CHAPTER 2
Putting Your Assets to Work for You
Money is a terrible master, but an excellent servant.
—P.T. Barnum
You work hard all your life to attain your desired lifestyle and to accumulate the assets you will need to maintain that lifestyle. Whether you are in the accumulation (working) or distribution (retirement) phase of your life, the next step in my Smart Money Approach will assure that your money is working at least as hard for you as you did for it.
As I touched on in the previous chapter, I try to bring a new approach to financial planning and to investing before and during retirement. I’ll begin by discussing the old and new approaches, and why I believe my system is best for both retirees and those planning for retirement.
The Old Way: Maximizing Returns Based on Risk Tolerance
Remember Sharon from Chapter 1? Before coming to me, she visited a stockbroker who practiced the old way: He started by having her answer a risk tolerance questionnaire to gauge how much of her principal she was willing to risk losing. Every risk tolerance questionnaire is a little different, but here are a couple of the types of questions you can expect to see:
Imagine if your stock investments lost 30 percent of their total value. Would you:
A. Sell all of your shares
B. Sell some of your shares
C. Do nothing
D. Buy more shares
Consider the following statement: “I am comfortable with volatile investments that have potential for high returns, but which may also experience significant declines ...
