In the Know
Securing a Successful Financial Destiny

You would think with the plethora of articles, magazines, books, television and radio talk shows devoted exclusively to money management and investment strategies we would all be financial experts. In reality, many investors are still mystified by investment theory, practical applications and portfolio strategy. Even after years of investing, some individuals get that ădeer in the headlightsä glaze if they spend any length of time in an in-depth discussion about their investments.

Yet that does not dampen investor interest for information about earnings reports, P/E ratios, beta, geopolitical factors and economic indicators. Have you ever heard of an airline passenger who had read a few aviation books and decided during the flight to give the pilot ideas for landing safely? I hope not. Have you ever heard of a patient in surgery who offered to guide the surgeon through their operation - probably not. Then what makes investors want to lead the charge? Possibly the desire to have a stake in the outcome of their financial future which is an honorable goal both novice and experienced investors alike should covet.

However, more crucial then all the facts and figures an investor could review and analyze is a thorough understanding by the investor and their advisor of the desired financial outcome. Will the financial strategies employed carry the investor towards a destination of financial well-being and peace or bankruptcy and financial disaster? A quick look at the headlines often reveals too many stories of musicians, actors and professional athletes who at one time had the best advisors and yet ended up impoverished.

Perhaps a few lessons that most of us were taught in childhood can help clarify the roles of investor and advisor in securing a successful financial destiny.

Take your sweater: When the skies are blue and the sun is shining it may seem foolish to carry a sweater. However, weather conditions can change without warning and it is better to be prepared for the unknown then to be exposed to the elements. Investment climates can also change just as suddenly and dramatically. Better to seek information from your team of advisors about protection for your investments rather then end up exposed and out in the cold. Make it clear to your advisor in writing that you would rather not be exposed during a sharp downturn and request strategies that limit your downside risk. To avoid a reversal of fortune, always take your sweater.

A penny saved is a penny earned: Donât expect your investments to provide a lifestyle in retirement that was difficult to attain and maintain during your earning years. The exuberant stock market of the nineties with its high double-digit investment returns may have spoiled investors. Although stocks disappointed for most of this decade the real estate market has become ăredä hot and threatens to seduce investors back to the days of overnight riches. In reality, the best way to assure your financial future is to start an investment plan and add to it regularly. Save at least 10% of your annual earnings each year for that ărainy day.ä

Turn off the lights: It is hard to discipline family members to be aware of the little excesses when money is tight. When money seems limitless it is nearly impossible. A client recently shared that his electric bill was about $1000 per month. The client is retired and he and his wife travel extensively. He said the bill stays the same because he must keep his air conditioning unit at full power 24/7 whether he is at home or not. He insisted that it was a necessary expense until we did a quick calculation. If the heating bill could be reduced by $6000 per year and the funds were invested in a tax deferred account at 4% interest compounded for 5 years the savings would grow to approximately $33,000. A quick call to the utility company made it possible for the family to reduce the bill significantly and place the savings that was literally ăburningä dollars, into an investment that in the future will be converted into a gift for a favorite charity.

Donât Shop When youâre Hungry: You just might buy everything edible in sight. After you have satisfied your hunger with a balanced and sensible meal you will be stuck with items you never really needed or wanted. That situation is true for investing as well. A colleague once shared an interesting story with me. She was invited to address a group of young pro athletes who had just gotten their first paycheck. Many had never invested before or had any knowledge of investing. However, many of them felt the need to just ădropä the money somewhere right away. Their season was about to start and they just wanted to buy something. She suggested they delay their instinct to buy. They needed to delay the decision until the off-season. In the meantime, they could start to gather information about investment offerings and explore relationships with potential advisors to develop a menu of balanced, sensible investment solutions. Anxious investors get stuck with investments they canât remember how they attained that have little or no investment value or purpose in their investment holdings.

Donât Talk to Strangers: It seems innocent enough when someone starts a conversation with you about investing. However, if you are not experienced in money management you might be swayed to leave the wise counsel of a trusted advisor and entertain investment strategies that work for some of the people some of the time but are not suited for you. Without an in-depth history of your goals and objectives, investment time horizon, current net worth, expenses and tax liability no one should steer you towards any type of investment.

Say your prayers: Enough said. Many of the Wall Street investment gurus were fooled by the folly of corporate America, which brought down Enron, MCI/WorldCom and tarnished the reputations of many well-known CEOâs. To successfully navigate the landscape of investing, donât forget to ask God to be by your side.

Martha A Khlopin is a Registered Investment Advisor of Khlopin Financial Services, an investment advisory family office. The firm is also a proud sponsor of the Hawaii Sports Celebrity Golf Classic held in Hawaii annually. She can be reached at: get2insurance@aol.com.