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INVESTOR I.Q.

We believe that an educated and informed investor is more likely to attain their personal and financial goals and experience less stress, anxiety and attain greater peace of mind.   These 17 Must Answer Questions are imperative to attaining a satisfying and fulfilling investment experience.  To assess your INVESTOR I.Q. answer the following about your investments.  To get a ‘Yes” answer to these questions your answer must be 100% Yes, otherwise you’ll have to answer it as No.

1.  Are you invested in the Market? 
This is really straight forward, are you invested in the market? Meaning, do you have stocks, equities, or do you have at least equity-based mutual funds? Most people easily get a “yes” to this question, because most people today have some money in the market whether it's in their 401K, their pension plan, or their personal investments.

2.  Do you know how markets work? 
I talk to investors all the time, and they have money in the market, but then when it comes to understanding the underlying dynamics of how the market works, they don’t know.  It can be very disconcerting to have a portion of your wealth invested in a way that you don’t really understand.

3.  Have you defined your Investment Philosophy? 
There are basically two investment philosophies. One is that markets work. That through the process of supply and demand, the market sets a price that’s impossible for any one individual to consistently predict or forecast what's going to happen next.  That is the basic philosophy and foundation for the free enterprise system in America today.  The second is that markets fail. That markets consistently and predictably mis-price things and that there’s one brilliant individual, or brilliant committee, that can tell you what the real price is.  That is the basic premise that was developed by Carl Marx, and the basic premise that Socialism was built on.

4.  Have you identified your personal risk tolerance? 
Do you have an academic number and consciously made a decision of how much and what type of risk you want in your portfolio.

5.  Do you know how to measure diversification in your portfolio? 
Do you have a specific number that you can identify that tells you how well, or how poorly, you’re diversified?

6.  Do you consistently and predictably achieve market returns?  
To be able to answer “yes” to this question, means that you have to know historically over the last 80 years, what market rates of return have actually been. These are the benchmarks that you want to look at as you build your portfolio going forward, because most people don’t know what historically markets have done, they have no idea whether they consistently achieve market returns, or dramatically under perform.

7.  Have you measured the total amount of commissions and costs in your portfolio?
Many of those costs can be hidden. Bid/ask spread…trading commissions…and other fees…

8.  Do you know where you fall on the Markowitz Efficient Frontier? 
Markowitz who won the Nobel Prize in 1990, determined that once you build a portfolio you can actually identify how much volatility a portfolio has based on historic rates of return, and then you could use modern statistics and analysis to create a portfolio that has a maximum expected return for any level of risk.  It's critical to be a successful investor, to know where you fall, so that you can look at what rates of return you're getting, for what risk you're taking.

9.  When it comes to building your investment portfolio, do you know exactly what you are doing and why?
It can be very disconcerting and frustrating to an investor to fail to understand the underlying dynamics of their portfolio and for what purpose it’s intended.

10.  Are you working with a financial coach versus a financial planner? 
A financial coach focuses you on helping to answer these ‘must-answer’ questions that we're talking about today, and help solve the chronic problems that commission-based brokers, and commission-based financial planners create. 

11.  Do you have a customized lifelong game plan to guide all of your investing and spending decisions?
What it is, is a way of looking at what all the things that are valuable to you, all of your life goals, all of your assets, and actually planning out what you want to do with your life and with your money.

12.  Do you have an Investment Policy Statement?
A written policy defining your investment philosophy.

13.  Have you devised a clear-cut method for measuring the success or failure of your portfolio?
Where is your measurement tool to know if your portfolio is actually doing what it's supposed to do?

14.  Do you fully understand the implications and applications of diversification in your portfolio?
Merely owning a bunch of stuff doesn’t assure proper diversification, or for that matter diversification at all.

15.  Do you have a system to measure portfolio volatility?
Such as Standard Deviation.

16. Are you aware of the incentives brokerage firms and the financial community have when selling commission-based products?
The large financial Institutions have a vested interest to get investors to trade more than they should...to generate commissions.

17.  Do you know the three warning signs that you are gambling and speculating with your money versus prudently investing it?
It's very difficult for most people to know if they're speculating, or if they're prudently investing, because they have no way to distinguish those two activities, especially when so much of the world leads you to believe you're prudently investing, when in reality all you're doing is gambling with your money.

Our job as your Financial Coach is to educate and assist you in understanding and answering each of the above 17 Must Answer Questions which will enable you to achieve greater Peace of Mind about your family’s financial future and significantly increase attainment of your financial goals.

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