the early 2000s it took several years just to get back to even. In 2008 there was such a drop that many investors sold out, just in time to lock in big losses. Withstanding wild fluctuations over a 20-year plus period is hard, very hard. You have to be true to yourself to know if you can handle it. Otherwise you’ll never see compounded returns from the market.

Why Does It Matter to You?

These are big issues for our clients. Many of whom are entrepreneurs or business owners who’ve made great sums in their businesses. While they still want to grow their investments, the overriding goal is Warren Buffet’s two rules of investing: 1) Don’t lose money. 2) Never forget rule #1.

To help our clients accomplish this we use rules-based trend following strategies. Our strategies use trends to capture upside momentum, as well as trying to limit drawdowns. This provides downside risk management with upside market potential. By providing a smoother investment ride, our investors are more likely to stick with the strategy long-term. That’s when they have a better chance to capture impressive compounded returns. That’s when they have a better chance of reaching their full financial potential.

Why High-Income Earners Are Living Paycheck to Paycheck

A six-figure income can go a long way in easing financial stress. But unfortunately, it doesn’t eliminate the risk of living paycheck to paycheck.

It’s easy to associate those who make a modest salary or work in a low-paying job with a “paycheck to paycheck” lifestyle. But, a study from Nielsen Global Consumer Insights is changing the game. The study found that one in four families making $150,000 or more are living a similar lifestyle.

Lifestyle Inflation: The Rich Man’s Kryptonite

There’s a concept that even some wealthy people have trouble understanding – it’s not how much you make that matters, but how much you spend that matters.

If you make $500,000 a year, but your annual expenses total $450,000, you’re completely maxing out your lifestyle. Doing this means that you will never reach your full financial potential. That’s because you’re eroding 90% of your money just as fast as you’re making it.

High-income earners routinely suffer from lifestyle inflation. I’ve seen it happen more times than I can count – people start earning more money, and in turn, slowly start upgrading their lifestyle. Before they know it, lifestyle “creep” has sprinted out of control and has them completely handcuffed.

Lifestyle inflation generally goes toward things that don’t bring much value to your family’s financial life, either. This means things like expensive homes, cars, traveling, and just plain old foolish spending. It’s great to have and do all these things, but what’s not great is winding up house poor and car poor.

A better use for that excess money would be to invest in yourself, or in your most important financial goals.

Related: The 12 Boring Secrets to Getting – and Staying – Rich That Millionaires Won’t Tell You

Wealth Erosion Overload

Buying “things” are only the start of lifestyle inflation. They’re the roots that sprout all the other eroding factors.

For example, say you buy a home worth $1.2 million. Pile on top of just that the mortgage, property taxes, utilities, and general upkeep, and you could easily add another $50,000 to your annual expenses. Expensive items aren’t only expensive to buy, they’re expensive to own.

Owning expensive things is an easy way to erode your income. Then, consider all the other eroding factors on top of this that you’ll encounter – economic inflation, taxes, lost opportunity cost, planned obsolescence, and more.

Related: 3 Dangers of Ignoring Your True Cost of Living

Be Reasonable, Not Lavish

So, how can you avoid finding yourself in this very situation?

Simple – live reasonably, not lavishly.

This is something that I try to instill in all my clients, even the wealthy entrepreneurs that I work with. Actually, this mantra is probably more important for them than anyone, because they have the most to lose.

Now, I’m not saying that I expect you to live in a tiny home, drive an old, beat-up car, never take a vacation, and never purchase something that you want. There’s absolutely no shame in indulging – I’m all about working hard, playing hard, and being able to enjoy the finer things in life.

After all, the goal is to be able to live the life you want.

But to do that, you have to abide by some simple rules to ensure that happens. These include spending less than you make, paying for things in cash rather than financing everything you own to make a purchase, not racking up high-interest debt, saving at least 15% of your income, protecting yourself and your assets, and remembering that slow and steady wins the race.

Related: 15 Common Sense Money Principles That Will Change Your Life

There’s something very important that I’ve learned from coaching clients over the last 14 years – the ones who understand that it’s the simple, boring disciplines that hold the secrets for getting and staying wealthy, are the ones who reach their full financial potential.

Why Does It Matter to You?

Living paycheck to paycheck is a possibility for anyone – whether you make $50,000 or $5 million. That’s why, as your income grows, you have to control lifestyle inflation before it controls you.

Living the life you want requires a balancing act between growing your wealth and smart wealth management. You should always be thinking with an abundance mindset, but in the right way. It’s not about how you can use your money to buy lots of things. It’s about how you can use your money to create opportunities that allow you to grow, to help you live intentionally with your money, and that put your resources to work for you. That’s how you reach your full financial potential.

Should You Invest or Pay Down Debt?

Have you ever found yourself asking this very question, wondering what to do next, and what the best option is for your financial success? Don’t be embarrassed if you have. I would dare say that you’re in good company, given the fact that Americans collectively owe $1 trillion in credit card debt. In fact, the question of whether to invest or pay down debt is one that I’m asked frequently by clients.

Logic is Always 20/20

Trying to tackle debt while still trying to save and invest can be tricky. But, when you think in terms of pure numbers, pure logic, the answer to this question is actually pretty simple. Ask yourself which number is greater, the return on your investment or the interest you’re paying on your debt. If you’re paying more interest than you’re earning, paying off your debt is the smarter choice.

Here’s one way I explain this to people when they ask me whether they should invest or pay down debt:

If you eliminate debt that you’re paying 15% interest on, that’s a guaranteed 15% return in your pocket. If you invest, you may have the possibility of earning 10%. So, what’s better for you to capture right now – a guaranteed 15% return, or a possible 10% return?

Numbers and logic make this a no-brainer. But it’s not always that simple, because money is emotional.

