What's the Next Hot Idea?

When people find out that I represent an investment advisor, the next question I typically hear is, “got any great tips?” I do have some great tips, but I don’t know that they’re the tips they’re looking for. What they’re asking me is whether I know what the next Apple to invest in is, like before Apple was Apple.

The “tips” I can offer are nothing new. If you invest today in a diverse mix of stocks, bonds, and alternatives, and stay disciplined with those investments, you will make money. Here’s the “tips” I do suggest:

1. Know what you’re investing for. Retirement, college, trip around the world…Define the goal, have a timeline, and keep it in focus.

2. Understand risk. If you’re invested properly, risk is generally only a factor over the short-term. Long tested principals will outlive short term trends.

3. Do not try to time the market. It doesn’t work. You’ll never time it right. If we have the benefit of a rearview mirror, we can always make it work statistically. But unless you’re Biff Tannen in Back to the Future 2, there’s no almanac that tells us what’s going to happen.

4. Take me as an example. I am 37 years old and married. If I contribute to a retirement account every year, stay disciplined and stay invested, there should be no reason I won’t be able to fund my retirement. Let’s look at what a $10,000 ($5000 for me, $5000 for my wife) contribution to a tax deferred retirement account would look like:

The adjusted closing price for the S&P 500 on March 22, 1985 was 179.04. The S&P 500 closed on Friday (3/20/2015) at 2108.06. That’s a cumulative return of 1077.42% over 30 years. Or an average annual return of 8.6%. With reinvested dividends, the cumulative return is 2217.43 and average annual return of 11.1%. Putting that into perspective, if you’d invested $10,000 into the S&P 500 in 1985, it would be worth $107,765 today and if you’d reinvested all dividends it

would be worth $231,743 today.*

• Under these assumptions for money invested in 1986-$10,000 now worth $171,979.10*

• Every year from 1985-current-$10k x 30 years= $300k principal, would be worth about $1.7 million today*

• *To be fair, this data does not account for expenses. Calculations were used simply tracking the S&P 500 historical data for the point of illustration. Also, there is no guarantee that the next 30 years will produce the same result as the last 30 years.

The approach is not going to make anyone rich overnight. That’s not what I do. Rather, I work with clients to help them grow their savings in real terms (after inflation). Also, I strive to manage their

investment risk so that market cycles and market corrections do not erode what they’ve worked so hard for and what I’ve worked so hard to help them grow over time.

While these tips might not be the silver bullet that you were looking for, they are probably more valuable. I could tell you about XYZ and why I think it’s a good buy today, but really I’d be just sharing an educated opinion and guess. No one really knows exactly what tomorrow brings, but by following a time-tested philosophy, you can expect a much more reliable result. If you still want a silver bullet, I’d be glad to get together over a Coors Light.

The Final Tip: Call me. I can give you information at a cocktail party, at a t-ball game, or on a blog, but I can’t help you address your goals that way. Let’s talk one-on-one about constructing a plan for you. Let’s talk about how much up and down you can stomach before you’d want to abandon your plan. Let's talk about your goals. Let's talk about how we can get out of the hypothetical and into the real world.