Commitment to the Client: Chemical Bank Wealth Management’s philosophy is deeply rooted in the tradition of providing personalized investment services to each client. Our mission is to design and maintain portfolios that provide the income, growth potential and risk tolerances that match our clients comfort levels and exceeds their financial expectations.
Staff:At Chemical Bank Wealth Management, we believe high-quality service begins with a well-trained diverse staff. We are recognized in our field as leaders in estate planning, employee benefits, trust administration and portfolio management. Our staff of professionals has been managing investment portfolios for almost 50 years.
Experience: Our staff is comprised of seasoned professionals with experience in the fields of banking, trust and investment services. We are recognized in our field as leaders in estate planning, employee benefits, trust administration and portfolio management.
Objectivity: At Chemical Bank Wealth Management, our investment team employs an “open architecture” approach to investing your funds. An open architecture system adapts to your needs rather than forcing you to adopt the limitations of the financial institution. Our process of investment analysis ensures that your portfolio includes the most suitable investments based on your goals.
Investment Discipline: In delivering investment management services, our goal is to provide clients with a comprehensive personalized investment program that considers sound economic financial principles and adheres to the Prudent Investor Rule. The Prudent Investor Rule is a legal doctrine which provides guidance to investment managers regarding the standards for managing an investment portfolio in a legally satisfactory manner. Our decision-making process will focus principally on long-term investment results within the confines of our client’s risk tolerance.
Independence: As a regionally owned financial institution our overriding mission is to serve the financial needs of each client. Successful completion of our mission supports the communities we serve and ultimately enhances shareholder value.
Evidence has shown that successful investors have typically developed a written plan identifying their financial goals. While there are no magical formulas to make one a successful investor, a well-defined investment plan can be as easy as six simple steps:
- Identify goals: Determine your investment goals, assess whether you’re investing for college, retirement, a home or a combination. By identifying your goals, an investment strategy can be structured to provide a road map to achieve investment success.
- Determine Time Horizon: How long do you have until you’ll need the money? Establishing appropriate time frames is instrumental in determining proper asset allocation guidelines.
- Define Investment Style: As you begin your journey into the world of investing, it is important to understand your investment style. In other words, what is your risk tolerance? Some investors are risk takers by nature while others prefer the security of cash in the bank. Most investors fall somewhere between these extremes. They are willing to assume some rick and understand the potential rewards associated with it. One’s style is determined by age, personality, financial experience and financial circumstances.
- Finalize Asset Allocation: Asset allocation is the way in which you apportion money across various classes of investments, including stocks, bonds and cash reserves. The objective is to select an allocation that supports one’s goals at a comfortable level of risk.
- Achieve Diversification: You can reduce the level of market risk in investing by distributing investment dollars among different asset categories (i.e. money market, fixed income and equities) as well as selected industries and sectors.
- Monitor performance: Frequent monitoring of one’s performance is a recommended discipline. Don’t focus on one investment; rather keep your eye on the big picture. If your portfolio begins to drift from the allocation, evaluate your preference and rebalance.
Achieving your financial goals through a defined investment plan will be an evolutionary process and success will not happen overnight.
The asset allocation decision, or how a portfolio’s investments are divided among different asset classes, has the largest impact on the overall performance of your account. According to Markowitz’s 1990 Nobel Prize winning theory, almost 92% of your investment returns depend on how your assets are allocated among the different classes, while only 2% is due to the actual investment selection. Asset allocation has a more significant effect on performance returns than industry weighting, stock selection, market timing or any other portfolio management decision.
Your asset allocation should reflect your current investment objective. An investment mix that suited you when you began investing may not be appropriate today. Just as one progresses through an evolutionary life cycle, your investment objective will encompass a similar pattern of change. Major changes in your personal life and financial situation should also prompt you to assess the appropriateness of your asset allocation.
The goal of diversification is to protect the value of your overall portfolio against the swings in the marketplace. When a portfolio is diversified, investable dollars are invested across different asset classes or types of securities with the intent that the different investment alternatives should counterbalance one another and help reduce risk. Diversification cannot eliminate the risk of fluctuating prices but it can reduce overall portfolio volatility.
