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Investment Philosophy

Making Money Or Making Mistakes

We are a net planning firm, meaning our financial advisors act from the perspective of net return, not from the illusory gross return. Most financial consultants and representatives are taught to try to get the best yield. We believe that this is important, but that is only half of the retirement/investment planning puzzle. Many Americans today have two principal financial concerns:

  • How to grow their money while protecting it from unnecessary market volatility
  • How to keep their money from the impact of what we call “The Retirement Axis of Evil,” Federal, State, Local, and Consumption Taxes as well as Inflation, and Longevity

We have found that while we do need to be concerned about market volatility and yield, especially when families are taking an income stream, we also need to be concerned about taxes, inflation, and longevity. Did you know that the tax losses from federal, state, local, consumption, and death taxes, may be the largest loss in the portfolios of individual Americans? Did you know that longevity has the greatest potential to devastate your Retirement Security?

What Does This Mean?

If you had put $10 (dollars) into a small cap index fund and large cap index fund in 1958, that $10 would have grown to:

  • Small Cap Index would have grown to $5,708 in 2008 (Average Return: 13.3%).
  • Large Cap Index would have grown to $1,100 in 2008 (Average Return: 9.7%).

Looking above, you will see a typical illustration that most financial advisors would have presented to their clients to justify why they need to be in the equity market for growth potential and wealth acceleration. However, what is missing here? The above info only focuses on the gross returns a potential investment earns and does not account for the impact of what we term as the Retirement Axis of Evil: taxes (federal, state, local, & consumption), inflation, and longevity. In other words, it is not the complete picture. Therefore, to give a retiree or investor a true bird’s eye view of their investment performance, we must go beyond just the gross earnings by also looking at their net earnings.

So, if we take just taxes (federal, state, local & consumption), and inflation into account what would be the impact to the Small Cap Index and Large Cap Index Funds mentioned previously. The results would be as follows:

  • Small Cap Index Fund would have reduced from $5,708.00 to $136.00 in 2008. This represents over a 97% Shrinkage resulting in an average return of 5.4%.
  • Large Cap Index Fund would have reduced from $1,100.00 to $53.00 in 2008. This represents over a 95% Shrinkage resulting in an average return of 3.4%.

These results do not even account for investment fees and expenses. The bottom line is that the above figures represent net investment returns before fees and expenses. Most advisors focus on asset allocation to diversify your assets or investment portfolio in order to reduce your overall risk exposure but fail to incorporate tax diversification as a strategy to get the federal and state governments out of your pocketbook during your golden years.

What we do differently here is help you to incorporate an efficient tax diversification strategy to enhance your overall retirement and investment plan. The emphasis is to reposition you today so you can protect what you have spent a lifetime of hard labor to accumulate from the excesses of the federal and state governments.

So basically, there are three holes in your retirement planner bucket: living too long, taxes, and inflation. We can’t do anything about “living too long”, but we can and must do something about taxes and inflation if you want to maintain the lifestyle you deserve during your golden years.

Let us show you how you can do what wealthy Americans have been doing to accelerate their wealth by diversifying your tax strategy just like you have been told to diversify your investment strategy. Failure to properly diversify your investment portfolio and retirement assets could result in reducing your standard of living significantly while in retirement or worse, you could run out of money during retirement years.

We are firm believers that wealth management and investment and retirement planning is not about how much you make, but more importantly: how much you get to keep.