Rich in America Secrets to Creating and Preserving Wealth PHẦN 4 doc

making a good salary but he had yet to put any money away. Still, as

a first-rate lawyer with a good firm, he was fairly confident of how his

career would progress and how much money he would make. Walter

knew himself as well as any client we’ve ever had; he knew how hard

he wanted to work, how much money he would need to be happy, even

how much money he wanted to give to charity. Fifteen years later,

Walter is pretty much where he thought he would be.

Another client, Henry, came to U.S. Trust in 1998. Like Walter,

he was confident that he could lay out his financial future. He had

made a great deal of money as a venture capitalist and at age 40, was

preparing to figure out what to do with his money and his future. But

even as we were laying the financial groundwork with him, Henry’s

net worth decreased precipitously. We warned him that his assets were

overly tied to one industry (technology), but he was convinced that he

knew better than anyone the strength of the two companies in which

he was heavily invested. Perhaps he did understand their technological

workings, but he failed to see how the market would react during an

industry-wide slump. Not long afterward, Henry’s wife divorced him

and gained custody of their two children. Within a relatively short

time he changed from being the head of a wealthy family to a single

man paying a great deal of alimony and retaining little income—and

holding a fraction of the assets he had once held.

These stories demonstrate that before you can become a good

investor, you must be able to answer a plethora of questions and then

create an appropriate investment plan. What are your objectives? For

example, how long do you want to work? Do you want to stay in the

same career all your life? Where do you want to live? Do you want a

second home? Do you want to marry, to have children? Remember, if

your career path changes, you will need to alter your plans accordingly.

Plans are organic. Few people are like Walter, although few people

are like Henry, either—most of us lead lives that take a middle course.

Still, we all have to change our plans as our lives take unexpected

Investments 67

02 Chapter Maurer 6/20/03 4:57 PM Page 67

turns. But it’s not necessary to abandon your entire plan in the process.

You’ll simply need to modify it to match your life’s new circumstances.

When it comes to planning, your age matters. If you’re 60 and

have sold your lifelong business, your goals will be very different from

a person of 40. At 60, you may well want to preserve and protect your

assets, while at 40, you may want to plow all that money back into

another entrepreneurial activity. (If you did, we might counsel you to

think it over. It’s great that you’ve been so successful, but not everyone

can repeat their success, and you probably don’t want to risk every￾thing. It is, of course, always your decision. But a good investment

advisor helps you to see clearly what you truly want.)

Understand the lifestyle that makes you comfortable, and then

structure your finances around your needs and desires. If what’s most

important to you is to live in a nice neighborhood, drive a nice car, and

spend a month on vacation each year, how much money does that

require? Don’t kid yourself. Some people truly love the luxuries of life.

There’s no need to pretend you don’t. You’d just be lying to yourself,

and your investment advisor, if you said that you want to give a tenth

of your money to charity when what you really want to do is take that

money and buy clothes. The odds are that’s what you’re going to do

anyway, so you need to plan on it.

Do you know your own risk tolerance? If you can’t sleep because

half of your money is sitting in the stock market, even if that’s the

most appropriate vehicle for it, investing in equities still might not be

the best thing for you. For many people, knowing that their money is

subject to the variable nature of the markets makes them too nervous

to be good investors. We had many clients who started sweating when

the markets went south in 2000. Some called us and asked if they

should sell. We explained our long-term theory of investment. Some

of them still wanted to sell everything, and we accommodated those

wishes. It now seems that selling all your stocks might have been a

very good decision, because the markets are down 40 percent from

68 Rich in America

02 Chapter Maurer 6/20/03 4:57 PM Page 68