Financial planning for
DIY Investors

The foundation of your financial plan is built on spending projections and the strategies to fund that spending. Forming that foundation can initially seem daunting due to the numerous assumptions about future spending needs. We simplify the process by helping you clearly define and prioritize your goals, project the timing and level of spending, and tailor a funding strategy that works for you.

Many of us anticipate spending goals spread over decades, such as college tuition, discretionary spending on "bucket list" activities, living expenses during a sabbatical, basic needs in full retirement, and potential healthcare or long-term care expenses. We assist you in forming realistic assumptions about future spending, specifically how much you’ll spend and when. Based on these assumptions, we project spending cash flows over your goal horizon.  

With a clear projection of your future spending goals, we can help formulate a funding strategy. Funding your projected spending can be achieved in various ways, whether from current income, borrowing, savings, insurance, or a mix of these sources. We can advise on securing the cheapest borrowing and aligning loan terms with your situation, such as borrowing to purchase real estate or to fund education.  We also help develop savings strategies by evaluating savings patterns that align with your projected income. Additionally, we point out savings vehicles with tax incentives and low-cost investment options. For spending contingent on events like the need for long-term care, we might consider insurance solutions, which serve as a form of savings.

This process often requires multiple iterations. We evaluate different spending projections based on various assumptions and consider a range of funding strategies. It is time well spent, as it becomes the foundation of your financial plan.

Our investment approach is guided by the following key principles.

Asset allocation. The first critical investment decision involves allocating your portfolio across major asset classes such as cash, bonds, stocks, and real estate. We recommend an allocation based on the time horizon for your spending goals and your personal preferences. We do not rely on "risk tolerance" surveys, as we believe in adjusting investing behavior to match your risk needs. For spending goals within the next ten years, we evaluate cash, bond funds, and bond ladders. For goals beyond ten years, we expand to include stocks and real estate. We generally favor a global stock allocation for maximum diversification and consider other factors like style and size, provided you are comfortable with the added complexity and committed to the long-term strategy.

Investment selection. With a target asset allocation in place, we typically recommend investing in diversified, low-cost mutual funds or ETFs that passively replicate market indexes. These options offer adequate diversification, low turnover, and low costs. We do not favor actively managed funds or individual stock selection due to the well-documented evidence that most managers cannot outperform market indexes over the long run after accounting for operating expenses and tax impacts.
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Investment management strategy. We work with you to develop an investment strategy that you can adhere to in both normal and turbulent markets. Your behavior during market volatility will likely be the primary factor in your investment outcomes. We generally recommend formalizing an investment policy to maintain a regular discipline for rebalancing (or holding) and to promote rule-based actions that mitigate the negative effects of emotions during volatile financial markets.

To be clear, we do not believe in market timing in any form. Effective market timing requires accurately predicting the market's direction twice in succession: once to leave or enter the market and again to re-enter or leave. We believe this has a very low probability of success and can impose high costs when unsuccessful.

By adhering to these principles, we aim to create a robust investment plan that aligns with your goals and helps you navigate both stable and uncertain market conditions.

Income taxes warrant special attention as it represents a large lifetime expense. Not only is the tax code complex, but it frequently changes through updates to federal and state tax law. Moreover, taxes affect most financial transactions both in the current year and potentially far into the future. For these reasons, we prioritize helping you minimize your tax burden through a comprehensive, lifetime planning approach.

Immediate tax opportunities. First, we raise awareness of adjustments, deductions, and credits that could apply to your situation, starting with clear-cut opportunities that don't rely on assumptions about future income levels or tax rates. These are the lowest-hanging fruit, often easy to overlook.
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Income deferral strategies. Taking a lifetime view, we evaluate opportunities to defer income recognition using vehicles such as IRAs, company 401(k), 403(b), and 457 plans. Crucially, for any income deferrals, we ensure you have a strategy for future income recognition to avoid unwelcome tax surprises down the road.
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Investment tax efficiency. We assess strategies to minimize the tax impact on your investment returns. Guided by your holistic asset allocation, we support decisions on placing investments among taxable, tax-deferred, and tax-free accounts. Additionally, we evaluate strategies for opportunistically realizing gains or losses, commonly known as tax-loss harvesting or gain harvesting. While highlighting the potential benefits, we also counsel on execution risks and whether the benefits justify the effort.

Business tax planning. If you are thinking about starting a business or already own a business, we can evaluate your business plans, establish sound bookkeeping processes, and minimize your tax burden.

By addressing these key areas, we aim to help you effectively manage and reduce your tax expenses, ensuring a more secure financial future.

A holistic risk management discipline is essential to your financial plan. Rather than aiming to eliminate all risks, it focuses on identifying opportunities to reduce risk or to retain and manage risk when appropriate. Your risk appetite will guide the rest of your financial plan, including investments, insurance, and estate planning.

Identifying risk exposures. First, we help identify all forms of risk to your financial strength. These include insurable risks like accidents, morbidity, mortality, and longevity; investment risks such as credit and market risks; information security risks; and plan continuity risks.

Assessing risks and opportunities. After creating an inventory of risk exposures, we assess both potential losses under adverse scenarios and opportunities under extreme yet favorable scenarios. We generally prefer forming and evaluating “what if” scenarios over interpreting probabilistic results from Monte Carlo simulation models. Given our extensive experience in risk management and stochastic analysis, we are cautious about relying on Monte Carlo simulations, especially for multi-decade projections.
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Managing risk. After a thorough assessment of risk exposures, we recommend techniques to manage risk. This involves reducing or eliminating certain risks and retaining or increasing others when the risk/reward balance is favorable. For retained risks, we formulate plans for loss mitigation and recovery under adverse events. We encourage formalizing risk policies to guide behavior and mitigate the effects of emotions during extreme scenarios.
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Continuity planning. Because our clients are hands-on with their finances, we emphasize the importance of continuity plans for managing your finances in the event of incapacity or premature death.

By incorporating these principles, we aim to provide a comprehensive risk management strategy that aligns with your overall financial goals and ensures a secure financial future.

We will consider insurance products to reduce or eliminate insurable risks based on your risk management decisions. We advocate using insurance to mitigate catastrophic losses due to accidents, theft, disease, disability, incapacity, premature death, or personal liability. Except in specific estate planning situations, we generally do not recommend insurance products as investment vehicles for funding savings goals or managing market risks due to their complexity, illiquidity, and hidden fees.

For health insurance, we can help you assess plans offered by your employer or from the Marketplace. If you own a business with a partner or employees, we collaborate with trusted brokers to identify options for group insurance plans.

For property and liability insurance, such as home, auto, and business insurance, we help determine the appropriate coverage amounts and levels of loss sharing, such as deductibles. We recommend re-evaluating product offerings with your insurance agent every 2-3 years.

For long-term insurance needs like life insurance, disability income insurance, or long-term care insurance, we work directly with brokers to find the simplest and most affordable products offered by highly-rated insurance companies. In addition to selecting products, we help determine the proper size and duration of coverage for your needs. We generally do not recommend annuities due to their complexity, high fees, and lack of inflation indexation. If you own any life insurance or annuity policies, we will evaluate their appropriateness for your long-term needs and advise on strategies for managing, replacing, or lapsing the policies.