A lovely couple recently reached out to me for help putting a financial plan in place, and they said we have questions we'd like answered about our savings and our spending and when we should collect social security, but we don't wanna talk about how our assets are invested. We're very comfortable with how we are currently positioned with our investments. My name is Laura Rotter of True Abundance Advisors, and this is not the first time I've heard from people who feel like investments are not part of their discussion of their financial plan. When I first started, having spent close to 30 years managing money for institutional investors, I too thought that I just wanted to come up with a financial plan as I met with people and did not wanna be involved in the investments.
I did that long enough. The first person who came to me, however, a lovely man that I'm still working with, had his money entirely invested in high yield bonds. That is: risky bonds of companies that have low ratings by the rating agency and why? Because his financial advisor had told him that he would just live off the coupons generated by this portfolio of bonds.
Well, he was taking a tremendous amount of risk in these bonds with limited upside. That is the highest bonds can go is to a hundred cents on the dollar, and quite a lot of downside bonds can trade down to zero. I believe that the risk you take in your investments should be in a portfolio of stocks which have unlimited upside.
Stocks can double and triple. And yes, of course they too can go to zero, but their risk reward is much more appropriate. . The second prospect that came to me was invested with her roommate from college, who now managed a portfolio of small company stocks. Small company stocks are inherently more risky, and she managed them on margin.
That is to say that she borrowed against the money invested to buy even more stocks. I shuttered. I can't give you a financial plan, I told her, if half your portfolio could disappear the next day, if the market trades down . So I do not have to manage the portfolio for you, but I am a firm believer that I have an opinion as to how your assets should be managed to reach your goals, whatever they might be, a portion of your portfolio in a bond ladder, a portion of your portfolio in the stock market, and there too diversified among US stocks, international stocks.
If you'd like to talk about this in more detail as to how this pertains to you, I would be happy to have a conversation. You can direct message me below or email me at laura l a u firstname.lastname@example.org. I urge you to use your money, your investments, to live your life on purpose and to understand how every part of your financial life plays a part in this journey.