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Sailing Your Way to Better Investments


Paper boats

Every year my wife and I rent a cottage on Keuka Lake. It's a beautiful place. We spend a week relaxing in the sun, reading, resting, and enjoying the view.

Last year, while sitting on the porch, I was struck with a brilliant idea; I should rent a sailboat! I was however surprised at my wife’s response after sharing my new vision and passion with her. I didn’t know you knew how to sail, she said.

I wasn’t sure where she was going with this line of thinking. Of course I didn’t know how to sail, I’m from Cheektowaga, NY. But how hard could it be?

After all, I was good at lots of other things. And I could see all the other people sailing around the lake without any problems. What could be so hard about this? All I needed was to rent a boat and we would be on our way.

But my wife was not convinced. "I’m not getting in a sailboat with you", she said, "and I don’t think you should either. You’re going to get stranded in the middle of the lake."

I couldn’t believe what I was hearing. The lake wasn’t that big I told her. You know I can swim, right? Of course I will watch some YouTube videos and learn the basics before we head out. You understand that, don’t you?

But the more I explained, the more determined she became. Eventually, for the sake of the marriage, even though I knew I was right, I let go of my newfound passion and resigned myself to reading a book on the porch.

The next day, I happened to run into my neighbor. We said hello and got to talking.

I explained to him how I was stranded on shore because my overly cautious wife wouldn't let me rent a sailboat. If it weren’t for her I told him, I would be sailing up and down the lake right this minute.

He smiled knowingly and offered to take me for a ride in his sailboat and I happily agreed.

I’m sure you know what happened next.

I quickly discovered that sailing is much more complicated than I expected. Learning to sail takes time, patience, and experience.

Watching a couple of YouTube videos might be a good starting place, but it will not make you a competent sailor. In fact, those videos were more likely to leave me stranded in the middle of the lake with no way back.

What I learned last summer is that the best way to learn to sail, was by spending time practicing under the guidance of an experienced sailor. I know you’re probably not surprised.

But would you be surprised to learn that it works the same way with investing? I know some of you are skeptical. But did you know there is research that identifies and measures the value of working with a financial advisor? It’s true.

There are quite a number of ways you can benefit from working with a financial advisor. They can help with portfolio construction, wealth management and behavioral coaching. And all of these services add significant value.

In fact, Vanguard research shows that your advisor not only adds to your financial confidence, but can potentially increase about 3 percentage points of value to net portfolio returns over time.You can read more about this by clicking here.

Research conducted by Financial Engines also supports this idea. They found that those who worked with an advisor outperformed those who didn’t by 1.86% per annum. This was after the fees charged by the advisors. Click here for more information.

The Investment Funds Institute of Canada found that investors who used financial advisors had a better chance of:

  • Accumulating greater wealth through better savings behavior
  • Building towards a more comfortable retirement
  • Protecting against poor financial decisions
  • Avoiding emotional investing habits.

They went on to say that, “These benefits show themselves in a number of ways, including having a greater sense of control of one’s finances, and the peace of mind that comes from greater confidence in the future.” Click here for more information.

So yes, there is a cost to hiring an investment advisor. But the research shows that the benefits outweigh the costs.

Another thing to consider is that there is a cost to not hiring a financial advisor.

In its 2016 Quantitative Analysis Of Investor Behavior, Dalbar found that the average mutual fund investor underperformed the S&P 500 by a margin of 3.66%.

They also found that while the broader market made incremental gains of 1.38%, the average equity investor suffered a more-than-incremental loss of -2.28%. Click here for more information.

The evidence is compelling.

If you're not certain you're up to the task of managing your own Investment Portfolio, it’s likely an advisor could add value in a variety of ways.

And if you are convinced you can handle your investments on your own, you might want to re-read my sailing story.

And by the way honey, I apologize. It turns out you were right!

 

If you would like some help…

Peter Hafner is the founder and President of the Hafner Financial Group,a Buffalo, NY based Financial Planning and Investment Advisory firm that specializes in helping middle class families throughout the United States plan and execute successful and happy retirements.

Click here to get a copy of 6 Steps to Your Dream Retirement.

 

If you would like to learn more about how the Hafner Financial Group could help you, please visit our website at HafnerFinancial.com. Or you could send us an email at info@HafnerFinancial.com, or call us at 716–650–4151.

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