A Recipe for Achieving Your Goals

Shelley Yates, Communications Senior Advisor
April 25, 2018

Does thinking about investing leave a bad taste in your mouth? With all the jargon that gets tossed around — headwinds/tailwinds; beta versus smart beta; portfolio under- and over-weightings; Brexit, Grexit and even Texit — investors are often left feeling like they have egg on their face when they try to make sense of it all.

Here’s some food for thought: think of your investments like ingredients for a recipe. Just as there are seemingly endless ingredient choices (meats, vegetables, spices, etc.), there are seemingly endless investment options (stocks, bonds, mutual funds, etc.). Your dietary needs and the time you have to make a meal may determine whether you consume a pre-packaged meal, such as an IMS Select Portfolio, or make everything from scratch; similarly, your financial needs and time horizon may determine the level of customization your investment plan needs.

Although there is no shortage of companies promising to deliver culinary perfection to your door, well-trained executive chefs know how to create flavors that you just can’t get on auto-ship. Likewise, your financial advisor is specially trained to serve as your maître d', sommelier and financial connoisseur.

Just like in fine dining, it’s wise to stick with what works when it comes to investing rather than chase the latest trends.

  1. Allocation, diversification and rebalancing. Diversification allows you to reduce business-specific risk by abiding by the “don’t put all of your eggs in one basket” adage. Asset allocation builds on the notion of diversification by looking at security or investment risks in the context of a broad portfolio rather than in isolation. As markets move, the asset allocation can shift; rebalancing gets the investment strategy back on track.
  2. Buy low, sell high. It sounds intuitive in theory, but in practice it may mean buying an underperforming asset and selling an asset that’s performing well. However, underperforming markets are actually the best time to invest: lower prices mean you can acquire more of an asset, which better positions you for when the market goes back up. We have an innate emotional tendency to buy high (when markets are good) and sell low (when markets are bad), but working with your advisor can help you overcome this.
  3. Stay focused on your long-term goals, not short-term market fluctuations. You can’t predict or control market movements, but it’s also important to not let it control you. Don’t let short-term market fluctuations deter you from achieving your long-term goals.

Now You're Cooking

Working with a financial advisor to create and follow a disciplined investment process that incorporates these tried and true principles has carried investors through countless fads and market meltdowns. Contact your advisor to create or update your own personal recipe for success to ensure you stay focused on achieving your long-term goals. Bon appétit!

Neither asset allocation nor diversification assures a profit or protects against a loss in declining markets.

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