The possibility of earning big will usually tug at your heartstrings harder than paying off your debt. Plus, saving into your investment account gives you a sense of future security and accomplishment. Paying bills is stressful and not what you “want” to do with your money.

Related: The 6 Most Common Bad Investing Behaviors to Avoid

Good Debt vs. Bad Debt

To be able to truly answer the question of whether you should invest or pay down debt, you have to understand all of its components.

That includes categorizing your debt into good debt and bad debt, and understanding how they affect you. This is the first step in creating a debt strategy that works for you.

Here’s a basic guide to help you discern what portion of your debt is good and what portion is bad:

Bad Debt (credit cards, car loans, unsecured loans, etc.):

  1. It has high interest rates.
  2. It’s not tax deductible.
  3. It’s not attached to appreciating assets.

Good Debt (mortgage):

  1. It has low interest rates.
  2. It’s tax deductible.
  3. It’s attached to appreciating assets.

Good debt is an interesting topic. It’s worth pointing out that most private equity and real estate firms build their empires by leveraging almost everything they have. People do this in a similar way. Why wouldn’t they, given that the market and other appreciating assets are out-earning the current interest rates?

For instance, the ticker SPY for the S&P 500 has returned 7% for the last 20 years. In comparison, our all-equity ETF portfolio has an average back-tested return of a little more than 9%. That means in 20 years, $10,0000 becomes $58,474.

Related: Protecting Your Portfolio Against Market Downturns

Your 4-Step Action Plan

Given all the factors we’ve discussed here, there’s probably one thing you’re thinking right about now – Great, but where do I start?

You should start with the following four-step action plan. We use this with our clients, and strive to approach their financial life in the following way:

1. Build core liquidity. You should have a minimum of 3-6 months in liquid cash. It would even be wise to have 6-12 months of near-liquid assets on hand as well.

2. Eliminate bad debt. Again, that would be any substantial amount of short-term debt that may have high interest rates.

3. Save 15% of your salary. With $1 trillion in credit card debt weighing on Americans, it’s no wonder that the average savings rate has plummeted to just under 6%. But if you can’t save, everything else has to work harder to pick up the slack. A healthy savings rate of at least 15% is critical to reaching your full financial potential.

4. Invest. Investing is critical to your success, but should only be done when you’re in the right position to do so.

5. BONUS! Have an ideal mortgage to income ratio. Your mortgage payment should be no more than 15% of your gross income. Otherwise, you may wind up house-poor down the road.

This action plan takes a “priority and combination” approach to your financial life. Put simply, this approach focuses on securing your liquid safety net first, paying off bad debt, and finally investing. Once you have your core liquidity built up, you can then use your 15% savings to accelerate your debt pay off. I recommend this approach because it allows you to pay off your debt, and eventually invest, while still being able to adapt to life’s changes.

In other words, you’re not completely sacrificing one important element (i.e. savings) just to take care of another (i.e. paying off debt).

Related: 15 Common Sense Money Principles That Will Change Your Life

Why Does It Matter to You?

Numbers make the answer to whether you should invest or pay down debt pretty simple – if you’re paying out more than you’re earning, investing may be an act in futility for you right now. But as we’ve shown here, that’s not all this question asks you to consider.
This question is about more than just numbers – it’s about prioritizing your financial life in a way that makes your money work for you. A way that makes your money work as efficiently as possible. That means having six months of liquid cash built up, paying off any substantial bad debt, and then investing. There’s no one-size-fits-all timeline for the action plan we’ve outlined here, either. However, it’s important to remember that the longer you delay investing and compounding your savings, the less time your money has to grow. That can mean a diminished lifestyle in retirement.

When you look at the big picture, debt directly affects your ability to save, invest, and ultimately live the life you want. Start tackling it now, and you can find yourself much better off in the future.

7 Principles That Will Protect Your Finances From “Life”

There are only two things that we can know with absolute certainty in the world of finance – your current financial position, and that your life will change. That’s it. Anyone who tries to tell you any different is lying. Despite your best efforts, you can’t predict, or even “plan,” for an unknown future. All you can do is take what you know, and use it to your advantage.

The Problem With Planning

Traditional planning is based on the premise that your life, your future, is linear. It then uses stagnant inputs and assumptions about tomorrow, to try and formulate a bullet-proof plan for success.

Here’s the bad news – your life isn’t linear. It’s not stagnant. If you plotted your life up until this point on a graph, it more than likely won’t yield a beautifully straight line. That’s because stuff happens, and when it does, it can cause your life to swing one way or the other. Your life is always in motion – it evolves through time. It’s dynamic, and therefore can’t be addressed by a static plan.

A static plan has little wiggle room when your life “chart” experiences fluctuations. But, your life will swing, I can promise you that. It won’t always be linear.

That’s precisely why traditional planning is flawed.

Life Events That Can Change Your Financial Situation

Here’s a quick-list of those big milestones that can cause your life to fluctuate:

1. Marriage.

2. Having a child.

3. Changing jobs.

4. Job loss.

5. Divorce.

6. Death of a spouse.

These events have different implications – some of them positive, some of them negative. Unfortunately, the negative ones can hit you out of nowhere. It’s usually not until this happens that you realize just how vulnerable your life’s work was. At this point, there’s typically little you can do about it other than stomach the blows.

On the other hand, you want to be able to take advantage of opportunities when they present themselves. These include things that can advance your life or make it more complete, like a new and better job, getting married, having children, or starting your own business.

To do both, to mitigate the financial heartache from the negative swings and capitalize on the good from the positive swings, you have to be optimally positioned to effectively react to your life as it evolves.

