Austec Wealth Management, LLC
John Hamel is the Managing Member at Austec Wealth Management, LLC in Highlands Ranch, CO and has over 17 years of experience in the finance industry. John and his team do their best work with business owners approximately ages 54-67+, still wearing multiple hats of the company, with 10-35+ million in revenue develop an written exit option strategy plan to fix business value gaps that would either prevent the business from selling, prevent a successful family succession or leave millions of dollars on the table at the time of sale.
Austec WM was founded on the concept that most investors’ investment experience does not follow perfectly a A-Z initial progress plan. Their mission is to coach and create harmonious relationships for their clients with specialists and experts to facilitate solutions to clients’ complex financial situations in the present and for their future financial unpredictability as it develops.
John and his team know planning early increases the probability of the business continuing as a "going concern" as the owner moves beyond the company. Often this is one of the biggest concerns of a family business succession and one of the most complicated.
BA, Finance, California State University-San Bernardino
The difficulty with making these choices often backed by a fear...the unknown. I say this because its important that you understand the numbers choice vs. the emotions choice are often in conflict with each other. I've only bumped into a couple of people in 18 years that drive everything they do by numbers alone. And quite a number of people only decide by emotions most all the time. So those who sway more to the numbers usually have more money to work with and those who sway more with emotions usually have less. But if it’s all about numbers then you probably should not get married, have kids or any kind of relationships because they all cost. But if you spend on everything when the emotion tells you to buy then you probably may have experienced divorce, your kids will be upset with you and your so-called friends only hang out with you when you have money to spend. Yes, the extremes and there are a lot of variations. But you have to find your own balance.
So what does this have to do with your question? Simply when clients ask me similar questions it means there is an emotional component that needs to be resolved first. In your case, I would assume that because you are asking about paying off the mortgage because you would rather stay there for a reason more than moving into a cheaper house. But you are concerned that you might be rather tight financially in doing so? Maybe you want to figure out why you want to keep your present house or why you would want a cheaper house? Don't just think it about it....write the reasons down.
I'm a big fan of clients paying off their homes because it provides an emotional security that often produces a lot of benefits non-financially....ie. being able to growth that garden you always wanted to do because you know you will be there a while or provides opportunity for travel. But sometimes it doesn't make sense to pay off a mortgage either.
If it was all about numbers I would say personally, with no emotional attachments to the present house, sell the house, use the equity from the house sale to buy the cheaper house/condo for cash with no mortgage and keep the 401k intact for cushion. $5,200 per month goes a lot further without a mortgage, plus a smaller house (assuming cheaper means smaller) has less expenses…ie heat, water, electricity bills. Also selling the house would negate the question of who is on title as next house would have both of you on the title. It’s the easiest financially by numbers but probably not so much with emotions and attachments.
Best of luck going forward!
One thing the brokerage/investment industry has done very well is to tell every investor that they should be constantly investing their cash or they will possibly lose out on returns. But this is not always the correct thing to do. If you study the most successful investors you will often see that they hold large amounts of cash in their portfolios for years. Why you may ask? Because as they say “Cash is King”. They are very patient and willing to wait for opportunities that provide great possibilities for greater returns.
I would recommend that you take another view of cash. Think of having cash for opportunity investing. Cash does not require selling something first to buy something second. If you were to invest your cash in something that gave you a conservative dividend or interest you will probably sacrifice opportunity later that might have provided you a return five times the return of being locked up in a fixed income vehicle as an example. I’m not recommending that you stay in cash or invest, but rather consider a different use of staying in cash.
I will say that it has personally served me well having this other view. The feeling of missing out on something often drives investors to miss out. Well at least that has what I’ve found in my last 18 years of the investment space. The downside is there are no guarantees that an opportunity will come by and if it does, that you will recognize it in time. In hindsight everything is clearer, but all investors invest whent a chart has not yet been developed.
I write a lot about purpose of different types of investments. Cash is a type of investment and should be looked at with a purpose to how it can assist your portfolio strategy. Sometimes holding cash can be the better strategy if you are waiting and looking for a great investment opportunity to invest in. You may notice that some of the great investors almost always have a certain amount of cash at any one time. Cash is fast to use and does not require the sale of another investment and settlement requirements to purchase another opportunity. But if that seems to be too much work then re-investing dividends might be the easier route to take.
Congrats on putting away money for your son. It may seem like a silly thing to say, but it often goes with a wish that never gets implemented.
Over last number of years I’ve noticed a few things from investors. Investors who ask similar questions about losses and recovery tend to have either increased value significantly and then watched it disappear quickly or they watch their value disappear with fees and investments that always seem wrong. So if this is you, understand you a not alone.
The only way I know to effectively increase your odds of minimizing or regaining your losses is to develop a strategy that gives you the probability of achieving that goal. This means you need to understand systematically how, when, why and where you enter the investment/trade and at what point the trade is wrong and how, when, why and where you leave the investment/trade. You’ll want to read a good bit of books on this as it is simple but difficult. This concept holds true for both passive or active investing (you’ll hear this arguments in financial advisor circles a lot). Passive is just a lot easier to understand in my opinion. But just make sure you make it your own. If you’re looking for easy tips to make up your difference than I would say “good luck”. Every strategy has its losing periods and winning periods so its important that you fully understand your own. I could probably give you a number of successful strategies but it would not work for you unless you made them your own in some way. I would recommend that you at least spend 20 hours per week devoting yourself to understanding these concepts and many more. Or I would look to do what you do best to make the money, put the savings into your son’s account and implement a passive strategy with or without and advisor. I keep telling people that if you want to invest/trade yourself then you’re not a long-term client of an advisor. As an advisor, we are here to do what you do not want to do or don’t have the time to do. Or like some of my past clients, hire an advisor till you invest well enough to do it yourself. Best of luck on your journey!
If you are starting to learn to trade/write options then I would certainly use way way less capital. From what you are saying in your question I would suspect that you do not have a strategy written down or understood its expectations. Every strategy has times were it loses money. If you do not know how your strategy will lose money to eventually make money then I would push you to do some further reading and analysis. It takes a lot of time to make a strategy that fits you. I've found that only until you make a strategy your own will you have a chance to success. But use less capital....its a cheaper education.