Broker Check

Is Your Portfolio an Investor’s Ensemble?

| December 12, 2018
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One of the more challenging aspects of managing finances today is deciding howmuch to save and which savings vehicles are most appropriate in helping you reach your goals. Naturally, you hope to create a savings and investment plan that’s “in tune” with your personal objectives and risk tolerance. But, the lure of potentially high rates of return can easily skew a novice’s objectivity, which could result in unrealistic expectations and unnecessary exposure to risk. 

That’s why it’s important to meet regularly with a qualified financial professional to review your personal financial situation, taking into account your short-term and long-term goals. During these meetings, you’ll formulate answers to the following questions: 

  • What do I wish to accomplish with my money? 
  • How can I keep inflation from eroding the purchasing power of my money? 
  • How much risk am I willing to take with my money? 

One Key Player: Diversification 

Professional guidance can help you create a well-diversified savings program with assets placed in different types of investments and investment classes covering a wide range of the risk/return spectrum. Examples of some investment vehicles include: stocks; bonds;mutual funds (which can comprise stocks, bonds, or a combination of both); certificates of deposit (CDs);savings; and money market accounts. Each investment class, and its respective options, tends to react differently to changes in financial markets and to the economy as a whole. Thus, by diversifying your portfolio, risk is spread over a broader range of investments—potentially minimizing the impact of downturns in the economy or a particular market sector. Of course keep in mind that asset allocation (and/or diversification) does not ensure a profit or guarantee against loss; it is merely a method used to help manage risk. 

Each individual situation has its own set of circumstances that require constant re-evaluation. Factors such as your age, income, expenses, family responsibilities, and risk tolerance will certainly change over time. In addition, it’s important to recognize that past performance of any investment is not indicative of future results, and shares may be redeemed for more or less than their original value. Investments that are performing well above or below your expectations may create an unbalanced portfolio, which could result in an investment mix that is “out of harmony” (inconsistent) with your original objectives. 

Regular reviews with a qualified financial professional will help ensure your portfolio is properly diversified, balanced, and performing in accordance with your investment goals—in short, making music you want to hear.

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