Investment Management

Investment Management.

Are you familiar with the “barbell strategy”? When you think about how you’re investing your money, maybe you have a 401k, an IRA, a retirement funds or investment account. How do you decide how much money is in cash or how much money is in something else, like stocks or in bonds? 

The Cost of Investment Management

We want to keep your expenses low. This includes the internal cost. We can help make sure that the internal costs of what we’re doing are low, so we’re not missing out on performance with various fees. As far as turnover, generating high taxes also eats away at your performance.

So, there are a number of things to think about when it comes to investing. One approach is the idea of looking at the whole market and saying, “Let’s diversify”, and be invested in the broader market. Within that, there are some areas  where we can target a higher expected return with some sectors, countries or companies. Within these we want to have overweight. 

Stocks

With stocks, it’s important to know the company size, what’s the relative price that it’s currently being offered at and how’s their profitability. These are the dimensions of expected returns and we can look to those three areas to understand stocks. 

Bonds

With bonds, we look at the maturity of the bond, and when we are going to get our money back, the credit quality of the bond, and it’s currency. These are the dimensions of expected return. If it’s a, not a domestic bond, but rather an international bond or an emerging market bond, sometimes you have to be sensitive to the currency it’s in. 

The Barbell Strategy

I think it’s so important to have what I’ll call the barbell strategy, sometimes called the dumbbell strategy. The barbell strategy attempts to answer these questions:

•  What if their market returns to new all time highs in the stock market? Are you positioned to participate in that stock market run? 
• If it goes to all time new, all time highs. The other question people think about it.
• What if there’s a decline from where we are today of 50% in the stock market from where we are right now. Are you positioned okay for that event?  

Personal finance is more personal than financial. It’s important to know where you are at, and to understand what money you need right now, for the next three months, six months, year, two years, and so on. You’ll find a comfort level with saying, “I need X dollars to be comfortable in my life” or having an emergency fund in your savings account. 

Long Term Investing

What should I be doing with this additional money that I have?  That’s when you can have a long term approach with your money and can invest it into the market, while being sensitive to the company size, relative price and profitability.

We can invest it, and if the market does return to new all time highs, you will be positioned well with that money, if you’re hedged you’re in a good position. 

I like the barbell strategy, and I’d be happy to discuss this with you for your specific situation. We can have a free 15 minute call, you just click the Start Here button at Maranantha.com.

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