Investing can be exciting, investing can be complex… it may be the only money topic your friends or financial planner want to talk to you about, especially in these times.
At Old Peak, we think it should be the opposite.
While important, investing by itself has no meaning, no pathway forward because it has no personal goal in and of itself. That is because investing is just one part of something larger: a comprehensive financial plan. Investing must start with the plan, and a plan must start with your goals.
What are you investing for? Retirement? College? A future home? Without goals, it is hard to tell how your portfolio may impact other areas of your life like cash flows, taxes, or your estate plan.
Let’s face it, everyone is busy. Our clients often lead complex professional lives as business owners, doctors, or executives and even busier home lives as spouses, parents, and sometimes grandparents.
One area they do not need to be complex or exciting is their money.
So how can investing be made simple and, for the lack of a better word, boring? A passive investing approach.
Nine years ago, our founder Rick Waechter wrote a blog “Psst … Hot Investing Tip”. The summary: over the long term, taking an academic or passive investing approach – low cost, broadly diversified funds that usually track an index – tends to outperform an active approach – market timing or stock picking. This still holds true today.
In an updated study by Dimensional Fund Advisors, only 21% equity funds beat their benchmark after fees between 2010-2020. The percentage drops even further as you add longer time periods to the study. The conclusion: why would you pay for active management when it probably won’t provide better returns?
In addition, consider your time. That’s an additional cost which you won’t have with our approach.
Passively managed, low cost investing allows you to forgo the search time and stress to spend time thinking about the other areas of your financial plan that probably need more attention.
"There are investors who grind 80 hours a week to add 10 basis points to their returns when there are two or three full percentage points of lifestyle bloat in their finances that can be exploited with less effort."
Morgan Housel, Collaborative Fund
At Old Peak, we help our clients think about their complete financial picture, not just their portfolio. To learn more, I encourage you to read a case study about Sara (not her real name), a client who came to us with big goals who needed help simplifying and getting organized outside of her growing business