7 Principles That Will Protect Your Finances From “Life”

So, how do you do that? How do ensure that you can handle “life” when it happens to you? You adhere to these seven principles:

1. Practice financial positioning. This is the overarching principle to apply to your financial life. The others are gravy on top – but still extremely important. If planning is broken, you need something else. Financial positioning focuses on optimizing your current financial position. It manages your changing information as your life evolves, stress testing your current strategies against it. You can then keep yourself positioned to effectively react and adapt to life’s curve balls – whether positive or negative. The result? An increased ability to live the life you want.

2. Be engaged. You should regularly review your financial strategies, and be instrumental in implementing them. Make sure you understand what is being done on your behalf, and that you know what you have and where it is.

3. Align your financial strategies/behaviors with your most important values. Values should play the same role in your financial life that they play in your daily life – they should guide your decisions making. This keeps what is most important to you at the heart of your financial strategy.

4. Define your “why” behind money. What’s your reason for working, investing, doing everything you do? What does money mean to you? What does it enable you to do? Until you define this, you have nothing to fight for. Your “why” will guide your decision making, and help you live intentionally with your money.

5. Protect your life’s work. Your life’s work means nothing if it’s not protected from everything that can destroy it. You must protect yourself for your full economic value – this includes material assets like your home, and your most important asset, you.

6. Save at least 15% of your income. If you can’t save your money, everything else in your financial life will have to work harder to pick up the slack. Maintaining core liquidity is key to reaching your full financial potential.

7. Create an investment policy statement. This document puts your investment philosophy and strategy on paper. Essentially, it helps you understand where your money is, what it’s doing, and why it’s where it is and doing what it’s doing. Every time markets rattle you, pull out your IPS and remind yourself why it’s important to stay disciplined. If an investment doesn’t meet the criteria stipulated here, you shouldn’t invest in it.

Why Does it Matter to You?

Being able to effectively prepare for and respond to “life” is of the utmost importance.

Your success isn’t dependent on how much money you have. You can have all the money in the world, but it doesn’t mean anything if it can be wiped out should your life change. Rather, your success is dependent on your ability to effectively react to life as it happens around you – on whether your strategies can adapt to your current financial position as it continues to evolve.

Which brings us back to financial positioning – the principle that encompasses all the others. This method takes a comprehensive view of your financial life, from your assets and liabilities, to your protection and cash flow. Once you have that real-time picture of your current financial position, you optimize it based on new information, as your life evolves. This is the approach we take with our clients.

Life is messy and unpredictable. You can’t plan for a future you know nothing about. Therefore, you need a dynamic method for reaching your full financial potential that uses these facts to your advantage.

15 Common Sense Money Principles That Will Change Your Life

The game of reaching your full financial potential is 70% behavior. Successful people practice good habits, every day, for their entire life. They’re willing to do what others are not. Successful people also live intentionally with their money – meaning they use their money to live life on their terms and conditions.

That’s really what the secret “formula” boils down to. How you behave, and the choices that you make every day. Those choices are what determine your success.

You see, how to find financial success isn’t some huge secret or algorithm that takes expert-level knowledge to crack. If you were to ask a wealthy person how they got there, you would probably be shocked at how simple their answers are. You’d probably leave the conversation thinking, “Heck, even I can do that.”

And you absolutely can. That’s because much of what successful people do when it comes to money is simply abide by common sense principles – many of which I’m about to share with you here.

Here are 15 common sense money principles that will change your life:

1. Spend less than you make. The is probably the most important common sense principle you can apply to your financial life. If you are constantly overspending and maxing out your lifestyle, you’ll never reach your full financial potential.

2. If you can’t pay for it in cash, you can’t afford it. This mantra is the best way to avoid drowning yourself in credit card debt. Waiting to make large purchases until you have the money will always pay off more than spending money you don’t have.

3.Forget about the Jones’s. Living up to society’s definition of “rich” can be costly. Wealthy people know what their definition of financial success is – and that’s the only one that matters. They would gladly defy societal standards, rather than living a deceptively poor lifestyle just to keep up appearances in the eyes of their peers.

4. Protect yourself. Stuff happens. And when it does, your financial foundation can quickly crumble if the proper defenses aren’t in place. You should seek to protect every aspect of your life’s work – from material assets like your home to your most important asset, you.

5. Pay your credit bills in full every month. If you want the second fool-proof way to avoid going into credit card debt, don’t charge more on them than you can afford to pay off every month.

6. Money doesn’t buy happiness. Having money doesn’t mean anything. It’s how you use your money that creates your emotional response. There’s plenty of research to prove you derive the highest degree of happiness when you spend your money on experiences, not things.

7. Slow and steady wins the race. No one becomes financially successful overnight. It’s a long road of practicing good habits and staying disciplined. If you keep searching for the instant button, or speculating and gambling with your money, you’ll never reach your full financial potential.

8. Get comfortable with being uncomfortable. Investing is one of the most unnatural things you’ll do in your life. But you have to be okay with that – you have to be okay with the fact that markets rise and fall. Staying disciplined according to your Investment Policy Statement is the best way to find investing success.

9. Time is your most valuable resource. Stop thinking that you have time to catch up. Not only does your money need time to grow, but it needs time to bounce back from drawdowns. The longer your money is invested, the better your chances of financial success. Investing early and investing smart are crucial.

10. Out of sight, out of mind. If you’re like me, it’s easy to find a home for the money you see sitting in your checking account. One of the best ways to curb unnecessary spending and boost savings is to set up automatic deposits from every paycheck to go straight to your savings or investments.

11. Costs matter – a lot. Costs from taxes, expense ratios, and advisor fees add up. They directly impact your bottom line. Over the long-term, they can eat a large portion of your wealth. Be sure you know how much your investments are costing you, practice tax management, and work with an advisor who is transparent on the fees you pay directly to them.

