Video: 3 Part Series on the Investment Process

by | Jul 20, 2021 | Investing in the Stock Market, Videos

What goes into the Investment Process when working with SRP clients? Listen in as Gabe and Ryan, financial advisors, break down their internal process and all of the factors they consider.

Investment Process Part1: How important is knowing your risk score?

We’re starting a new series here where we dive a little bit deeper into topics that we think are important when it comes to people planning for retirement. The first topic we’re going to look at is the investment process, what goes into it on our end and with our clients and prospective clients. All of this starts with risk and how important it is.

Risk Assessment: First Step to the Investment Process

When covering the investment process and what goes into it, the first step is risk assessment. One of the tools we use for this is called “riskalyze” where it puts each of our clients risk score on a scale between 1 and 99. 1 represents the safest like cash or similar risk to cash and 99 represents the most aggressive like if you are in a really aggressive stock. The S&P 500 is the major index in the United States currently sitting around a 75-80 risk score. We’ve found that “riskalyze” really helps our clients begin to understand risk. What comes with that understanding is a ready-to-return expectation. “If I take this risk score, I can expect this much return, at this point in time”. That’s what we’re always trying to teach and approach with our clients.

Different Stages in Life Lend to Different Approaches for Investing

People are in different stages of life, we can’t have 100% of our portfolio in risk assets when in retirement. On the other hand, somebody who’s younger may not need a lot of safe investments right now. This is why we work with our clients to find out what risk is appropriate for them based on their investment objective, needs, and goals in life.

We always begin our investment process by helping clients understand risk and then establishing their risk target and a ready to return that we’re targeting. It’s one of the best things we can do for our clients. If you have any questions about this, or if you don’t even understand what risk means, give us a call and we can help bring clarity on that.

Get your complimentary risk score by clicking here.

Investment Process Part 2: What factors go into building a portfolio?

Once we’ve established risk, we dive into what’s actually inside the portfolio. You can have bonds, stocks, real estate, gold, mutual funds, and ETFs…there are so many components that go into building a portfolio. That’s where we start the process for our clients. Then we have a great team around us that help us analyze all of those different areas of investment and what’s best considering all the different stages of the economy and market cycles.

Active Investment Versus Passive Investment: How We Evaluate and Decide

The discussion of active investment vs passive, what does that mean? We have a deep bench of chartered financial analysts (CFAs). They help us evaluate the portfolios of our clients. We also reach out to certain sponsor groups that we work with and they evaluate client portfolios with their team. This is all a lot of time and effort behind the scenes that is not spent working directly with the client. We do this evaluation quarterly and go very in-depth helping us make decisions on when and how we place trades. It’s a huge part of the experience our clients have in regards to our investment performance. When we do the quarterly evaluation we have a great team surrounding us in order to help tailor the information we gather to each of our clients and the risk tolerance they have. Ultimately the goal is to guide clients through the ups and downs of market cycles getting them through retirement.

A key part of our investment process is the building of the components that our actually part of our portfolio. If you want to know more about it, you want to know your risk, whatever your need maybe reach out to us here at Strategic Retirement Plans.

Investment Process Part 3: Continual Alignment and Ongoing Client Relationship

This is part 3 of 3 videos, we first talked about risk, then about the components of what goes into a portfolio. For this final video we want to go into the ongoing investment alignment that we have for each of our clients through different cycles of the market… whether it’s the ups and downs, recessions, depressions, all of those things in addition to the different cycles people go through in their individual life.

Risk Score Influences Portfolio Construction

This is alignment, keeping the clients’ risk score aligned with their portfolio construction. This is also sometimes referred to as the maintenance stage. How do we keep the different stages a client goes through and their needs at certain times of life aligned with their portfolio construction? Some of this is even based on where people are at behaviorally. This process that we go through ensures that we are always aligned with the client and what their needs are as well as where they are at risk-wise.

Timing the Market Versus Time IN the Market

Something we’ve seen is that trying to time the market is near impossible. Very few of even the brightest minds and teams in investment, can even come close to timing the market accurately. So then we turn to the phrase “it’s about time in the market”. Meaning, you have to ride the ups and downs of the market cycle. That’s where we come in and do the behavioral coaching for our clients, guiding them as the turbulence shows up in markets, because we know it’s always right around the corner. Corrections are going to happen, they always have and they always will.

From an investment process standpoint, risk matters, you have to understand the components of your portfolio, but this alignment is probably the most important thing we do for our clients over a long period of time. We make sure their interests are aligned with how their portfolio is built. Not only that, but making sure they know why they have alignment with their portfolio. If you have any questions about alignment reach out to our team, we’d love to meet with you.

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