Modern Investment Services Focused On Your Goals
Over the past two decades, technology has literally impacted everything we do. From driving to shopping, new technologies have enabled massive increases in productivity and efficiency. The way we invest has also changed – for the better. Interestingly, most investment advisors still cling to investment methods that were introduced almost 70 years ago!
The Problem With “MODERN” Portfolio Theory
In the year 1952 Harry Markowitz introduced the idea that the stock market could be subdivided into various categories that had different risk and return characteristics. His research showed that splitting an investment amount into various proportions of these categories could actually reduce overall risk while improving long-term returns. In other words, Harry Markowitz invented this:
The asset allocation pie chart is a simple tool that helps investors manage their long-term risk and return. The problem is that using an asset allocation model does nothing to protect you from sharp downturns in the stock market. It’s been proven again and again that sharp market declines cause nearly ALL asset classes to fall at approximately the same rate. A great example of this was February 2020 when the Covid-19 crisis caused stocks of all kinds to fall about -35% in a single month! During that time high quality corporate bonds also fell about -25% in the same time. So much for reducing risk through asset allocation!
A High-Tech Approach to Investing
While the basic principles of asset allocation still work fine over the long term, there are more modern techniques we can use to improve your returns and reduce your downside risk. Technology allows us to use macroeconomic data to determine the types of stocks that are likely to benefit the most from the current economic conditions.
Technology also allows us to exit positions if they drop more than a predetermined amount. We can then construct a portfolio for you that is allocated properly for your risk tolerance, focused on the best performing areas of the market, and controlled for downside risk. Here is an example of the S&P 500 Index exchange traded fund over a six month period from October 2019 – March 2020. Technology allowed this position to be kept in the portfolio while the market was rising, but automatically sold it before a normal-sized drop turned into a huge disaster.
Our philosophy is to communicate frequently with our clients so they know what is going on with their money. We are committed to providing timely reports that reflect the investment methods we are using as well as the performance in relation to comparable benchmarks. We will meet with our clients as often as they feel is needed. We don’t ever want to be the kind of advisor that you hand off money to and then never hear from again. We’ve heard plenty of stories like one before. You won’t get that type of service from Larson Wealth Management!
Ask yourself the following questions:
1. When is your ideal retirement date?
2. When are you actually likely to retire?
3. Based on how much you are contributing to your investment portfolio each year, what is your required rate of return?
4. And how much downside can you afford to take without compromising your objective?
These are some basic questions that we use to determine the type of investment portfolio is most appropriate for you. Our objective isn’t simply to maximize the returns on your portfolio, we also want to help you reach your goal as early as possible so you have more time to enjoy your life in retirement or that vacation cabin in the mountains.
Now ask yourself one more question:
• Is your current advisor doing what you expect them to do for you?
If the answer is no, then we hope you’ll schedule a consultation with us so you can learn more about how our system will better accomplish your objectives!
ARE YOU READY TO CREATE A HIGH-PERFORMANCE INVESTMENT PLAN?
Getting started is easy. The first step is to let us know how we can help you. Just fill out the simple contact form below and we will be in touch with you right away – or just call us at 480-699-5540.