The Quest for the Best Investment AdviceSeptember 28, 2015 5:34 pm
There are so many financial “experts” out there these days making recommendations that it can be difficult to sift through all of them to find the advice that is right for you. It seems that people are always looking for the quick fix and easy answer to finances and investments, but unfortunately there isn’t just one recommendation that suits everyone. Just like the miracle diet or diet pill that will allow us to shed pounds without changing our diet or exercising, we all want to get rich quickly without having to put in the work. The truth is, just like that diet pill which was later found to contain harmful chemicals, sometimes investors get convinced that a specific investment or product is going to be the magic and easy answer only to later realize they were invested in a far more risky investment than they thought or stuck in a product which winds up costing them a lot of money to get out of it. So what is the answer?
Keep It Real
I find that formulating realistic retirement spending goals can sometimes be difficult for a variety of reasons. You may be young and have no idea what type of lifestyle you want in retirement because it just seems too far off. Sometimes investors who are much closer to retirement and haven’t saved enough are unrealistic about when they should stop working and how much they can afford to live on. This is why planning and starting to save for retirement early can afford you more flexibility later on in life. Your savings rate is something that you can control and usually has a direct correlation to how much you can spend in retirement. If you are nearer to retirement and don’t have enough savings, consider working longer or maybe downsizing your house or making adjustments to spending. Not addressing the issues and hoping things will just work out is not frequently the solution.
Stick to Your Plan
Once you’ve mapped out what you think you would like your retirement to look like or even if you are only planning for the next five or ten years, you will need to develop a strategy to get there. Your plan should include retirement savings goals, debt repayment, and any other funding goals you wish to accomplish such as college funding, saving for a special trip, or perhaps buying or renovating a house. Of course, your plan needs to be put into action to be successful. By setting realistic and attainable goals you are more likely to stay on track with your plan. My savings rate will probably not be the same as yours because we may not earn the same salary or have the same goals. No plan is perfect which is why you need to monitor its progress and make adjustments as necessary because circumstances are certain to change throughout your life.
It doesn’t make much sense to invest exactly the same way someone else does unless your financial life and situation is exactly the same. This is why I find it puzzling when investors tell me that their boss, mom or dad, or ex-boyfriend picked their allocation for them. Some contend that they just want to make as much money as possible, so their particular situation is not important. I would argue that an assessment of your personal situation, your goals, and your feelings about risk is a far superior way of gaining control of your finances. For most of us, there is some degree of risk that needs to be taken in order for our nest egg to grow over time to create the income we will need in retirement. Since I happen to have 25 more years until retirement, why would I be invested exactly the same way my mom who will retire in one year is invested? I wouldn’t because I can afford to take on a greater element of risk in my portfolio than she can since she doesn’t have the time to recover from a potential loss. Just because the stock market is going up doesn’t mean it’s time to make your portfolio more aggressive, but this is the time when many investors make those decisions only to be disappointed by a market downturn. By becoming familiar with how you emotionally react to gains and losses in your portfolio, you can create an allocation which will hopefully make you less likely to engage in fear driven transactions.
No financial or investment advice is going to be perfect for everyone because we all have different objectives for our money. By starting to learn what your objectives are and building a framework around them will probably get you closer to your personal goals than searching for the magic solution.
Chrissy Canapari serves as Senior Financial Advisor and Manager of Client Services at StrategicPoint Investment Advisors in Providence and East Greenwich. You can e-mail her at firstname.lastname@example.org.
The information contained in this post is not intended as investment, tax or legal advice. StrategicPoint Investment Advisors assumes no responsibility for any action or inaction resulting from the contents herein. Chrissy’s opinions and comments expressed on this site are her own and may not accurately reflect those of the firm. Third party content does not reflect the view of the firm and is not reviewed for completeness or accuracy. It is provided for ease of reference.