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25 Years in Review: The Evolution of My Investing Philosophy

The Evolution of My Investing Philosophy

When I first started out as a financial advisor back in 1992, times were different. First of all, it was a really bad fashion decade…think baggy suits. Haha! Anyway, I digress.

The Dow Jones was at 3233; we were well off the lows of the September 1990 correction of 14% and of course the 33% correction of October 1987. Little did I know at the time that we would enjoy one of the best bull markets of history, rising to 10876 (+256%) by November 1999.

Allocation models were simple; for the most part, the model was 80% Equities/20% Fixed Income. If we were not earning 20% per year there was something wrong…

Flash forward to today, and though client’s goals, objectives, and risk tolerance drive the allocation, our moderate growth allocation looks pretty similar to this:

  • 35% Global Equities
  • 30% Real Assets
    • Real Estate
    • Natural Resources
    • Global Infrastructure
    • Commodities
  • 20% Fixed Income
  • 15% Alternative Investments
    • Reinsurance
    • Life Settlements
    • Managed Futures
    • Absolute Return Funds

When I create retirement strategies for my clients, there are four factors I focus on:

  1. Client’s retirement goals: What age they would like to retire at or what year?
  2. Client’s risk profile: For example, do they lose sleep over the thought of loss of principal?
  3. Client’s current lifestyle vs. desired retirement lifestyle: Will there be more travel, hobbies (like golf), etc.? The ‘old rule’ was to use 80% of pre-retirement expenses, but today people are much more active and traveling so we are actually calculating with 100-110% of pre-retirement expenses.
  4. Current economics:For the last 35 years, interest rates have been falling, causing Bond values to increase, thereby making Bonds a natural choice for a majority of retirees’ portfolios. Today, interest rates are at all-time lows but WILL eventually rise, causing value of bonds to decrease. That has caused us wealth advisors to seek other areas of income. This is where ‘Alternative Investments’and ‘Real Assets’ come into play (as per above).

Other factors have changed retirement overall, which have, in turn, affected my investing philosophy:

  • Decrease in pensions—the reliance on company funded pensions are a thing of the past. This requires me as a wealth advisor to advise clients to practice one of the most basic principles of wealth accumulation…”Pay yourself first”. Whenever possible, use Defined Contribution Plans (401k, SIMPLE IRA, SEP-IRA) to save for your future with tax deferred, tax deductible dollars.
  • People are retiring later in life—but also living longer. The net/net of it is that we have longer retirements to plan for. Years in retirement, expenses, and inflation are all key factors.
  • Today’s economy – the economy is a big factor in what drives our investment models. The percentage that we allocate to Global Equities, Real Assets, Fixed Income and Alternatives is driven in large part by the current economy as well as what we see for the potential future economy.
  • Increasing health care costs – Health care costs expensed during retirement are one of the biggest factors in retirement planning; rising health care costs can have a big impact on that.

One thing that doesn’t change as the years go by is my approach. Our job as wealth advisors is to evaluate the circumstances, trust our models, and stick to the course. I make sure to keep an investment strategy in front of my clients and make sure accounts are properly allocated and rebalanced as needed.

Make your investments great again

Although every day is a new opportunity to begin again, there is something about the start of a fresh season that empowers people to take action. In addition to ushering in 2017, we are also welcoming a new President into the White House to lead our nation.

While rising interest rates are eminent and a 7 year bull stock market run are both cause for concern, the President has made promises that could strengthen our economy, thereby maintaining the stock market run for a bit longer than anticipated.

Throughout this season of change, the key to positioning oneself for the ebb and flow is to diversify and include alternative investments such as non-stock, non-bond assets. While it’s impossible to know what the future will hold, implementing a forward thinking strategy that works towards your individual goals will pay off in dividends.

5 Wealth Building Recommendations

Having been a CFP for 25 years, I am often asked what my top tips are for making smart investments. Here are my top 5 recommendations that everyone should consider when making strategic decisions to their wealth building strategy:

  1. Avoid Self Destructive Investor Behavior. Be an Investor…not a Trader. From 1994 to 2013, the average stock fund returned 8.7% per year while the average stock investor earned only 5%. We call the gap between these results “investor behavior penalty”. Driven by emotions like fear and greed, they succumbed to negative behavior such as: 1) Pouring money into the latest top performing fund or asset class expecting the winning streak to continue 2) Avoiding areas of the market that have performed poorly, assuming recovery will never return 3) Abandoning their investment plan by attempting to successfully time moves in and out of the market, a near impossible feat.
  2. Keep long term goals and objectives in mind while refusing to be swayed by emotions or “Hot Tips”.
  3. Diversify. There is something to the old adage “do not keep all of your eggs in one basket”.
  4. Consider adding Alternative Investments. These would be investments that are not stocks or bonds. Examples are Commodities, Real Estate, Reinsurance, Life Settlements, Managed Futures.
  5. Pay attention to your Bond holdings. Rising interest rates could have negative effect on the value of exiting bonds. There is no time like the present to take inventory of what works, what doesn’t and what can be improved upon.