12. Money is like a kid. It’s incapable of managing itself – think of how your kids would’ve turned out had you let them make their own decisions, without any guidance or discipline from you. Money is the same way. You have to apply structure and discipline to how its managed, and you have to tend to it on a regular basis.

13. Your most important values must align with your financial actions. If your financial actions aren’t furthering your most important values, you’re probably not going to accomplish the goals you set for yourself. Values should play the same role in your financial life as they play in your daily life – they should guide your financial actions and priorities.

14. Be debt free. Or at least bad-debt (i.e. credit card, other high interest debt) free. Carrying substantial amounts of high-interest debt directly affects your ability to save and invest for your future. It makes everything else in your financial life have to work that much harder to pick up the slack.

15. Live the life you want. Wealthy people know their “why” behind money – you need to know yours too. Why do you work, why do you invest, why do you do any of it? Your answers will be specific to you, but it ultimately comes down to being able to live the life you want. That’s the real goal – to have your money work for you, so that you can reach your full financial potential. But you have to start with “why.” Otherwise, you don’t have anything to fight for. You can’t live intentionally with your money, because there’s nothing guiding your behavior.

Warning: Checking Your Portfolio Often is a Good Way to Lose Money

8 billion. That’s the number of times per day Americans collectively check their phones. Probably because smart phones have become the hub of our lives in a certain way – virtually anything you need, there’s an app for that. Including your investment performance. But frequently checking your portfolio is a good way to lose money – and it’s getting harder not to look.

Stop Checking Your Portfolio

We pride ourselves on making technology available to you that puts your entire financial life in front of you, in real-time. That makes checking your investment performance as simple as pressing a few buttons. And we intend to keep advancing that technology, to make managing your financial life as easy and convenient as possible.

With that in mind, call me crazy for what I’m about to say – You should stop looking at your investments.

There are plenty of reasons for why you should stop constantly checking your portfolio. At the top of the list is your mental and financial health. While you may think checking your portfolio often is a good habit, in reality this leads to increased stress, impulsive, emotionally-charged behavior, and poor investment performance.

The market is a volatile animal – it’s a toss-up every day whether it will be up or down. And here’s a secret – the market is in a drawdown often.

It can even fluctuate hundreds of points one way, and back the opposite way before the closing bell rings. The average daily swing for over 40 years has been +\- 1.4%. So, the more often you check your portfolio, the greater your chances of seeing it when the market is down.

And when you see negative numbers staring at you, your emotions will stop you in your tracks every time. Thanks to a little thing called myopic loss aversion.

What Behavioral Finance Tells Us

Myopic loss aversion was first introduced by Daniel Kahneman and Amos Tversky in 1984. This sliver of behavioral finance states that people dislike losing money more than they like making it. In other words, we feel the pain of a loss much more deeply than the happiness of earning.

Investors who check their portfolios often will perceive investing to be riskier than investors who don’t. According to Betterment’s data on login frequency, checking your portfolio quarterly instead of daily can reduce the chance of you seeing a moderate loss (of -2% or more) from 25% to 12%.

In a 1997 study by Kahnerman and Tversky, the idea that loss aversion reduces investor returns was confirmed once again by their research. Take this statement straight from their abstract:

“The investors who got the most frequent feedback (and thus the most information) took the least risk and earned the least money.”

In other words, the more time you spend checking and analyzing your portfolio, the more likely you are to let your emotions take control.

The Beer Goggles of Investing

Think of loss aversion as the beer goggles of investing – you’ll be more likely to see a loss the more often you check your portfolio. This can then make you think your investments are riskier than they really are. If you listen to your emotions, you can end up making some bad decisions – changing your risk tolerance, selling or liquidating funds, and so on.

And very rarely do these decisions end up helping you. Research proves that investor behavior is the leading cause of under-performance, and contributes to poor performance over the long-term.

DALBAR’s annual study of investor behavior shows that in 2015:

1. The average equity mutual fund investor underperformed the S&P 500 by a margin of 3.66%. While the broader market made incremental gains of 1.38%, the average equity investor suffered a more-than-incremental loss of -2.28%.

2. The average fixed income mutual fund investor underperformed the Barclays Aggregate Bond Index by a margin of 3.66%. The broader bond market realized a slight return of 0.55% while the average fixed income fund investor lost -3.11%.

3. In 9 out of 12 months, investors guessed right about the market direction the following month. However, the average mutual fund investor was still not able to keep pace with the market, based on the actual volume and timing of fund flows.

You also need to remember that your portfolio is made up of several different asset classes, according to your risk tolerance. Even when the market is “up,” one or more of the asset classes in your portfolio may be down. If you happen to be checking your portfolio at this time, these losses will bother you more than the fact that the market is up will excite you.

Decisions incited by loss aversion don’t align with your most important goals that are outlined in your Investment Policy Statement. And remember, if a decision doesn’t meet these criteria, then you shouldn’t act on it. Period.

Why Does it Matter to You?

It’s your right to be able to check your portfolio essentially on-demand. Part of your job as an investor is making sure that you’re satisfied with your results.

Our job is to help you overcome bad investor behavior, and make smarter financial decisions. To reach your full financial potential, you need to implement strategies that account for the human side of investing, and in turn, help make for a smoother ride. That’s why we created strategies designed to mitigate the impact volatility can have on your bottom line – something that traditional strategies often ignore.

Investing is uncomfortable – it’s one of the most unnatural things you will probably do in your life. You’re putting your wealth on the line, when putting your wealth on the line is something you wouldn’t inherently do. But you have to get comfortable with being uncomfortable. You have to realize that investing is a game won by checking and stressing less. Rather than struggling to fight the market and potentially causing your financial health to suffer from harmful side-effects, take a break from checking your portfolio until your advisor says it’s time for a review.

