521 Capitola Avenue
Typical value added for client when moving to Vanguard Advisor's Alpha methodology (basis points)
Suitable asset allocation using broadly diversified funds/ETFs
Cost-effective implementation (expense ratios)
0 to 75
Spending strategy (withdrawal order)
0 to 110
Total-return versus income investing
Range of potential value added
About 3% in net returns
Asset allocation is the percentage of a portfolio dedicated to different asset classes such as stock, bonds, or cash under a particular investment strategy. Investing with a suitable asset allocation is one of the first steps to achieving your financial goals. After we create a financial plan based on your financial position, we’ll recommend certain investments according to your objectives.
There are costs when implementing an investment strategy. Trading costs, fund expense ratios, and taxes are all items that can take away from your net return. From Vanguard's research, investing in low-cost mutual funds and ETFs can increase returns from between 26 and 34 basis points in the long term. This is not from better fund performance but simply because you get to keep more of the returns when you pay less for them.
Most likely, the different investments in a portfolio will perform differently and make different returns, thus drifting from target allocations. Over time, these changes to the portfolio shift its risk vs. return characteristics, therefore losing original objectives in the process. Rebalancing is trading within that portfolio that has drifted back to its original allocation.
Human nature emotionally attaches us to our investments. It is our job as advisors to help our clients maintain a long term perspective with their plan and stick to their goals. When the markets trend either positive or negative, we are easily influenced by the color on our portfolio statements, what we read on the internet, and the so-called experts in the news headlines. While it's normal to give in to these emotions, it is important not to act out on them. Abandoning a well-constructed plan can be costly.
Location refers to either taxable and tax-advantaged accounts.
When the bills are due, the order in which you draw from your accounts matter.
Fixed-income yields are at historically low levels and it is hard to draw the income off of income-focused investments. As advisors, we can help you optimize a portfolio's yield.