Friends in their 40s Discussing Building Wealth

Last month, I wrote about the Top Ways to Build Wealth in Your 50s. This month, let’s talk about wealth building in your 40s. Dare I say that in your 40s, you’re hitting your mid-life stride?  40-somethings are kind of walking a tightrope with their wealth – maximizing earnings, minimizing debts, and prioritizing needs and desires.

There’s a lot to think about in your 40s: if you don’t have kids in college, chances are you’re at least thinking about saving for college. Usually, your late 40s into your 50s are your top earning years, so with your higher income, you might be thinking about buying a larger house, traveling, golf club memberships, or luxury cars. It’s easy to get distracted!

So, what’s a 40-something to focus on if you’re serious about building wealth? Here are my top tips:

Save 50% of every raise

In your 40s, you’ll likely have promotions and job opportunities that can lead to significant increase your income. Lifestyle creep is prevalent at this stage of life, and it’s tempting to adjust your lifestyle upward with each bump in income. Proceed with caution!

Instead, a smarter wealth building strategy is to save at least 50% of every raise. That may even seem generous to some, who might save an even larger chunk of their raises. Obviously, if you can save even more, that is even better. But if you’re wanting to travel, or do some fun things you couldn’t afford to do before, committing to only spending 50% of each raise will help you build a larger savings/401k and narrow the gap to retirement.

Create passive income streams

With the extra income you’re generating in your 40s, another wealth building strategy is to create a passive income stream. Passive income streams usually require an initial outlay of cash or investment money and time, but after some work, will bring you consistent income without a lot of effort on your part.

One good example of a passive income stream is a rental property. There are some dividend stocks you can invest in as well that can bring regular payouts. You can also turn a hobby into a business, or become a silent partner in a business. Every person’s path is different, but it’s something to consider in your 40s!

Curb the cost of kids

Did you know the cost of raising a child from birth to age 17 is $491,000 for families earning over $100,000 year? A significant portion of that cost (30%) is estimated to be clothing and “miscellaneous”.  If you’re saying “yes” to all of your kids’ requests, it might be time to start saying “no”. If not for the sake of your wealth building, for the sake of the kids.

For more in-depth info on that, I recommend “The Financially Intelligent Parent” by Eileen and Jon Gallo, who propose an 8 step strategy to raising successful, generous, and responsible children.

Get fit

Surprised by this one? Many people are! Yet, research shows that people who exercise at least three times a week earn 6% to 9% more than those who do not, according to research by Cleveland State University professor Vasilios Kosteas. Initially the correlation may not make sense to you, but diving in, Professor Kosteas cites growing evidence that fit employees are more productive and manage work-related stress better, which can lead to faster career advancement.

Get Life Insurance

This is another one that you might not think about as a wealth building strategy. And honestly, it’s more for your family than you. Buying a life insurance policy helps ensure that all the money you’ve worked hard to save for retirement is used for its intended purpose, should you pass away in the meantime.

For example, if you died without life insurance, your spouse or family members might have to dip into those accounts to pay off debt or assist in burial expenses. Life insurance helps ensure that your family is taken care of, and that they won’t have to spend your retirement money prematurely.

I recommend speaking with an insurance advisor on the type and amount of coverage to invest in. The point is, if you don’t have it, the time is now!

Friends In Their 50s Celebrating Building Wealth

When you reach 50, retirement is starting to seem within reach. But, you still have at least 10 to 15 years of work left, which is a good amount of time to positively impact your burgeoning retirement account. So, in your 50s, consider it a great time to assess where you’re at with your retirement accounts, your lifestyle, and your overall financial situation.

If you review your overall financial situation and find that you’re behind on your goals, or want to ratchet your savings up a notch, here are some great steps to take in your 50s:

Save your bonus check.

When you were younger, you might have spent your bonus on a vacation, a down payment on a new car, or other “wants”. Now, it’s time to sock away that extra money for the future. The same goes for commissions and pay raises. Basically it’s time to keep your income steady and save everything above what your “normal” income is.

Maximize retirement plan contributions.

If you’re not doing it already, now is the time to max out contributions to your retirement plan. Contribute the maximum allowed to your 401(k) as well as any IRAs.

In addition, when you turn 50, you’re allowed to start making catch-up contributions to your retirement plans. Specifically, contribution limits are relaxed a bit, so you can channel an extra $6,000 into your 401(k) and another $1,000 into your IRA. And it’s tax-free!

Don’t take money out of your 401(k).

If your kids are headed off to college, it can be tempting to want to withdraw from your 401(k) to help finance tuition and living expenses. But don’t do it! You’ll pay a hefty penalty, typically a 10% premature distribution penalty in addition to owing taxes on the money you withdraw. You’re much too close to retirement and have worked too hard to put yourself at risk by doing this.

Pay down your debt

Your 50s are typically your highest earning years, which makes it a great time to aggressively pay down your non-mortgage debt. Specifically think car loans, credit cards, and any other miscellaneous debts that are not good to carry into retirement.

Paying off a mortgage may or may not be a good strategy; it really depends on your personal situation. I recommend speaking with your wealth advisor before making a decision like this.

