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ALTUS Wealth Solutions
Boing Boing Boing PDF Print E-mail
Written by John D. Buerger, CFP®   
Thursday, 27 May 2010 22:48

John BuergerRemember the old Mazda car commercial touting the Wankel Rotary engine?  The piston engine goes "boing, boing, boing" while the rotary engine goes Hmmmmmmmm.

The same could be said of your investment portfolio - especially if that portfolio is only invested in stocks and bonds (as most portfolios are, sad to say).  Your net worth goes "boing, boing, boing" with the markets while a smarter portfolio (including other asset classes) will produce much smoother and steadier results.

I thought of this commercial while I was reading a technical article in Investment Advisor magazine (March, 2010 issue) about reducing risk in a portfolio by actually adding riskier asset classes.  This is a technique we've used for years and it works well (as long as the asset class being introduced has a low or negative correlation to the rest of the assets in the portfolio).

I got to thinking: why would anyone want a portfolio that goes, "boing, boing, boing?"

The short answer to that question is, "They don't!"  Nobody WANTS their wealth to be on a roller coaster ride ... yet that is the thrust of the main stream investment world - a "Buy stocks" or "Trade stocks" process that has a lot of action but long term has very little direction - as has been the case with the stock market (and likely your portfolio) the past 10 years.

Of course, the stock broker makes money with this process even if you don't.

Inconvenient Truths

The past month in this blog, we've unveiled a number of inconvenient truths.  The "10% Myth" article proves that historically, stock market returns are closer to 7% than the 10% figure mentioned in the media.  "Fat Tails" explains that average is not normal ... a stock market investor is far more likely to see a horribly bad return than an average return.  "Greed Is" points out that greed is neither a good thing nor a bad thing.  It just "IS."

Every one of these myths was foisted upon the public by the investment community and promoted by the financial media.  They aren't lies as much as they are exaggerations.  One stock broker I know says this is no big deal.  "It's just good marketing."  It puts stock market investing in a favorable light and allows brokerage firms to focus on a narrow and simple business model (get all clients to buy/trade stocks - don't worry about those messy alternatives).

"Boing, boing, boing" looks pretty good - at least you're bouncing around and not just laying there.  If all you know about is a piston engine, then you're happy to have one in your car.

"Boing, boing, boing" looks pretty good ... until you see "Hmmmmmmmmm."

Alternatives - Investment Hmmmmmm

What are these investment alternatives?

They range from real estate investment trusts (REITs) to manage futures, options to Forex money exchanges.  There are many different flavors.  Some are simple, others are quite complicated.  Some correlate well with stock prices, others do not correlate at all.

There are a few common traits among the better alternatives:

Most investment advisors don't understand how they work - you need to work with a true professional - and they are commonly demonized by the main stream financial media as "wildly risky" or "too complicated for traditional investors."  I suspect they are too complicated for traditional stock brokers, but that does not mean they are too complicated for you or my clients.

How Risky Is It ... Really?

The article I was reading in Investment Advisor magazine discusses 'managed futures' a term that conjures up heartburn for the uninitiated (but as the article points out "it is typical to fear what we don't know or understand").  The author then goes on to calculate the riskiness of this investment asset class and finds out that managed futures had a much-less-bad worst month (-8.16%) than the S&P 500 (-16.79%).  The worst draw-down period for the managed futures index was a 15% loss over five months versus a 50.95% loss over 17 months (ending in February 2009) for the S&P 500.

So exactly WHICH asset class is too risky for average investors like you?

And yet the main stream financial media (the main marketing arm to all the brokerage houses, wealth managers and investment advisors) makes investing in the stock market seem glamorous and easy ... and makes out alternatives to be risky and unwise.  In fact, most investment professionals are very surprised to see those numbers - it goes against everything we thought we knew (that just wasn't so).

Smart Investor Plus™

My firm offers the "Smart Investor Plus™" strategy for our investment clients.  It starts with a globally diversified portfolio of stocks, bonds, commodities, real estate and cash.  We then overlay that portfolio with an options strategy - selling options to get in and out of each position.  This is a simple (although not intuitive) strategy that improves average rate of return (because you are being paid premiums to sell the options) and greatly decreases the downside risk.

This is a strategy that goes "Hmmmmmmmm" even when the stock market is going "boing, boing. boing."

What's The Catch

When most people hear about this for the first time, they are concerned.  "Options are risky."  True, some kinds of option strategies can be risky.  This isn't one of those.  Once we explain this strategy to most investors, they understand pretty quickly how it is less risky than a traditional "buy and hope" stock portfolio.

Then their only question is, "Why aren't more people doing this?"

I would have to suspect that the reason is the same one plaguing the Wankel rotary engine.  Most people don't know there is an alternative to the piston engine.  It is typical to fear something that you don't understand.  The makers of piston engines have a vested interest in promoting that fear so they can sell more of their products.  The rotary engine is a threat to market share ... and you are none the wiser to being the pawn in their little game.  You keep on buying piston engines because ... well ... that's what everybody else is doing.  The alternative seems risky.

If you want your wealth to go "Boing, boing, boing" for the next 7-10 years, then stick to your piston engine, all-stock portfolio.  If you want your wealth to go "Hmmmmm," it might be time to look into some alternatives.

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Last Updated on Thursday, 27 May 2010 22:52
 

John Buerger

ALTUS Wealth Solutions is an independent Financial Planning and Registered Investment Advisor firm located in San Luis Obispo, California. We are fiduciary advisors who empower successful professionals and entrepreneurs like you to make the best choices possible with your money so you can enjoy more of what is important in life to you.