Cash reserves: Cash reserves are monies that you don’t need to invest or spend immediately. You still want this cash to be earning as much interest as possible until the investment decision is made. Cash reserves are noted for their liquidity and stability and, in most instances, safety is a consideration. Three of the most popular cash reserve instruments are money-market funds, certificate of deposits and short-term Treasury Obligations.
Bonds: Bonds are debt securities where the holder of a bond is a creditor of the issuing entity. The bond represents a loan from the issuer and the holder is entitled to a specified rate of interest over a specific time period in addition to the face value of the instrument at maturity. Bonds are ordinarily chosen for the potential fixed income and capital preservation they may offer. However, this doesn’t mean that bonds are without risk. When considering bond investments it is important to analyze the five types of risk:
- Credit risk/quality - If the issuer is unable to pay interest and principal when due, the bond is in default. The smaller the chance that the issuer will go into default, the higher the bond’s quality.
- Liquidity Risk: This is the risk that should you want to sell your bonds before maturity, you won’t be able to find a buyer. All things being equal, those bonds which are less liquid typically offer potentially higher yields to compensate the investor for the added risk.
- Interest Rate Risk: If interest rates rise, bond prices usually decline. If interest rates decline, bond prices usually increase. Thus, the longer a bond’s maturity, the greater the impact a change in interest rates can have on its price. If you don’t hold the bond until maturity you may experience a gain or loss when you sell the bond.
- Prepayment Risk: Some bonds have call provisions which allows the issuer to pay off the existing bonds and then re-borrow the face value at a lower rate. Prepayment risk is the risk that the issuer of a security will repay principal prior to the bond’s maturity date, thereby changing the expected payment schedule of the bonds.
- Reinvestment Risk: During periods of declining interest rates, investors may be forced to buy new bonds at lower, prevailing interest rates as existing investments reach maturity and/or are called.
Stocks: Common stocks are equity securities as they represent partial ownership in the issuing corporation. Stocks offer two components of return: dividends and capital gain or loss. Neither the stock’s future price nor the payment of future dividends is guaranteed. In assuming this risk, the stockholder usually has the opportunity to earn greater investment returns than those provided with cash reserves and bonds.
A mutual fund is an investment company that pools the money of many investors and invests in diversified portfolios of stocks and/or bonds. The primary advantages of a mutual fund are that they offer professional investment management, research and record-keeping. Challenges associated with the ownership of a mutual fund are that the investor cannot control what assets are held and it may be difficult to match individual investment objectives and philosophies with those of a mutual fund. Mutual funds are often used if the dollar amount to invest is limited or expertise in a special field of investing is required (international, alternative investments, real estate).
An ETF is a collection of securities that are tracked and is intended to represent the performance of a broad or specific segment of the market. Like index mutual funds, ETFs allow investors to track hundreds of domestic and international indexes, including the S&P 500® and the Dow Jones Wilshire 5000SM, as well as specific sectors or industries (e.g. utilities, technology or healthcare). Like individual stocks, ETFs give investors the flexibility to buy and sell on the major stock exchanges throughout the day, at the current market price.
Compounding lets you earn interest on your interest. The way your money may grow through compounding is the greatest single benefit a long-term investment plan can offer.
Let’s evaluate two individuals who invest on an annual basis for a specified period of years:
Jane began investing, at age 22, $1,000 per year and earned a hypothetical 8% growth rate on her investment. She continued to contribute every year between the ages of 22 and 65, for a total contribution of $43,000. At age 65, she will have $279,781.
Dick started investing, at age 32, $1,000 per year and earned a hypothetical 8% growth rate on his investment. He continued to contribute every year between the ages of 32 and 65, for a total contribution of $33,000 (or $10,000 less than Jane). At 65 he will have $122,346, which is approximately $157,435 less than Jane.
Assumes $1,000 annual contribution and 8% growth rate, is not representative of any specific investment. Your plan's performance will vary.
There is no guarantee that you will be able to attain 8% annual rate of return. This example is for illustrative purposes only.