We begin by ensuring adequate provision for necessities, including prudent reserves with protection against common risks. We set objectives for socioeconomic security, major expenditures, enhanced income, tax shelter, and other common purposes. We make specific, measurable, action-oriented, reasonable, and time bound goals. We measure risk-adjusted return for each opportunity utilizing time value of money calculations integrating modern portfolio concepts. We carefully assess potential return and probable risk, estimating life expectancy and business cycles, calculating income taxation, and consider other socioeconomic decisions linked to specific projects consistent with stated goals. We implement our plan trading cash for a series of suitable projects. We continue measuring attitudes, behaviors, outcomes, correlating funding projects working together, and make corrective decisions as required.
Intuitive investing is possible for the individual and institutional investor who has weathered stormy seasons while sailing through to safe harbors. Yet, the seasoned capitalist with compassion for people aligns with evidence that supports planning (Gitman, Joehnk, & Smart, 2011, p.11). Gitman, Joehnk, & Smart suggested following a proven approach by meeting prerequisites, establishing goals, adopting a plan, evaluating opportunities, selecting suitable investments, constructing a diversified portfolio, and managing the portfolio.
Gitman, L.J., Joehnk, D. J., and Smart, S.B. (2011). Fundamentals of Investing (Eleventh Edition). Boston, MA: Prentice Hall.
One approach to financial planning, investing, and portfolio management involves strategic asset allocation. Chen (2020) inferred strategic asset allocation is presetting targets based on investment policy then re-balancing assets as deviation occurs beyond initial ranges over a significant period. Surveys attempt to assess investor confidence with essential risk and return scenarios (Bryant, 2020). Bryant affirms this investing approach based on a plan. That commentary remains congruent with previous research. Graham, Smart, & Megginson (2010, p.692) affirmed balancing short-term cash management with long-term equity and fixed income positions. The risk-averse U.S. investor generally has a conservative-to-aggressive tolerance to financial uncertainty. To accurately discern strategic asset allocation that is tailored for an investor requires qualitative and quantitative tools – intuition with math.
Employing computer-based algorithms and processes is part of modern finance. Without significant limitations, robots cannot assess appropriate financial strategies or investments tailored for a human being. This involves art and science. Humans and robots both have limitations. “Robo-advisors can’t take your long-term lifestyle goals into account and a successful investment strategy always aligns with those goals” (Jansen, 2018). Jansen concurred with the U.S. Securities and Exchange Commission (SEC). Robots, or more accurately named “Internet Investment Advisers” provide interactive questions and answers through a website where computer-based algorithm processes analyze transmit investment advice to the investor by electronic media (SEC, 2003).
SEC opinion concurs with long-term financial practice. The risk-averse U.S. investor is best served by working with a registered investment adviser who is a human being employing computer-based algorithm processes for personal financial analysis with communication service leadership through electronic and other media. This hybrid model of investors working with the registered investment adviser who employ computers to help with analysis, automation, and processing is the best approach for people experiencing financial independence and helping people become financially independent.
Bryant, J.C. (2020 August 20). Investing is a Process. Retrieved from https://tinyurl.com/y5b9v987
Chen, J. (2020 June 11). Strategic Asset Allocation. Investopedia. Retrieved from https://tinyurl.com/y5ujc6x8
Graham, J.R., Smart, S.B. and Megginson, W.L. (2010). Corporate Finance, 3rd Edition. Mason, OH: South-Western Cengage Learning.
Jansen, E. (2018 June 5). When a Robo-Advisor is, or Isn’t, the Right Choice. CNBC LLC. Retrieved from https://tinyurl.com/y8lljk8z
U.S. Securities and Exchange Commission. (2003 January 20). Final Rule: Exemption for Certain Investment Advisers Operating Through the Internet. Retrieved from https://tinyurl.com/y6bvgoox