Implement tax-saving strategies

Higher earning years mean higher tax brackets, so this is also a good time to look at tax-saving strategies. Some possible options include:

  • Directing more money into tax-deferred savings vehicles like 401(k)s or traditional IRAs.
  • Consider donating appreciated assets to charities.
  • Discuss tax loss harvesting strategies with your wealth advisor

Happy Family Taking a Beach Selfie in Laguna Beach, CA

Earlier in the year I wrote a blog post with reasons why you should have a trust instead of a will. Now, I’m going to dive a little deeper into the different types of trusts and discuss the reasons why you might want to choose one that you might not be too familiar with.

As you probably know, the basic two types of trusts are living trusts and testamentary trusts. Living trusts are set up during the individual’s lifetime, while a testamentary trust is set up only after an individual’s death, when their will goes into effect.

For the purposes of my post today, we will be discussing the more complicated types of trusts that apply to specific situations. My goal here is to inform you of some different types of trusts that you may not know about, so if you are looking to set up a trust, you can choose the one best suited for your needs and goals.


Credit shelter trusts: A credit shelter trust is also sometimes called a bypass or family trust. It’s an irrevocable trust established after the death of a married spouse, to benefit the surviving spouse.

The main purpose of this trust is to limit estate taxes. If you have a multimillion dollar estate, this might be a trust that interests you. Assets specified in the trust agreement are transferred to the individual’s beneficiaries (usually the couple’s children) without estate taxes being levied when the surviving spouse passes away.

A key benefit to a credit shelter trust is that the surviving spouse maintains rights to the trust assets and the income they generate during the remainder of his or her lifetime.


Generation-skipping trusts: This type of trust is also called a dynasty trust. It allows you to transfer a substantial amount of money tax-free to beneficiaries who are at least two generations your junior – so this would typically your grandchildren and great-grandchildren.


Qualified personal residence trusts: This special type of irrevocable trust is created to remove the value of your primary residence or second home from your taxable estate. It can be particularly useful in situations where the home is likely to appreciate in value.


Irrevocable life insurance trusts: This trust is also sometimes referred to as an ILIT or a wealth replacement trust. This trust basically owns your life insurance policies for you, so you personally don’t own the life insurance and it won’t be included in your estate, thereby reducing your estate taxes. The caveat here is if you die within 3 years of the date of transfer to the trust, the trust is considered invalid and the life insurance will be included in your taxable estate.


Qualified terminable interest property trusts: You’ll probably hear this trust referred to as a QTIP. It’s particularly useful for individuals who have been divorced, remarried, or have stepchildren or other family members that you want to direct assets to.

Your surviving spouse receives income from the trust, but as an example, your children from a prior marriage will receive the principal or remainder of the trust after your surviving spouse dies.


It’s important to note again that these are very specialized types of trusts that do not apply to everyone. You should consult with an estate attorney and your finance and legal team to understand whether one of these trusts is right for your individual situation. As always, feel free to contact me if you have any questions.


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Bart A Zandbergen, CFP® is a Registered Investment Advisor with Optivest, Inc and a Registered Representative with Gramercy Securities, Inc. Investment advisory services are offered by Optivest, Inc. under SEC Registration and securities are offered through Gramercy Securities, Inc., member FINRA & SIPC, 3949 Old Post Road, Charlestown, RI, 02813, 800-333-7450.


Investment advisory services are offered by Optivest, Inc. and securities are offered through Gramercy Securities, Inc., member FINRA & SIPC. Securities are not FDIC-Insured, are not bank-guaranteed and may lose value. This website is provided solely for Optivest, Inc. clients and does not intend to provide investment, tax or legal advice. Be sure to consult with your own tax and legal advisors before taking any action that would have tax consequences. All references to Optivest on this website refer to Optivest, Inc. (a California Incorporated company) and all references to Optivest Properties refer to Optivest Properties, LLC. Optivest, Inc. does not represent that the securities, products, or services discussed in this website are suitable or appropriate for all investors. Information herein is taken from sources deemed reliable and neither Optivest, Inc. nor Gramercy Securities, Inc. is responsible for any errors that might occur. Optivest, Inc. may only transact business in those states and international jurisdictions where we are registered/filed notice or otherwise excluded or exempted from registration requirements. The information on this website is not intended for distribution to, or use by, any entity or person in any jurisdiction or country where such distribution or use would be contrary to law or regulation, or which would subject Optivest, Inc. or Gramercy Securities to any registration requirement within such jurisdiction or country. The opinions expressed by vendors or third parties are those of the author(s) and are not necessarily those of Optivest, Gramercy or their affiliates. All links to other Internet websites (“hyperlinks”) are included as a convenience for our visitors and Optivest, Inc. assumes no liability for the content or the presentation of such linked sites. No part of this website may be reproduced in any form, or referred to in any other print or electronic publication without the express consent of Optivest, Inc. The material has been prepared and is distributed solely for information purposes and is not a solicitation or an offer to buy or sell any security or instrument or to participate in any trading strategy. No representation or warranty is provided for any software that may be downloaded from this website. Copyright © 2016 Optivest, Inc.

Securities offered through Gramercy Securities, Inc., 3949 Old Post Road, Charlestown, RI 02813, 1-800-333-7450

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