Larry Klotz

CONNECT

Address:

4427 Talmadge Rd.
Toledo, OH 43623

Phone:

(419) 344-9934

Principles

 “We control our actions, but the consequences that flow from those actions are controlled by principles.” -Dr. Stephen R. Covey

 My principles for investment Policy.

#1Don't lose/ Don't lose out

“Investing is a “losers' game” in which the winner is often the investor who makes the fewest errors”- Charley Ellis

For the money you the investor doesn't want to lose, some Non-Profit organizations and Union Benefit Funds, or cannot afford to lose,( i.e. retirement funds); “Safety First Investing “is likely appropriate. "Safety First Investing preserves and can provide some growth. The major distinction is Risk Transfer vs Risk Retention.

When implemented correctly it provides Principal preservation, and

Some conservative amount of Income along with the probability of a growth rate slightly above the short-term treasury rate.

The other most common way is called “Probability Investing”. It is used for most Mutual Funds and managed portfolios and is usually based on Modern Portfolio Theory. It is a good theory, but the limits are the time frame of the investor and the amount of risk he is willing to take. All outcomes are based on Probabilities.


 #2Control Risk/ Volatility

“The essence of investment management is the management of risks, not the management of returns”- Benjamin Graham

You cannot control returns. Risk management contributes to enhancing Compounded Returns as well as reducing the variability of the return series. You cannot spend average returns: you can only spend compound returns. Take three portfolios with the same average return over the same period but with different volatilities and compare the actual dollars at the end. The portfolio with the lowest volatility will have more dollars!


#3 Keep costs low

“It is unwise to pay too much. But it's worse to pay too little. When you pay too much, you lose a little money¦that is all. When you pay too little you sometimes lose everything, because the thing you bought is incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot - it can't be done. If you deal with the lowest bidder, it is well to add something for the risk you run. And if you do that, you will have enough to pay for something better.”- John Ruskin

This is not a suggestion to overpay by any means. Every dollar you save you get to keep and compound or use to fund your goals. But wall street is truly a Pricing jungle. The actual costs are sometimes not transparent. But you need to know what the total costs are: both seen and cost unmeasurable but never the less can be estimated.  (i.e. turnover, trading and illiquidity premiums). You need an experienced guide.


# 4. Keep it Simple

Stained-glass window showing William of Ockham

William of Ockham

Occam's razor (or Ockham's razor) is a principle from philosophy. Suppose there exist two explanations for an occurrence. In this case, the simpler one is usually better. Another way of saying it is that the more assumptions you have to make, the more unlikely an explanation. Occam's razor applies especially in the philosophy of science, but also more generally.

When you see “KISS (Keep it Simple Stupid)”  my experience shows after 40 years experience, it should refer to Wall Street NOT the customer. Last 3 stock market crashes attributed to the Federal Reserve, Wall Street Tech crash, Wall Street “Strange Mortgage Foolishness.”

Why make 1,000 decisions when you can make 1?

Safety First Investing” sometimes called “Modern Retirement Theory” allows the investor to ensure “secure, stable and sustainable” funding for their important “can't afford to lose assets”. Safety First Investing may be used for Retirement Funding or to Suppor a Charitable Institution's funding commitments.  As part of this theory it also has a role in the “Discretionary Expenses Fund” and for “Legacy Fund”. Here is the place for volatile and uncertain returns.

Most investment firms often stress the amount of wealth you have in your account.  In contrast, Modern Retirement Theory is concerned with the amount of lifetime guaranteed income, you would be able to get from your savings, not the account value, which in most cases must be converted to income.

Credit for this theory goes to Jason K Branning CFP and M. Ray Grubbs, Ph.D. as well as Dr. Robert

Merton, Nobel Prize winner and Dr. Ziv Bodie.

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