Clients often ask us – “where should Adrian Day Asset Management fit into my investment plans?”, “what type of Adrian Day Asset Management account should I open?” and, in similar fashion - “how much should I put in my account?” We feel that the best way to answer these important questions is by providing several hypothetical examples which are somewhat representative of real-life situations that we deal with on a regular basis.
Mary Jones is a 63 year old widow. She is in good health and has no dependents living at home. Her assets are her house (no mortgage), life insurance & annuities (worth $400,000), a taxable account of $500,000 and retirement account (IRA) just inherited from her husband ($1,000,000).
According to the calculations made by her adult son, Tom, she needs an income, apart from social security, which she will start to collect in a few years, of about $50,000 to fund her un-extravagant lifestyle.
Mary wants to be involved with her investments, but not to the extent of making day-to-day decisions. She has determined that she wants to invest some of her money globally for growth purposes and to maintain some exposure to natural resources, which had been a great interest of her husband’s. So, what would be our recommendation for Mary?
We would suggest that Mary put $400,000 of the funds in the retirement account into the Adrian Day Asset Management Conservative Account. This account is our most broad-based account and is intended to provide stability of capital as well as steady appreciation over the years through a portfolio of good quality stocks around the world together with an allocation to natural resources including gold, when appropriate.
The balance of Mary’s assets remains available to generate the income that she requires and/or to provide growth using strategies other than those in which Adrian Day Asset Management specializes.
Frank Smith is a successful 60 year old entrepreneur with an engineering background. He recently sold his firm, which developed a new type of coating for brake pads, to one of the major auto manufacturers and netted $25 million. He plans to reserve up to $10 million – despite his wife’s strenuous objections – to invest in a new company to be run by his son, but he will retain $15 million for investment purposes.
He has decided to place $12 million in a portfolio of NY state municipal bonds. These bonds will provide him with a comfortable tax-free income in the early days of the new company. The balance of $3 million will be invested with 3 – 4 money managers following different styles.
Frank’s interest in A.D.A.M. derives from his knowledge that we manage portfolios of gold stocks. Although he is an optimistic person at heart, he has a lingering concern that global terrorism and the possibility of inflation may threaten global financial markets. Our proposal to Frank is to place $1 million in a dedicated Adrian Day Asset Management Gold Account.
The gold account is exclusively invested in a portfolio of gold stocks around the world. Some will be “seniors”, large producing companies, others will be “juniors”, firms that have only recently started to produce gold and a few may be “development” enterprises with no production, but perhaps great prospects. The $1 million investments should be seen as an insurance policy, designed to perform in difficult economic times. Although a large sum for a volatile sector, given his investment in munis, which provide steady income, such exposure is appropriate.
Mike Newby is a young physician, married with 2 children. Although he earns a comfortable and rising income, his investable assets consist primarily of a recent legacy from his grandmother of $400,000 and a SEP IRA with $200,000 in conservative mutual funds.
He plans to put half of the legacy into a substantial down payment on a new home for his growing family. The balance is to be invested for strong growth with an eye to global markets. Due to his age, 32, Mike’s time horizon runs into several decades. He can afford to be aggressive with his investments, so our recommendation is to invest in the Adrian Day Asset Management Aggressive Account. Although this account is not an actively traded, speculative account, it does look for “higher octane” opportunities; up to 50% of the account may be invested at any one time in the natural resource sector.
Note: These examples are hypothetical and for illustration purposes only. They do not take into account the multiple different circumstances which exist in real life.