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Establish Lifestyle Return Benchmark

The next step is to take what we have learned about you and your lifestyle, and to establish your Lifestyle Return Benchmark™ (LRB).

The LRB is the number that you need to earn on your portfolio to make your lifestyle goals and aspirations come true.

The LRB process will convert your lifestyle goals and aspirations into your personalized return objective. Additionally, it will act as your custom return benchmark as opposed to a relative and often random benchmark like the S&P 500. The S&P 500 has nothing to do with who you are, so it is a mistake to measure your investing success by it.

We establish your LRB through our proprietary required rate of return (RRR) process. Each year we will compare your LRB with the actual return on your portfolio to ensure you are moving in the right direction. If you are not on track, we will reevaluate your plan and make any necessary portfolio adjustments that are economically possible. Moreover, we will educate you on the other options you have to stay on track.

Investing success hinges on the integration between the investor’s unique circumstances and the prudent identification of long-term strategies that are positioned to achieve client goals with the highest probability of success.

At SFM, we take a different approach to constructing your portfolio by reverse-engineering your required rate of return (RRR) and using it as your Lifestyle Return Benchmark™.

The RRR Process

Use your LRB to build your portfolio

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Okay, your lifestyle has been converted into a real number that actually means something to you. So now what? Now it is time to take your LRB and use it to build your portfolio. The goal is to build you a portfolio that has a good chance of achieving your LRB with as little risk as possible.

Remember that there is a tradeoff between expected return and risk and that some investors are strongly risk-averse, while others are more tolerant of risk. Therefore, it is very important that we build you a portfolio that is respectful of your ability and willingness to take risk while also providing you with an above average chance of meeting your LRB objective.

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