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Greater Tulsa Reporter

First State Investment Offers ‘Gold Chip Philosophy’

Contributing Writer

SUCCESSFUL ADVISORS: Matt Redmond, left, and Sid Shupack of First State Investment Advisors believe in a strategy of investing exclusively in the highest quality large-cap stocks. Shupack founded the company in 1971.

LARRY LEVY for GTR Newspapers

Retirement planning is a daunting task, but in the right hands and right investments, one’s future can be as good as gold. This was the goal of Sid Shupack when he founded First State Investment Advisors in 1971. He built the company on what he called the “Gold Chip Philosophy”—a strategy of investing exclusively in the highest quality large-cap stocks—and it continues to pay off for investors nearly 50 years later.

“The secret,” said Shupack, “is having a deep understanding of the businesses into which you are putting your money.”

First State’s recently elected Vice President, Matt Redmond, CFA, agrees. “The problem many individuals face with their investments is that they do not actually know what they own. They might not understand the underlying businesses, or they may not know who is actually managing their portfolio and how that person is making decisions.”

Investor education is one of Redmond’s passions. At 27, he has worked to distill the wisdom Shupack, 83, has built up over a lifetime. He hopes to pass that golden wisdom onto investors, wherever they may be in their financial lives.

“We custom-tailor every portfolio to the individual,” said Redmond. “We review each individual’s goals, circumstances, and risk tolerance to design their ideal Gold Chip portfolio. We want to ensure that their philosophy aligns with ours and that they understand how we manage their assets.”

The Gold Chip philosophy laid out by Shupack in 1971 is the same followed today. It invests only in the most successful public companies that are worth over $10 billion, called large-cap stocks. These companies have the advantage of proven business models, expert management, relatively greater stability, and solid strategies for growth.

Gold Chip companies must also pay a stable dividend, have strong balance sheets, be leaders in their industry, and have instant product or company recognition. First State’s current five largest Gold Chip stocks are Boeing, Exxon Mobil, Wal-Mart, Texas Instruments, and Walt Disney. There are 35 Gold Chips in total, the remainder of which can be found on First State Investment Advisors’ website.

“One of my favorite benefits of Gold Chips is the confidence they give investors for their future. The high quality of these investments can reduce investor’s worries in an up-and-down financial environment. I want investors to be able to sleep soundly at night knowing that they, their future, and their children are well cared for,” added Redmond.

A common tool used in the industry is the “Rule of 72.” The Rule of 72 is a simplified way of calculating how long an investment will take to double at a given rate of return. Dividing 72 by an expected annual rate of return results in an estimate of the number of years before the money doubles.

The target average annual rate of return for a Gold Chip portfolio is 8 percent. This would mean that if the portfolio is successful in reaching that target, it will double in 9 years. An investment of $10,000 would become $20,000 in 9 years, $40,000 in 18 years, $80,000 in 27 years, $160,000 in 36 years, and $320,000 in 45 years.

Redmond often uses this example in educating investors on the importance of saving early and saving often. “Many individuals underestimate the amount they will need to retire. What seems like a large number now might not last for a 20 or 30 plus year retirement.”

“One frequently used estimate of how much you will need for retirement is 25 times the annual income you will want in retirement. This called the ‘4 percent Rule,’ based upon studies that have found 4 percent to be the highest withdrawal rate retirees could take from their portfolio for their money to last a 30-year retirement.”

Redmond concluded by emphasizing that it is never too early or too late to start planning for retirement. “No matter where you are at in your working career, the time to prepare and assure you are on the right track is today. If you are unsure where to begin, there are many experts who can assist in walking you through the process. Find one with qualified investment credentials whom you can trust to help you make the best decisions for your future.”

Updated 06-18-2018

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