An Introduction to Power of Five Investing

In the beginning, investing seems really complicated. And honestly, it can be. Much of our job is breaking down the complex nature of the markets, investment options and investment strategies – and helping our clients do the same.


Many of our clients come to us sometime in their 50s or 60s thinking about retirement. This is when they're confronted with uncertainty. We hear questions like, "Will I really be able to retire?" and "What will retirement look like for me?"

They value safety and stability, but many of them don't have it yet. They aren't asking for a billion dollars; they just want to feel confident that everything will be all right. Our job is to give them that. We show them what's possible and get them on the right track.


How? Everything we do revolves around the Power of Five Investing framework. We believe so strongly in this framework, we quite literally wrote a book about it! In this blog post, we'll go through the principles from a high level to give you a solid grasp on the framework and what makes it work.

  1. The Five Steps of Investing

The first principle is a disciplined five-step process for managing your investments. It includes advice and planning, portfolio modeling and design, selecting someone to manage your investments, implementing your plan and monitoring and reporting on your progress.


  1. Live on Five Percent

This principle is all about how to set up your retirement for success by living on a four-to-six percent withdrawal annually. It flows directly from the first principle, and helps you stay on track—no matter how many years of retirement you have.


  1. Five Years of Stability

Setting aside part of your retirement in low-volatility investments is key to staying the course. We recommend a dollar amount equivalent to five years of your total retirement expenses.


  1. The Five-Percent Limit

We’re back to percentages with the fourth principle, The Five-Percent Limit. Our focus in planning your portfolio is to ensure that no single holding focused on growth is more than 5% of your total portfolio. Some call it diversification. We call it common sense.


  1. Five Words of Wisdom

Our last principle is something clients come back to over and over. It’s just five simple words that help keep you on track and put your mind at ease as markets fluctuate.


Principles for Success

A successful retirement – however you define it – is the goal, and these are principles can get you there. In fact, they've served that aim for decades, through the good times and the bad. Markets don't go up in a straight line – at least not forever. We've been there for people during the ups and downs, and it was these principles that helped remove any doubts our clients may have had about their financial future.


With these principles, you can stop chasing the ever-elusive investment “Holy Grail” or magic formula. These principles are timeless and effective. You can find confidence in solid good sense: if it worked through the Great Recession, it will work through anything.


In the coming weeks and months, we will be releasing more blog posts that explore each of these principles in-depth. Our goal is to steer clear of the jargon and help you understand each of these principles from a down to earth, common-sense perspective.

Do you like our principled approach to investing? Get a copy of our book, Power of 5 Investing!