Growing Your Financial Portfolio: Are You Gluten-Free Investing?

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Gluten is a protein found in grains. It is responsible for the elastic texture of bread, allows the bread to rise and gives it shape. Many of us look for ways to make our daily habits healthier. Those with sensitivity to or intolerance of gluten simply remove it from their diet.

You can’t take the gluten out of your financial plan. “There is no such thing as gluten-free investing,” says Keith Klein, Wealth Management Advisor at Turning Pointe Wealth Management in Phoenix, AZ. The most successful investors have a strategy in place that provides an overall structure to the financial portfolio and allows the value to rise over time.

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The gluten of investments

According to Klein, four key elements are needed to provide the structure that will allow your investments to rise:

1. Define the goal. Will the money be used for the down payment on a home? For someone’s education? For retirement income? Will a single pool of money be used for multiple financial goals?

2. Understand the time frame. “Retirement is like climbing Mount Everest,” says Klein. “The real goal isn’t getting to the top. It’s getting safely back down.” In other words, the goal is not to save until retirement age arrives but rather to fund the desired lifestyle for another 25 or 30 years beyond. Klein notes that “the length of time using the asset can be much longer than the time it takes to accumulate it,” making it all the more important that the investment strategy is properly structured during the timeframe allowed.

3. Understand risk tolerance. Timeframe is not the only factor to examine when determining risk tolerance. The investor needs to understand what the investment behavior is and what might be expected from any particular investment, in addition to the length of time available and his or her own propensity for risk-taking.

4. Understand whether the assets are affected and defined by multiple goals. “You have to operationally know how you’ll use the money,” explains Klein. If an unexpected expenditure comes up, how will you pull money out? What will the consequences be? If you have no plan to follow, inefficiency of process could cause you to lose money, by paying too much in taxes, for example. “At the end of the day, good returns can be wiped out by high taxes because you didn’t take into account operational structure. You could lose more than you ever gained.”

Finding the answers

A financial plan is a highly personal thing. It is an expression of your priorities, the fruits of your life’s labors. Do-it-yourself investing is common now, but no matter what website you use, a level of knowledge and understanding above and beyond that of most non-experts is indispensable if you want to achieve the best possible financial results. Investors at all income levels should consider consulting a financial professional for guidance. “It’s not that you can’t get the information you need online,” says Klein, “but a computer can’t ask you about your goals or your feelings, or understand your behavior. It’s the follow-up questions that matter.”

Some people have access to advisors through their employer’s 401k program or the bank where they do business.  Ask your friends and family members for referrals. Make use of the abundance of online resources for checking licensure and backgrounds. Visit DesignationCheck.com or CFP.net to verify professional designations and degrees. “But know that those details don’t tell the whole story,” cautions Klein.  When you consider who to work with, interview at least two or three advisors for comparison. In the meeting, you have to discuss what it is that you really want to accomplish. The seven key topics to cover are:

  • What happens if my health changes?
  • What happens if I die?
  • What happens if I become disabled?
  • What happens if I need help taking care of myself?
  • What are my savings goals?
  • What are my retirement goals?
  • What should my overall investment plan be?

The answers will change over time, reflecting whatever stage of life you’re in. Often, a related event will be what motivates you to seek guidance in the first place.

Keep the gluten in

“The same process serves high net worth clients just as well as the regular Joe’s,” says Klein. Organization, not wealth, is the key to success. Answering the seven questions and addressing the four key points will allow you to clearly define a plan. Then it’s really about managing it. “People spend more time planning their vacations than their financial lives,” says Klein. “But if you switch your focus, you’ll end up with less worry and more fun.”

Spend at least a couple of hours each year defining, reviewing and updating your financial plan. The process becomes less complicated as time goes on. “Product selection becomes much easier because you know where to plug and play specific investments based on your goals, risks and needs, and you understand where they go, their behaviors, and where they fit into your overall plan,” says Klein. Furthermore, the financial planner you choose to work with will be an accountability partner, keeping you on track as time goes by.

Kimberly Rotter
Kimberly Rotter is a writer and editor in San Diego, CA. She and her husband have an emergency fund, two homes, a few vehicles, a handful of modest investments and minimal debt. Both are successfully self-employed, each in their own field. Learn more at RotterWrites.com.

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