Investing with Optimism

Optimism

Investing with Optimism

2020 has been a volatile year for the stock market. Volatile means sharp moves downward as well as sharp moves upward. We’ve seen historic swings in both directions, and these swings make people nervous.

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Some people react in these situations and let their emotions dictate their portfolios by moving into cash. However, successful investors like Warren Buffett, also known as the Oracle of Omaha, consistently rely on one trait to navigate nerve-wracking times. The simple trait: optimism.

This optimism refers to the belief that things will get better and that companies will bounce back. As seen during the 2008 financial crisis, Buffett invested in many companies like Mars, Goldman Sachs, BNSF Railroad, and others when people were frozen with fear. These investments through Buffet’s company, Berkshire Hathaway, proved successful since 2008 because we witnessed multiple years of economic growth. Buffett didn’t let the world’s fear during the Great Recession freeze him from investing for a long-term horizon — a time horizon that saw the Great Recession as a buying opportunity.

Buffett

As of writing, Buffett’s net worth is around $70 billion, and he has gained his fortune by investing in companies. Instead of earning a “hedge fund shark” persona, similar to figures like Gordon Gecko from the movie, Wall Street, Buffett comes across like a goofy grandpa. You can’t imagine him saying Gecko’s famous phrase, “greed is good,” since Buffet’s one of the founders of The Giving Pledge movement, which encourages billionaires to give substantial sums of their net worths to charities.

Don’t just take my word for it. Read this summary on how Buffett’s mind works. The data researcher analyzed the ratio of positive to negative words in Buffett’s annual letters to Berkshire Hathaway shareholders.

Another illustration of Buffett’s positive mindset:

▶︎ “Your success didn’t create your optimism; your optimism led to your success.” A quote about Buffet written by Melinda Gates in her foundation’s annual letter

The Connection Between Investing and Optimism

We invest our hard-earned money so it can grow over time. If we weren’t optimistic about our money growing, then why invest in the first place? You already have this optimism when it comes to investing! 

Let me explain my own personal investment philosophy, which I use to help clients.

▶︎ A larger and stronger middle class benefits everyone: people, companies, and your investments. I believe large numbers of poverty-stricken populations in the United States and around the world will become middle-class citizens. For example, in China, we see a migration of agricultural populations abandoning their traditional lives to adopt an urban way of living. These new city dwellers become middle-class citizens by working as entrepreneurs or for other businesses, buying condos, and shopping at grocery stores to support their new lives. This new shopping behavior in turn creates more profits for the companies selling goods and services to these populations. The many companies selling to these consumers are represented on the financial markets. These companies earn more money over time by selling more goods to populations no longer living in poverty. As a result, more revenues for publicly traded companies typically means higher valuations for their stock. To summarize, more people buying stuff means publicly traded companies become more valuable.

Fun Fact: Bill and Melinda Gates mentioned that the world’s population in extreme poverty has been cut by 50% since 1990 in their 2017 annual letter

Have Hope in Uncertainty

We position our portfolios to reflect that this worldwide progress will be the long-term philosophy for our investments and the wealth of the world. Yet that progress won’t be a straight line up. Market corrections and challenges will occasionally make us all nervous. One of the only guarantees we can give is that markets will be scary at times.

However, we encourage you to think like Warren Buffett and adopt optimism for your investments. This hope during uncertain times can help you stay the course and navigate the scary times with a more positive mindset.


This article gives you a glimpse of the “Create an Investment Plan” module from FPFoCo Academy. Access these personal finance modules by becoming a client.

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Head to our Comprehensive Services page to learn more about what we do for our clients.

Dan Andrews
dan@fpfoco.com

Dan Andrews is a CERTIFIED FINANCIAL PLANNER™ professional, Accredited Estate Planner® designee, and Chartered Advisor in Philanthropy® as well as the Director of Estate and Financial Planning at Financial Planning Fort Collins. Helping clients since 2012, Dan aims to make the financial planning process less daunting. Even though he also has extensive knowledge in estate planning, Dan enjoys financial planning with a professional yet light-hearted approach. To learn more about Dan, read his blogs or the articles he’s been featured in.



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ANNUAL FEE
Assets Under Management Fee as a % of AUM
$100,000 - $249,999 1.00%
$250,000 - $499,999 0.90%
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$1,000,000 - $1,999,999 0.65%
$2,000,000 or more 0.50%

inStream proactive financial planning as a stand-alone service: $1,000/year or $100/month
MINIMUM ACCOUNT SIZE
There is a minimum initial investment of $100,000 per Strategy:FOCO client household. This minimum can be met via transfer of existing accounts or with new funds. A client household may generally include accounts for a head of household, a significant other, dependents, and any controlled organizations or entities.

Minimums do not apply to inStream proactive financial planning as a stand-alone service.
ANNUAL FEE
Assets Under Management Fee as a % of AUM
$100,000 - $249,999 1.00%
$250,000 - $499,999 0.90%
$500,000 - $999,999 0.80%
$1,000,000 - $1,999,999 0.65%
$2,000,000 or more 0.50%

inStream proactive financial planning as a stand-alone service: $1,000/year or $100/month
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The minimum initial investment for the Invest:FOCO platform is only $5,000 per account. This minimum can be met via transfer of an existing account or with new funds. Invest:FOCO is currently available for Individual, Joint, Traditional IRA, and Roth IRA registrations.
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MINIMUM ACCOUNT SIZE
The minimum initial investment for the Invest:FOCO platform is only $5,000 per account. This minimum can be met via transfer of an existing account or with new funds.
ANNUAL FEE
0.65% of assets under management ($65 per $10,000 managed)
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When investment management services are desired, there is a minimum initial investment of $125,000 per Strategy:FOCO client household. This minimum can be met via transfer of existing accounts or with new funds. A client household may generally include accounts for a head of household, a significant other, dependents, and any controlled organizations or entities. inStream proactive financial planning is then included at no additional cost.
ANNUAL FEE
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Assets Under Management Fee as a % of AUM
$125,000 - $249,999 1.00%
$250,000 - $499,999 0.90%
$500,000 - $999,999 0.80%
$1,000,000 - $1,999,999 0.65%
$2,000,000 or more 0.50%
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For investment management services there is a minimum initial investment of $125,000 per Strategy:FOCO client household. This minimum can be met via transfer of existing accounts or with new funds. Investment management fees are generally debited from the accounts to which they apply. Financial planning services are included for Strategy:FOCO investment management clients at no additional charge.
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Assets Under Management Fee as a % of AUM
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$250,000 - $499,999 0.90%
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FINANCIAL PLANNING
Financial planning services are ongoing, and include unlimited phone, email, web and in-person meeting and consultation time. Pricing is based on the unique circumstances of each client situation. Generally, there is a one-time plan development fee ranging from $500 - $2,000 and a monthly fee of $150 - $500; cancel anytime. Clients utilizing investment management services with portfolios of $500,000 or more will typically receive financial planning services for no additional fee.
INVESTMENT MANAGEMENT
Assets Under Management (AUM) Annual fee as % of AUM or flat-dollar
$0 - $249,999 1.00%
$250,000 - $499,999 0.90%
$500,000 - $999,999 0.80%
$1,000,000 - $1,999,999 0.65%
$2,000,000 - $2,999,999 0.50%
$3,000,000 - $3,999,999 $15,000
$4,000,000 - $4,999,999 $20,000
$5,000,000 or more $25,000 + $2,000 per additional $1mm
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