In this article, the first in a short series, we describe a hypothetical investor who would be well-served by Peloton’s Custom Portfolio management – one of our four investment strategy and management offerings. 

The Need

Jim has always been a saver. Ever since he bought his father’s company 30 years ago, he’s found a way to live below his means and save for the future. The business is strong now, and Jim is happy to have reached an agreement to sell it to his children over the next 5 years. His two main investment assets are a 401(k) with a $2 million value, and the 5-year installment payments on the sales of his business, $500,000 each.

The transition from manager/saver to retiree/spender is more challenging than Jim thought it would be. He knows how to drive value for his former customers and create income from the business, but he’s not sure how to approach managing money to support his retirement. How much can he spend each year and not run out of money? He knows he needs some growth, but what’s the right level? How will he identify assets to generate cash flow? How can he ensure that his investment costs are fair, and that his manager is making decisions in his best interests?

The Peloton Solution

Jim approaches Peloton to learn about a custom investment portfolio solution. Peloton begins by asking Jim to describe his financial needs and concerns. They then help him quantify his spending plans and determine whether his assets can reasonably support this level cash flow. Peloton provides a comprehensive proposal, detailing how they would use individual stocks and bonds to build a fully diversified portfolio. His custom portfolio would have a mix of growth-oriented stocks, stocks with growing dividends, corporate bonds, municipal bonds, and cash.

The exact mix of stocks, bonds, and cash would be specific to Jim’s portfolio. The composition of individual stocks and bonds would be tailored to his unique spending needs, growth strategy, and risk profile. Other than minimal trading commissions paid to the broker, Jim’s only cost is Peloton’s asset-based management fee. For Jim’s initial $2,000,000 portfolio value, Peloton’s fee would be 0.85% of assets annually. And as Jim invests his future installment payments, his average fee rate will decline with higher portfolio values. When funds are added in the future, Peloton seamlessly incorporates them within the portfolio according to the overall strategy.

Peloton currently has capacity to accept new clients, and we welcome your Custom Portfolio referrals for anyone you know who sounds like “Jim” described above. Next quarter, we’ll describe an investor ideally suited for our Core Growth Strategies.