posted on October 19th 2015 in Austin CFP Team Posts & Market Commentary with 0 Comments /

Every week I participate in a discussion group that is currently reading and discussing the Majjhima Nikāya, or Middle Length Discourses of the Buddha. The discussion is led by an American Monk who was previously a Zen practitioner.

Recently we were discussing the topic of “Mindfulness” and I realized that it has many practical applications for investors and the advisor-client relationship.

What is mindfulness? Mindfulness essentially means staying on task. There are many times in life where we are multi-tasking, thinking about many things but not really doing anything effectively. This behavior has become further exacerbated by technology and the abundance of information. Not being mindful and trying to multi-task while driving, for example, can lead to fatal accidents. Similarly, not being mindful of your financial affairs can lead to disastrous results.

There are many advantages to being mindful, one of them is doing a good job at the one thing you are focused on for that moment, rather than doing not so well on the many things that you may be thinking about. An example that the Zen folks would give is this: “If you are chopping carrots, just chop carrots.” To be mindful of your task is to be present.

With all of our responsibilities in life with work, family, and social obligations, it is virtually impossible to stay on task, or mindful, of your financial affairs with any depth and clarity. Thus the power and value of having a good advisor. A good advisor can be mindful and on task for you so you can focus on life, as long as you have the wisdom to allow him or her to do so.

One major problem in life and with financial affairs is that most people don’t have well defined tasks. And having well defined tasks is essential to being mindful.

The first step you should accomplish in this financial process is to define and document your values and your goals and identify your assets. This will serve as a guiding beacon when the seas get rough. Worthpointe does this for our clients via our wealth management process and it is a key part of staying on task throughout the cycles of life and the financial markets.

To stay mindful, it also helps to have simple and well defined tasks. In order to do this financially, you must first know what you have . An inventory of your entire financial picture is essential but most people don’t have this holistic perspective. Worthpointe has rolled out a new service called WorthPointe 360 that consolidates your entire financial picture into one personalized portal with real time information. It is really an amazing tool and if you are not utilizing this, you are selling yourself short of the value of our services available to you. You can see a preview here. Further specifics in defining clear tasks include having and Investment Policy Statement(IPS), knowing how much you’ll need for retirement, and periodically reviewing strategies as updates occur.

It is also important to identify the difference between effective and ineffective tasks. Focusing on yearly stock market movement is an example of an ineffective task. Constructing strategic portfolios for future decades based on your values and goals is an example of an effective task.

The best aspect of being a trusted advisor is the relationships we have with amazing, talented, and intelligent clients. They understand that they could not be as mindful of their financial affairs without us. So, we are on-task on our clients behalf. But it’s a collaborative effort and we ask our clients to be present and mindful when it comes to advice and our collaborative efforts. If you aren’t then you will most likely continue to have the same financial difficulties most people have.

It is a rare thing to be mindful and on task. Once you acknowledge this and open up to trusted advice, the path forward becomes much more pleasant and effective.

2015 Q3 Index and Model Portfolio Review
Periodic Performance
By 9/2015 ; Default Currency: USD
morgan-report-q3
(Table Disclosures and https://www.worthpointeinvest.com/disclaimer/) Performance for periods greater than one year are annualized. Selection of funds, indices and time periods presented are chosen by the client’s advisor. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Past performance is not a guarantee of future results. Russell data copyright © Russell Investment Group 1995-2013, all rights reserved. The S&P data are provided by Standard & Poor’s Index Services Group. MSCI data copyright © MSCI 2013, all rights reserved. Barclays Capital data provided by Barclays Bank PLC. * 100% globally diversified stock portfolio net of expenses and fees. ** 60% stock 40% bond portfolio net of expenses and fees. “First Full Month” is for WP100 and WP60 is 09/1990

The third quarter was a difficult quarter for stocks as all indicated indexes had significant negative returns. Emerging markets led the declining indexes for the quarter with a -17.78% return and have had some interesting developments over the last year with respect to China. For more on this see this article.

International and domestic small caps fared worse than the S&P 500 while US REIT’s held up the best amongst the stock indexes. All of the indicated bond indexes held in positive territory for the quarter and if allocated correctly in your portfolio will have provided some short term stability. Counter to most everyone’s predictions, interest rates across the US fixed income markets generally decreased during the third quarter.

For those investors who do not have a long term strategic perspective, these moments can be challenging. They will ask themselves “Why am I invested in stocks?” and “Shouldn’t I change something?”

The answer to the first question is that that stocks, over time, have always provided a significant return above cash, bonds, and inflation. It’s a very simple notion and and the foundation to fall back on for perspective when markets appear to be working against you. The problem with most investors is that the try and fiddle with things based on short term information and have worse returns than the stock markets have offered.

The answer to the second question, “Should I change something?” is that it depends. If you are not well diversified in a global allocation then you might reconsider your strategy. If something has changed in your life or you feel your personal tolerance for risk has changed, that is also a good indicator to further explore your investment strategy.

It really does come down to being mindful of the big picture. If you recognize that your money will be relevant to you and/or your family over the next twenty five years than you should look no further than the WP100 and WP60 portfolios returns “Since First Full Month [09/1990]” with returns of 10.58% and 8.24% respectively, net of all expenses and fees.

Hopefully, this displays the effectiveness of allowing a good financial advisor to stay on task for you. Another way of saying it is that we will just chop carrots so you can enjoy the meal.

about the author: Morgan H. Smith Jr. IMBA CFP®

Morgan Smith Jr. IMBA, CFPMorgan H. Smith Jr. IMBA CFP, who has been a fee-only financial planner for over 12 years, specializes in wealth management for successful families, business owners, retirement plans and institutions requiring a disciplined fiduciary process.

An Assistant Professor at the University of San Diego, Morgan has been a frequent speaker to many professional organizations and has appeared on CNBC, Fox Business New Live and is a founding member of the Strategic Trusted Advisors Roundtable.

Learn More and/or Contact Morgan

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