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In my last post, I discussed ways that non-experts can start to take control of their finances when the stock market turns bearish. Today, lets focus on a few simple tips that mere mortals can heed to take control of their stock portfolio, now and in the future. Darren Henke, Managing Partner of 180 Wealth Advisors reminds investors that saving and investing are markedly different practices. Henke says: “We save for near-term needs and emergencies and we accept low returns in exchange for certainty and near-term liquidity. We invest in order to grow our wealth over time, and that requires accepting some volatility in exchange for growth that exceeds the rate of inflation.”
Henke and other experts recommend some simple tasks that can put a novice investor in the right position to deal with market volatility and weather the difficult times. Here are four things you can do right now.
Rebalance your investments. All the experts say you should balance your investment portfolio between different types of vehicles: stocks, bonds, real estate, cash, etc. The goal is to make sure that your investment pie doesn’t become too heavily weighted in one area and therefore prone to higher risk. Even though we know that we should rebalance, most people rarely do it. According to Henke, a downturn is a great time to buy stocks, since they’re now on sale. A lower price means more shares. You’ll thank yourself in the long term. They don’t say “buy low, sell high” for nothing.
Get advice. You’ve been thinking about meeting with your broker for ages, but haven’t been able to find the time. Or you don’t have any sort of financial advisor other than your brother-in-law who went to Harvard and thinks he knows everything (news flash: he doesn’t). Take the time between now and the end of the year to schedule a meeting with a financial advisor early in the new year and go over your goals and fears. Most initial meetings are free, and you shouldn’t feel any obligation to meet again unless the advisor can present a plan that you’re confident will help you achieve your goals.
Befriend a financial bot. The digital world has changed drastically since the major period of stock market uncertainty in 2008-9. There are more ways than ever to use the internet and apps to help track your spending. Virtually all banks have healthy and helpful online presences, which allow you to write and deposit checks, schedule payments, and track a budget. Tax and accounting software is easy and more prevalent than ever. And you can track your overall portfolio through major brokers and with a variety of software options.
Pay yourself first. Your financial wants will likely always be greater than your needs. So you’ll never feel like you have enough money. Just remember to take care your own financial needs before dealing with all of the other pulls on your assets. Henke advises his beginning clients to set up an automatic investment program to invest regularly on a monthly basis, using broadly diversified mutual funds and/or index funds to start. Set it up to come out of your paycheck or bank account automatically like any other bill.
Declining markets don’t have to require you to abandon your dreams. But they do require you to sit up and take notice. Remember that even if you work for someone else, in the end, you’re the CEO of your own wealth management company. Use the bad market news to gather your financial acorns for the winter. When the spring comes (and it always does), you’ll be glad you did.
December 18, 2018 at 05:33AM
Forbes – Entrepreneurs