Investing

Let’s talk about investing and what we can take away from the recent down market.

The most important thing to remember is that investing is never a short term deal and that you always need return to the long term basics.

Start by re-visiting your goals. The market environment may have changed but that does not mean that your goals have shifted.

Next – take a look at your risk tolerance.

It is very cyclical. That means that people tend to be more risk averse when they lose as much as 15%. It then takes a substantial gain like 40-50% to rebuild their confidence and to become more risk tolerant.

I recognize that at times it feels uncomfortable but investing is not about feeling right, it is about being prepared for you goals. The bottom line is this – if you need let’s say 7% rate of return to catch up, you have to be willing to accept more risk.

The basic premise of successful investing is having a discipline. There is nothing sexy about it!

To recap:

revisit your goals, stay diversified and keep the emotion out of it. How? use the resources. Allow yourself to get educated by a financial professional about what makes the most sense for your situation. Remember, you are not alone.

For the NEWSCHANNEL 13 Economy Tracker – I’m Denisa Tova.

To protect your investments against Ponzi Schemes:

* 1) Look at your account statements for clues * a. First, that statement should come from a fairly reliable third party, a custodian bank or brokerage, rather than the manager himself. * b. Second, you should compare the values of your individual holdings in your account statements with the values posted by Yahoo or MSN. * 2) Most importantly, ask yourself a couple of questions: * a. Does it just make sense? Does the rate of return that you are being promised relative to what the market is actually doing make sense? * b. Ask How. If your advisor claims to deliver much higher rate or return, it is not that it can’t be done, you just need to ask “How”. Does it mean that you will have to take much higher risk to get that rate of return? * 3) Lastly, don’t put too many dollars into any one thing. Diversification is a key to stopping this. It doesn’t pay for the schemer to have too many accounts for small amounts of money.

QUESTION: How would a person take charge of their investment portfolio?

The best way to take charge is to do it yourself but conducting a detailed financial analysis takes a long time that most of us don’t have. The easiest way to do this is to buy actively managed mutual funds. If you have conviction that some sector of the market is going to do well, then find a fund that invests in that sector and let that fund manager make the little decisions about which specific stocks to buy and sell. You’ve made the big decision.

QUESTION: Based on your age (e.g. 35) how do you determine aggressiveness recommended for investment?

The risk tolerance of your portfolio is heavily dependent on two factors, your goal and the time you have to reach that goal. So, age is a big part of that. What really matters is how long before your goal becomes your reality. If you want to retire at 55 and you’re 35 today, your goal is twenty years away.