Your Advisor and You: Partners in Your Portfolio Decisions

No matter how sophisticated an investor you are, it’s important to have an expert to deal with your portfolio and advise you on changes.

If you have an advisor to manage your financial investments, congratulations; you’ve made the right move. But the relationship between you and your advisor is an ongoing partnership; you need to pull your weight. And it’s a good idea to understand your own portfolio. Here are some things to discuss with your advisor:

What am I invested in? Am I invested in stocks, bonds, or cash equivalents, and in what mix? Am I invested directly in these assets, or via mutual funds? What about real estate and commodities? How might that mix of assets change over time?

Is now a good time to buy? When to buy depends on several things: What’s happening in the overall market? What’s happening in a certain asset class or sector? Will this purchase fit with my investment goals? How attractive is the price? How much should I buy?

What do I do with winners? When my investments fare well, should I keep or sell them? Typically, successful investors will know the answer to this question (and the reasoning behind it) before they invest.

What do I do with losers? Not all investments work out, however well-conceived. It’s important to know at which point to sell a loser.

Your advisor is an expert. But you need to participate. The more you know about your own portfolio, the easier it will be for your advisor to help you.

Avoid Mistakes Now; Live a Happy Retirement Later

It’s easy to make financial mistakes when you’re young, because you can generally recover from them over time. Unfortunately, the same can’t be said as you approach retirement, when you’ll have less room for error. With that in mind, here are five mistakes that are easy to make heading into, or during, retirement.

Waiting too long to start saving. If you save aggressively in your twenties, those gains will compound over forty or more years. But the later you start saving, the harder it gets to accumulate a nest egg with which you’re comfortable.

Not saving enough. Some of us are disciplined savers who live below our means and put away a good amount for retirement. Most of us are not. Indeed, the savings rate today is around 6%, about half what it was in the 1960s. So as you approach retirement, it’s a good idea to make do with less and save more.

Ignore tax consequences. Every dollar you pay in taxes is a dollar you could have potentially saved and invested. So consider tax-advantaged accounts, such as 401(k) plans and individual retirement accounts (IRAs).

Being too aggressive. Being too aggressive late in your retirement planning can be disastrous, and it’s easy to do when we’ve saved too little. Many investors try and compensate for a lack of savings and low returns on safer investments such as cash and bonds by taking on more risk.

Being too conservative. On the other hand, having too little in riskier investments can also be disastrous. Stocks are usually the best long-term growth vehicle, but other investments can fall into this category as well – real estate, for example, and commodities. Regardless of how you take on risk, you’ll likely need at least a little, depending on your time horizon – more when it’s longer, less when it’s shorter.

The takeaway: don’t make mistakes now that will affect your lifestyle later.