The PivotPoint Dial of Investment Portfolios – The “What” and “Why”
The selections in your retirement plan portfolio matter. A lot. We work with companies and their plan participants to manage a great plan.
We too often see portfolios that have been neglected for many years, and by “neglected” we mean losing out on the growth needed to 1) overcome inflation and 2) provide for comfy retirement years. Partially to avoid fiduciary malpractice, employee plans are often set up with a default investment into money markets only. This “safe” choice isn’t too safe: money markets at this writing are good for about 4% return while inflation stands at about 3%.
You can’t grow a nice nest egg with those numbers. We strongly believe in three basic rules for your 401(k) money:
- Stay invested. Don’t try to time the market.
- Select or get help selecting the right return/risk profile for YOU. General rule of thumb—build a portfolio with just enough return/risk so when the market dives (and it WILL dive) you might say, “Ouch!” but keep your money in and working for you.
- Don’t try to pick stocks, use low-cost funds as main investment vehicle.
We didn’t invent these ideas. John Bogle, founder of Vanguard gets most credit for this proven, simple approach. We recommend you become Bogleheads® like us!
_________________________________________________________________________________
A big part of our portfolio management practice is to make task #2 pretty easy for you. We help make the correct choices easy to make. We make these choices in the portfolios we manage for clients.
- We use fourteen asset class ETFs (exchange traded funds) to model the global securities markets. From quarter to quarter, money constantly moves among the asset classes and your portfolio should be updated to take full advantage
- Our 10 portfolios are simply numbered (instead of named) for easy understanding. PivotPoint 1 is always designed to be the minimum risk portfolio. Risk and return rise as the numbers go up.
Portfolios are all designed at the same time, at the beginning of each quarter. Risk and return of each portfolio generally “stays in its lane”. You see how the return reliably goes up as the numbers go up. We also see the real world is captured here. PivotPoint 9 and PivotPoint 10 aren’t quite in their lanes right now. PP9 and PP10 are the most volatile so they’re always the most likely to be “out of place”. About 8 months ago, all 10 portfolios were in numerical order. And they likely will be again in the near future.
PivotPoint 10 is the most aggressive and may be just right for you if you’re a 28 year old risktaker who vows not to touch the money for decades. PivotPoint 1 might be right for a 77 year old grandpa who has fixed income, no taste for risk and just wants to stay ahead of inflation.
