Financial Abundance

Financial Abundance, LLC, a Registered Investment Adviser, offers low cost Asset Management services, with a primary focus on asset preservation and growth.

Financial Abundance provides a collaborative approach with our asset management services. Our first step is to develop a comprehensive Investment Policy Statement (IPS), defining the types of investments with which our clients are comfortable, as well as  a percentage asset allocation range for each investment catagory.  The IPS also defines a strategic asset allocation based on our client’s age and risk tolerance.  Since many of our clients are saving for their children’s education or are approaching retirement, capital preservation is a high priority with the Financial Abundance’s asset management approach.

The tactical ranges for each investment class allow us to provide a more comprehensive approach to capital preservation and growth in varying  economic and market conditions.  While the strategic allocation is the ideal asset allocation for “normal” market conditions, the IPS defines the ranges within which we can tactically allocate assets based on changing or uncertain conditions.  In times of uncertain economic and market conditions we may modify individual asset allocations within the ranges defined in the IPS.

Our investment categories include 1) individual stocks and stock based Exchange Traded Funds (ETFs); 2) bonds and bond funds;  3)alternative investments including commodity funds, real estate investment trust (REIT) funds, and foreign currency investment funds and 4) cash investments including money market funds  and CDS.

After the IPS is complete we examine your current asset holdings and provide our recommended changes.  With our collaborative approach to asset management we only begin our implementation after you have approved our recommendations.

These are the types of investments that Financial Abundance considers:

1.    Equities: For the equity portion of your portfolio, we invest in individual stocks and low cost exchange traded funds.

For individual stock investments, we screen stocks, with a market capitalization above $1 billion, to find stocks with very high (A+, A++) financial strength.  Using a value oriented approach, as defined by Benjamin Graham and Warren Buffet, we determine the Owner’s Earnings (OE) of each stock.  We will only consider  stocks that are priced at a discount to their owner’s earnings and that pass other value oriented screens including dividend growth.   We then analyze each stock and choose only those stocks that  have minimal downside and maximum upside potential.

For international investments, as well as small and mid-cap investments, we typically use low cost indexed Exchange Traded Funds (ETFs).  Indexed ETFs have very low operating costs and will typically outperform most actively manage mutual funds over multiple year periods.

2.    Alternative Investments: Alternative investments are typically 10% or less of the total portfolio.   While alternative investments are often riskier than stocks and bonds, when combined with them in a portfolio, they can lower the risk and volatility for the total portfolio.  Our alternative investments include Real Estate Investment Trust (REIT) ETFs and commodity ETFs.  We also invest in foreign currency ETFs when we believe that those currencies will out-perform the US dollar.  With our interactive IPS process, our clients choose which (if any) alternative investments they wish to use.

3.    Fixed Assets: For our fixed asset investments, we typically use actively managed bond funds and indexed ETFs.  We use Treasury Inflation Protected Bond funds, government insured GMNA bond funds and corporate and municipal bond funds whose durations are consistent with current interest rates.  When we expect interest rates to rise we buy only short term bond funds.  When interest rates will likely fall we buy longer term bond funds.  This approach helps us maximize our investment returns while minimizing our downside from interest rate risk.

For clients with larger amounts under management, we may build a municipal bond ladder for their taxable accounts.  Maturities are never more than 10 years.  This strategy is used when interest rates are adequate to support this long term buy and hold strategy.

4.    Cash: Cash investments include money market funds and laddered CDs, when interest rates are expected to decline.

Studies have shown that as much as 90% of investment returns can come from appropriate asset allocation. Our asset allocation approach encompasses our clients total investment portfolio, including 401(k)s, rental properties, investment partnerships etc. For the maximum after tax return, we examine and make recommendations on which assets should be held in taxable, tax deferred or tax free accounts.

A major determinant of total investment return is the amount of fees paid for both fund operating expenses and asset management. Many asset management firms charge between 1% and 1.5% annually to invest assets into mutual funds.  Actively managed mutual funds typically have annual operating and marketing expenses of between 1% and 2.5%. With this asset management approach, the total annual fees are between 2% and 4%  before you receive any investment return.

Financial Abundance charges a maximum of 0.75% annually on accounts with a minimum of $200,000 in assets under management. When we use funds, they are typically low cost ETFs with a maximum fee of 0.25%. Our goal is to keep our client’s maximum total investment fees to less than 1% annually. The less that is paid in investment management fees, the higher your investment return.

If you would like more information on our Asset Management services and approach, please contact us via phone or email.