My clients always ask me how I manage my own money as if it’s a secret that I keep to myself. The thing about money management is that people often feel like no matter how much they learn about the latest techniques and trends, they’re never quite doing it right, that there’s always some better way to save or to invest. 

Well, as a Certified Public Accountant (CPA) and CERTIFIED FINANCIAL PLANNER™ professional who works with wealth management strategies every day, I’m here to tell you that the way I manage my own money is not all that different from how I manage my clients’ money. Here are the three things I focus on the most when investing my own money.

Active vs. Passive Investing

One of the most important aspects of my personal investment plan is the distinction between active and passive investing. At Rosemeyer Management Group, we focus on passive investing because it has generally outperformed active management over the long term. However, there is no guarantee one strategy will outperform the other. (1)

Passive investing utilizes strategies like buy-and-hold or indexing, while active investing involves single-stock investing and frequent buying and selling in an attempt to beat the average returns of the market. As expected, active management comes with added expenses and no guarantees that the returns will be any better than a passively invested portfolio. In fact, active investing often results in worse returns when the increased costs are factored in. (2)

Trying to pick and choose individual stocks has proven to be a losing game many times

and something we encourage clients to avoid. But single stocks are not the only investing strategy that’s actively managed. Many mutual funds also utilize this strategy, and clients might not even realize that they are overpaying for these services when they could achieve the same allocation through a low-cost index fund. Checking out a mutual fund’s turnover rate on Morningstar is a great way to ensure you know how it’s invested and managed.

Diversification

Next, diversification is a critical piece of any investment plan. It can be achieved through an asset allocation strategy that considers which components of your plan can move together and which can act as a hedge against downside risk. Diversification can’t guarantee a minimum level of return, but it will at least act as a buffer against the inherent volatility of the market. By investing across and within several different asset classes, you can reduce your overall exposure to risk. 

While it can be tempting to chase performance and overload a portfolio with the hottest asset class, I prefer to take a more balanced (and diversified) approach when investing my own money. This mindset aligns with how we manage our clients’ funds at Rosemeyer Management Group. Our portfolio options include diversified allocations in:

• Large-cap growth
• Large-cap value
• Mid-cap 
• Small-cap
• Diversified international
• Emerging market
• Fixed income

This provides broad exposure to several different industries, sectors, and asset classes across the market, with the strategy that no single investment can drastically alter the returns of the whole portfolio. If a client comes to us with their own allocation, we feel they should be able to tell us exactly why they are invested that way. Oftentimes clients don’t realize how much unnecessary risk they take on by not properly diversifying their portfolios.

Not All Bonds Are Created Equal

Similarly, clients often don’t realize that traditional “safe” investments like bonds no longer provide the guarantees they used to 40 years ago. In 1982, you could achieve an average yield of 13.01% with a relatively low-risk investment in long-term bonds, but that is no longer the case. (3) As of June 7, 2022, the yield on a 10-year bond is only about 3.31%! (4)

Given the interest-rate environment we find ourselves in, not all bonds are created equal. The Federal Reserve has already raised interest rates twice and they are very likely to continue raising rates throughout the rest of 2022. (5) Because of this, we believe that short-term bond funds are a much better choice for the fixed income portion of an investment portfolio as opposed to longer-term bonds. 

This is because interest rates are inversely related to bond prices, and the longer the bond’s maturity, the more intense this relationship is. So longer-term bonds will likely lose their value much more quickly and intensely as interest rates continue to rise. Paying attention to the duration of a fixed-income investment has never been more important than it is in today’s investment environment.

How We Can Help

Successful money management and investing don’t have to be shrouded in mystery. At Rosemeyer Management Group, our goal is to give our clients the tools and resources they need to feel confident in their financial plans. If you’d like to learn more about our investment philosophy and how it applies to your portfolio, schedule an introductory appointment online or by calling us at 608-348-2274.

Disclosure: Bond prices can fluctuate, like the value of any other investment. Past performance doesn’t guarantee future results.

About Regan

Regan Shipp is an investment advisor representative at Rosemeyer Management Group, an SEC Registered Investment Advisor based in Platteville, WI. Regan is known for building relationships and looking at the whole picture of her clients’ lives to provide personalized, comprehensive wealth management services and advice. She leaves no stone unturned as she integrates investment strategies, risk management strategies, tax planning, retirement planning, and estate planning to design a plan that will help her clients pursue both financial success and freedom throughout their lives. Regan strives to educate her clients so they can feel empowered to take the actions necessary to achieve their goals. Regan is passionate about making a difference in people’s lives and loves journeying with her clients and seeing them reach new levels, surpass goals, and create wealth they might not have known was possible. Regan has a bachelor’s degree in accounting and agricultural business from the University of Wisconsin-Platteville and is a Certified Public Accountant (CPA) and CERTIFIED FINANCIAL PLANNER™ professional.

When she’s not at work, you can often find Regan spending time with her friends and family or out on a run training for a half or full marathon. Regan and her husband, Payton, son, Lincoln, and their dog, Axel, love the outdoors and look forward to more camping, deer hunting, and beach trips. To learn more about Regan, connect with her on LinkedIn.

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(1) https://www.forbes.com/advisor/investing/passive-investing-vs-active-investing/
(2) https://www.forbes.com/advisor/investing/passive-investing-vs-active-investing/
(3) https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart
(4) https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart
(5) https://www.bankrate.com/banking/federal-reserve/how-much-will-fed-raise-rates-in-2022/