Here we introduce you to the retirement planning and investment strategies and tools we call on for your financial well-being. These include:
Asset Allocation
Dollar Cost Averaging
Rebalancing
Annual Review
How much you invest in each asset class should depend on a variety of factors, including:
- your investment time frame,
- how much money you want to accumulate, and
- your comfort level with the inevitable ebb and flow of markets over time.
Younger investors may want to emphasize equities in their portfolio to take advantage of their historic growth potential.
Older investors may want to concentrate on the fixed-income (bond) portion of their portfolios for principal preservation potential.
How much you should have in equities (U.S. and foreign) versus fixed income is something to discuss with your investment representative as the appropriate asset allocation will be different for every investor. Asset allocation does not assure a profit or protect against loss.
Dollar Cost Averaging (DCA) involves automatically transferring assets ($50 minimum) from a checking or savings account into an investment account on a regular basis.
Continuous or periodic investment plans neither ensure a profit nor protect against a loss in declining markets. But they can take the hassle out of adding to your investments.
More importantly in this current environment, DCA removes emotion from investing, and allows natural market fluctuations to work in your favor.
When the market is high, your regular investments buy fewer shares. When prices are low, you purchase more shares. Overall, this strategy may allow you to lower your average cost per share compared to the average price per share you would pay in a fluctuating market.
Since dollar cost averaging does involve continuous investments in securities regardless of fluctuating markets, investors should consider their willingness to continue purchases during market downturns.
The asset mix that you and your investment representative agreed on will change over time. One year stocks may perform exceptionally well (or poorly). Another year bonds may over (or under) perform.
Over time, this market ebb and flow can knock your original asset mix out of whack.
If your asset allocation slowly but inexorably shifts, you could unintentionally undermine some of the keystones to defensive investing.
For this reason, periodic reviews and rebalancing of your investment portfolio is paramount to your success as an investor.
You turned to your advisor for help choosing your initial investment. He or she can also be a valuable resource helping you realize your goals.
An annual review with your financial representative can:
Uncover financial problems. This can include spending above your means, or saving too little or too conservatively.
Determine whether lifestyle changes warrant further attention. Has your family grown – or shrunk – since your last financial review? Perhaps you’ve had a baby or grandchild. Remarried. Or maybe your grown children have graduated and now you’re an empty nester. Any of these situations can impact your financial goals and how you should try to reach them.
Discover whether you’re taking advantage of new investment opportunities. Are you up on all the new IRA and 401(k) contribution rules? A financial representative can review recent legislative changes, and propose ways you might benefit.
Suggest ways to assist other family members. Do you have a child or grandchild planning to go to college? Congress has passed legislation here, too, that can make it easier to help loved ones reach their higher education goals.
Evaluate whether you have enough life insurance. As the years pass, your life insurance needs may change. With an annual review, a professional can help ensure that your current coverage is appropriate for your current need.
Ensure that your estate is in order. An annual review with a financial representative is one way to make sure your assets are registered in a way that makes the most sense from a tax perspective. It’s also a good time to review your will – or make one if you haven’t yet – so you’re confident your assets will be distributed according to your wishes,.
PLANNING AHEAD
It’s simply not possible to know in advance exactly when a market downturn will end, and a new surge will begin. But by practicing defensive investing, you and your financial representative can construct a plan that makes sense in good times and bad. Together, you can review that plan regularly. And make mid-course corrections as needed when life’s unpredictable events warrant.
To talk to us about a retirement plan or investment planning that makes sense in “good times and bad,” call Brad, Ken, or Lon at 402-397-1900 or send an email to RJFSWestOmaha@raymondjames.com for a no-obligation consultation
