We enjoy helping you with your financial plan. Now we want to tell you a little about ours. This is the first blog in a series about how our advisors handle their own finances.

My life has changed a lot recently. If I had written this article five or six years ago, I would have been really focused on financial security for myself and my husband, plus leaving some money to my children. Fast-forward to today, and each of my children has a family of their own, and I now have five grandchildren. Suddenly, it’s more important that I work a little longer so I can be a source of financial support to them.

My Asset Allocation Strategy

With a growing family, I decided to allocate portions of my portfolio to the next generation. So while I’m still building financial security for my husband and myself, I’ve also created a portfolio that is specifically designed for future generations of my family.

The make-up of this next-generation portfolio is quite a bit different than my own portfolio. The next-gen portfolio has a much longer timeline — and might even exist in perpetuity — so I’m able to take more risk (and pursue more reward) than would make sense for my own retirement portfolio.

My children are the beneficiaries of this account, but I’ve had conversations with them about the bigger picture. Within this portfolio is money that I inherited from my parents four years ago. I want to be a good steward of this money, and my ultimate goal is to protect, grow, and transfer this wealth. I get a thrill out of the idea that this legacy could go on for generations within my family.

With five new grandchildren, I’ve also been opening 529 college savings plans in each of their names. I used 529 plans for my own children, and I’ve been going through the process again, now as a grandmother.

Turning to the portfolio that is designed for me and my husband’s eventual retirement, it’s most important for us to focus on investments that can provide stability and moderate growth as we approach the next stage in our lives. This portfolio is less risky and less growth-oriented when compared to the legacy portfolio I built for my children and grandchildren. Historically, “stable and moderate growth” investments would mean bonds; however, with interest rates at historic lows, the bond market has struggled to keep pace with inflation. As a result, the “sleep at night” portion of my portfolio is primarily focused on alternative investments, such as private real estate or equity-exposed assets that have volatility controls in place.

For the equity portion of my portfolio, I’m a firm believer in holding a diverse set of asset classes and having diverse holdings within those asset classes. Over the course of my 30-year career, I’ve developed huge confidence in the capital markets: we’ve seen booms, busts, terror attacks, and global pandemics. The markets can go down, and they can go down fast and furious. But there has never been a time in history where markets have gone down and haven’t recovered.

If you believe (as I do) that Americans and people around the world are innovative, creative, resilient, and always looking to provide a better product or service, then there will always be great companies to invest in — and there will always be cause for optimism.

In my experience, the key to success is aligning three things: your investment horizon, your financial goals, and your asset allocation decisions. This core belief drives the investment portfolio that I manage for myself, my children, my grandchildren, and every portfolio that I manage on behalf of clients. With this said, it’s important to note that I don’t take a completely passive approach to investing; rather, I want to know that I’m investing in quality. To me, that comes from working with managers who use reason, sound judgment, and detailed analysis to determine which companies are the durable leaders in their industry.

Finally, while asset allocation is critical, I also put a lot of energy into asset location. Name any type of investment account — 401(k), IRA, Roth, HSA, joint trust account, donor-advised fund, etc. — and I probably have one. I’m a firm believer in finding the right investment account to match your investment timeline. For example, my Roth IRA is the last account that I’ll touch during retirement, while my joint trust account is probably the first money I will use.

Closing Thoughts

I share this information in the hopes that it will provide some ideas you can use in your own financial life. And in the spirit of sharing ideas, I want to end by sharing one of my greatest weaknesses as an investor in hopes that it might help you on your journey.

It’s natural to fall in love with our investments, and in my experience, it can be very tough to stick to our long-term investment goals when our love for a company, fund, or sector distracts us from the big picture. Remaining mindful of this tendency can help all of us avoid costly mistakes.

As a wealth advisor, it is our job to help you and your family navigate these kinds of challenges while managing the big picture of your financial life. If this approach sounds right for you and your family, we invite you to connect with our team.