The 5 Most Revealing Questions to Ask Before Hiring a Financial Advisor

Hiring a financial advisor can be stressful. You’re trusting someone to help you accomplish one of – if not THE – most important things in your life. That’s why you need the leg up. And the best way to do that is to know what matters, what doesn’t, and the critical questions to ask a financial advisor before hiring them.

Seeing Through the Smoke and Mirrors

The institutions and Wall Street broker-dealers have spent the last century building their grandeur. And they want to hold onto that power, forever. As consumers have gotten smarter, the traditional industry has had to do a lot to cloud your vision from what’s really going on.

For example, a lot of people don’t even know what their investments are truly costing them. And costs matter – a lot. They directly impact your bottom line. When investing, you can incur fees and other costs at almost every turn, from the advisor fee, to the institution’s fee, to the cost of the funds in your portfolio (your expense ratio), taxes, and more. And unless you explicitly go digging, most of these costs will remain hidden from you.

They also try to saturate your brain with a lot of fancy terminology to describe those of us qualified to offer financial advice – broker, CFP, CFA, CMT, advisor, investment manager, financial planner, portfolio manager, and so on. Which combination of the alphabet do you choose? While you should do some basic investing research before hiring a financial advisor, I say ignore the words and letters. Instead, find out what this person actually does and how they conduct business. That’s what matters more.

The next few paragraphs will give you the most important bit of information you should consider when hiring a financial advisor – and that’s knowing the difference between an advisor and a broker.

Advisor vs. Broker: Who Has Your Best Interest at Heart?

It’s critical that you understand what I’m about to say – Most people 1) don’t realize that most advisors aren’t fiduciaries, and 2) don’t realize that they’re not actually working with an “advisor.”

Before the 90s, there used to be a known distinction between advisors and brokers. In fact, there’s still a hard distinction between the two – it’s just not known to most people. It was in the 90s when the traditional industry stopped calling their salespeople brokers, and started calling them advisors. Ever since then, they’ve done a good job keeping the catch-all “advisor” category alive and well.

The biggest distinction is that advisors are fiduciaries. This means they represent you, and are legally obligated to work in your best interest. No one else’s. They typically charge a flat fee of assets you have under their management, and that is how they’re compensated. Basically, they have zero to no conflicts of interest, because their loyalty lies specifically with you.

On the other hand, brokers are not fiduciaries. They work for an investment firm (commonly known as a broker-dealer), and are representatives of that broker-dealer. Not you, the client. Brokers are obligated to sell the products offered by that broker-dealer. When it comes to products, a broker’s standard is “suitability.” This means if an investment is suitable, but not necessarily the best or conflict-free, they can still sell it to you. They’re paid on commissions from the broker-dealer they represent, not by you. The need to sell among brokers is high.

The 5 Most Revealing Questions to Ask a Financial Advisor Before Hiring Them

There are numerous questions, theories, and strategies for picking an investment advisor. But I believe it really comes down to asking a few core questions that get to the root of what matters most – what this person stands for.

Here are what I believe to be the five most revealing questions to ask before hiring a financial advisor. Take these questions with you when you conduct your interviews:

1. Are you an independent advisor or a broker? Your first question should get to the root of whose best interests they represent – yours, or an institution’s. I started Jarred Bunch because I was passionate about making a difference in people’s lives – so much so, that I walked away from a cushy, six-figure job in corporate America to strike out on my own. I remember being so excited about building a company that was going to change the industry. On the day my business cards arrived, I looked on the back and saw in writing, “Scott Jarred is a Registered Representative of so-and-so big Wall Street broker-dealer.” This was the opposite of who I am, the opposite of what Jarred Bunch stands for. I couldn’t make money work for people – I was still working for and being controlled by the man. So, we broke free from the chains, and became an independent Registered Investment Advisory firm (RIA).

2. Who pays you? If they’re truly an advisor, their answer should be something like, “You pay me.” They should clearly lay out how they charge their fees, and disclose all costs associated with doing business. Down the road, if you decide to work with them, you should also ask for complete transparency on portfolio costs. Brokers, on the other hand, are paid commissions by the broker-dealer they represent. In addition to the conflicts of interest this can create, it can also cause them to jack up your advisor fees – they have to make money after the broker-dealer takes their cut off the top.

3. Are you legally obligated to act in my best interest? The answer to this must be yes. All the time, no exceptions. If they’re a true advisor, their answer will be yes. This is their duty as a fiduciary – they are legally bound to act in and offer solutions that represent your best interests. Brokers are legally bound by contracts with their broker-dealer, and must act in the best interests of that broker-dealer. Yet another red flag that they’re not a true fiduciary.

4. What is your firm’s history and current professional standing? In other words, you can ask to see a copy of their Form ADV. This is a registration document that advisors must submit to the SEC and to state securities authorities. Form ADV is divided into two parts. The first part discloses specific information about the Registered Investment Advisory firm that is important to regulators. This includes things like name, number of employees, nature of the business and so on. The second part acts as a disclosure document, and includes information on fees, any conflicts of interest that may be present, any disciplinary actions, if they act as a broker-dealer and more.

5. What do you think you can help me accomplish in the next three years that would make my life significantly better? During the interview, take the opportunity to outline your top priorities, and give the high-level overview of what reaching your full financial potential looks like to you. Note that you should be doing most of the talking when you get to this point. The advisor’s job should be to listen, and hear what value you’re looking for them to add to your life. Then ask them what specific steps they can take to help you get there – so that when you guys meet three years from now, you’ll feel like the time you’ve invested in this relationship has been worthwhile. Not only does it give you a glimpse into how well the advisor aligns with your values, but also gives you a clue as to whether they view the world with an abundance or scarcity mindset.

Why Does It Matter to You?

