Things Every Investor Should Know Before Investing

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March 22, 2018
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Due to the nature of my profession, I am solicited for financial advice in all aspects of my life from all types of people. Similar to a doctor who gets asked about symptoms at birthday parties, people often ask for my opinion or input on financial matters, particularly investing. As most doctors will tell you, it’s hard to give advice when you don’t know the particulars.

However, if someone is really eager or serious for guidance on investing, I will suggest that they do their homework. The information they’re looking for isn’t found on the stock exchange or the Finance section of a newspaper.  Most times, the information you need to start with is found a lot closer than you would expect.

The first thing to take into account are your financial goals. As I’ve mentioned before, being aware of your financial “why” can highlight good habits, change inefficient patterns, refocus priorities and ultimately develop a plan to help you achieve your financial freedom. Therefore, you need to be specific. Do you want to retire in 30 years? Perhaps you want to buy a house in five years or start a business in two. In these scenarios, your goals act as targets, and with the help of a good financial planner, you can develop an action plan with measurable steps to incrementally achieve them.

Another thing to be aware of is your risk tolerance. This isn’t a measure of whether you like to bungee cord jump or skydive. Rather, this is an indication of how much volatility in your investments you are comfortable with. This is something that needs to be determined for the individual as well as the household. Risk tolerance is a very personal indicator, and there are times that couples don’t see eye to eye. When new clients come in, we have them complete a risk tolerance questionnaire to not only to see how individuals may or may not be working together but to also figure out the most effective plan to achieve their goals. The last thing we want you to do is tackle investments that won’t achieve your goals in a timely.

As you can tell, these items are all very personal. What you’re saving for, how long and hard you’re willing to work towards your goals, and what your income and lifestyle needs are, both current and future, will all be factors in planning how to invest. I bring this up because so many clients come in referring to the advice their friends, neighbors or coworker gave them. As I’ve mentioned before, I’m all for educating one’s self. Let’s discuss your options. But please don’t think that investing in what your child’s Little League coach is investing in is automatically the best option for you.

Let me put it another way. I’ve been athletic all of my life, playing high school and college baseball and an avid golfer. Knowing that, I’m not going to start a new exercise regime with a leisurely walk around the block or bench pressing 400 pounds. It’s not that I don’t believe these fitness goals are valid – they’re just not valid for me. The same idea can be applied to your finances. If any of the factors I’ve mentioned are not aligned, you may discover that the grass isn’t always greener on the other side, and that you need to be wary of the barb wire in between.

I know it sounds odd, that investing should be more complicated. But the truth is knowing your financial self is much important than knowing the stock market when you first start investing.

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By
Windus Fernandez Brinkkord, AIF®, CEPA
January 8, 2019

Insurance is a necessary component to creating a financial plan that works well for you, your family, and your long-term goals. It can take just one illness, one job loss, or one car accident to turn your world upside down and crumble your financial plan.

If you have the proper insurance in place from the start, however, you can weather these life-changing moments and keep your goals and dreams on the right trajectory.

  1. Auto Insurance – Auto insurance is a must and not just because the law requires that you carry it. Auto insurance can protect your assets in the case of an accident and make sure that not only can you shoulder liability in an accident but you can also get back on the road with a car that will carry you safely to and from work. Full coverage is especially important if you owe money on your vehicle. No one wants to keep making car payments on a vehicle that was totaled in an accident.
  2. Homeowners or Renters Insurance – You have worked hard to provide for your family and homeowners and renters insurance can protect you and get you back to where you were in the case of a natural disaster or a home break-in. Depending on where you live, you have seen the damage that can be done by tornadoes, earthquakes, floods, and more. Be sure to check that your policy covers the weather most likely to wreak havoc in your neck of the woods.
  3. Life Insurance – Life insurance is absolutely necessary for any individual who supports another individual. So, if you are married or you have dependents, then you definitely want to make sure that their needs are covered if you meet an untimely death. Think about what life would be like for your dependents without your income and choose the amount of life insurance that you need accordingly.
  4. Health Insurance – Health insurance is such a smart choice. Medical costs have skyrocketed and long-term illness or serious injury can drain your savings fast. Having health insurance goes a long way in keeping your household doing well financially in the midst of a health crisis. If you do not receive health insurance through your employer, take the time to talk to your insurance agent about it.
  5. Disability Insurance – If you work you may already be getting this type of insurance through your employer. Look at the specific plan and if you are not getting enough coverage through your workplace then you may want to consider getting some through your agent or broker.

