Keep human capital diverse from financial capital

by | Oct 28, 2019

“My interest is in the future because I am going to spend the rest of my life there.”

– Anonymous

As financial advisors your role is critical to the success your clients seek. 

Investing for future needs is the biggest challenge faced by investors and their advisors. In order to retire at 65, today’s millennial needs to save approximately one-half of each paycheck.  That seems a very difficult goal to achieve in today’s environment.

What are some of the components of sound financial advice advisors should be conveying to their clients?  

  1. Most important is to avoid disaster and keep human capital diverse from financial capital.  I mention this because of the Enron debacle and many like it.   Many investors had not only a significant portion of their financial capital exposed to Enron’s stock, but also were employees of Enron which proved to be ruinous to their human capital as well.  A double whammy that caused the financial ruin of many.
  2. Next it is important to reduce the risk or volatility by using non-correlated assets in constructing portfolios.  All asset classes have unique risk and return factors.  Maximizing expected returns and minimizing volatility through a diversified portfolio can enhance returns.   Reduced volatility results in better long-term investment results.
  3. Finally, be conscious of the money illusion that fails to incorporate the effects of inflation on long term goals.  Even though inflation is currently well contained, ignoring the erosive effects it can have on future assets and liabilities will cause future needs to be grossly underestimated.

Planning and investing for the future require skill, discipline, process and a realization of risks that are ever present in an investment market where the future may not look like the past.

As you consider the information provided with the Salt Creek Investors Asset Allocation Platform (the “Program”), please review the following:

The information and descriptions provided about the Program are for educational and information purposes only and should not be used or construed as investment advice, an offer to sell, a solicitation of an offer to buy, a recommendation for any security, or suggest any course of action. LaSalle St. Investment Advisers (“LSIA”) does not guarantee that the information or descriptions supplied about the Program are complete or timely. LSIA makes no warranty with regard to any results obtained from the Program or its deployment. LSIA is not responsible for any direct or incidental loss incurred by relying on information provided about the Program. The allocations presented herein are illustrations and completely hypothetical. None reflect actual investments or investment results and do not reflect allocation of any individual portfolio. Asset allocation and its results vary over time. Other allocations or asset investment categories not offered in the Program may have characteristics similar or superior to those illustrated. Past performance of any model or allocation is no prediction of future results. Neither the Program nor any system/model can predict the future of any market or price movement in a market. Diversification and asset allocation do not guarantee against the risk of investment loss, including risk of loss of principal. Information provided regarding the Program is as of the date of publication and may change at any time without notice. Information has been included which was obtained from third parties and is believed to be reliable and complete. LSIA does not warrant the accuracy or completeness of such information. LSIA is a registered investment advisor and does not provide tax, accounting or legal advice ‒ the information and/or descriptions provided do not constitute such advice. More information regarding LSIA and its investment strategies can be found in the LSIA brochure, ADV Part II, which is available online or through LSIA. Asset allocation may not be suitable for all investors. Before deciding to invest, potential participants should consult with an investment adviser to determine an appropriate investment strategy and methodology which meets the investor’s specific financial needs, objectives, goals, time horizons and risk tolerance. The information and description provided herein has been made without consideration of any investor’s particular suitability for investing in the Program. Asset allocation also involves investment in various asset classes which are not insured by the government. Investing in fixed income and/or high yield securities involves additional concerns including interest rate risk, credit risk and reinvestment rate risk. Investing in securities outside the United States may entail greater risk than investing in domestic U. S. markets. These risks typically include political and economic uncertainty of foreign countries as well as currency exchange fluctuations, including foreign currency exchange rates, political risks, different methods of accounting, financial reporting and foreign taxes. The prospectus accompanying a security should carefully be reviewed before investing. The services described herein are available to persons residing in any state where they would otherwise be contrary to local law or regulation.


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