What are your investment goals? That’s one of the first questions we ask our Private Bank clients. Some investors know immediately what their goals are — but many aren’t as sure.
Is your objective to significantly grow your money? Do you want to rely on your investments to generate a steady income? Or do you prefer to reduce risk and focus on preserving your principal?
Knowing your investment goals can help you and your client advisor make the right decision for you when constructing your portfolio.
To help achieve customers’ desired outcomes, Huntington’s Private Bank generally organizes client portfolios around three investment outcome objectives. John Augustine, our chief investment officer, explains.
What are the main investment objectives that Huntington organizes its client portfolios around?
Based on our experience managing clients’ investments over the decades, we’ve found clients typically have one of three investing goals:
- Capital appreciation is a portfolio in which the outcome objective is to produce returns that exceed the inflation rate so investors can build future purchasing power and wealth. Our goal is to produce at least a 6% real return over the inflation rate.
- Income generation is for investors who want to produce a growing income distribution while leaving the principal alone.
- Principal preservation aims to cover the inflation rate — around 2-3% in recent years — with the least amount of risk and volatility.
How should an investor determine which investment objective to pursue?
There are a variety of factors investors should consider when trying to determine which type of investment outcome. Here are a few:
- Willingness to accept that market values of accounts will go up and down during economic cycles
- How much current income one needs
- Unique tax circumstances
- Unique asset circumstances
- Time horizon for the account
We carefully review these factors and others with clients to identify the right strategy. We also check in regularly with them to ensure we’re on the right track and that their goals haven’t changed. With this information, we employ our best thinking as a firm to guide our clients’ portfolios through economic cycles to meet their outcome objectives.
Can an investor have more than one investment outcome?
Absolutely. It’s very possible to have all three investment objectives in play at the same time.
As investors, we all have different goals beyond these core objectives, but capital appreciation, income generation and principal preservation are effective ways we can connect with our customers around outcome objectives and surpass the benchmark.
How do you typically structure your portfolios?
As we structure the capital appreciation, income generation and principal preservation portfolios, we focus on answering three key questions:
- Is this portfolio diversified enough, but not too much, within the asset groups that we follow, so that at least one group is going up in value when markets swing up or down?
- Then, is this portfolio in the best position, given where we believe we are in an economic cycle?
- Lastly, what can we learn from past performance that can enhance our future decisions?
We’re constantly monitoring and evaluating our portfolios to ensure we’re doing the right thing for our clients who entrust us with their assets.