7 Steps to a Better Investment Approach
Meaningful Conversations about Money
By Robert Fezza and Steve Siders
Are you an investor? We sure hope so, as it is the best way to build wealth to fund your retirement goals. We also realize it’s not easy. It takes time, knowledge, patience, and a disciplined approach. Everyone can do it, but not everyone does it well. Read on to learn how.
The Brexit vote on June 23rd reminds us of the old proverb, “the more things change, the more they stay the same.” Did you follow the market volatility during the days before and after the vote? Did you react emotionally and make changes to your portfolio?
Despite the global selloff of stocks after the vote, the S&P 500 index* rallied as it reached new all-time record highs July 11th, 12th, and 13th (as of this writing), which were the 109th, 110th, and 111th record highs of the current bull market. Did you participate in market gains?
Market volatility can be unsettling, and emotions can wreak havoc on your investment returns if you let them. The stock market is unpredictable, because there will always be a “crisis of the moment”. So embrace it. Accept that your emotions create fear, but don’t react to it (by pulling out of the markets). Investors that attempt to time the markets do so at their own peril. The results above are yet another example of this.
The best way to grow your portfolio is to follow a good investment approach and to invest in a proven investment strategy.
Here are 7 time-tested steps to a better long-term investment approach**:
1 Identify each of your major financial goals, and set a deadline for each.
2 Have a meaningful conversation about your tolerance for risk, so that you can stay invested during the next “crisis.”
3 Develop an asset allocation (stocks vs. bonds vs. cash) in line with your risk tolerance, so you can clearly understand the pros and cons of investing for each goal.
4 Based on the asset allocation you can develop an “expected return.” This may be 7–8% for long-term goals vs. 1–3% for short-term goals.
5 Calculate how much you need to save to have a reasonable expectation of achieving each goal.
6 Save on a regular and consistent basis, and do not make emotional decisions (as a result of the latest crisis of the moment).
7 Review and make adjustments on a periodic basis. You can control the amount you save and/or change your goals, but you can’t control the investment markets.
If you don’t have an investment strategy, or don’t have confidence in the one you have, seek help! Life’s a journey, navigate it wisely.
* Investors cannot invest directly in indexes. Index performance is not indicative of the performance of any investment and does not take into account fees and expenses associated with investing.
**All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.
Robert Fezza, CFP® and Steve Siders, CFP® own Odyssey Personal Financial Advisors, 500 Sun Valley Drive, Suite A-6, Roswell, GA. Their firm specializes in working with people who are serious about making progress towards their financial goals. Odyssey manages portfolios greater than $500,000. 770-992-4444, www.odysseypfa.com. Securities offered through Cetera Financial Specialists LLC, member FINRA/SIPC.
College Planning Workshop
THURSDAY, AUGUST 25, 2016 from 6:00 – 8:00 PM @ HEMBREE PARK RECREATION CENTER
Odyssey is pleased to partner with Jim Anderson of Making College Worth It for an informative workshop to educate you about finding the right fit for your student academically and financially.
This workshop is intended for parents (and students) of children attending middle school through high school. As this is an educational event we encourage you to invite friends and neighbors as your guests. Please help us spread the word. ALL ARE WELCOME.
Hembree Park, 850 Hembree Road, Roswell, Georgia 30076 Refreshments provided.
Please RSVP by Monday, August 22, to Jan Ingersoll at (770) 992.4444 x1 or firstname.lastname@example.org.