Family Business: Money Management Lessons, Part III

Kim Kantor

Photo by Lexey Swall, Naples Daily News

Kim Kantor

As an investor you need to focus on what you can control.

Being stressed by such things as daily market fluctuations, for which you have no control, will only hamper your ability to preserve your wealth. In my previous two columns, I addressed several mistakes a successful financially secure investor will avoid, as discussed by James P. Owen, in "The Prudent Investor: The Definitive Guide To Professional Money Management." We will now explore the final three mistakes of the top 10 that investors should avoid:

8. Looking At Relative Performance Only — Traditionally, large institutional managers emphasize relative performance comparing against indexes. While it can be gratifying to learn your portfolio outpaced the S&P 500, it is really quite irrelevant. Generally for those investors who play this game, they only want to play part of the time.

They want to beat the indexes when the market is increasing, but not lose any money when the market tumbles. Unfortunately, it can't be both ways. More important is how well your investment program is doing in relation to your personal goals. Measuring your performance the right way should include reviewing the overall portfolio results against your targeted goals; determining after-tax returns; taking into account inflation and expenses; using the appropriate benchmarks to compare segments of your portfolio; and recognizing the level of risk associated with your returns. In most cases, consistent results are a wiser choice over spectacular performance.

9. Not Knowing When To Fire A Money Manager — Investors generally err in two ways: They fire managers they should keep and they keep managers they should really let go.

Several items that should stimulate serious review of the money manager relationship will include: a change in investment style; the loss of key people in the firm; repeated violations of their investment discipline; back office or severe operational problems; a significant increase or decrease in the assets they manage; or, legal or regulatory problems, to name a few.

Of course, performance can be a valid reason for termination as well. The hiring or firing of a manager should be made after careful exploration and thoughtful deliberation.

10. Not Utilizing A Key Advisor Or Investment Management Consultant — You may wonder how you are supposed to develop an investment plan, create an asset allocation strategy, select managers, monitor and evaluate results and accomplish all the other things the investing of your assets and managing your legacy entails. Successful affluent investors seek knowledgeable investment management consultants.

Understand what such a person can or cannot provide to you. They do not manage your assets; instead they help you create the strategic framework essential for the successful management of your assets.

Don't expect your consultant to guarantee you will always beat the market, or that you won't encounter some reversals along the way. A consultant has no control over the markets.

They can, however, help you avoid big mistakes. Equipped with the right advice, you can make intelligent decisions.

Kim Ciccarelli Kantor is president and founder of Ciccarelli Advisory Services Inc., a family owned and operated firm in Florida and New York, which provides comprehensive financial investment and estate planning services for individuals, families and businesses. Her book is "Preserving Family Wealth & Peace of Mind."

Ciccarelli Advisory Services, Inc. is at 3066 U.S. 41 N., No. 202, Naples, 239-262-6577.

© 2012 marconews.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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