WHAT TO DO NOW?
November 12, 2020
These financial planning tips never go out of style.
- Have a financial plan documenting where you want to be and how you are going to get there.
- Have an investment policy statement detailing how you will make investment decisions. This will prevent you from making emotionally-charged investment choices.
- Work with a financial planner who is compensated to provide objective advice, not an advisor who is compensated to sell products.
- Whenever possible, invest early and often. This forces dollar-cost averaging.
- Identify your risk tolerance before the next market pullback, and have an asset allocation that reflects that risk tolerance.
- Be truly diversified among large, mid, small, international, growth, and value stocks. Invest not only in corporate bonds, but government and international bonds.
- Make your asset allocation more conservative as you age.
- Rebalance your portfolio annually.
- Have an ongoing relationship with your financial advisor. Meet with him or her at least every six months.
- Update your financial plan and estate documents at least annually.
- Maintain liquidity in your portfolio. Having cash available will reduce your need to sell securities when their values are depleted.
- Take advantage of the full employer match on your 401k.
- Understand the risk/return relationship of all your investments.
- Understand how and how much your advisor is compensated.
- WORK WITH A FIDUCIARY – someone who is obligated to act in your best interest.
- Necessarily trust your financial advisor. Make him or her earn that trust.
- Let emotion get the best of you.
- Be enticed by new, short-term investment strategies.
- Trust “financial advisors” that encourage you to leverage your home, or push annuity products without mentioning the costs of such products.
- Neglect estate planning.
- Work with a financial planner who isn’t financially motivated to constantly serve you.
- Pay high investment fees or commissions.
- Invest in things you don’t understand such as gold, commodities, and options.
- Seek advice from friends and family who are not financial professionals.
- Seek advice from “financial advisors” with few tools, such as insurance or annuity salesmen.
- Use short-term investments for long-term goals, or vice versa.
- Invest for the long-term without an established emergency fund (3-6 months of expenses).
- Purchase loaded products.
- Work with a financial wolf in sheep’s clothing (an advisor who is not a fiduciary).