Two of the most important people in your life are your doctor and your financial advisor. Cliché, I know, but something that I believe.

In fact, think about hiring a financial advisor in terms of what made you pick your doctor. Would you have chosen them if they told you their loyalty lied with anyone but you, the patient? If they said that they have to represent the best interests of an outside group, not you? If they only offered you one treatment option, regardless of whether it was the best thing for you, because that’s what the group who controls them allows?

Heck no. So, why then, would you consider hiring a financial advisor, one of the most important people in your life, who conducts business this way?

That’s why it’s so important that above all, you ensure you’re working with a true advisor – not a broker using the traditional industry’s smoke and mirrors to make you think they’re an advisor. This means that you’ll have a fiduciary on your side – someone who’s bound to the same principle of “First, do no harm,” as your doctor. You’ll have hired someone who goes to work for you every day, and who you can count on to educate, guide and counsel you toward reaching your full financial potential. While it will be their job to listen to what it is you want, it’s their responsibility to protect your financial well-being. If you ask them to do something they believe would threaten your well-being, it’s their job to explain why you shouldn’t. Just like your doctor would do if you asked them to perform an unnecessary or risky procedure.

In the end, your decision for hiring a financial advisor comes down to what you value in a person who is responsible for playing this role in your life. After all, this is your financial life, no one else’s. But just remember, you get one shot at your financial journey. And failure is not option. So, I would caution you to hire wisely. I promise, if you find the right advisor, you’ll never want to leave them, because they’ll help you live the life you want.

3 Reasons Why You Should Value Mind Over Money

We live in a world full of information on how to find financial success, enough information that everyone should be able to reach their full financial potential. It’s the truth staring all of us in the face, but that only a few can clearly see. That’s because 95% of people are missing the crucial first ingredient in the recipe for success – cultivating the right mindset.

A Tale of Two Minds

There are two general mindsets – scarcity and abundance. Not only is a scarcity mindset the most common one, but it’s also a common denominator among those who never reach their full financial potential. This mindset gives you the illusion that you never have enough. It leads you to believe you can’t afford to practice the good habits that inch you closer to financial success. You settle in thinking that you can’t achieve more than where you are, and accept that your dreams will never become a reality. It’s the curtain that hides that truth staring you in the face.

A scarcity mindset makes you think “I can’t do that.” An abundance mindset makes you think “How can I do that?” This pivotal phrase is the first step in pulling back the curtain. Unlike scarcity, an abundance mindset helps you view every situation you encounter as an opportunity for success. You understand that if you continue those good habits that foster success, you will eventually achieve your goals and then some. This is how you break through the glass ceiling between what is and what could be. It’s how you make your dreams a reality and live the life you want. It’s how you put yourself in a position of control over your destiny, and become the CEO of your financial life.

How to do Something Isn’t Doing it

You can easily find the answers for financial success. I educate my clients every day on how to reach their full financial potential, I give them the answers. But what many people lack is understanding that the answer is only the how to. And the how to is only information, it’s just the steps to follow for financial success. It isn’t applying that information to help you live the life you want.

This simple fact is the reason you will fail again and again, no matter how many books you read, talk shows you listen to or articles you collect. Knowing how to find financial success is only one piece of the puzzle, and not necessarily the most important one. The other, and more important, piece is applying those how tos in a way that inches you closer to success. In other words, how you do the how to is more important than the how to itself.

I’ll say it again – how you do the how to is more important than the how to itself.

3 Reasons Why You Should Value Mind Over Money

This leads us to my central message – reaching your full financial potential is impossible until you learn to value mind over money. Here are three reasons why:

1. Success starts with your mindset. The human psyche is linear – your attitude creates your actions, creates your results, creates your life. Therefore, you may think all you need is an attitude adjustment. But that’s still not enough. What creates your attitude? Your mindset – your mindset creates your philosophy, creates your attitude, creates your actions, creates your results, creates your life. A scarcity mindset means you will live and behave accordingly. An abundance mindset means you will live and behave accordingly.

2. Success means doing what others won’t. Financial success, or success in any area of your life, is simple – do the little things that breed good habits consistently. Even the little things that seem insignificant. What’s difficult is actually doing the things that push you closer to success. They’re easy to do, and just as easy not to do. So, you have to change your priorities, the way you go about your daily life in general. You have to change your mindset, the way you think about the decisions you make. Successful people are willing to do what others are not willing to do.

3. Success means mastering the mundane. Those who succeed understand the difference between success and failure lies in the choices you make every day. Simple, positive actions, repeated over and over, that push you toward success. Or simple errors in judgement, repeated over and over, dragging you down toward failure. And again, doing what it takes to be successful isn’t difficult – there’s nothing difficult about mastering the mundane. Saving an extra $100 a month isn’t going to make you rich overnight. But that positive action, compounded and growing over time, will. You must simply make the conscious effort to view your life through the lens of abundance, and be willing to consistently do the things that others are not.

Why Does it Matter to You?

Benjamin Franklin once said, “An investment in knowledge pays the best interest.” I would amend this to say, “An investment in your personal growth and development pays the best interest.”

If you were to ask me if I would rather have a million dollars in the bank or a million-dollar mindset, I would opt for the million-dollar mindset all day long. Sure, it would be great to have a million dollars, but it’s even better to be worth a million dollars. If you start your journey toward financial success with a million-dollar mindset, it won’t be long before you’ve reached your full financial potential. But if you don’t have the right mindset, all the money in the world can’t guarantee your ability to succeed. This is because how much money you have and your level of personal development share a symbiotic relationship. They are constantly working to balance each other out. If your net worth doesn’t match your personal development, it will shrink back down to where your development limits it. But, if you’re always challenging yourself to grow, working on your personal development, then your net worth will rise to catch up with it. You can either become as small as the balance in your bank account, or as big as your greatest dream.

