Key to Investment Success: Question Everything
The Institute for Wealth Management
Front row from left: Armin Sarabi, Matthew Medeiros, Jeff Jorgensen; Back row from left: Mike Orav, Hiro Nakakura, Pat Benton, Colin Chmielewski, Brian Rettig, Kori Libnor, Robert Hoff, Nick Lopez
Do you judge a particular market vehicle or strategy by its past performance? Do you measure your investment success by whether you beat the S&P in any given year?
If so, you’re certainly not alone. But you may be relying too heavily on the wrong criteria.
“Many industry experts claim historically great returns, suggesting this somehow predicts future success,” says Matt Medeiros, founder of the Institute for Wealth Management, an independent portfolio management firm. “This sends the wrong message. Investors need to be prepared to ask their advisors the right questions.”
Question #1: “Nice return, but how did you achieve it?”
Returns that beat market indices might quicken the pulse, but they aren’t necessarily a good long-term bet for investors. “A money manager’s process is what matters most,” Medeiros says. “What kind of risk did this involve? What was the downside? If you’re getting a 10 percent return but taking 20 percent more risk than a benchmark, you’ll lose big if you don’t have perfect timing when the market corrects. In the event of a large correction in the market (e.g., 2001 and 2008), you could lose much more than the market.”
Question #2: “Why do I need a risk manager? I already have a good stock broker.”
People are increasingly living 30+ years in retirement. Protecting hard-earned assets—by way of enlisting the help of an experienced risk manager—can mean the difference between a carefree lifestyle and a constant financial struggle.
According to Medeiros, risk managers such as the Institute have a very different purpose and perspective than a typical stock broker. “Risk managers understand their clients deeply and work solely for their clients’ benefit,” he says. “Stock brokers are paid to deploy assets.”
The Institute takes a long view of investing, offering portfolios with downside protection so clients can rest easy during down cycles. Adds Medeiros: “Nothing is more valuable than peace of mind.”
Question #3: “How will you design an investment strategy that’s right for me?”
In markets and in life, change is the only constant. What’s trending this year may not provide the same kinds of returns next year; younger investors have far different concerns than people over 55.
“The Institute offers portfolios designed to do well when the S&P performs well, and other portfolios that are actively managed and well diversified,” Medeiros says. “For pre-retirees, we offer portfolios designed to help preserve their nest egg; for retirees, we offer portfolios that provide guaranteed income. The bottom line is, we not only provide the right strategy at the right time, but we add benefits to address the changing needs of the investor.”
