General Investment Philosophy

G.W. Henssler & Associates, Ltd. works with a simple, yet comprehensive financial planning strategy called the Ten Year Rule. The basis for our Ten Year Rule is:

	GWH believes it is imprudent for an investor to be forced to sell equity investments during a period of depressed stock prices in order to generate funds to cover spending needs.
	GWH finds that many investors are either too conservative or too aggressive with their financial asset allocation.

The GWH philosophy is that any money a client needs within 10 years should be invested in fixed income securities, and any money not needed within 10 years should be invested in high quality, individual common stocks or mutual funds that invest in common stocks. GWH implements this philosophy by running cash flow projections, recommending the purchase of fixed income securities to cover liquidity needs within the next 10 years, and the purchase of equities with any remaining funds.

First, GWH estimates a client's liquidity needs by running cash flow projections. Liquidity needs refer to the difference between after-tax income and desired after-tax spending for any given year. The projections are based on information provided by the client, including asset values, expected sources of income, and plans for retirement. These projections will help determine reasonable expectations involving a client's savings goals, desired spending in future years, and expected retirement date. GWH runs several projections for clients to help determine which course of action will most likely allow the client to meet his financial goals. Common goals include an early retirement date, a certain desired spending level in retirement, a dream home, or some other large purchase.

Next, GWH recommends purchasing fixed-income securities to cover the client's next 10 years of liquidity needs. A money market fund or other cash equivalent is appropriate for emergency reserves, or for funds needed over the next 12 months. GWH recommends that additional liquidity needs should be covered with the purchase of fixed-income securities with maturity dates and amounts that correspond to those needs. GWH recommends either U.S. Treasury securities, or high-grade municipal bonds from the client's state of residence, depending on the client's projected tax bracket. GWH does not recommend the purchase of bond funds, as the principal is not guaranteed as of any particular date.

Finally, GWH recommends the client purchase high quality, individual common stocks or mutual funds that invest in common stocks with any funds not needed in the next 10 years. GWH recommends only common stocks that meet the GWH strict financial criteria, or mutual funds that meet certain guidelines.

By following this strategy, the client's asset allocation will be specifically geared towards his unique needs. At GWH this is believed to be a more effective method of determining a client's appropriate asset allocation than simply plugging a client's age into a formula. Each and every client has a unique situation, and unique needs. GWH's approach attempts to take all available information into account when determining the appropriate stock/bond mix.