Investment Advisers - They're Just Like You and Me

My husband and I have an investment account together that we use for long-term savings. For the most part, it consists of individual stocks of companies we invest in Iowa Wealth Management (IWM) models, the same companies that our clients are invested in. We believe in eating our own cooking! On the rare occasions, we step outside of not just IWM models, but our prudent investor process as well. These "flyers" act as investments and investment research opportunities, testing and educating us and, hopefully, providing a profitable experience as well. Let me tell you about my best and worst experiment.

My best investment in 2021 was purchasing Tesla stock (a measly 12 shares, I might add). My worst investment in 2022 was purchasing Tesla stock in 2021.

I can hardly say I was "investing". I was speculating, a key rule that we do not break with our clients' money at Iowa Wealth Management. Tesla does not meet the strict criteria for our prudent investor process. The selections in our models should encourage investors to buy and hold, maintain their investment strategy and not give the investor reasons to make frequent changes. They also require durable sources of income, specifically in the form of dividends.

Long-term investors can expect to get the long-term rate of return in their portfolios... if they can maintain their investment strategy. To put it mildly, Tesla's unstable stock price, the company's lack of true management and most importantly - it's lack of dividend income - makes me want to jump out as quickly as I jumped in.

Let my personal lesson be an example to our clients that asset quality matters in your portfolio. Although the perceived value, or price, of an investment is important, the quality of the company's balance sheet, the cash flow it generates, and the durability of the company's dividends provide far better predictions on it's worth as a long-term investment.