An ETF manager shares his 2 'investment mission statements' that are helping him build long-term wealth

view original post
  • ETF manager Taylor Sohns encourages all investors to write down their specific goals.
  • Doing so will help you figure out exactly how to invest your money, he says.
  • He has two investment mission statements that he refers back to every year. 

After graduating with a degree in finance in 2010, Taylor Sohns landed his first job on Wall Street as an internal advisor consultant at Legg Mason.

During the first two years of his career, he took night classes and earned his MBA in finance in 2012.

Despite studying finance and working full-time in the industry, he didn’t have much of a plan for his personal finances in his early 20s.

It was a mentor who suggested writing down more of a precise plan for how to invest his money. 

That was years ago, said Sohns, who now runs a company that builds ETFs, LifeGoal Investments, with his brother Brett.

“Since then, I’ve kept the same statement but refer back to it every year and ask myself: Did I stick to the plan? Has it done what I wanted it to do? How do my investments need to be tweaked to better serve my overall mission?” he told Insider.   

He recommends all new investors establish their goals before actually putting their money to work.

“Write down — not talk about, but write down — what your goals are,” said the 34-year-old fund manager. “You can’t invest in anything — stocks, bonds, whatever it may be – unless you know what your intentions are.” 

If you’re already an investor but don’t have specific goals in writing, come up with at least one today. Then, ask yourself if your current investments are putting you on the right track to achieve whatever it is you want to achieve.

Sohns shared with Insider his two investment mission statements, which he keeps in the notes app on his phone. The first is specific to how he’s managing the money in his brokerage account, which he wants to be more accessible for short- or medium-term goals. The second is specific to how he’s managing his retirement money, which he doesn’t plan to touch for decades.

Here’s his brokerage account investment statement: 

My brokerage account dollars are there to outpace inflation; anything additional is bonus. I will remain diversified and actively tweak the allocation to take advantage of market opportunities, with my emphasis being on preserving my money. This account is for singles and maybe an occasional double, no strikeouts. 

The last line analogizes investing to baseball: He’s not looking to hit a home run with this account by picking individual stocks, for example, and risk striking out. Rather, he’s content with consistent single runs. In the investing world, this means owning a highly diversified portfolio that can do well regardless of market conditions.

Here’s his retirement account investing statement: 

I’m invested for the long term. I’m willing to take on more risk because my time horizon is longer. I will remain diversified but tend to be more aggressive without trying to hit a home run. Again, no strikeouts. 

Since Sohns is in his early 30s and doesn’t plan on retiring anytime soon, he’s comfortable putting this money in a more aggressive portfolio, which may have a higher percentage of stocks, for example, than a more conservative portfolio would have.

He hopes that his mission statements will help him avoid past investing mistakes.

When he was younger, “I was too aggressive in my investments,” he recalled. “At some point along the line, I needed to buy a house, and I had to take money out of the stock market when it was down,” meaning he realized a loss. 

“That is exactly why you need to understand your goals to begin with,” said Sohns, who would’ve put his down payment savings in a more conservative vehicle if he could go back in time. “The goals are the top of the funnel that dictate what you’re trying to do with your overall investment. If your goals don’t align with what the asset allocation looks like, you can put yourself in a tough spot.”

Once you have a specific goal, you can start figuring out the smartest way to invest to achieve it. 

When it comes time to actually put your money to work, spend time researching various investment vehicles and “invest in what you know,” advised Sohns. As a rule of thumb, “if you can’t explain something to me, you can’t buy it.”

For example, “if you cannot articulate to me what the value that crypto brings to the world is, you can’t invest in it,” he added. “I took an eight-hour class on crypto to try to understand it. I walked away with a fair understanding of what’s going on, but didn’t understand the value of it. And, therefore, I couldn’t invest in it.” 

The same goes for picking stocks: “You can’t invest in individual stocks unless you actually understand the fundamentals and direction of the company,” said Sohns. “Investing in individual stocks is for a professional. Period.”