Picking Up The Pieces - Building an Investment Plan

This is a guest post from Wade Slome. Wade is the author of "How I Managed $20,000,000,000 by Age 32" Wade is currently on a virtual tour through cyberspace and I am happy to be able to host a guest post from him.

The financial markets were a disaster in 2008, and many investors have been left to pick up the pieces after the market collapse. So the question becomes, what now? Rather than an ad hoc strategy of constantly reacting to changing financial circumstances, it’s imperative to create an investment plan that is designed to manage volatility and meet your future goals. But before you can do that, you need to take inventory of what you have (left) and answer some crucial questions.

For most people, the value of what they own now is worth considerably less, whether it’s the house, retirement assets, or the car in the garage. Since resources are considerably more scarce, the importance of creating a plan promptly becomes that much more critical. If you are burning cash, rather than building cash, it’s time to take control of your finances. If you are not equipped to handle your own finances, then seek out an experienced AND trusted advisor.

A major reason that this financial crisis engulfed our economy was because of the insatiable appetite for debt. It was not just individuals obtaining “Option ARM” mortgages, 0% financing car loans, and no-payment-for-two-years big screen TV purchases. Corporations were credit gluttons too, especially the financial system (think Bear Stearns, Lehman Brothers, AIG, etc.) The overreaching behavior doesn’t stop there. Our government – and governments around the world like Iceland – became inundated with debt that will likely saddle our children with the deficit repayment burden for decades.

There is hope, however. Our sins in credit consumption are not insurmountable, if tough decisions and actions are implemented immediately. The traditional “spend-now, save-later” lifestyle needs to be reversed. Just like an unhealthy couch-potato sinking into cushion oblivion, a binging credit consumer must face the responsibility of a serious debt diet and exercise regiment to climb out of this financial hole.

The two step solution requires 2 sets of interviews.

I. Interview Yourself

• Evaluate your asset allocation: Does it match your objectives and risk tolerance level? ·
  
• Review Assets & Liabilities: Are there assets that can be sold? Can debt be paid down? How about your credit card (s)? Is it possible to refinance your mortgage?
• Examine what you are paying in investment fees: The less you pay, the more you keep, the earlier you retire, and the more you can spend in the future. Too many investors are paying excessive fees and they do not even know it. An annuity, although appropriate for some, is one notorious example of a hefty-fee product that often lines the brokers’ pockets.
• Ask yourself if you are saving? If you are not retired, do whatever it takes to save. If you are retired and excessively spending, explore avenues to cut costs.

II. Interview Your Advisor (if you don’t have one, then concentrate on Part I)

• How is the advisor compensated? Is your advisor “Fee-only?” There can be inherent conflicts of interest established between client and advisor. Unlike commission based brokers that generally collect up-front fees for products sold, a Fee-only advisor’s incentives are aligned with the client. If the client’s portfolio goes down in value, the paycheck of the Fee-only advisor will suffer as well. Therefore the Fee-only advisor has the incentive to keep fees low and grow assets (not focus on cash generative commission-based product sales like a traditional broker).
• What fees are you paying?
• Is your advisor implementing cost efficient and tax efficient products and strategies? It’s not the money you make before taxes that counts, it’s the money you make after paying taxes that REALLY counts!
  
• Do you have access to the advisor’s regulatory ADV “brochure?”
• Experience matters. What type of credentials does the advisor hold? College degree? Masters Degree? CFA (Chartered Financial Analyst) designation? CFP® (CERTIFIED FINANCIAL PLANNER) certification?

There is no silver-bullet to solving your financial issues. A disciplined, systematic investment plan, which is flexible enough to adapt to changing economic environments, is required. If you do not have the time, discipline, or temperament for creating an investment plan yourself, then contact a trusted, experienced, “Fee-only” advisor like Sidoxia Capital Management (www.Sidoxia.com). Plan. Invest. Prosper. -Wade W. Slome, CFA, CFP

SPECIAL NOTE

Each time you leave a comment on any or all of Wade's blog stops, you will be entered in a random drawing for a free copy of How I Managed $20,000,000,000 by Age 32. Stop by one or more scheduled blog tour stops and share your thoughts and comments with author and investing expert Wade Slome. He will check in throughout the day to answer questions, and you'll have a chance to win a copy of his book.

Wade is also offering a free ebook which shares excerpts from his book, for a limited time. Be sure to stop by his website to get a copy www.Sidoxia.com. This is your chance to take a look inside the book and to learn additional information about Wade Slome and his business.

For more information about Wade Slome and his virtual tour, check the schedule at http://virtualblogtour.blogspot.com/2008/12/how-i-managed-20000000000-by-age-32-by.html

Autographed copies available at http://www.amazon.com/gp/offer-listing/0615251587 - from Sidoxia for $23.95

Or

His book is also on Amazon for retail cost - http://www.amazon.com/How-Managed-000-000-00-Age/dp/0615251587