C - Red Money
Disadvantages: Overall Risk, Loss of principle
Examples: Variable Annuities, Stocks, Bonds, Mutual Funds, 401(k)'s, Brokerage Accounts, ETF's, REIT's
- Column C represents our Red Risk Growth assets. These assets move up and down with the market.
- Investors usually chase higher returns over time, though their assets can gain or lose 30% in a year or even more.
- The market “giveth” and the market “taketh” away; there are NO protections or limits. The money is invested in the market and the principle is NOT protected.
- The majority of the assets found in column C are in retirement accounts such as 401(k)’s, 403(b)’s, IRA’s, and Variable Annuities.
- They can also be found in non-qualified brokerage accounts, mutual funds, stocks, or bonds.
- You can either be your own manager or hire a professional investment advisor to manage this part for you.
- The main concern with C money is risk. Your principle is at risk with any dollars that are in column C. The focus should be on how you manage the risk.
- The strengths of the ABC model is that instead of having 100% of your investments at risk, you might only have 20% at risk. In addition to that, you are going to manage that risk from a tactical approach. So if the market goes down 30%, would you rather have 100% of your money subject to that risk, or only 20% subject to that market risk?
For C or Red money, OMH Partner Group ultilizies the advisory services of Brookstone Capital Management as an investment advisor representative. Brookstone is a leading wealth management firm with an impressive track record in helping clients to preserve and build wealth. OMH Partner Group owes it to our clients that we do what is in their best long term interest with regards to their investments, and Brookstone Capital Management fits that bill. They bring a full range of investment options to our clients and provide top notch service. Brookstone Capital Management currently has over 1.9 billion assets under management.
All rights reserved by Brookstone, used by permission
Brookstone Capital Management (BCM) is a Registered Investment Advisor headquartered in Wheaton, IL and led by Dean Zayed, a well-known and respected investment professional. You may have even seen Dean on one of his frequent appearances on CNBC and Fox Business News.
Don’t confuse “percentage” returns with DOLLAR returns
Investors are often asked to focus on annualized percentage returns, but this can divert them from the ultimate long-term goal: cumulative dollar returns. By not taking into account market downturns that can sometimes be masked by percentage return performance, it can be difficult to see the long-term effect market declines have on a portfolio’s ability to experience compounded growth.
This hypothetical example shows how Portfolio A saw its gains evaporate because substantial declines destroyed the ability to achieve compounding. Portfolio A had a +100% gain followed by a -50% loss, while Portfolio B had only a +65% gain, but followed by only a -15% loss. Both portfolios had the same net percentage gain of +50%.
However, over time, while Portfolio A experienced higher percentage gains, Portfolio B was able to limit its downward fluctuations during declining periods. As a result, Portfolio B benefits from compounded growth while Portfolio A makes no advancement after several years invested.
This hypothetical example is for illustrative purposes only and is not intended to project the performance of any specific investment or investment strategy and is not a solicitation or recommendation of any investment strategy. It is only designed to show the mathematical differences between substantial declines and less substantial fluctuations. It does not represent the trading of any actual account.
For a complete description of investment risks, fees and services, review the Brookstone Capital Management firm brochure (ADV Part 2A) which is available from your Investment Advisor Representative or by contacting Brookstone Capital Management.
You can find more information about them on their website: www.brookstonecm.com.