Thursday, April 21, 2011

Family Lawyer In Houston Discusses Choosing An Advisor For Retirement

By: Kim Hegwood, Family Lawyer in Houston

The way you have been investing in your retirement account for the last 30 years worked perfectly. Now you have all this cash and the rest of your life ahead of you, but who do you choose to help manage those funds for the next 30 years? A great question, and it may require making a switch.

While your investments were geared for making you money over the long haul, you now need to switch that strategy to help make money in the short term.  As they always say: "While past returns are no indication of future performance", many people try to base their decisions on what kinds of returns were done in the past. For instance, if you had an investor who just went with his gut instinct and you made 30% on your investment -- and you had another investor who knew and understood the markets, guaranteed and produced a 15% return on your investment, which one would you choose?

Well, I would say that it is more important to base your decision on investment managers who really understand what they are trying to accomplish instead of winging it using past performances.

I did some digging, and I turned up the three qualities many of the Ivy League Endowment Fund investors look for in their managers. And if the big boys look for these qualities, it doesn't hurt for individuals to do the same when it comes to picking out a retirement investment manager:

Risk-adjusted returns
These returns must be exceptional. Risk-adjusted returns basically compare the amount of risk used in order to generate the return, which helps investors to compare investments as apples to apples. It is basically like the difference in total score and degree of difficulty in a gymnast's or ice skater's routine.

Investment rationale
Taking a look at not only how a company is doing financially, but what a company is all about, is a big factor in making investment decisions. Investment rationale is the ability to look past the "hype" and figure out if a company will be around and doing strong for a good number of years.

Stickiness
This is where Ivy League investors look at how well investment managers take note of what their clients want and stick to the plan as well as possible. Customer satisfaction is based largely in how well a company sticks to a stated investment style and preference.

Keeping these qualities in mind will help individuals looking to find the perfect retirement investment manager. Your retirement is extremely important, so it is imperative that you find someone who knows what they are doing, are able to explain every step of the way, balance risk and return, look beyond the stats, and keep you in their best interest when making decisions.

Pick several top choices for your investment manager and sit down with them.  Ask them each about their past experiences, but more importantly, ask them how they came to those decisions, because the process matters more than the outcomes.

And I may have a specific idea or two, as well -- so feel free to shoot me an email.

Lastly, email this blog post to a few friends who may be on the lookout for something like this -->

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