Disability insurance is important because it keeps your household operating during a long absence from work due to illness or injury.

Now is the time to make sure all of your “insurance ducks” are in a row. Catastrophe may never hit, but if it does, you want to make sure that you and your family are covered.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

By
Rebecca DeSoto, CDFA®
March 12, 2018

Each of our lives is comprised of elements that create a story. Our financial lives are no different – the elements include our bank accounts, retirement accounts, mortgages, car loans, student loans, investment accounts, stock options at work, life insurance policies, credit cards, etc. When most people think of their financial life, they think of these elements but have trouble contextualizing them in their overall financial story. All of these elements are simply tools that either help or deter us from our goals. Before analyzing the tools, it’s important to understand why you’re using them and the goals and priorities that create the story which requires them.

One way people analyze these tools is by researching investment returns. Before delving into the world of returns, think about why you are investing in the first place. Your investments should reflect your overall financial priorities. If the risk tolerance in your investment appropriately reflects the time-frame you plan on needing the money, then worrying about investment returns day-to-day can be more of a headache than it’s worth. For example, if you are 35 years old saving for retirement at 60 – you should be aggressively invested if you’re comfortable with that. Because you have 25 years before you plan on using the money, short-term fluctuations in the market shouldn’t really concern you. In fact, if the market does go down and you are still contributing to your retirement, you are technically “buying on sale” – getting more shares for the same dollar value. Contributing to your retirement in up-and-down markets is called “dollar-cost-averaging” – meaning you average out the cost/share of an investment by contributing consistently rather than trying to time the market and invest when you are “buying low”.

There are many benchmarks in the financial industry to compare your investments to and track performance. Some examples include the S&P500 and the Dow Jones Industrial Average for large-cap stocks, the Barclays US Aggregate Bond Index for bonds, and the MSCI Index for international investments. It’s important to understand how your investments are doing in relation to the overall market – it keeps you abreast of what you are investing in and prompts questions you may not ask otherwise – such as what fees you are paying, who’s helping you decide what to invest in, and how much risk you’re taking on compared to the benchmarks you’re using as a comparison. However, the benchmark you should habitually pay more attention to than any other is your particular goal with each investment and your overall goals in terms of building wealth.

Focusing on investment returns only paints half of the picture when tracking progress because it is completely out of your control. If you can confidently say your investments are well diversified and invested according to a risk-tolerance you are comfortable with, there is a much more important benchmark to track than returns. Instead of relying on your investment vehicles to do all the heavy-lifting, you should use your investment behavior as the ultimate indicator to determine if you’re making progress or need more work. What are the financial goals you have in mind? To retire by 55? To save for a second down payment on a house? To pay off your mortgage? Help your children pay for their college tuition? Protect your investments and family in case of a long-term illness? Reduce credit cards and student loans? Build emergency savings?

When you are focused on goal-based financial planning, there are a lot of benchmarks to concern yourself with other than the hype involved in investment performance. Are you saving more this year than you were last year? Did you increase your savings rate when you received a raise? Does the money you are spending appropriately reflect the values and priorities that are most important to you? Are you using extra income to increase investments and decrease liabilities? By focusing on why you’re investing in the first place and the priorities that matter to you, it’s easier to ask the right questions and monitor progress. Once you know what you’re shooting for, a Decision Coach can help you understand the appropriate tools to get there.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Bloomberg Barclays U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.

The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI EAFE Index consists of the following developed country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the UK.

Each index is an unmanaged index which cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. Past performance is no guarantee of future results.

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