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Wealth Management Simplified

How to Run Your Investment Portfolio Like a Business

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What Our Clients Are Saying

The service provided by Tumwater has met all of my needs.

Jack C, 6/17/2021 

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Tumwater has been a great resource for financial planning for my future and eventually my retirement. I’ve worked with Ben to find the right balance of investments that suit my long-term saving goals. I also have appreciated Ben’s help with other savings goals, whether it’s regarding an emergency savings fund, or saving for a specific purchase. He is always willing to answer my questions and explain the rationale behind investment moves. He also reviewed my 401(k) plan which was very helpful!

Brooke W, 6/16/2021 

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Tumwater allows us to enjoy our retirement.

Paul M, 6/17/2021 

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Tumwater has helped to make us feel financially secure over the long run because of the sensible investment strategies Ben has employed for us.

Cherie and Jim C, 6/17/2021

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Tumwater has helped my family think about our financial future– but in a uniquely holistic way.
I really value being able to ask for Ben’s advice on any financial topic, be it immediately related to our investment planning or not.
Ben sees and understands how the big picture impacts the tactical decisions he helps you make.

Matthew M, 6/17/2021 
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Through Ben’s guidance for over 10 years he has us brought to a comfortable financial position heading into retirement.

Nic C, 6/16/2021 

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They have helped me feel safe with my financial future and provided me a valuable resource to come to with any questions about financial decisions and planning.

Jack C, 6/17/2021 

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I find the entire staff consistently responsive. This is significant for me. Once I recognize I need information, it is helpful to receive that information quickly.

Jenni Y, 6/17/2021 

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I have complete trust in Tumwater, they alleviate a huge burden of stress in my life.

Jenni Y, 6/17/2021 

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[I] sleep well at night knowing Ben and his team are taking care of our investments.

Kealy B, 6/16/2021 

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You have been a valuable resource for others in our family. You have gained our trust and respect and this is very important at our stage in life!

Cherie and Jim C, 6/17/2021 

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Tumwater has given me a place to have my money managed, to allow the money to work for us, thereby increasing in value every day. Tumwater invests the money into funds that grow, watches those funds to stay [diversified]. You hire a Financial Advisor to focus on increasing the value of your saved money. This allows you to focus on your own profession to succeed. The money invested then grows and is there for life’s big bills, college for youngsters, retirement, etc.

Paul M, 6/17/2021 

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Tumwater provides a thorough explanation of my assets and how best to meet my needs.

Ruth M, 6/17/2021 

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We have 100% confidence that you know what you are doing which is so much more that most professionals who call themselves a financial advisor.

Kealy B, 6/16/2021 

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My first contact with Ben occurred when he was the Financial Advisor for my former employer… The first one-on-one meeting we held to discuss my financial future
was a total wakeup call (Yes, there were tears). He laid out an honest appraisal of my current financial situation and what I needed to do differently to move positively
toward a reasonably comfortable retirement. I took his sound advice to heart. Last year, I was unexpectedly laid off and that led to my decision to retire at the age of 70. I reached out to Ben and he immediately set up a time to talk about the best options for my 401K. A plan to roll the funds into an IRA was set in place and implemented by Ben and his co worker, Jackson. I am confident that Ben has my best interest at heart.
Communication is never an issue—I always know I will receive honest, appropriate guidance.

Patricia A, 6/17/2021 

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How to Run Your Investment Portfolio Like a Business

Posted on:
July 31, 2020

The smartest business owners I know seem to approach business with two distinct, almost opposite mindsets.

In the first place, they push extremely hard to grow their businesses. They take meaningful risks to grow their market share, enter new markets, and to pivot toward new opportunities. They invest in the growth of their people paying for training and further education, they invest in the infrastructure and technology tools of their business to be able maximize each person’s productivity.

In short, they spend a tremendous amount of time, energy, and money on aggressively growing.

But what I’ve noticed is the smartest of them offset that aggressive mentality by holding large amounts of cash to weather economic storms. They war game and scenario test in order to have a game plan to survive and thrive through the bad times as well. Only a novice believes the good times are permanent. The economy ebbs and flows and the best business owners plan for both sides of that coin.

What’s interesting to me about that is how similar it is to what we believe is the most intelligent way to structure your investment portfolio.

We want to build portfolios that maximize our chances for growth over the long term. We accept the risks of the stock market knowing it has historically provided much higher rates of return than more conservative investments. We believe in general, that any investment money that will not be needed for spending within the next 5-10 years is often best invested in a thoroughly diversified portfolio of stocks.

If you think through that it could mean a 55 year old, planning to retire in ten years, may very well have 100% of their portfolio in stocks. Many people in our industry would say that’s too aggressive.

But we offset that aggressive mentality by insisting that any investment money that will be needed for spending in the next 5-10 years should stay as far away from the stock market as possible.

If you think about the investment world as a spectrum of risk and return, our strategy would look like a barbell. All the long term dollars (not needed in the next 5-10 years) would be invested on the far end of the risk/return spectrum while all the short term dollars (those needed in the next 5-10 years) would be clustered on the extreme opposite end of the spectrum where we hold nothing but short term, very high quality bonds and cash.

This way we’re capturing as much return as possible with the dollars that have the time horizon to weather market storms and taking as little risk as possible with those dollars we need to be sure will be there and intact in the short term.

Many advisors portfolios try to straddle the fence in this regard. They get complaints from their clients that their safe money isn’t earning enough (or any) return so they push the dollars that need to be safe and stable toward the middle of that risk/return spectrum. They take on more risk with those in an attempt to earn a higher rate of return. In the business, that’s called “Chasing Yield”.

They might do that by holding more aggressive bonds. But remember, buying bonds is just lending money. More aggressive bonds are just lending money to folks (companies, municipalities, governments, etc.) that have a poorer track record of repaying their loans and/or lending the money for a longer time. With interest rates at or near all time lows how eager should we be today to lock those terrible rates in for a long time? So those don’t really sound like good options do they?

Or they may get complaints from their clients that their long term money is too “risky” so they push those dollars toward the middle as well. They try to find a way to reduce the risk, even of the long term money, without reducing the returns too much.

They might do this by holding bonds that are convertible into stocks, or “market-linked” CDs, or equity indexed annuities, or preferred stocks. All of which are simply an attempt to earn stock-like returns with bond-like risk.

Think about that.

If it was possible to get stock like returns with bond like risk why would anyone ever hold stocks at all?

My opinion, for what it’s worth, is that those investment options are generally just cleverly packaged ways for Wall St. to get Main St. to part with their money.

Smart investors, just like smart business owners realize that having a big stash of cash allows them to be aggressive throughout the rest of their business. They don’t try to predict the future by being conservative just before the economy slows and aggressive just before it picks back up again. They realize no one can reliably predict those moments with any consistency.

They simply build a strategy that is aggressive where its appropriate and have a big war chest to get through the bad times. Your portfolio should do the same.

Disclosure:

Tumwater Wealth Management is a registered investment adviser and may only conduct business in states where it is registered or exempt. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

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