Ten Tips for a Prosperous New Year

January is an ideal time to evaluate one’s portfolio to see if it is positioned to meet an investor’s goals and objectives.  In doing so, it is helpful if the investor has an investment plan.  The plan does not need to be complex but simply a road map as to what the investor is wishing to achieve with his or her assets.

A good place to start is by determining one’s goals and objectives. In other words what is the investor wishing to achieve and how can their allocation of assets make this a reality.  Is the goal of the portfolio to subsidize cash flow, to grow in value, or both?  Assuming cash flow is needed, building a cash flow ladder can be appropriate.  This is achieved by segregating assets from the investor’s long term investments and placing them in fixed income investments with maturities that match upcoming obligations.

Once an investor has a good understanding of one’s goals and objectives, and has their cash flow needs covered, the investor needs to consider the level of risk one is willing to take. Truly understanding one’s risk tolerance is important especially in today’s volatile markets.  Establishing acceptable risk levels before “the heat of battle” allows the investor to make logical investment decisions and helps to remove some of the psychological emotional “knee jerk” reactions to market movements.

Equally important is the amount of time one has to give the investment an opportunity to perform.  This is referred to as an investor’s time horizon.  Typically short term needs for investments require a more conservative approach while longer term horizons can afford investors higher levels of risk.  It is important that higher risk investments offer potentially higher returns.  The longer the time horizon, the more likely these more aggressive assets will work for the investor.

Once the plan is established, the investor can begin to evaluate their current portfolio to see how closely aligned these objectives are to their existing holdings.  Those investors who repeat this process on an ongoing basis are more likely to have success and hopefully less stress with their portfolio.

The Top 10 Things Investors Can Do For a Prosperous New Year

 1   Develop an investment plan.

 2   Determine goals and objectives for the portfolio.

 3   Build a cash flow ladder if the portfolio is needed to subsidize income.

 4   Determine the level of  risk the investor is willing to take.

5   Use asset allocation to diversify risk

 6   Be aware of the investor’s time horizon.

Focus on the fundamentals and not the noise.

 8   Work with a knowledgeable trusted advisor.

 9   Plan for changes in estate and income taxation.

10  Review steps 1 – 9 adjusting as needed,  on an ongoing basis.