Provided by UBS Financial Advisor, Gabe Lajeunesse, AAMS®
Now that we’ve gained at least some space from the COVID-19 pandemic, summer travel is heating up. But while you might be eager to hit the road, you won’t want your investments to take a vacation – you need them to work hard for you consistently. But how can you make this happen?
Here are some ideas:
- Know your destination.“If you don’t know where you want to go, then it doesn’t matter which path you take.” This bit of wisdom, paraphrased from the classic children’s book, Alice’s Adventures in Wonderland, may be appropriate for, say, hikers exploring a new landscape. But as an investor, it matters a great deal which path you take. If you only dabble in investing, occasionally putting some money into one investment or another, it will be difficult to build a portfolio that’s consistently working in your best interest. It’s important to create a long-term investment strategy based on where you want to go in life – that is, how long you plan to work, what sort of retirement lifestyle you envision, and so on.
- Match goals with investments. Some investments are designed to achieve certain goals. To illustrate: When you contribute to an IRA and a 401(k) or similar employer-sponsored plan, you’re investing for one specific, long-term goal: a comfortable retirement. While you can tap into these accounts for other purposes – though doing so might incur immediate taxes and penalties – they are designed to provide you with income during your retirement years. Similarly, you may have other investments for other purposes, such as a 529 education savings plan. Here’s the key point: Goals-based investing, by its nature, can help ensure your portfolio is always working on your behalf, in the way you intended.
- Invest for growth. Ideally, hard work produces results, and one of the main results you want from your investments is growth – that is, you want your investments to appreciate in value so they can eventually help you meet your goals. But if you are overconcentrated in vehicles such as certificates of deposit (CDs) and government securities, you may end up lowering your growth potential. That’s not to say that CDs and Treasury bills are in some sense “lazy.” They can provide you with income and help you reduce the impact of market volatility on your portfolio. But to achieve most of your goals, you’ll need a reasonable number of growth-oriented investments working for you, with the exact percentage based on your needs and life stages.
- Check your progress. How else can you ensure your investments aren’t just taking it easy? By checking up on them. If you follow a buy-and-hold strategy, your portfolio shouldn’t require many changes if it already reflects your goals, risk tolerance, and time horizon. Too much buying and selling could jeopardize your ability to follow a consistent, long-term strategy. However, “buy and hold” doesn’t mean “buy and forget.” By reviewing your portfolio at least once a year, you can determine if your investments are performing as they should. If they’re not working for you as you’d like, you may need to make some changes.
If you’re traveling this summer, relax and enjoy yourself – but keep those investments working hard!
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.
Edward Jones, Member SIPC