A number of months ago I was asked by Investopedia.com to join many other advisors to answer questions posed by investors looking for direction. This evening I responded to a 66 year old who retired in February of this year. There seems to be only two different types of investors posting questions. The first type is searching for information to go it alone and the second is the type that is trying to understand enough information to find a good advisor. However, many post questions that allude to "going it alone" when they are uncertain whether to "go it alone" or hire an advisor. So the answers to their questions really do not address their objectives and essentially increases their time spent figuring it out. So I thought I would post a copy of my response in this blog as well. In fact I plan to transfer many of my replies on Investopedia.com since most of my replies are more general in nature and I feel very helpful to investors asking the better questions.
"What you pose is a great question “how do I maintain this income stream”. Years ago, when I first entered into the investment world I kept thinking there was a Holy Grail method to be discovered. Many years since I have found that there are probably more investment methods and tools to accomplish investors goals than investors to trade them. However, I found that the success of each method had to rely on universal fundamentals, but more importantly, the method and tools used had to match the viewpoint of the investor or advisor for long-term success. (i.e. if the investor doesn’t believe in using stocks for investment then the least amount of negative market returns will cause the investor to likely sell too soon or some other negative actions).
If I were you I would decide whether you wish to use an investment advisor for advice or go it alone. If you go it alone I would recommend that you should probably reduce your stock exposure and bond maturity length to mitigate a downturn in the stock market and a possible increase in interest rates (bond values go generally opposite of interest rate increases) till you learn a bit more how markets work. Then at some point, you will need to make your method your own. I will caution you to have patience with yourself in learning.
However, if you choose to find an investment advisor I offer you that many advisors probably could get you to your goal. Just understand that you are borrowing their methods, so your responsibility is to hold them accountable to their method and not to instruct them on how to do their job. If you find yourself instructing the advisor it’s probably because you are not confident in their method and/or advisor’s ability. When this happens you should cut your loss and just go find another advisor or method. Think about it like if you had a subordinate you continue to have to micromanage. It will drain you and you would probably be better off just doing the task yourself.
Once you decide which path to take it will be easier to decide on more questions to ask. Good luck and keep asking questions on Investopedia.com. It’s a great resource for investors. "
Your feedback is welcome!
John Hamel is the Managing Member of Austec Wealth Management, LLC. helping current & retired business owners optimize relative to their company value and personal life.