STEPS TO SAFER INVESTMENT DECISIONS IN 2009

It’s tough to tell how much one investor can do alone to preserve their assets in 2009, particularly with unprecedented government intervention in world markets.  But there are some general ideas to employ as markets and economies hopefully stabilize in the New Year:

Start with a plan – or review an old one: If you’ve worked with a good financial planner, you should be able to articulate your long-term investment goals by yourself. If you can’t discuss such goals in detail, it might be time to meet with a comprehensive financial advisor who can assist you in assessing your individual risk tolerance, assist you in adopting an appropriate long-term investment philosophy and design an appropriate asset allocation and globally diversified investment portfolio.  Additionally an investment advisor should educate you about how markets truly work and provide the life long coaching to enhance attainment of your investment goals.  Much of the riskiest investing, overbuying and panic selling during the late 1990s and early 2000s could have been avoided if individual investors sought advice for achieving long-term specific goals such as retirement or a college education.

Check all your assets in banks: As a result of the federal economic bailout legislation, the Federal Deposit Insurance Corporation (FDIC) temporarily raised the per-deposit account, per bank coverage level from $100,000 to $250,000 through Dec. 31, 2009. Certain retirement-related accounts carry $250,000 of FDIC coverage, but again, check in with your bank to make sure you’re covered, and if not, get the right advice for moving funds so you don’t incur an unexpected tax liability or fees.

Review your risk tolerance: One of the first items an investment advisor should assess is your tolerance for risk.  If you haven’t had one done you need a new advisor.  Essentially, risk tolerance is an individual’s ability to emotionally withstand an investments decline without reacting in panic.  Unfortunately, as simple as this sounds, most investors have never truly determined their tolerance for risk and therefore their portfolio level of risk is not properly aligned with their emotional tolerance for risk.  Tragically this ultimately results in unnecessary stress, anxiety and, worst of all, panic trading during temporary market declines locking in permanent investment losses.

Prepare to stay invested: Market downturns are often filled with panic selling – and buying. If your investment portfolio has been academically and scientifically asset allocated and globally diversified, you shouldn’t be in panic.  A properly educated, allocated and diversified investor will be rewarded with long-term success by remaining disciplined.

Check your credit: No one knows how long it might take to unravel the nation’s current credit situation.  It’s definitely a good time to schedule a review of each of your latest credit reports at staggered intervals throughout the next year. Why? Because in tough economies and times of tight credit, identity theft is on the rise, and you’ll need to make sure the information on your credit report is accurate.

Pay attention to your cash: You should have an emergency fund of three to six months’ worth of living expenses.  Not every investment that’s lost value is necessarily a bad investment, and with careful study, you should be able to have cash on reserve so you can capitalize on legitimate opportunities.

Re-budget: It’s a good time to make a budget or re-assess the one you have. Though the federal government would love for consumers to start spending again to lift the economy, that doesn’t mean you have to jump in with both feet. Keep your spending smart, your debt low so it’s easier to meet savings and investment priorities that will do you the most good when the economy and the markets recover.

Check your retirement: How will the activity in the market affect your retirement timetable? You might want to continue working full-time or plan a phased-out approach as you continue to build retirement assets.  The greatest single fear concerning retirement is running out of money.  Contact our office for a No Charge/No Obligation review of your investment portfolio.

 

Run date 1/30/2009