The Benefits Of Partnering With Able wealth management

In today's complex financial landscape, managing personal finances can be overwhelming.

With numerous investment options and financial decisions to make, navigating these waters alone is a challenging feat. This is where Able Wealth Management can provide valuable guidance and support. The value of working with us lies in our expertise, experience, and commitment to helping you achieve your financial goals. Our team of dedicated professionals will work closely with you to understand your unique situation, assess your risk tolerance, and develop a personalized investment strategy tailored to your needs. By partnering with Able Wealth Management, you can benefit from our extensive knowledge of the financial markets, access to cutting-edge investment tools, and our unwavering focus on your long-term financial success.

Increased Investment Returns

According to a Vanguard study, individuals who work with a financial advisor can experience up to 3% in net returns compared to those who do not (Vanguard, 2019). Partnering with a financial advisor can result in higher investment returns over time. Moreover, a financial advisor can help individuals make better investment decisions, set appropriate asset allocations, and avoid behavioral mistakes that can negatively impact returns.

Boosted Financial Confidence and Well-being

However, the value of a financial advisor extends beyond monetary returns. In a Financial Planning Association study, individuals who work with a financial advisor are more likely to feel confident about their financial future and report higher levels of financial well-being (Financial Planning Association, 2019). A financial advisor can guide you in making crucial financial decisions and creating a tailored financial plan that includes advice on budgeting, savings, investments, and retirement planning. Additionally, a financial advisor can offer emotional support during times of financial stress and uncertainty.

Tax and Fee Minimization

Furthermore, working with a financial advisor can help individuals minimize taxes and fees, saving significant money over time. A financial advisor can provide expert analysis and insight into the current financial market, potentially leading to higher investment returns. They can also advise on tax-efficient investment strategies and help individuals avoid unnecessary fees.

Financial Security: A Compelling Factor

According to a Northwestern Mutual survey, 70% of Americans who work with a financial advisor feel financially secure, compared to only 30% of those who do not work with an advisor (Northwestern Mutual, 2019). This underscores the importance of partnering with a financial advisor to gain the confidence and knowledge needed to make informed financial decisions and achieve long-term goals.

The data suggests that partnering with a financial advisor can provide qualitative and quantitative value for individuals seeking to manage their finances and achieve their financial goals. From higher investment returns to emotional support and financial well-being, a financial advisor can help individuals navigate the complex world of personal finance and achieve a secure financial future.

Calculating the Value of Financial Advice

What are the real financial benefits of working with a financial planner?

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Volatility Drag

Volatility drag, often unnoticed by many investors, plays a significant role in the performance of investment portfolios, especially in markets characterized by high volatility. Understanding volatility drag is crucial for making informed investment decisions and managing long-term investment performance.

Understanding Volatility Drag

Volatility drag refers to the negative effect of investment volatility on compound returns over time. It occurs because losses have a more significant impact on portfolio value than gains of the same magnitude. For example, if an investment loses 10% one year and gains 10% the next, the investment will not return to its starting value due to the mathematical asymmetry between gains and losses. This phenomenon underscores the importance of minimizing large fluctuations in investment value to protect long-term returns.

The Mathematics Behind Volatility Drag

The mathematical principle underlying volatility drag is relatively straightforward but profound in its implications for investors. The key concept is that percentage gains and losses are not symmetrical. A 50% loss requires a 100% gain to break even, not a 50% gain. This asymmetry means that volatility (up and down movements in price) can erode the compound growth rate of an investment, even if the arithmetic mean of the returns seems healthy.

Example of Volatility Drag

Consider an investment with the following annual returns: +20%, -15%, +10%, and -5%. While the arithmetic mean of these returns might suggest a modest positive performance, the compound annual growth rate (CAGR) would tell a different story, factoring in the volatility drag and showing a lower effective return than the arithmetic mean would suggest.

Implications for Investors

  • Risk Management: Understanding volatility drag emphasizes the importance of risk management strategies, such as diversification and the use of derivatives for hedging, to minimize significant downturns in portfolio value.
  • Investment Strategy: Investors might consider investment strategies that aim for steady, consistent returns over those with potentially higher but more volatile returns. Such strategies might include investing in low-volatility stocks, index funds, or using dollar-cost averaging to mitigate the impact of market fluctuations.
  • Psychological Aspects: Volatility drag also highlights the psychological challenge for investors who may overreact to short-term market movements. A long-term perspective is crucial for successful investing, as frequent trading in response to volatility can exacerbate the drag on returns.
  • Performance Evaluation: When assessing investment performance, considering both the arithmetic mean return and the compound annual growth rate (CAGR) can provide a more comprehensive view of an investment’s performance, factoring in the effect of volatility.

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