Today more than ever: It’s never been more important to understand what you own and why.
Since the market bottomed in March 2009, the U.S. stock market is up more than 1,000% (through May 31, 2026). With dividends reinvested, a $1,000 investment in the U.S. stock market would be worth approximately $13,000 today, about 16% annually. (Using the S&P 500® as our proxy)
Here are some recent events:
• The media’s pushing sensational wealth building stories regarding the Mag7 and those leading the AI boom.
• New investment “products” and “strategies” are popping up daily.
• DIY day trading and adding leverage has never been easier (the average investor’s holding time continues to dwindle).
Hype aside, and while some of these strategies may work out over the long-term, we believe in our foundational plan: Owning a low-cost diversified portfolio of the best companies in America and the world.
- We want to own companies of various sizes: Small, medium, and large.
- We want to own great U.S. based companies as well as great international businesses.
- We want to own companies in all the sectors: Tech, healthcare, financial services, etc…
Rather than selecting individual companies, we allocate broadly across many public traded businesses. This approach is intended to support long-term investing but does not guarantee positive results.
Historically, some companies that survive crisis and recessions may emerge stronger and continue to capture market share.
Our mindset is that we have fractional ownership in companies and are not merely trading stocks. So how do we build our portfolios?
We call this the 6-5-4.
SIX
We believe that you should keep six months’ worth of expenses in short-term cash equivalents (checking and savings accounts).
For example, if your total monthly expenses are $8,000, we would recommend $48,000 in your emergency fund.
FIVE
If you need portfolio income, we recommend that you consider keeping five years’ worth of portfolio income in short-term high-quality investment grade bonds.
For example, if you need $5,000 per month from your portfolio, we will keep $300,000 in investment grade bonds.
For example, if you entered day 1 of retirement with $1,000,000, based on the scenario above, we would keep $48,000 in cash and $300,000 in investment grade bonds.
These short-term investment grade bonds represent our “break glass in case of emergency” funds. We want to use these during the periods where the value of our companies are plummeting (at least on paper).
FOR
The remaining $652,000 would be invested for growth. (Yes, 6-5-4 is a bit of a play on words).
At Know My Plan, investing for growth is ownership in companies (different size, sector, and country of domicile).
Ownership in companies is the growth engine designed to outpace inflation.
Our goal is to not merely to help clients financially survive a three-decade retirement, but to enjoy, live, and thrive!
In closing, it is easy to get distracted by shiny objects, but let’s stay on our path.
–Nic
Any opinions are those of Know My Plan and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
