The Investment Plan – Overall View

By – Donald L. Haisman, CFP®

This is the first in the series of articles outlining what goes into the Haisman Wealth Management Inc. written Investment Plan. You were most likely provided an Investment Plan or similar plan at the beginning of our professional relationship.

As with any investment made in life—a family, a home, a college education, retirement—the best results are achieved by carefully constructing a plan and following that plan consistently over time. A well-crafted investment plan allows the investor and the financial advisor to agree on specific investment goals and the strategies by which to attain those goals.

While each investor’s situation is unique, investment and retirement plans always address certain factors, including the reasons for the investment, the investing horizon and the degree of risk that the investor can comfortably tolerate. A plan will serve to guide us as we work to achieve your long-term financial success.

As a result of the financial crisis of 2008, Haisman Wealth Management, Inc. completed an exhaustive review of our investment selection process and made what we feel are significant improvements.

Our process centers around six steps:

1. Assess your goals and circumstances. The investment plan process began during the Discovery Meeting with a discussion of your financial values and goals, as well as your existing assets, advisors, processes and interests.

2. Set long-term investment objectives. Taking into account the long-term nature of successful investing, we set objectives for your portfolio that are appropriate for your attitude towards risk and investment horizon.

3. Plan the broad asset allocation. Because it is so important, asset allocation is the first investment decision. During this process, we decide for each portfolio, the appropriate proportion between the two broad asset classes of equities (growth investments) and fixed (income investments) based on your risk tolerance.

4. Select asset classes. With your broad asset allocation in place, we now subdivide these broad asset types into major asset classes.

The six major asset classes we consider are:

• Domestic Equity,
• International Equity,
• Commodities,
• U.S./Foreign Currency,
• Fixed Income and
• Cash.

These asset classes are compared to one another via a mathematical method known as relative strength analysis and then ranked from the strongest to weakest.

Relative strength analysis is merely a way of ranking investment options and the premise behind relative strength is very similar to that of ranking your favorite sports teams and athletes. The more your team wins, (i.e. exhibits strength versus an opposing team) the higher its ranking will be in your eyes and eventually that of others as well.

5. Build your initial portfolio. Building on the first four steps, we construct a portfolio suited to your needs, goals, investment horizon and risk attitude. We do this by allocating to the asset classes based upon their relative strength. Asset classes are then dissected further into their component subclasses and the strongest investments in each subclass are selected, again based on relative strength. At each level we apply the relative strength analysis to determine the strongest investments. We continue to “drill down” until we get to the strongest securities based on relative strength and fundamentals. Those securities are then strong candidates for your portfolio.

The building blocks for the portfolio are quality, low cost asset class mutual funds and exchange traded funds. This is an excellent way to achieve a diversified investment portfolio to maximize the probability of achieving your goals.

6. Portfolio review. We next implement an ongoing process of periodically analyzing the major asset classes in order to adapt and change as the markets change. We continually ask the question, “Is your portfolio invested where it needs to be, when it needs to be there, in terms of asset classes, style, sectors and more.” The idea being we want to be purchasing the strongest investments and selling the weakest ones on a regular basis.