5 Ways To Tell You Are A Professional

March 11, 2015 - Max Osbon (3 mins to read)

Wealthy individuals often get there because they were successful at something other than investing. Building a business, developing real estate, perfecting a technological or medical breakthrough, taking smart chances, investing in oneself – these can create substantial financial wealth. After you have worked for your money and it’s time for your money to work for you, it’s important to ask yourself this: “how professional am I”? Here’s a simple test:

  • How often do you check your portfolio performance? Daily is too often. Monthly is better. Money is emotional and watching your returns seesaw over the short term is almost guaranteed to drive you crazy. In athletics, your body will follow your eyes. Look to the right and you will go to the right. The same goes for investing. Keep your eyes on the portfolio horizon instead of stumbling over your feet.ExcellenceSlide1
  • How often do you strategize with your advisor? Portfolios should be tweaked for two reasons: when the markets move significantly and knock your allocation out of line (rebalancing), and when your personal circumstances have changed. If you have sold a business, bought a house, inherited money, or your company has IPO’d, it’s time to review your strategy.
  • How aware are you of the 5 most important market indicators? To gauge the pulse of the market start with the 10 year Treasury, the Dow, the euro, unemployment, and the CPI.  No, you won’t be able to predict the movement of the S&P by reading these figures… but you can use them to gain context for how your portfolio has reacted and where your risks might be. Currency risk, for example, can often lead to an unpleasant surprise. Ask your advisor to cover these indicators and how they might affect your investments. Similar to checking your heart rate, simple awareness is key.
  • How often do you check for tax loss harvesting opportunities (anti-taxing)? By design, pieces of a diversified portfolio move in different directions over time. You can capture losses and use them against your tax bill by swapping lagging assets for their appropriate peers. However, beware of making any unintentional shifts in allocation as not all mutual funds and ETFs are created equal and names can be deceiving. How big should that loss be before acting on it? And when should you check? Your advisor should automatically screen for these opportunities. However, taxes should not ultimately drive your investment mix.
  • Where do you reinvest your dividends? As your allocation drifts over time, accumulated dividends can be used to nudge your portfolio back into balance. Often this means putting your dividends back into the underperformers. Ask your advisor to justify where your dividends are investing. A good rule of thumb is to reallocate your dividends when your portfolio’s cash reaches one percent.

Be intentional
When you consider applying these guidelines to your investments, ask yourself what you would do if you had another ‘0’ or ‘000’ added to the end of your portfolio? Ask yourself if you have the time, willingness, and ability to give your portfolio the attention it deserves at that higher level. Raise your expectations. There is no merit to good intentions unless they are acted on. Add the above five tips with the help of an investment professional to make your investment strategy 100% intentional. We do just that.

Bonus Number 6, just for fun… How often do you read the OsbonCapital.com articles? Keep up to date every Thursday at 6am.

–  Max Osbon



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