Make Mine a Treasure Chest

The outgoing governor, international press, and local mucky-mucks all sat silently as the historical time capsule was opened at the Museum of Fine Arts. Originally placed in a cornerstone of the Massachusetts statehouse by our forefathers, the contents could provide more clues to our colonial past. The crowd was transfixed, what was in the box? The possibilities seemed endless that January, 2015 night

Well, while historically significant, the artifacts left some people disappointed. Our colonial fathers did not make much so they did not have much to leave us. Observers hoping for a miniature swan boat, a prototype Jordan Marsh blueberry muffin, or maybe a coveted invitation to Kathryn Whites’ birthday party were in the wrong place at the wrong time. What the time capsule held were coins, old newspapers and a silver plate. Only the history buffs were fascinated.

What does your time capsule hold? Before you say you don’t have one, let me explain. Your time capsule is the box or desk drawer holding all your mutual fund statements that you never review. The may be IRA’s’, 401k’s, 403B’s etc. that you have not looked at because you think everything is just fine. But is that what you want to settle for, “just fine?” Take the advice of legendary money manager Peter Lynch: “You have to know what you own and why you own it" and you will likely do better than “just fine.”

The Wicked Smart Investor has unearthed many surprises when reviewing people’s dust covered investment statements. I don’t even have to lie on a wooden plank and chip away at stone like MFA conservator Pam Hatchfield did to remove the colonial time capsule. While some of the investments surprises I find have come out of left field, most of my discoveries usually involve three critical issues.

First, a frequent discovery is the investments are not proper for the investor’s risk tolerance. The investments could be too risky; conversely the investments are not risky enough. The only way investors earn a return in the stock market is to take risks, but if the risk level is too high and causing lost sleep, it’s not worthwhile. It’s prudent for investors to assess their risk level first then select proper investments.

Next, a robust analysis proves investors are not as diversified as they think. You may own several mutual funds with glitzy names from Greek mythology or space age buzz words and think you are diversified, but you’re not. Managers at the larger funds frequently purchase the same stocks because the companies are deemed “hot stocks.” Many times, the “hot stocks” don’t live up to the hype. By not diversifying, you likely are missing out on the stocks that usually give the best performance over the long run.

Finally, a qualified advisor may point out that you are paying too much in expenses. Quick, without looking at anything, how much are you paying in expenses? Most investors have no idea, but the more you pay to the mutual fund company, the less goes into your time capsule. Over time, what seems like small dollars adds up due the compounding math. I’m sure you agree that the money would look much better in your account.

It’s all your choice. You can place your investment statements in a time vault and maybe do “just fine,” or review your portfolio with a qualified advisor and maybe build a jammed packed treasure chest. Getting your financial house in order doesn’t take the effort of an archaeological dig and it may be the best gift you leave for your future self.

Chris Hanson is a CPA that specializes in financial planning at OakTree Capital Partners in Easton. He earned his BBA at the Isenberg School of Management University of Massachusetts and an MBA at Babson College's F. W. Olin Graduate School of Business.