Know What You Own and Why You Own It

Why “Know What You Own and Why You Own It”?

As it pertains to your investment strategy, it can be comforting to know why you own a given investment during times of high market volatility. You will be more likely to hold onto an asset through a turbulent time in the markets because you understand what role that asset plays in your planning and investment strategy.

For example, let’s say you’re in a consumer staples fund (toothpaste, toilet paper, etc.) during a turbulent time in the markets. If you know that consumer staples are something that people buy in good times and bad, you’ll be able to weather a drop in the markets with less anxiety.

This same idea applies to investments and debt not managed directly by your financial advisors. For example, why do you carry a student loan when it might be better to pay it off? Know why you own your home, or maybe a second home, why you have financed them in the way you have, and so on.

What Might Someone Own and Not Need to Own?

Sometimes someone may hold many different investment funds chosen without a clear understanding of their nature and the role they play in their overall investment strategy. As an example, maybe someone owns shares in ten different mutual funds, and upon deeper analysis, two or more of these funds hold the same underlying investments. Where someone thought they had diversification, they may in fact be lacking diversification. In this case, they would keep the best fund and then buy shares in other funds that provide the missing diversification.

What Might Someone Not Own that Would be Good to Own?

This will depend on each person. Some questions we might ask would be, do you own something in the international or emerging markets? Do you own a specific kind of bond fund? Do you hold investments that will better cope with inflation?

This concept can be extended to risk mitigation (insurance products), such as a term-life or variable or universal life insurance, medical, dental, etc.

In Closing

We discover what’s appropriate to own and why by going through the planning, strategy and tactics process, as well as through our proprietary “sleeves and arms” investment process. After these processes we know what we own and why we own it. There is comfort in the planning and investment process.

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About the Author
Todd Frank, President & CEO, Frank Financial Advisors in San DiegoTodd E. Frank, CPA/PFS, MBA is the President and CEO of Frank Financial Advisors, a Registered Investment Advisory Firm (RIA) serving clients nationwide from our headquarters in Carlsbad, San Diego, California. As an RIA, Frank Financial Advisors is able to offer truly independent, fee-only financial advisory services.