Investors who have financial advisors are on the path to financial freedom, but that does not necessarily mean they should sit back and ignore their portfolios. Investing is a never-ending process, and your relationship with your financial advisor is an ongoing partnership. That means it is a good idea to be educated about your investments. You can start by asking the three questions below.
How am I invested? You would be surprised by how many investors don’t know the answer to this question. Start with the basic asset classes: Are you invested in stocks, bonds, or cash? Then move on: Are you invested in any alternatives, such as real estate and commodities? Then ask about the allocation: How much of each asset class are you invested in? And are you invested directly in those assets or via mutual funds? And how might you expect that mix of assets and investment types to change over time?
Are changes warranted? When to buy or sell depends on several things. What is happening in the overall market (i.e., a bull or bear market)? What is happening in the asset class? Is the buy or sell price attractive? If you should buy or sell, how much and when? And what will you do with the proceeds? Are there other investments that you believe have more potential? As you can see, a change isn’t as simple as it seems.
What do I do with winners and losers? When your investments fare well, do you keep them or sell them? Not all investments work out, however well planned, and successful investors should know the answer to this question (and the reasoning behind it). In other words, have a plan for investments that are performing well and for those that are performing poorly.
If you need help answering these questions, please reach out to us.