Investors often want to know how a financial advisor is investing their money and how a portfolio is being built.  This is especially true in times of economic uncertainty, like we're experiencing now.  Today, Lou Melone of Melone Private Wealth rejoins RJ King to talk about this.

A portfolio begins with understanding the client and their goals for their future.  Once that's established, it comes down to asset allocation, diversification, and rebalancing.   Lou explains each of these, citing a study that shows 93% of a portfolio's success comes down to this plan. Only 7% is tied to timing, selection, and the other things you'll hear about in the financial media.

The word risk is often misused - a better term would be market volatility.  Whichever term you use, Lou talks about employing a 1 to 99 scale for a client's comfort in this area, as opposed to small, medium, and large.

The primary tools in building a portfolio are stocks, bonds, bills, and cash. Which of these have performed the best over time, dating all the way back to 1802? The answer may surprise you.

Lou talks about the "3 bucket strategy" for investing - putting money away for bear markets, for expected big ticket items, and finally, for your long-term future.

One of the key qualities in being a good financial planner is also being what Lou calls a "behavioral coach."  This involves educating clients so they don't give in to their natural, human emotions, and stay the course.

In our next episode, we'll talk to CFP Brandon Carney about the largest generation of wealth transfer that we've seen in quite some time.

Resources:

Lou Melone's book, "Unpack Your Financial Baggage:" https://www.amazon.com/Unpack-Your-Financial-Baggage-Misconceptions/dp/1948237776

Melone Private Wealth Website: https://www.meloneprivatewealth.com/

D Business Magazine Website: https://www.dbusiness.com/