Investment Planning

One of the key components of any retirement plan is an investment strategy that has good return to risk ratio. Normally, a balanced approach works best, but during certain periods in a person’s financial life cycle it can make sense to venture out to the furthest ends of the investing spectrum – being aggressive to maximize returns with excess discretionary cash flow, or straight fixed income when saving for short-term needs, for example. Investing successfully starts with planning.

Whether you are trying to decide how much to invest, what type of account to use or what stocks to purchase, the most effective strategy is always going to include the expertise of a talented financial advisor who can help you implement customized strategies based on your age, income, assets, liabilities, risk tolerance, family situation and retirement goals. Once this has been achieved it is simply a matter of staying the course and following the time-honored lessons the markets have taught us over the past 150 years.

• Set realistic goals and avoid unnecessary risks. Understand your situation and your limitations to make sure your plan is truly attainable.
• Choose a strategy and remain consistent. It is important to stay disciplined and not let short-term fluctuations or emotion affect your long-term plans.
• Diversify your holdings so that no single sector or policy change can derail your future outlook.
• Remain within your established risk parameters regardless of how promising or frightening the markets may appear at the time. Higher returns always imply higher risk.
• Don’t chase the latest trends. Investing is not a popularity contest. Only efficient, well-managed companies make profits over the long haul.
• Always consider the tax consequences, but never let them blind you to the overall value of the investment.
• Be aware of historical results, but only as context to formulate your expectations for the future.
• When choosing bonds, avoid focusing entirely on yields. Interest rates are always changing, and the more a bond relies on a large yield for its attractiveness the more sensitive it will be to fluctuations.
• Re-invest your distributions regularly to ensure you take full advantage of the compounding opportunities created by your growth.

If you are willing to honestly assess your circumstances and diligently implement a long-term investment plan as outlined by your financial advisor, it is completely reasonable to expect your portfolio to provide an excellent ratio of return to risk. The idea is to design the most effective and appropriate portfolio for your particular set of circumstances, then to be disciplined enough to see it through.