The Retired Investor: Time to Hire an Investment Adviser?
Individual investors have had a decade or more of gains, compliments of a stock market that has gone up with few interruptions. But as we enter a new era of tighter monetary policy, the road ahead may be a bit rockier than most investors expect. As such, it might be time to enlist a little professional help to preserve those profits.
There is a saying on Wall Street that just about anyone can make money in a bull market. That may be a bit harsh. I don’t want to denigrate the efforts of so many who work hard at managing their own retirement portfolios. Some work diligently at following the markets and have made it a full-time occupation. Most others "dabble" with the aid of newsletters and columns like this one. That may have worked well up until now, but I fear we are entering a new stage of the market where a weekly column like mine just won’t be enough to protect your investments.
I recognize that if you are like me, you hate to spend money on something you can do yourself, especially if you have been making money by buying dips and staying invested. If this bullish trend continues, why would you even consider paying fees to a money manager?
For the same reason you don't fix your own computer, washer/dryer, or put on your own new roof. Notice in each case I used an example where something broke down or malfunctioned. That has not happened yet in the stock market. Afterall, we are only a percentage point or two away from all-time highs. But what would happen if the stock market suffered a 20 percent decline? Well, just buy the dip, you might say, right?
What would happen if you were right, but after the sell-off, dip buying worked, just not in the case of U.S. equites? Let's say international securities bounced back, but U.S. equities did not. Are you prepared to navigate changes like this?
And do you have the time to do that? Up until recently, your portfolio was probably on auto-drive. A daily check on the markets, maybe a brief read of the occasional research note was sufficient to keep you on the straight and narrow. But the fact is that more than 75 percent of individuals investors, according to Fidelity studies, do not have the time, knowledge or experience to be confident in their investment choices.
I will be the first one to tell you that reading my weekly columns is not going to cut it. Sure, I have a good track record in calling the turns in the markets and possible investment choices over the years. But what I don't know are your backgrounds, your investing plans, nor your risk tolerance, tax status, spending behavior, retirement issues, or your estate and long-term care plans. That is why my advice will always remain generic. In down markets you need a lot more than that.
Now many investment advisors simply manage money, and don't get involved with financial planning. I believe that is a big mistake. Most investors, regardless of age, should seek an investment advisor that does both. How else can a professional craft an investment portfolio with the right risk profile that considers all your life factors. Many of those details are as important (or even more important) than how much money you win or lose over a day or month within the vagaries of the market.
Another important reason to consider a financial advisor is in order to keep your emotions in check. Personally, I expect a serious correction in the stock market in January-February 2022. If so, some investors could lose most of the profits they made in 2021. How much pain can you absorb? Does your present portfolio reflect the proper risk you are willing to take, or has it become more aggressive over time? If you are like most people, you have no idea. But I will bet your risk taking is higher than it should be.
History says that individual investors tend to hold on, suffer through the pain of a declining market only to sell at the bottom of a big decline. Don't allow yourself to be one of those casualties. The time to act, reduce the risk in your portfolio, and prepare for this pain trade is now. A professional portfolio manager can help you do that and be there for you when you are convinced the world is coming to an end.
The purpose of this column is to scare you into getting off your butt. Most people won't make a move until they absolutely must. Sure, I could give you all those boring, financial arguments that you read (and ignore) all the time. Fear is a great motivator, however. Pick up the phone and set up an appointment now, don't wait until it is too late. If you don't know who to contact, call, or email me. Given my background, plus 40 years of investment experience, I will work with you to determine someone appropriate given your circumstances.