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The Year End Move to Consider Now


Here in the Mile High City of Denver, you can’t go too far without seeing the image of a wild horse otherwise known as a bronco. Football fans are particularly enamored with the beast given Tim Tebow’s miraculous 7-1 start with our hometown professional football team.

And for those unfamiliar with Denver’s adopted mascot, the city has commissioned what can only be called a 32-foot-tall Horse from Hell, complete with demonic red eyes to welcome all visitors arriving into Denver’s International Airport. It’s so controversial that the Wall Street Journal even ran a piece on it a couple years ago. A Horse of a Different Color

If you were watching the markets at all this year, you could easily mistake them for a bucking bronco, flailing back and forth trying to toss to the ground any and all investors who dared take a ride on it. The hedge funds and gun-slinging fast money investors relish in the volatility as they try to move in and out of the markets like a gambler running from casino-to-casino looking to make a buck. Unfortunately for many traditional investors, 2011 made them want to get off of the horse and stay off for good. Who could blame them given the whipsaw, back-and-forth moves up and down? Makes a person seriously question the validity of owning stocks in the first place.

At Infinium Investment Advisors, we believe the current mayhem in the markets can actually be our friend, rather than our enemy. In an interview on CNBC this past November, Warren Buffett even said, “Volatility is good for you.”

He continued with a blunt statement about the current environment, “I mean, if farm prices would vary from X to 3X in a given year, I'd make a lot of money in farming. I just buy when people were depressed. They don't move that much. Stocks overreact all the time and that's why a guy who can keep his senses about him can get very rich.”

So our goal as financial advisors is to keep our perspective and to help our clients do the same. How do we do this? We believe investors should consider the most important year-end strategy to combat the recent turmoil and be ready to profit once the markets calm down:

Create a financial plan! We cannot overstate the value of this exercise for everyone. The old saying goes, “the cobbler’s kids have no shoes.” In other words, often times the savviest investors spend oodles of time planning and forecasting in their businesses but fail to draft a blueprint for their own financial success. If you have not created a financial plan for Your Household Inc., we challenge you to carve out the time to complete this now. 

At the very least, make the commitment today to draft and adopt your personal financial road map in 2012. What is your slowest month of the year (if such a time even exists)? Once you identify the best month of year to tackle your plan, we suggest you find a trusted advisor to help you with this process. Your time is too valuable to not outsource the heavy-lifting involved with the creation of a sound financial plan.

Without question, the biggest benefit you will get from creating your plan is to determine what your money needs to do for you. For example, do you know what rate-of-return your investable assets must produce in order for you to attain all of the goal items you have, like putting your children through college, ensuring you can live a comfortable retirement independent of help from others like the government, or even that cabin in the mountains where family memories will be made for years to come?

By finding this number, you will give yourself peace of mind and greater confidence that will minimize the odds that you will make a foolish mistake with your money as the markets kick like a bucking bronco.

One of the most interesting findings from our financial planning process over the years with clients is that many of them are taking too much risk!  It stands to reason that if you take more risk, and make greater returns on your investments, you will have a bigger cushion and more financial security. Sounds reasonable, but in reality, with greater risk we see greater uncertainty of the results. Of course, if you don’t know how all of the inputs work together - like your annual savings, inflation, withdrawal rates and portfolio returns - you may very well jeopardize your chances of success by pushing the envelope too far with your portfolio. 

In the current environment, we are also seeing just the opposite with greater frequency; an investment mix that is so conservative or skewed to gold, for example, that the investor stands little-to-no chance of hitting their needed rate-of-return bogey. The only way to really get your hands around the answer to this question is to make the time to do your plan; you won’t regret the effort. In our experience, the total commitment require by a client can be as little as two hours which certainly many investors can spare in order to get their financial house in order.

If you would like to learn more about Infinium’s financial planning process, click here: 

Infinium's Financial Planning Process

or contact us via email or phone.

The entire team here at Infinium Investment Advisors wishes you a prosperous and healthy 2012!

Opinions and views expressed by our Financial Advisors are provided for informational purposes only and should not be construed as investment or tax advice. Content on this website is not a recommendation to buy or sell any security or financial product, or investment strategy. The ideas expressed on this site are solely the opinions of the Financial Advisor(s) and do not necessarily represent the opinions of firms affiliated with the author(s). The author(s) may or may not have a position in any security referenced herein. Consult your investment and/or tax adviser before making any investment decisions for its appropriateness in your personal situation.