Our strengths include helping you (a) preserve the wealth you've already worked hard to accumulate, (b) keep more of the money flowing through your fingers every day through proprietary (and fun) cash flow management techniques, (c) grow your wealth through advanced investment management solutions and (d) take control of the college funding process while keeping education costs for your children to a reasonable level.

Life is a Process.  Success in life is achieved through a process.  We believe strongly that financial success comes from the process you use, too ... not by buying products.  If you agree, we invite you to learn more about the ALTUS Planning Process™ and how it can help you enjoy a rich and fulfilling life every day.

Take the first step - learn more about the ALTUS Welath Health Check-Up™.

Welcome - A Personal Note

Welcome to ALTUS Wealth Solutions.  As the founder of this very unique company I wanted to personally thank you for visiting our website.  I would also like to share with you a little bit about what makes our firm different from any other business in financial services.

It Starts with My Story ... But I Bet You Can Relate

I got into financial planning in 2002 to solve my own problems and challenges because I could not find a trusted expert who could or would help me.  I talked with lots of people who I thought should be able to help - stock-brokers, insurance experts and people with an alphabet soup of designations after their names, but all they wanted to do was sell me stuff.

I met with representatives from big-name, well-known firms.  Oddly enough, the answer to all my financial ills was in one or more of their company's products.  I talked with independent advisors ... they had more products to choose from (not just from one company), but still all they had to offer were products.

Products, products, products ... I was never convinced that any of these products were what I really needed to solve my financial challenges or help me build wealth.  

I was looking for solutions.  Everyone in the business was offering me "stuff."  

They would package it up to make it look nice - often presenting each product as an "opportunity" - but it was still just stuff.  Now that I have been on "the other side of the desk" for a few years, I am certain I was NOT the person who made the money on each of those "opportunities" that were presented to me.

Maybe you've had the same experience ... most people have.

For years I have quipped that there is a lot of money to be made in the financial markets.  Unfortunately that money ISN'T made by those people on the client side of the desk.

So in 2002, I started studying and working in the financial planning field - the one area of financial services (other than accounting) that focuses more on the process of creating wealth rather than the peddling of financial products.

I went through hundreds of hours of education and thousands of hours of hands-on experience.  I passed the CFP® exam (10 hours, 2 days, 330 questions - average pass rate is 52%) in 2005 and continue to learn new things every day.

The Creation of ALTUS Wealth Solutions

While I was pretty successful working at other financial planning firms, I felt like there was still something missing ... like there was something more ... that there were ways I could better serve clients and provide them with more value.  What I wanted to see in place required a different business model than anything that had been created so far.

That is why I decided to create ALTUS Wealth Solutions, a Registered Investment Advisor and Fiduciary Financial Planning firm.  As the founder of this firm, I am committed to providing the kind of service and environment that I longed for as a professional, business owner and entrepreneur ... but could never find.

It's All About the Process

ALTUS Wealth Solutions focuses on a process (aptly named the ALTUS Planning Process™) where collaboration is the key and solutions are the objective.  We want to work together with you to create an affordable and lasting relationship between you and a trustworthy fiduciary advisor while giving you the tools, techniques, strategies and unbiased information you need so that YOU can make the best choices with your money every day.

Our goal is to help you achieve your goals, objectives and dreams which can only happen when you are making the best financial decisions possible ... and this has very little to do with buying or selling financial products.

Innovation That Works

The biggest financial challenge facing you is not the economy, not your spouse, not your business's competition or any other factor / reason / excuse you might come up with.  The biggest financial challenge facing you is actually your own brain's hard-wiring.  Human beings have many superior mental capabilities, but we also all come equipped with a number of quirks that get in the way of making good, sound financial decisions.

As such, having a strategy for handling your money is not enough.  If it was that easy, everyone would have a financial plan and be executing on that plan ... and we'd all be enjoying happy lives full of great financial success.  Obviously, we aren't there yet.

At ALTUS Wealth Solutions we focus on constant innovation within the process.

We have already developed industry leading tools to help you manage your cash-flow (the Cash Flow Hydrant™), realize more consistent investment returns (ALTUS Advanced Investment Strategies™) and build a stronger legacy with future generations (Legacy Planning).  We are even on the cutting edge of teaching financial literacy to kids and College Funding Solutions for their parents.  But we're not done ...

As we continue to learn more about behavioral economics (how people actually make financial decisions) we'll keep on innovating to improve the tools and techniques that we make available to you.

Where to Start

The best place to start is at the beginning.  That first step is to get a clear understanding of where you are.

Whether you are a business owner, professional or employee; whether you are just getting started or trying to navigate your senior years and want to be sure you don't run out of money before you run out of life ... your future success depends first and foremost on clarity of your present situation.

Anyone who wants to work with us must start with a Wealth Health Check-Up™.  Learn more about this single-meeting, fee-for-service engagement by clicking on the link or go to http://bit.ly/2eNZpb. Please note that we always offer an Unconditional Risk-Free Money-Back Guarantee - if the service we are providing isn't of value to you, we will gladly refund your fee.

So thanks again for visiting this site.  Feel free to send me an email ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it ) or call me at 805-476-0333 if you have any questions.  I promise to do my best to help you find solutions to your problems ... and I won't try to sell you any "stuff."

Yours truly,

John