How to Build Portfolios That Serve your Goals Instead of Chasing Returns
A client walked into our office last month with a portfolio that was 90% stocks. He felt pretty good about it given recent market performance.
But here’s what happened when we sat down and built his financial plan together. The analysis suggested a 60% stock allocation could hit every goal he cared about.
This isn’t unusual. Many people think bigger risk equals bigger reward, but that isn’t always the case.
We Start with a Boring Answer That Changes Everything
When we work with clients, we ask one question first: What return do you actually need?
That means looking at your financial plan which is the foundation for every asset allocation decision.
Sometimes you find out you’re taking more risk than necessary. Other times you realize you’re being overly conservative and missing potential opportunities.
Your financial plan should drive every investment decision. Not headlines. Not tips from friends. Not even our latest market forecasts.
Often, clients who come to us with too-aggressive portfolio tell a similar story. They haven’t looked at their financial plan in years. Or they skipped that step entirely and jumped straight to “how do I get rich faster?”
You’re investing your money, so it’s natural to want the highest return possible. But when we dig into what you’re really trying to accomplish, the numbers often tell a different story.
Why take the wild swings of a 90/10 portfolio if a more moderate allocation could get you to retirement just fine? You’re taking on risk without achieving any real benefit.
Take the clients in their late 50s and early 60s who want to retire early. Their portfolios aren’t ready for retirement until they’re 65 or 67, so they’re taking on more risk hoping to compress their timeline. We help them figure out if that’s the right approach for their situation.
When We Actually Recommend More Risk (And the Conversations That Follow)
Sometimes we determine together that you need to take on more risk. If your plan requires higher returns to work, you might need more stocks than bonds have historically delivered.
That’s when we have our most interesting conversations. Do you truly prefer a higher potential return if it means dealing with the volatility? Or would you rather work two more years, but know your allocation has less risk?
Neither choice is wrong. It depends on what matters most to you.
Age can be a factor, but it’s not the only one. Younger clients often have time to recover from market pullbacks, so we can typically build more aggressive allocations. But we also work with some older clients who may have the assets to take on longer time horizons with alternatives because they don’t need that liquidity tomorrow.
It often comes down to liquidity needs and figuring out what makes the most sense for your unique situation.
The Stuff That Doesn’t Show Up in Our Models
Numbers only tell part of the story. The emotional side matters too, and it shows up in ways that tend to surprise people.
We worked with a client who inherited his father’s stock portfolio. One company made up 40% of its investments. A level of concentration that can significantly increase risk.
But when we suggested rebalancing, he hesitated.
His dad had this stock for thirty years, and he said it felt like throwing away part of him.
These moments require more than spreadsheet analysis. We often discuss strategies with clients that find ways to honor what matters emotionally while still building portfolios that make financial sense.
This comes up regularly when parents pass away and leave concentrated positions. There’s sentimental value attached to certain investments. People want to maintain that connection.
But here’s what we’ve learned working with families: you can honor that emotional attachment while still managing risk appropriately. For some, that may mean keeping a smaller tribute position while diversifying the rest. Sometimes it means deeper conversations about what that person would have actually wanted for their family’s financial security.
What We’re Actually Seeing in Portfolios Right Now
Markets have generally recovered since that 2022 pullback. Here’s what we identify and address in client meetings:
Equity allocations have drifted higher than planned.
Strong markets push stock percentages up automatically. When we review portfolios, we often find clients taking more risks than their original plan called for. Time to rebalance.
Many clients are sitting on more cash than makes sense.
For our higher net worth clients especially, we’re considering alternatives that could provide better potential returns when immediate liquidity isn’t needed. But this depends entirely on each situation.
Life keeps changing, so we’re scheduling more frequent check-ins.
Goals shift. Family situations evolve. Business ventures develop. We make sure portfolios keep up.
Our role is to work through these changes with you. We gather information first. The more we understand your situation and concerns, the better plan we can create together.
But plans evolve constantly. What made sense last year might not work today. That’s why we meet regularly to make sure everything still lines up.
Sometimes this means taking advantage of market opportunities. At times, market pull backs may create opportunities to rebalance or apply tax strategies depending on a client’s situation. In certain situations, clients may choose to adjust allocations or explore strategies to improve tax efficiency as part of their overall plan.
We also look at your complete financial picture. Many clients have complex situations like trusts, business interests, real estate holdings, or executive compensation. Asset allocation isn’t just about investment accounts. It’s about how all these pieces work together in your wealth strategy.
The Real Goal Here
When we sit down to review your asset allocation, we’re serving your financial plan. Not reacting to market headlines or chasing benchmarks.
The goal isn’t squeezing every possible return out of your portfolio. The goal is to build a strategy designed to support your goals in a way you can remain comfortable with during different market conditions.
Good investing isn’t about taking the most risk or chasing the highest returns. Effective investing often involves balancing risk appropriately for your specific situation and maintaining an allocation you can stick with through changing environments.
In our experience, the clients who feel the most confident have clear plans, understand why we’ve structured their portfolios the way we have, and trust us to help navigate whatever comes up along the way.
Because complexity always comes up with substantial wealth, we’re here to help you think through the implications and make decisions that align with your vision for your family’s future.
Have questions about how your portfolio aligns with your goals? Please reach out to your W&A wealth strategist with any questions and the opportunity to connect more on this topic.
New here? Learn about the Waddell & Associates difference and explore how you can work with us. We’d love to hear from you.
Robby J. Graham is a Memphis-based wealth strategist focusing on high-net-worth family planning at Waddell & Associates.
This content is for informational purposes only and should not be considered legal, tax, or investment advice. Opinions are those of the author and may change. Waddell & Associates is an SEC-registered investment adviser. Registration does not imply a certain level of skill. Past performance is not indicative of future results. Please consult your professional advisors before making financial decisions.
