San Diego PREMIER Business & Finance: Invest with a Purpose

Feb Issue 2012 San Diego PREMIER Business & Finance: Invest with a Purpose  Investing doesn’t come with a GPS.

Investing doesn’t come with a GPS. When we first sit down with a prospective client, we want to get to know what makes that client tick. So we will ask the question, “What are you looking for by investing your money?”

At first that seems like a silly question. Usually people tell us, “I just want to make money.” Or we will hear things like, “I want to beat the market averages.” But what we really want to know is why you want to make money. What is the purpose of investing your funds? Is it for living in retirement? Is it to buy a new car? Or a boat? Perhaps the purpose of investing your money is because you are looking to buy a house, or an apartment building.

The answer to that silly little question makes all the difference in the world in how one might go about putting those funds to work. For instance, if the purpose of investing the money is to fund retirement and you are in your 20’s or 30’s with a lot of time to go before needing the money, then a more aggressive approach to those investment dollars might make sense.

If, however, the purpose of the money is to buy a home in the next five years, then it might make more sense to be very conservative with those funds.

If an investor needs money in the next five years for a specific purpose, does it really matter if that investor beats the market average? If you need to make 6% per year for the next 10 years in order to retire comfortably, is beating the Dow Jones Industrial average really the bogey you need? What if you need to average 10% per year for the next 10 years in order to retire comfortably, or to have enough money to buy your dream home? Are you prepared mentally, emotionally and perhaps financially to take on the risk it might require to attempt to meet that goal?

Most everyone with children frets about putting money away for college. That creates another dilemma. You know that you have about 18 years to put money away, certainly enough time to take some risk, but how much risk are you willing to take?

What about the investor who has already made enough money with which to support his or her lifestyle? The purpose of investing for that investor might just be to make enough to keep up with inflation with almost no regard to the market averages. Let’s face it, we all “just want to make money” but investing without knowing the purpose behind it is a little like being lost without some sort of a road map…you can take any street, but it might not get you to your destination.

By Steven R. Wolff, Managing Partner at Wolff, Wiese, Magana

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Wolff Wiese Magana is an Investment Adviser registered with the SEC.  Advisory services are only offered to clients or prospective clients where Wolff Wiese Magana and its representatives are properly licensed or exempt from licensure.  This editorial is solely for informational purposes.  No advice may be rendered unless a client service agreement is in place.


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