Echelon Magazine

May/June 2012

Echelon Magazine is a Gay and Lesbian Business Publication

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based on your time frames, risk tolerance and financial goals. If the past is any indication, provided that you give this plan long enough and appropriate funding, financial independence should follow. Wealth, you will discover, is much less a function of what you know than of what you do. The system above- if that is the proper way to label it- required very little knowledge on your part of investments, the economy, taxes, or even math for that matter. Further if done right this system will require a negligible amount of your time and energy. Investing is only one portion of a comprehensive financial plan, which should also include Estate and Protection Planning. A portfolio is not, in and of itself, a plan. Furthermore, a portfolio (investments, accounts, stocks, bonds, cash- having a bevy of "stuff" likewise does not make a well diversified portfolio) that isn't in service of your financial planning goals is just a form of speculation: A portfolio without a financial plan can have no other goal than to "beat" most other people's portfolio's. would you rather do? Actually Accumulate Wealth? Or be able to brag you picked the best XYZ fund of last year? What If you chose "brag" above, don't forget "outperformance" isn't a real financial goal. A better example of a financial goal is: A retirement income you can't outlive, or having enough assets to make work an option (others may include, buying a house, sending your kids to college, among a million other things). your portfolio outperforms mine, and you still run out of money at 75, you are still 75 and out of money. (.....Hello and welcome to Walmart) You need a financial plan, which leads to the next principle: you need a Certified Financial PlannerTM (CFPR). I will leave the other areas of a complete plan –budgeting, mortgages, debt, life and disability insurance, estate plans etc- for another time. Here we are simply looking at how to prudently handle the investment portion of your Financial Plan. If When looking at the big picture, picking this year's "right"/ "best"/ "hottest" investment really just isn't that important. Similarly if you spend hours reading and doing research in hopes of finding that next great investment that is going to outperform the last great investment you picked, it often is a big waste of time. If you are like most people, you will probably pick investments that did great over some past period, hoping they will do the same going forward. One great –short term – idea is not going to determine whether you achieve or fail to achieve wealth. Heck even a string of "right/great/amazing" investments won't make you wealthy. Past performance is no guarantee of future results. things may help you be wealthier, but these will never be the main driver of your plan to achieve financial independence. investors spend time/energy/dollars diving into investments with spectacular performance over some previous period of time, as they grab headlines, selling other investments that may have gone cold lately, and probably even dropped in value before being sold. This strategy of "buy high, sell low" won't make you wealthy, and may even cost you much of the capital you have saved. So many Now if you follow the tortoise rather than the hare as the fairytale goes, essentially taking the "slow" approach of accumulating wealth via seemingly mundane investments months and years on end, and remain true to your financial plan, you will be on track These to achieving wealth and may even outperform most you of your fellow investors without even trying. According to Dalbar studies, the average investor usually underperforms their own investments by a wide margin. As you may have heard me say before, Wealth isn't primarily determined by investment selection, but by investor behavior. Investors who realize this principle realize they are very much in control of their own destinies. Have you ever met someone who became wealthy on the advice from Jim Cramer, A financial magazine, or watching the financial news on TV? To be fair I do usually find articles like "Hot Funds to buy now" to be helpful, as a list of things to avoid. Perhaps someday one of those lists will prove me wrong, even a broken clock is right twice a day. But think about it- why follow the masses when you can work with a caring and talented CFPR who will provide you with customized comprehensive financial advice? I hope I don't need to say more about the value of free "help" from the press. (ok you get what you pay for.) A CFP can and should act as your financial behavior coach to help guide you past many of the pitfalls, fads, and fears that hinder the average investor and greatly decrease their odds of achieving true wealth and the financial independence that come with it. when your fee-based planner does their job, their value to you should be many times their cost. Get your head out of the sand. Contact a CFP today, and get back on track for you financial goals, and take those important steps closer to Freedom. If and David Rae CFP is a Retirement Income Specialist with Trilogy Financial Services, He can be reached at david.rae@trilogyfs.com. For more information visit www.davidraefp.com. Securities and advisory services offered through National Planning Corporation(NPC), Member FINRA,SIPC, a Registered Investment Advisor. Trilogy and NPC are separate and unrelated entities. Examples used for informational purposes only. Investment decisions should be based on an individual's goals, time horizon, and tolerance of risk. may/june 2012 ECHELON 25

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