Just as every investor has their own unique world view, we have a specific orientation towards the trade-off between risk and return. There are three possible goals that every investor can have in respect to their assets: growth, income, or safety/capital preservation. Of course, everyone wants to achieve all three of these desired outcomes and preferably in great measure.

Delivering a positive outcome in at least one of these areas often requires prioritizing one over the others. Clients need to realize what their priorities are between these contradictory goals.

As professional financial advisors, our job is to inform and to educate those who come to us to learn how markets really work.  Our job is to keep a watchful eye and most often, preservation
of capital is our highest priority. If we are given specific directions to pursue high levels of current income or heightened growth in an account, we are happy to accommodate those desires. Most people don’t want to lose the capital that they have worked hard to gather so preserving it for their family’s future use is often the main goal.

 

There are many unexpected ways to lose capital, including doing nothing. There is a risk of depletion of purchasing power that inflation takes from those afraid of committing to an investment program. Taxes and fees take a bite out of returns and so preserving capital after expenses is a key factor. Many investors have unrealistically high expectations that the markets will continue to provide double digit growth because the recent past is all they can remember.

As long-term owners of U.S. based assets, our experience has shown us that helping clients from becoming victims of believing that the future will look like the past is vital to protecting assets. Some people are put off by the market’s volatility or they worry about current political conditions, both here and abroad. One good thing about financial assets is that people are continuously looking to create new entrepreneurial opportunities and so long as this is the case, the markets, both public and private, will continue to function.

A large part of our job is to make sure that investors get back their capital along with a reasonable return while not getting lured into complacency, greed or fear. Staying clear of the latest investment fad is one key to achieving these goals.