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Friday’s Financial Update 7-14-2017

MICHELLE SMALENBERGER, CFP®

As this week took the market up to new highs, it is important to be reminded of investing disciplines that should be in place for your portfolio.  Before quarterly earnings hit full steam, this is a great time to review for anything that should be added or changes that should be made.

Do you have any “rules” set for how you invest?  For example, do you keep the gains you earn and make transitions when necessary?  Or do you consistently jump into hot sectors when they have been performing well only to watch that investment go down in value?

We want to provide a list of things to consider by yourself or with your advisor to ensure you have a repeatable investment process that can be successful for the long-term:

  1. Don’t Chase Performance: You might be the last to join before an investment drops in value.  It’s important to have a clear reason for why you invest in what you do.  Research and economic analysis provide insight for investing.
  2. Invest for the Long-Term: Don’t risk assets that you need in the near future because you want a few extra dollars.  Since you know you need those dollars, seeing them decrease in value will leave you scrambling to make up the difference elsewhere.
  3. Review Your Risk Tolerance Regularly: Things happen in life that can cause us to be more or less risk adverse than we used to be.  Staying alert to the market highs and lows you are willing to tolerate is important.
  4. Watch Expenses: Pay attention to investment costs such as internal fund expenses, transaction or trading costs, and tax implications.  Funds have different strategies, therefore, different costs.
  5. Manage Your Portfolio: Construct your investments appropriate to your ability to manage them.  Making active portfolio decisions with passive and active investments can add excess return over time.  It takes time and knowledge to give your portfolio the attention it needs.  Don’t be afraid to get help when you need it.
  6. Diversification: Are you invested over a variety of sectors and asset types?  You don’t want to keep all your eggs in one basket and take unnecessary risk.

Instead of getting greedy, regularly take profits in a way that aligns with your investment philosophy and tax situation.

We would like to help you design a disciplined investment approach that achieves your goals.