SIMC's Top 6 Investment Princples - Part 2

SIMC’s Top 6 Investment Principles for Individual Investors - Part 2

(or What I wish I truly understood when I was 20.)

•  This is part 2 of a 2-part blog.  We covered 3 principles in Part 1 (you can read then here.), and we will cover the final 3 in this blog.
•  I am often asked what an individual investor should be focused on.  In my mind there are about 6 key Investment Principles.
•  Following these high-level principles will position one for long-term success in your investing activities.
•  Picking up where we left off……

 Investment Principle #4:

A Financial Plan is Central but not Critical.

• This is almost heresy amongst my peers as we make our living as Financial Planners.
•  I do believe all investors should have a financial plan – it shows you where you are headed – and can be very helpful.
•  However, if you can save 10 to 20% of your after-tax take-home pay while working, can maintain investment discipline, and can employ the 4% rule when you are in retirement, you are good.  No need for a detailed financial plan.
•  The difficulty with the statement above is covered in Investment Principle #2 of SIMC’s 6 Investment Principles – this stuff is easy in theory, very hard to implement in the real world.  If you already know what to do, and can execute in a timely manner, you are set.   However, very few can actually do it alone. (….and you are probably falling victim to behavioral finance if you think you are one of the few….)

Investment Principle #5:

Balance is Power.

• At its core, investing is about delaying consumption.  You will need to find the balance between living well today and living well in the future.
•  The mini Financial Plan delivered under Principle #4 helps strike that balance.  The fact is we are in the workforce for approximately 35 years on average and should plan for a 30-year retirement.   These time parameters help set how much we should save, and how long our investments will need to support us when we no longer work.  It is a pre-set balancing act but might not be right for you.
•  Going outside these generic milestones allows one to live a unique life.   You find your own balance.  You can save more aggressively and retire early or save less and compensate by working later into your twilight years.
• In these cases, (outside of generic markers) a Financial Plan will take on far greater importance.  You will need to do some serious number crunching and strategizing about how best to live your preferred life.  This is where most Financial Planners shine – developing a unique plan to help you attain your unique goals.  Your unique balance.

Investment Principle #6:

Focus your energy on what you can control.

• In this final Principle I am defining “energy” as both your time and your money.

• In terms of time, I think you should spend time thinking about how your current approach to investing matches up to these Investment principles.  Avoid intellectual rabbit-holes.  Implement any changes you need to so that you are aligned with these simple principles, then go out and have some fun.  Life is short.

• In terms of money, investment fees/costs are important over long investment horizons but are not everything. 

• Yes, investing in funds with low fees is important.   It is one of the decisions we can control, and we should work on cost minimization.

• However, it does not mean you should avoid paying for good advice.

• Today, most of the value-add from a Financial Advisor centers around the Comprehensive or Holistic advice given on a variety of topics.  Not just investments.  It is often here that the cost-conscious investor makes a mistake by not engaging a professional to help them solve a complex issue.

Thank you for reading SIMC’s 6 Key investment Principles.  They are designed to help guide your focus on strategic investment issues we feel are critical to your financial well-being.  The initial 3 can be reached here.

 If you have any questions or comments please do not hesitate to reach out for additional information at info@simcollective.com.

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This is being provided for informational purposes only and should not be construed as a recommendation to buy or sell any specific securities. The views expressed are those of Southern Investment Management Collective (SIMC) and do not necessarily reflect the views of Mutual Advisors, LLC or any of its affiliates. SIMC, nor any of its members, are tax accountants or legal attorneys, and do not provide tax or legal advice. For tax or legal advice, you should consult your tax or legal professional. Investment advisory services offered through Mutual Advisors, LLC DBA Southern Investment Management Collective, a SEC registered investment adviser.

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About the Author:  Kent Fisher, CFA, CFP^®

Kent Fisher is a Chapel Hill, NC Fee-Only Comprehensive Wealth Manager at the Southern Investment Management Collective (SIMC).  SIMC provides comprehensive financial planning, retirement planning and investment management services to help clients organize, grow and protect their assets.  SIMC serves clients as a fiduciary, and tailors all solutions to each client's unique situation