A Thoughtful Investor’s Question – And Why Having a Plan Matters
Last week, I sat down with a retired couple who spent their careers as college professors in Austin, Texas. They’ve worked hard, saved diligently, and built a seven-figure investment portfolio to complement their Social Security and pension income. Their financial foundation is solid, and they’re enjoying retirement—weekend trips to the coast, evenings with friends, and a growing list of places they’d love to visit next.
But even with their strong financial position, they had an important question as we reviewed their portfolio:
“How do we know that our favorite stock won’t become the next Sears, Montgomery Ward, or Blockbuster?”
For context, their largest individual stock holding is a well-known home improvement company that they’ve owned for over 20 years. While it’s been a great log-term investment, it was a good question to ask—how can they be sure that it won’t follow the path of once-great companies that eventually faded away?
Together we walked through a few key points:
- Diversification is key. While they own a significant position in this stock, they also hold a broad, low-cost diversified portfolio, ensuring that no single company truly determines their financial future.
- Dividend growth matters. One sign of financial strength is a company’s ability to consistently grow its dividend. Their stock recently announced a dividend increase, which is a positive indicator.
- Red flags to keep an eye on 🚩 — If the company were to cut, suspend, or eliminate its dividend, that might be a signal that something may be wrong. We discussed how to monitor this over time.
- No stock is invincible, even great companies go through change—Which is why owning a diversified portfolio of companies that have weathered multiple market cycles is so important.
Following our conversation you could sense their increased confidence. They weren’t just holding on to a favorite stock out of loyalty—they had a clear plan for what to watch for and how to adjust if needed.
Markets will always change, but a well-thought-out strategy can provide clarity and confidence—and that’s exactly what a good financial plan should do.
Have questions about your investments? Let’s make sure you know your plan.
If you or someone you’re close to is a high-achieving professional that could use help aligning their finances and establishing a financial plan, please reach out to us, we’re accepting new clients and eager to help.
–Nic
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. There is no guarantee that a diversifed portfolio will enhance overall returns or outperform a non-diversifed portfolio. Diversifcation does not protect against market risk.
