Live with emotion, invest with purpose

My father once told me the only constant in life is change and he couldn't have been more spot-on.

Throughout life, we all go through changes: career, our health, periodic changes in living arrangements relocation for career.

In our lifetime, we experience changes in income, from promotions or a job loss, perhaps progress or regression of an entrepreneur's business. You'll encounter exciting changes in household expenses from a growing family or maybe unexpected medical bills from an unfortunate prolonged illness. You get the idea: Dad's prophetic Mantra was this: "Change is constant in everything we do in life, including business."

Just like in life, changes are in flux, even when it comes to investing. Goals change, tax laws adjust, outlooks refresh. This is where a financial planner, wealth manager, or your financial quarterback can be the best protection for one's investments. The adviser assesses your situation with objectivity, minus the emotion that the individual investor tends to fall prey too.

Studies show that the average investor comes up short of the major domestic indexes consistently. The investor often times underachieves due to some obvious factors such as fees, taxes, trading costs, but some not so obvious, for example, using older investment vehicles like mutual funds.

It's best to try to give your portfolio the best chance it has at meeting your goals and expectations. Each and every recommendation that comes from your adviser should have a purpose to support it.

When selecting an adviser, it's imperative to pinpoint a leader with purpose. Good advisers will deploy purpose-driven strategies containing investment models and practices that should resemble the following:

First and foremost, utilize an adviser that's adept at setting up realistic expectations and works within those parameters. This step is essential to creating your personal investor policy. Expectations can be unrealistic, for instance, like attempting to outperform the S&P 500 over many years.

Working collaboratively with your adviser toward using investment vehicles that could give your investments a big advantage such as being able to emulate the Yale or Harvard University endowment funds can be highly advantageous, for example. Google "Harvard Endowment fund performance" and you'll find that in their fiscal year ending report June 30, 2016 that over the last 20 years the Harvard Endowment fund has returned 10.4 percent annualized versus the average annual return of the benchmark portfolio of 7.7 percent, the US 60/40 Stock Bond Portfolio of 7.3 percent , and the Global 60/40 Stock/Bond Portfolio of 5.6 percent. The Harvard endowment fund invests on information, not emotion and therein, lies the rub.

Second, good advisers are mindful of risk control when it comes to their clientele. Clearly, no one can control the future, but we can and do mutually decide a client's inherent level of risk.

An investor's level of risk will evolve and transition through life's journey. Risk levels should be selected and dictated using good information, dialogue, and avoiding impulsive choices.

Another critical area of importance when working with or choosing an adviser is communication and the monitoring of investments. Progress should be monitored, updated and communicated on an ongoing basis. Like anything else in life, consistent, purposeful communication is the benchmark for success.

Keep your forecasting realistic and understand the inherent problems that accompany forecasting. Any adviser will have to make reasonable assumptions along the way to project future progress and potential growth to meet their client's goals.

It's probably best when forecasting to not get a "target number" on a specific index but instead project with ideas like "its probably more likely stock will go up this year than down because of X, Y, and Z" or "bond yields should be going up but how quickly, remains to be seen."

One final thought I'd like to share is a wonderful quote by Ella Wheeler Wilcox which I absolutely love:

"One ship drives east and another drives west with the selfsame winds that blow.

Tis the set of the sails and not the gales which tells us the way to go.

Like the winds of the sea are the ways of fate, as we voyage along through life:

Tis the set of the soul that decides the goal and not the calm or the strife."

• Sean C. Gay is President and owner of Blue Oak Financial Services 1580 S. Milwaukee Ave. Suite 606 Libertyville, IL 60048. P: 630-773-0600 Licensed in CA, CO, FL, IL, IN, MI, MO, NJ, TX, WI. Security and Advisory Services offered through Ausdal Financial Partners Inc., member FINRA-SIPC. 5187 Utica Ridge Rd. Davenport, IA 52807 800-722-8732. Blue Oak Financial and Ausdal Financial are independently owned and operated.