Investing isn't rocket science, says certified financial planner Dan Danford, principal and CEO at Family Investment Center. "The things that work are well-known, just tough for most people to endure throughout all market cycles," he says. "Those cycles can be moderated - not eliminated - by careful and deliberate diversification."
For successful investing, it's helpful for clients to understand some basic principles and to have an adviser who has empathy and experience.
We checked in with Dan recently to get his take on how to develop a good investment strategy and best practices for reaching your financial goals. Here's what he had to say:
Tell us about Family Investment Center. What services do you offer? Who should be using them?
Investors want honest advice. We offer commission-free (fee-only®) portfolio management services to families, nonprofits and companies. We believe that almost anyone can benefit from professional help, but Family Investment Center provides the best value for clients with $100,000 or more in investments. Our team members are quality financial planners, too, but investing is where we really shine.
What sets you apart from other investment managers?
People need a total portfolio that offers good probability for success without ridiculous risks or cost. There are a bunch of retail stockbrokers out there and they do a decent job of selling investments. That's not how we operate, though. We build and manage portfolios for each client, and we're more like a buyer's agent than a salesperson. We don't know the future, but we do know about products, pricing, performance and risk.
How do you shop for good investment opportunities for your clients? What sorts of things do you look for? What do you steer clear of?
I hate investment fads. Most are orchestrated and marketed by someone earning a fat paycheck. My shopping is akin to reading Consumer Reports; I know what I'm looking for, and I'm seeking honest, objective, and proven information for each situation. I don't visit a car dealer until I know what I want and how much I should pay. I take those same skills to Wall Street for our clients.
What sorts of factors do you consider - and do you recommend your clients consider - when developing an investment strategy?
Read some good books. So many things sound really good until you dig deeper. The most successful investment firms have the best salespeople. Period. Those people know every button to push and have an answer for every objection. Just find some good books on personal finance and investing and start there. I like Jonathan Clements, Andrew Tobias, Ric Edelman and Ron Lieber for a start, but there are others, too.
How often should we be checking in our investments? When should we tweak our strategy?
Less often than you think. The stuff that really works in investing doesn't require a lot of attention. The salespeople see a crisis around every corner because that causes people to trade. Most of those crises never happen; and even when they do, they are entirely unpredictable in advance. Remember the parable about the sky falling? It didn't happen then and it won't happen now. Here's my suggestion: keep adding to your portfolios and make adjustments as you reach goals or as circumstances change.
What are some best practices or good habits investors should get into to reach their goals?
Seek help. Honestly, most successful people use advisors. It cracks me up when I hear someone say they can't afford a professional advisor. So they stumble along for decades to save a few dollars. Hobbyist investors simply don't know what they don't know.
What bad habits should they ditch?
Ignore the screeching monkeys on television. Sure, they are entertaining, but go to the circus or a movie for entertainment. Family investing is serious business with genuine consequences.
What are some of your favorite tools or resources for retirement planning?
Get a financial calculator and play with compound growth. Many free websites also offer a Monte Carlo calculator, too, that can help evaluate how much money you'll need to retire. But nothing takes the place of an honest advisor. Again, it's not rocket science, and there are a ton of free sites to help you learn.
What are the most interesting or exciting investment trends you've been following recently?
Fees are falling fast in certain products. Index mutual funds and Exchange Traded Funds are good examples. Many of these index products charge investors a miniscule annual fee, and they can be very specific to a particular industry or sector. Buying a health care or regional ETF (for example) is targeted, inexpensive and diversified. The risk-reward ratio is very good.