Fear is a strong motivator – fear of losing money, fear of running out of money. Our client Elizabeth was in her early 60s and single. She came to us with fears of losing money and of outliving her portfolio. Propelled by those insecurities, her investment strategy resembled a “protective bunker” mindset. We felt she lacked the breadth of a comprehensive and thoughtful investment strategy. Elizabeth was referred to us by her friend at one of the area’s largest accounting firms. We identified the obstacles for her to meet her financial objectives. These included both a need for growth and a mindset toward protection against loss. Yet, she was not aware of those hurdles. So, we worked to build trust and confidence. We saw it as the necessary first step to help her build a sound portfolio.
We believed that expanding her thinking to gain comfort investing outside of just bonds, and helping her focus more broadly on growing the whole portfolio, was important. Our team started building Elizabeth’s confidence, knowledge of investment tradeoffs and the fundamentals of portfolio construction. Understanding that she was heavily motivated by fear, we knew it was important to help her understand what comprises true risk over a long life expectancy. We explained that while one element is to protect the capital entrusted to us, there are indeed many elements of risk when it comes to building a balanced financial strategy. We viewed inflation as the greatest threat to her portfolio. For example, just 20 years with only three percent inflation, we knew the value of her assets would be cut in half. No one had ever shared this essential knowledge with her. We knew that by shifting her strategy from a singularly-focused approach, to one that included the addition of stocks and other assets, she should have a better likelihood of staving off the ravages of inflation and minimizing threats from a variety of market sources. Over time, we conducted a series of educational sessions with Elizabeth covering a wide array of investment topics. These included a comprehensive review of historical market data and our firm’s economic projections. Through those meetings, along with frank discussions that allowed her to comfortably ask questions and express her concerns openly, we developed a thoughtful, customized, financial plan that she could believe in. Our initial approach to the portfolio introduced her to a still conservative strategy where she maintained her investment in bonds while redirecting excess income into a diversified portfolio of stocks. With time, her exposure to stocks increased. Elizabeth soon recognized the benefits of our strategy and experienced both improved returns and lower risk versus her original all-bond approach. As she saw the stronger growth stocks generated, she became even more of a believer. With further time and education, her understanding, trust, and confidence blossomed. Elizabeth developed a longer-term perspective, which we believe is critical to investor’s success.
She has now developed into a true investor with a balanced portfolio and substantial equity exposure. With more of her portfolio in stocks than bonds, it has grown nicely since the bull market began in 2009. Now, she even calls us with the occasional stock recommendation! In our opinion, she has evolved from a scared and bond-centric mindset, to a place of confidence. Her team at CIP is delighted to witness the transformation. Elizabeth’s net worth is meaningfully higher than if she had continued with the original all-bond strategy. For her, living an inspired life started with gaining a true understanding of the financial realities of her portfolio and the hidden long-term threats to its growth. She was open to education and brave enough to carefully explore a less conservative strategy. Today, her investment focus is more strongly focused on helping the next generation – her children.
*Some details have been changed to preserve client privacy.