Investment Philosophy


Before you choose to work with a financial professional, it is important to understand their investment philosophy. This philosophy should act as a set of guiding principles whose threads are carefully woven through all their client relationships.

The basis of our philosophy is the fact that many people only save and invest money for one reason; to spend it. Whether the plan is to spend their funds during retirement, for their kids’ college, for a new home, for charity, inheritance, or a rainy day, many people save and invest to spend. If the money that is intended to be spent is not available when it is needed, then a problem exists. Enter the need to protect your hard-earned assets.

Before we can protect something, it is important to know what we are trying to protect it against. At Swanson Financial, we work hard to protect people against what we call "The Three Bad Things That Happen to Money". First, we must protect from low interest rates. We are currently smack dab in the middle of a low interest rate environment. We have seen 1-year CD rates drop from around 7% to somewhere around 2%. As important as CDs are in providing principal stability, dramatic reductions in short-term fixed interest rates can have a devastating effect on immediate income.

On the other hand, we also must protect against rising interest rates. Rising interest rates can have a dramatic downward effect on the prices of longer-term, more rate-stable fixed-interest investments like corporate or municipal bonds. As important as intermediate-term and long-term fixed-interest investments can be in providing dependable income, we must protect from their potential price volatility.

Perhaps the most important risk we must protect against is inflation. Inflation, also known as the devaluation of the dollar, is one of the greatest risks our money faces. Inflation acts like a piranha, steadily and tirelessly devouring the buying power of our hard-earned money. There are many ways of calculating both the current and historic average inflation rate, but suffice it to say that the stuff we buy - gas, milk, eggs, rice, coffee and postage stamps, cost us more every year. If a part of our money doesn’t work hard enough to outpace the effects of inflation and provide a source of rising income, then there may be trouble looming on the horizon.

There is actually a fourth danger we must protect against, and we will cover it in depth in a later article. The fourth danger is the premature loss of income as a result of death or disability.

How well protected are your assets and income? Our financial planning analysis is a good way to find out.


David Swanson
President