Insights + Resources

We’re Off to See the Wizard!

May 30, 2014

“We’re off to see the wizard!” a simple phrase that is universally known. To think, a movie that was released in 1939 still to this day brings great imagination and memories into the hearts of children and adults alike: the legendary film The Wizard of Oz. It was voted a “top 10 movie” of all time and, more importantly, it was my mother’s favorite. She was a big Judy Garland fan and was head-over-heels for musicals. One of the most memorable scenes was when Dorothy exited the door of her house after it had been swept up by the tornado and landed in Munchkin Land. She exited the door, Toto in arm, and immediately the movie turned from black and white to color. It’s a beautifully put together scene and an incredible use of Technicolor, a fairly new film-coloring technology at the time.

What I find interesting to remember is that televisions sets, at the time of The Wizard of Oz’s movie release, were still in black and white. And it wasn’t until about 25 years later, in the mid-60s, that the color television set started to make its way into homes. My point with this reminiscent prologue is that everyone loved black and white television … and then came color. I could bring this same example into more modern times and make a similar comparison between a large, floor-model, 50” picture-tube television set from the 1990s (the size of a small car) and the new, LCD flat-screen 50” TVs that are only a couple of inches thick and hang freely above many of our own fireplaces or in our living rooms. Or how about going from a flip-phone to an iPhone, or any smart phone for that matter? The bottom line is that it’s very easy to be satisfied with something or some way of doing something, until you find out there is a different way, possibly a way that appeals to you more or simply makes more sense given what you now know is available.

What I’m really getting at is an incredibly important question that I think everyone should ask themselves. Here’s the question: How long have you been investing the way you are investing, and is it possible that your investment strategy is out of date? Some might be thinking, “What is my investment strategy?” Or “How did I come about investing the way that I do, or owning the investments that I own?” Here’s a second question: If you have been doing the same thing for quite some time, isn’t it fair to say that the strategy you chose years ago may no longer be appropriate for your now shortened time frame or possibly your later-stage-in-life risk profile?

Times have changed, markets have changed and investments have changed. When was the last time that you made any changes, rebalanced your portfolio or sought out suggestions for newer alternatives? Whether it be investments in your 401(k) plan, your IRA account or your investment accounts held with Fidelity, Vanguard or Charles Schwab, I’ve got news for you: none of those accounts are going to call you to say, “Hey, it’s time to change me!”

More importantly, how do you know if what you own is the most appropriate investment of its kind? Is your portfolio built in the most tax-efficient way to gain exposure to those investments? Are they the most cost-effective investments of their kind? How have your investments performed from a risk-return profile basis when compared to similar investments, and could there be other investments that more suitable? Are there other investments out there that could compliment your current holdings and help to lower your overall portfolio risk?

We can all become a bit complacent at times, especially when it comes to our finances. I’m a self-professed financial geek and sometimes even I can fall victim to putting something off that has to do with the betterment of my family’s finances (refinancing our home was certainly put off a bit longer than I would like to admit). Management of one’s personal finances can bore the heck out of most people. Let’s be honest, no one wakes up clicking their heels because they need to go rectify a household net-worth statement, balance a budget or pull together documents for a financial review with their financial advisor or CPA. I get that.

That brings me to another thought. Some may think that they are all set because they have a financial advisor. Wrong. Not all advisors are created equal. For those folks, I simply ask: How often do you meet with your advisor? Do they conduct regularly scheduled quarterly or semi-annual reviews? Are they proactive in making suggestions to tweak a few things here and there, or have they introduced any new strategies or ideas recently?

There are some outstanding advisors around the Charlotte area, but how do you know yours is one of them? I certainly encourage anyone who feels that their advisor may be asleep at the wheel to seek out a second opinion on the appropriateness of their investments.

Investments, just like TVs and cellphones, have adapted to the needs and demands of the marketplace. They have become more cost-effective, they have become more tax-efficient and, through proper diversification utilizing more modern offerings, one can build a very sound investment strategy and portfolio that is truly customized to their specific needs, time-frame and risk tolerance.

Like Dorothy from The Wizard of Oz, step out of black and white and into color and get a second opinion on how you or someone else is handling the management of your finances. We would welcome the opportunity to be that second opinion.

As Seen in Society Charlotte Magazine, June 2014.  Written by Edward R. Doughty, CFP®.