“My aunt is 90 and has been a client of yours for many years – at least 20. I recently retired and asked her about her experience with you. She said she is very happy and has gotten good rates of return even though she is very conservative.
She showed me her investments. I was surprised to see that you had invested some of her money in the stock market. With her age and her conservative nature I can’t see where the stock market is the place for her.
It’s important that I understand if I should be concerned about this.
I am considering becoming a client and would wonder why things are being done the way they are.”
Thank you for asking these important questions. I’m sure your Aunt appreciates your concern as well. As you might expect, I can only answer in ways that will not violate your Aunt’s privacy. But I think we can be quite clear.
Your Aunt is a lovely lady with a very sharp mind. Over the more than twenty-five (25) years we worked together she has been an active participant in all of our financial and investment decisions. And I must say she is every bit as clear and quick witted today as ever.
Many conservative investors are surprised to find that conservative investment portfolios are both more productive and more consistent with a small allocation to equities – the stock market. Comparisons of portfolios that are 100% allocated to fixed income (cash, bonds, mortgages, etc.) are a bit more volatile and provide a bit less return than portfolios with a touch (15% seems to work quite well) of exposure to the stock market.
It is important for all investors to understand that ‘the stock market’ is not one thing. It is tens of thousands of companies traded on multiple stock exchanges. Within that universe, there are stock investments that are little better than putting money in the slots at the casino. And within that universe, are stock investments in companies that have exceptional track records of strength and stability. Focusing a small portion of a conservative portfolio in that small section of the stock market that represents what we used to call “Blue Chip’ stocks has worked very well for your Aunt and many other conservative investors.
As a potential client, continue asking questions that concern you. No advisor can provide you with the best advice possible without excellent lines of communication. Being comfortable in your relationship with an advisor to ask questions – even hard questions – is critical. And having an advisor who answers your questions clearly and appropriately is equally critical.
Perhaps we’ll have the chance to serve you as we have your Aunt these many years.
If you have questions or comments, please send them to Gene@AskMtM.com