Frequently Asked Questions
1. Where will my investments be, and how will I know they are safe?
If CIM manages your investments, they will be held by a custodian, either a mutual fund company or its affiliated broker. The custodian will send regular transaction and at least quarterly reports directly to you. Comprehensive Investment Management LLC advisers provide expert investment advice, but there will always be a clear division of responsibility concerning the safeguarding and whereabouts of the assets themselves.
2. How much does CIM charge?
When considering important value added financial services, the net cost is what’s important. We are confident the professional attention given to your portfolio will result in enhanced performance. That’s not to say your investments will always go up, but that overall you will likely do better. In that sense, then, our services should, in the very least, pay for themselves.
It’s not difficult to contrast the considerable benefits of a properly planned, maintained, allocated, tax efficient portfolio, and the woeful result of mistakes from which some investors never recover. CIM charges an annual fee of 1% of the average balance of managed assets, one fourth of that amount billed quarterly. Reduced percentages are charged on larger investment portfolios starting at $500,000.
3. What does Fee Only mean?
The great majority of investment brokers and advisers are paid up-front commissions (at the time of sale) by the companies whose products they sell. In the end the investors pay those charges through reduced investment returns. The typical investor seldom knows how much the commissions are. Fee Only advisers, on the other hand, are compensated only by their clients. The payments are spread over the same period services are rendered (pay-as-you-go). Fee Only advisers accept no commissions or marketing fees. They sell no products, and have no need to garner new investments in order to make money. That tends to make Fee Only advisers more objective, and they will direct investments to any excellent mutual fund company, including those that don’t pay commissions, such as The Vanguard Group®.
4. What commitment do I have to make?
None. Although there is written contract, as is required by the Pennsylvania Department of Banking and Securities, either party can terminate it at anytime with no penalty. The purpose of the contract is to have in writing the investment services to be performed and the fee to be charged.
5. Which custodian and mutual fund companies does CIM often work with?
The Vanguard Group in Malvern PA is the custodian for the great majority of client funds. There are others but the usual mutual fund companies are Vanguard, Primecap, T Rowe Price and Brown Capital. All funds are no load, that is no commissions, and have low reasonable cost ratios. They provide a broad array of funds designed to support long-term diversified investing. There are strict rules and procedures which assure each fund is compliant with the policies and procedures described in its prospectus. There are also restrictions against overly frequent trading to minimize the costs to the fund owners that can be a result of short-term trading by individuals.
No one can predict or control stock and bond market variations. But the security and cost of investing can be predicted and controlled. Tax efficiency, although a secondary consideration in investment decisions, is important as well.
6. How much is the average portfolio managed by CIM?
The median (half of the clients are above and half are below) balance is approximately $1,000,000.
7. What return can I expect on my investments?
In the short term no one can say. The economy and consequently the financial markets fluctuate a great deal. In the long term, your return will depend primarily on adherence to an appropriate investment allocation. Your allocation should be based on your time horizon and your ability to deal with market volatility. Most portfolios should not be one hundred percent stocks, but in the long term stocks have returned about 6.5% after inflation. Bonds about half that.
8. What do you mean by short term and long term?
Short term normally refers to between one and five years. Investing in stocks is generally not recommended if there is a chance the funds will be needed before at least five years. The long term averages referred to in the answer to question seven (above) are from studies covering the seventy five year period from 1926 though 2000. However, the averages are roughly the same when broken down into twenty year periods from 1880 through 2000. Investment portfolios and withdrawal rates are typically designed to cover a thirty year retirement period.
9. What is a diversified portfolio?
Typically a diversified stock portfolio holds US large cap, mid cap, and small-capitalization stocks in proportion roughly similar to that of the overall U.S. stock market, and will include both growth and value stocks. Having as much as 10% of the portfolio in international stocks provides important global diversification. A bond portfolio is often diversified across durations and credit levels. The purpose of diversification is to reduce risk and volatility.
10. Is investing in the stock market a good idea?
Based on several studies over the years the average individual investor does not come close to matching the average returns of the mutual funds they buy. Folks have a terrible habit of jumping in and out of funds based on recent performance. They would probably do better and have much less anxiety if they invested in bonds, or for the really risk averse, certificates of deposit. There is a significant inflation risk with low return portfolios, but the likelihood of a nominal return is high. If you have to see the value of your account balance go up at a steady pace, then a savings account at a bank may be your only alternative.
If you have a long term perspective, an understanding that stock markets ebb and flow, and a suitable temperament for risk versus return, then stock investing can add considerably to the long term performance of your portfolio. Past performance does not guarantee future results, but history shows it’s no contest when comparing the long term return of stocks to other investments.
Finally, a portfolio doesn’t have to be all or nothing. It can and probably should, have a combination of high risk and low risk. The ratio of the two is in the details.