Time is What Matters

When discussing financial objectives, much of the historical method of risk planning relies on determining what you want (objectives) and then uses a generic set of questions to help calculate the investor’s tolerance for risk. IndiWealth does it differently. We believe that time is the most important factor when discussing asset allocation. A mission without a deadline is only a dream. 

As an example, there are two sets of investors that have the exact same risk tolerance score but their objectives and time horizon are extremely different: 

• Investor A is 35 years old and saving for retirement at 55
• Investor B is 65 years old and is looking to use a portion of their funds for a down payment on a vacation home in the next 6 months. 

A questionnaire may give these individuals the same score and won’t take the vastly different objectives into consideration. Investing based only on the risk tolerance is incomplete. Asset selection needs to consider the timeframe to achieve an objective. 

At IndiWealth, we focus on time-based objectives. To properly allocate assets, we work with our clients to assess near term goals (recurring expenses and goals within one year), intermediate term goals (1-5 year timeframe) and long term goals (5 years and beyond). Establishing a time frame with the objective allows us to transfer that dream into an attainable goal and set a tailored plan to achieve it.

Once we have established the timeframes, assets are selected based on their appropriate use to achieve the objectives. For short term goals, the focus is capital preservation. For intermediate goals, a blend of lower volatility stocks, bonds, and alternatives are used to eventually replenish short term funds and provide for planned expenses. For long term goals, IndiWealth focuses on a mix of assets that generally have higher growth but may display higher volatility – primarily stocks due to their long term growth characteristics. 

This doesn’t mean risk measurement is obsolete. Understanding an investor’s tolerance and ability for risk does provide a general framework and how assets should be discussed. Questionnaires, and simple formulas based on the answers, should not be relied upon as the sole source of information. When we discuss comprehensive financial planning, the time horizon of the various missions is often the more critical aspect to proper asset allocation. 

In summary, IndiWealth incorporates time based assessments into each mission strategy. By understanding the various needs, and the time required to achieve them, we can focus asset allocation to appropriate levels of risk for the objective. Whether that is cash management strategies for asset preservation on near term goals and recurring expenses, or growth strategies for legacy planning and charitable giving, IndiWealth will understand the mission and create a strategy that fits the need. Because your time matters.