As someone who has spent more than a decade educating, guiding, and counseling people to reach their full financial potential, I can tell you that not everyone is inherently wired to succeed. But that doesn’t mean you should be tossed to the side. Your future can still be a successful one, you can still live the life you want to live. You just need to cultivate the right mindset.

4 Reasons Why Market Timing Fails as a Money Maker

Markets will easily rattle you. A couple hundred-point swing here. A doomsday headline there. But before you go and flee the market or try to strike it big through market timing, you have to stop and consider the consequences.

The Dilemma

Market timing may be one of the most controversial topics around – many say it’s impossible, while the exact same number of people will claim they can do it perfectly every time.

It’s true that markets move in cycles and general predictions can be made about what to expect. But, this is exactly where investors get themselves in trouble. These facts do not mean that you can accurately and consistently get in and out of the market at the exact right moments.

Why, then, do investors continue to engage in this self-destructing behavior? Maybe it’s the same reason that we’re all pulled to the neon lights on the Las Vegas Strip – we all want to prove that we can win big and beat the game. Sometimes you do, and when you do, luck is almost a bigger factor than anything. But most of the time you don’t. When you don’t, it’s easy to keep pouring money into the machines to try and prevail. What usually happens is you fly home with your tail between your legs, in a deeper hole now than when you arrived.

4 Reasons Why Timing the Market Fails as a Money Maker

Here are four reasons why timing the market fails as a money maker:

1. It almost always hurts your performance over the long-term. A recent analysis of investor behavior from SigFig found that during the market correction in October 2014, roughly one in five investors reduced their exposure to equities, mutual funds and ETFs, with 0.6% selling 90% or more. While this may have seemed like a smart move to investors at the time, SigFig found that the more investors sold, the worse their investments performed. Investors who panicked the most had the worst 12-month trailing performance of all groups.

2. It can cost more than you will make. Market timing prompts investors to be active. While active investing isn’t necessarily a bad thing, it can be costly. And the more active you are, the more you will pay in costs. Every time you make a trade, you will incur fees associated with the cost of making that trade. Investment decisions also have tax consequences. If you try to time the market and make trades without regard for the tax impact, you can find any returns you may make quickly squashed by a tax bill.

3. You have to be right twice. Gambling is easy – you only have to be right once to make it big. Market timing is a different animal. You have to be right twice in order to win, because investing has two sides, buying and selling. To be a master at market timing, you have to be able to sell at the precise moment that the market has reached the top of its climb and can’t go any further. Then, you have to be able to buy at the precise moment the market bottoms out, before it rebounds. Do you have the guts to make that bet?

4. Your focus is on reward, not risk. Investors who time the market are in it to reap big rewards – no matter the risk. You’re chasing the high of making it big, of greed. When you don’t get that reward, you run into big problems. A focus on winning doesn’t prepare you for a loss. You have no exit strategy when things go south, and they often will. In case you’ve forgotten, higher risk doesn’t guarantee higher returns. It just means a higher chance of you losing your money. If you have a high probability of losing money, you better have something to catch you when you fall.

Why Does It Matter to You?

The truth is that investors who adhere to one extreme or the other – impossible or possible – regularly find themselves less successful than investors who try to find a happy medium.

Everyday market volatility can do enough harm to your returns, without you throwing in a little extra turbulence yourself from trying to time the market. In fact, volatility is what makes market timing difficult to do, because markets can rise and fall close together. Reaching your full financial potential depends on engaging in the right types of active investing, on a balancing act between your active and passive strategies. And this doesn’t include market timing. The only form of active investing proven to work is trend following. To take it a step further, indexing almost always outperforms active investing. This is why your main goal as an investor shouldn’t be to strike it rich from one big pop of luck. Rather, lower volatility and consistent returns – even if they’re lower returns – will increase your dollar growth, make for a smoother investment ride, and help you avoid bad investor behavior by keeping you disciplined.

Our investment strategies are built on these very principles. They move with the market, but can avoid the big declines. They limit investor exposure while still capturing upside potential. Remember, it’s not timing the market that drives your success, but time IN the market.

The 4 Rules of Financial Institutions

Breaking news alert – the financial industry has an agenda for your money! Okay, no offense, but if this is breaking news to you, then you need to read this article more than most.

Yes, the financial industry has an agenda for your money. Everywhere you turn, almost every solution you’re offered has their best interest at heart, not yours. But, shouldn’t your financial actions support your most important goals? Shouldn’t the effort you’re putting in be working to further your best interests? Absolutely.

Whose Agenda Are You Furthering?

If you fail to acknowledge the simple fact that the institutions have designed things mostly to benefit themselves, you may find yourself never living the life you envisioned. Essentially, the game of finance is just that – a game. Successful players take the time to understand the rules and instead of admitting defeat, figure out how to make the rules work to their benefit instead.

Now, the point of this isn’t to paint the traditional financial industry as the enemy. Besides, making them the enemy doesn’t do you or I any good, we still have to deal with them every day. But there are in fact rules that the financial industry adheres to. Rules that you need to be aware of, as they can limit your financial success. You can’t change their agenda or the rules they stipulate for the game. But, you can define the way that we live and work within them, and bend them to your advantage.

The 4 Rules of Financial Institutions

The traditional financial industry has four core rules that they live by:

1. They want your money. This simple rule is what starts it all. You want to save for retirement? Here’s an IRA. Oh, you want your employer to help you save for retirement? Here’s a 401(k). When you’re ready to save for your child’s college education, pick from our selection of 529 plans. And the list goes on. The institutions have designed solutions for your biggest needs simply because of rule number one – they want your money.

