Last updated: 29 Mar 24 00:07:20 (UTC)

Michael's Financial Philosophy & Service Model

This note began over 34 years ago when I entered into the investment business and began cataloging my beliefs and insights. Eventually I shared it with a few clients (on physical paper!) when they asked for a brief summary of my financial philosophy (in time it expanded into a monthly newsletter). What you’re reading now is my most current edition of that original note. ―Michael Paulding Thomas


Table-of-Contents



MY TWO GUIDING PRINCIPLES

1. Do What’s Right

This has been my guiding philosophy since I started in this industry over 34 years ago. When I sit with a client I ask myself, “What would I do for myself and my family if I were in this situation?” Then that’s what I recommend.

“The truth tellers have no competition.”Nick Murray

“I want to be happy by doing well by doing good.Michael


2. Make a Complex Subject Simple

I keep my presentations, explanations, strategies and investments as simple as possible. I don’t use fancy jargon nor try to impress you with sophisticated language, charts and graphs.

“Everything must be made as simple as possible, but no simpler.” ―Albert Einstein




MY THREE INVESTMENT EPIPHANIES

The three principles below are the foundation of my investment philosophy which is based upon the teachings of Nick Murray and Warren Buffet.


1. Invest 100% in the World’s Great Companies via Mutual Funds

Most people who invest most of their capital in fixed income investments as they go into retirement will run out of money well within their lifetimes. You are not investing to retirement, but through retirement, and very probably on to the next generation. Equities = life. Bonds = death-in-life.

“Equities are the only asset class that fully captures human ingenuity, which is the most valuable asset on earth.”Nick Murray



2. Have an Intelligent Retirement Withdrawal Strategy

Americans say that what they want for retirement is safety and income. What they really want is all the income they can get, and the illusion of safety. The best vehicle to create a guaranteed retirement income that outpaces inflation is a variable annuity with a guaranteed income rider that is invested in 100% equities, and yet provide a minimum 5% guaranteed withdrawal for the rest of your life.


3. Proper Investor Behavior via Coaching

At the end of an investor’s life, 95% of his total lifetime return will come from how the investor behaved. And the primary determinant of that behavior will be the quality of the advice he got, or didn’t get. I believe you will do far better in real life with an empathetic, tough-loving behavioral coach than you will on your own.

“Without an adequately compensated advisor to help with selection and discipline, the individual investor will simply make all the classic and horrendous mistakes.”Nick Murray

“People make better decisions with financial advisors.”Robert Shiller, Nobel Prize-winning economist




FINANCIAL PHILOSOPHY

Retirement

  1. 401(k). Contribute up to the matching point.

  2. Roth / Traditional IRA. Fully-fund your IRA. Roth is preferable, if you qualify for it.

  3. 401(k). Contribute past the matching point up to the maximum allowed.

  4. SEP IRA. If you’re self-employed and/or get paid via 1099.

  5. Variable Annuity - pure growth. If you have additional money available to invest for retirement, use a VA for tax-deferral.

  6. Variable Annuity - guaranteed income. When you’re approximately 10-years from retirement withdrawals start this product.


Minor Accounts

  1. UTMA. When saving for your child for non-education purposes invest in a Uniform Transfer to Minor Act.

  2. 529-Plan. For higher-education / college invest in a 529-Plan.

  3. Roth IRA. As soon as your child as earned-income, such as a summer job, have them invest in a Roth IRA.

  4. ABLE Accounts. Achieving a Better Life Experience Act allows individuals with mild to severe disabilities to open investment accounts.


Emergency / Protection / Insurance

  1. Emergency Fund. I recommend saving three to six months living expenses. I like the American Funds Tax-Aware Conservative Growth and Income Portfolio.

  2. Living Trust. If you are married, have kids or real estate you need a living trust to avoid probate (and much more).

  3. LLC + Land Trust. If you have rental properties and/or want to really protect your real estate against law-suits etc.

  4. Term Life Insurance. Always get term insurance. How do you know if you need life insurance? Ask yourself if your spouse/kids will have financial problems if you die?  If ‘yes’ then you need it; if ‘no’ then you don’t. This is why you usually only


Big-Picture Strategy




WHAT I DO AND WHAT I DON’T

Crafting a long-term plan and funding the plan with a long-term equity portfolio: 20%
Coaching clients to continue following the plan through all the cycles of the economy, and all the fads and fears of the market: 80%
Analyzing/interpreting the economy and current events. Timing the market, calling tops and bottoms. Identifying consistently top-performing investments: 0%
100%



MY SERVICE MODEL

  1. First and most important, please don’t hesitate to call or email me anytime for any reason whatsoever. I commit to returning your emails, calls, and voicemails within 24 hours. Note: all account-specific, product-specific and Advice needs to be communicated via email or phone, not text. Please ensure you receive me emails.

  1. Next, I’ll certainly call/email if something is going on and that’s important enough to require a decision of some sort. This will rarely happen, as our whole philosophy is based on not reacting to current events in the economy or the markets.

“Nothing that happens in 90 days can have any bearing on a long-term investment plan.”Nick Murray


  1. Once a month I will email my client newsletter (subscribe here) which includes the current month’s Client’s Corner by Nick Murray, the Podcast-of-the-Month, the Financial Book-of-the-Month, and my Financial Tip-of-the-Month. In the July and January issues I will include my Mid-Year and Year-End Client Letters.

  1. Finally, every January I will email a summary of your plan, and most importantly, show you the number of shares you own of your mutual fund(s).

Other than that: not much. It’s deliberately relaxed, informal, friendly - but most of all open, in both directions.




RECOMMENDED READING LIST




MY CONTACT INFORMATION

Michael Paulding Thomas

  • Celebrating 34 years in the industry
  • Investment Advisor • Securities Principal
  • Series 6, 26, 63, 65 • Life
  • Mutual Funds • IRAs (Roth, Traditional, SEP, Simple, Minor-IRAs) • 529 College Plans • UTMA minor accounts • ABLE accounts • Variable Annuities • 401k Plans • Term Life Insurance • Living Trusts, Land Trusts, LLC’s.


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