How to Live Off Our Investments

Our overall philosophy of investment advice is goal-focused and planning-driven, as sharply distinguished from an approach that is market-focused and current-events-driven. Every successful investor I've ever known was acting continuously on a plan. Failed investors, in my experience, get that way by reacting to current events in the economy and the markets.

We neither forecast the economy, nor attempt to time the markets, nor predict which market sectors will “outperform” others over the next block of time. In a sentence that always bears repeating: I'm a planner rather than a prognosticator. So is every wealth manager at A&I.

Once a client family and I have a plan in place—and have funded it with what have historically been the most appropriate types of investments—I'll hardly ever recommend changing the portfolio so long as your long-term goals haven't changed. As a general statement, I believe that the more often investors change their portfolios (in response to the market fears or fads of the moment), the worse their long-term results.

In sum, our essential principles of portfolio management are fourfold: 

1. The performance of a portfolio relative to a benchmark is largely irrelevant to long-term financial success. 

2.  The only benchmark we should care about is the one that indicates whether you are on track to accomplish your financial goals.

3.  Risk should be measured as the probability that you won't achieve your goals.

4.  Investing should have the exclusive objective of minimizing that risk.

Why don’t we benchmark? If we happen to have beaten this or that benchmark over any period of time, we were either skilled, or lucky or both. Let’s enjoy the feeling. If, on the other hand, we beat all these benchmarks and you run out of money—we all fail. Instead, we will measure the benchmark that allows your financial plan to succeed.

Be thankful for a financial plan, thoughtfully created, well-funded, and a lot less stressful than the news makes out our investments to be.

Thank you for your confidence and trust in our firm.

A Policy for a Lifetime of Investment Success
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