2. They want your money systematically. Once you give the institutions your money, they want to make sure that you keep giving it to them, on the same day, every moth, year after year. Think about 401(k) contributions – these often come straight out of your paycheck. People often make IRA contributions on a schedule as well. Many times, we operate in ways that are convenient for us, hence paycheck deductions. Yes, the institutions do a good job of tricking us with convenience.

3. They want to hold onto your money for a long time. All of that money you’re putting into your 401(k) is locked away until you’re 59 ½. And just in case you get antsy before that, you’ll find yourself slapped with taxes and penalties galore should you try to pull it out. Isn’t it funny how you have to pay to get your own money back? For all of those responsible people who want to keep saving into their IRA past this same age, don’t worry – they’ll hold onto it for you until your 70 ½ .

4. When the time comes, they want to give back as little as possible. Money that you take out of your 401(k) goes in pre-tax. That means when you go to take it out, you’ll be paying taxes on it. The same goes for an IRA. This is different than a Roth IRA, where you put in post-tax money. Concerning IRAs, they also don’t want you to let those sit and grow for too long. They’ll keep it until you’re 70 ½ , but then you must start taking distributions from it. This lowers the principle, which lowers the return.

Why Does It Matter to You?

Yes, you can’t change the rules of the financial institutions. But you can change how you live within them. And I’m not trying to trash 401(k)s, IRAs or any of the other things we’ve mentioned here. These aren’t “bad” things to do – in fact, they can be essential tools to help you succeed financially.

What is important for you to take away is that part of winning the game of finance is mastering a balancing act. Financial success depends on a healthy balance of money that is under your control, and money that is out of your control. Based on these rules, all of your money shouldn’t be tied up in long-term savings accounts. Life happens, that’s a fact. When it does, you need to be able to access your money when you need it. For instances where your money is tied up, you need to know what role these strategies are playing and exactly how they fit into your complete financial life.

You don’t lump all of your goals into one end all, be all goal. You have multiple goals, multiple things you’re working toward. Money is the same way. You have to dedicate different buckets of money to different goals. And it’s not just about having a lot of buckets – it’s about having the right ones that are best suited to the purpose that money is serving.

Let me put it this way – one of my cardinal rules for reaching your full financial potential is to never have more money out of your control than in your control. Remember this, and you can go far.

The Best Way to Guide Your Investment Decisions

Whether you’re just beginning to invest or are a seasoned investor, there’s one question that we all have. It’s a question that I guarantee you’ve asked yourself at one point or another – why do some people succeed at investing while others fail, and how can I be one of the successful people?

When it comes to investing, you can be your own worst enemy. This is because money is emotional, and when volatility strikes, it causes you to react emotionally – even irrationally or dangerously. Emotionally driven investor behavior often hurts you more than it helps you. And there are numerous emotional triggers and traps that will plague you almost daily as an investor.

Before you put that first dollar into your investment account, you have to understand this – you have to know what can deter your success. You also need to determine the best way to invest based on your personal values, wants and most important goals.

So, how can you avoid bad investor behavior? How do you know that you’re making the right investment decision? What is the overarching philosophy that’s guiding your decision making process? Easy, refer to your Investment Policy Statement (IPS).

Crafting Your Investment Policy Statement 

An IPS is one of the best ways to guide your investment decision making process. It’s one of the best ways to make sure that your personal values and most important goals are at the heart of your strategy. It’s one of the best ways to avoid bad investor behavior and maintain a disciplined approach. It’s also a great way to set expectations between yourself and your wealth manager, and to make sure all fees are completely transparent.

Drafting a basic IPS is relatively easy, and should be done in conjunction with your wealth manager. Here are the main components that should comprise your IPS:

Purpose. What is the purpose of your IPS? This should be easy, because we’ve already given you the answer. Your IPS is meant to foster a disciplined approach to investing by guiding your decision making process based on your most important goals and personal values.

Statement of Values. If can’t name your top five most important values, do that now. These are things that money enables you to do, the things that fuel your “why.” They should be defined and clearly laid out in this section of your IPS.  All of your investment decisions/actions should support these values, so this is a good way to remind yourself of what’s motivating you.

Statement of Objectives. These are defined based on your values. For example, if family is your number one value, one objective of your investment account(s) may be to send your children to college. Other elements such as time horizon, risk tolerance and performance expectations should be detailed here as well.

Duties/Responsibilities. It’s important to know what role everyone on your investing team will play. Who is on your team and what role do they play? How involved will you be? Do you want a partnership with your advisor, or do you want them to take everything off your plate? What is the duty of the actual investment manager? These are important things to stipulate. This sets expectations upfront, and enacts accountability for each team member.

Portfolio Selection. What are the actual investments that will comprise your portfolio? This should be based on previous elements, such as your risk tolerance and time horizon. Here is where you put your portfolio on paper, so that you can clearly see each individual investment and what the complete picture looks like.

Performance Monitoring. It’s important to know what dictates the selection of investments in a portfolio, and what determines their hiring and firing. This is an important question to ask and understand. This is where that criteria should be explicitly stated. Again, base decisions on facts, not opinions.

Costs. Any fees associated with your portfolio should be accurately communicated, and your advisor should be nothing less than 100% transparent with you. Period.

Review. Don’t overlook this last part. You need to stipulate how often your IPS should be reviewed. You should review your IPS annually at the least. Some people will need to review theirs quarterly. This ensures that as life changes, your investment strategies change with it.

Why Does it Matter to You?

While this is a simple template to help get you started, your IPS should be unique to you. After all, investing isn’t about a “number.” It’s about maximizing your financial potential with good habits, control, and value (what you value personally and what money enables you to accomplish). This is why you have to protect yourself against those bad decisions that can deter your success. When you have an IPS, the choice is simple – if the investment doesn’t align with what’s stated in your IPS, you shouldn’t invest in it. Period.