Life is often a bit easier when you receive a word of wisdom to guide you along the way. Here, you'll read some wise words from financial planners on retirement, saving, investing, budgeting, and managing your finances.
Crystal balls are pretty hard to come by particularly when it comes to investing in the stock market. To help you shape the most fruitful investment strategy, Black Enterprise surveyed a handful of experts. Here’s what they believe are nine of the most essential tips for successfully managing your portfolio:
Identify your tolerance for risk.
Just about everyone’s perspective on risk has changed over the last few years, thanks to major market shifts and the economic downturn. Prior to December 2007 (when the recession officially began), investors were accustomed to a stock market that generally moved in a positive direction. “Risk was a nebulous concept,” says Roderick Barnes, CFP, an Ameriprise financial adviser in Huntersville, North Carolina. After all, “how could you get an accurate gauge on your risk tolerance if you’d never experienced a real loss before?” asks Barnes. “We no longer need to wonder, since the downturn offered a painful reminder of the true meaning of risk,” he says. “We now know that it is possible to lose money by keeping your money in the stock market. The more you take on, the more exposed you are to potential losses. Risk has been clearly defined, thanks to the recession. The key is to clearly understand your time frame, goals, and investment objectives,” says Barnes. “What is your comfort zone? What can you lose and still have peace of mind?”
According to Kasper Mingo, a MassMutual financial professional with HF Financial in Charlotte, North Carolina, more than 90% of Americans have the majority of their assets in one or two asset class accounts. That’s way too many eggs in one basket, says Mingo. “Proper asset diversification—and not just stock diversification,” he stresses, “will spread the inherent risk of high tax liabilities and longevity risks over different asset classes to reduce these threats to your financial independence.” The point is, stocks and bonds are great, but—where appropriate—investors should hold a basket of other assets as well. These include commodities, real estate, and money market instruments.