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What Trivial Pursuit Can Teach You About Your Money


5 Processes Business Owners Can Automate to Save Time and Money

August 07, 2022

The trivia game that started it all where you challenged your knowledge of various categories to obtain 6 different colored wedges to win the game. Why are the wedges different colors and what is the relevance to your portfolio? Well, each piece of your "pie" represents a different investment that you have, and the different colors are there to help you identify your investments so that you can easily see just how well they are doing and make any changes if needed. In an economy flirting with recession, rampant inflation, and macroeconomic issues influenced by a pandemic, war, and supply constraints, now would be an opportune time to examine ways to reduce financial risk. A suitable place to start to do that is with the allocation of your investment portfolio.

First let us discuss what asset diversification is not. It is not spreading your investments between multiple financial institutions. It is not splitting the "pie" between multiple investment professionals. In both cases, instead of diversifying your portfolio, what you did is potentially set yourself up to pay overlapping fees. In addition, using two different investment professionals that do not coordinate their investment purchases, can lead to the same or similar securities being purchased. This can cause heavy concentrations in similar investments. This is exactly what you were trying to avoid.

The driving factor behind Investment Allocation is to allocate capital in a way that provides you the opportunity to reach your needed return while taking on the least amount of risk possible. For most investors, the best way to accomplish this is as follows:

  • First, determine what your goal or goals are and establish a period to accomplish them. This will help to inform the next step, determining your risk tolerance and asset mix.
  • Your risk tolerance is simply how much volatility you can stand to see in your portfolio when the quarterly statement comes in. Your stomach for volatility, along with the period the assets will be invested, in conjunction with the return need on your investments will determine your target mix of assets.
  • Target mix of assets is another way to say portfolio allocation. Simply stated, it is the percentage of equities, debt, cash, insurance, and alternative investments you want to maintain. (Your advisor can help you design this. Also, a growing number of employers gives access to tools in their retirement plans to help accomplish this)
  • Next, treat all your assets (employer sponsored retirement plans, CDs, IRAs, taxable investment accounts, private placements, etc.) as one large investment pool. Moreover, consideration should be given to how each investment fits into your pool of assets. Of course, if you have assets set aside for a special purpose, like a home purchase, treat them accordingly
  • Mind the tax implications of the accounts in use. Investments like, bonds or bond funds, high turn-over mutual funds generate more taxable income than others. Investments like municipal bonds, certain preferred stocks, and some real estate trust, generate interest & dividends that have preferential tax treatment. Discuss with your credentialed professional about allocating each investment in the most suitable account type.
  • Monitor and rebalance your portfolios. This is a critical and often overlooked part of asset allocation. Like The financial planning process, investing is NOT a onetime transaction, the picking of a mutual fund and walking away. Investing is a process. To get the most out of it you must revisit it regularly and make changes as needed.

Finally, most things in life are out of one's control. However, making sure your investments are allocated properly is not one of them. Take the time to invest in how your allocated and why. Your future self will thank you for it.

If you would like to receive more information on making smart money moves for your future, be sure to contact us today!


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About the author

a man wearing a suit and tie talking on a cell phone

Charles Steele

Vice President, Private CFO®

I'm a Marshall U grad (Go Herd!) with a degree spanning multiple disciplines: Economics, Finance, & Management. Helping small business owners, individuals, and families breathe easier® has been my calling since 2005.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

Background and qualification information is available at FINRA's BrokerCheck website.

* Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC.

+ Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice. Investor Disclosures: https://Bit.ly/KF-Disclosures

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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice. https://Bit.ly/KF-Disclosures

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