An inside look at investing
There is always a looming reason not to invest in the stock and bond markets; everyone has one. The rates are too low; the rates are too high; Israel can bomb Iran; another terrorist attack may occur; My portfolio has shrunk in the last 10 years. I don’t have confidence Following the pack and not having confidence seems to be all the rage right now, but those who continue to pay themselves first every month in their 401k, SEP/IRA, Roth IRA, mutual fund accounts, savings accounts, etc., and ignore the media. They seem to keep earning in retirement. Those who allocate assets to achieve the right risk/reward mix for their situation also tend to come out ahead in the end.
Not surprisingly, the largest group of professional tipsters are the ones most associated with making money: investment advisers. “According to the Securities Industry Association (SIA), half a million people are licensed by the National Association of Securities Dealers to advise clients on buying securities. They come from all walks of life, and around 200,000 of them earn a living by actively advising you on how to invest your money,” according to William A. Sherden.
According to Sherden’s research, the SIA estimates that of these 200,000 investment advisers, almost half are stockbrokers working in securities firms. In fact, almost everyone who works in the $71 billion securities industry is involved in forecasting the future of investments. The industry employs a large number of “strategists” who project where the general market is headed and “analysts” who predict which stocks to buy and sell.
The Securities and Exchange Commission (SEC) has authorized about 10,000 money management companies. These sets make up a $50 billion industry that includes everything from major financial institutions like Prudential and Citicorp to thousands of small investment boutiques. According to the Company Institutes for Investment and Employee Benefits Research, these tens of thousands of money managers provide investment prediction advice in managing $7.5 trillion in pensions, endowments and mutual funds.
So, in a very crowded field and with so much information everywhere… How do you know if you’ve found a good investment adviser? Here are some guidelines to help you:
1) They work on commission. They do not charge commissions for the products or services they sell to you. This helps keep them on your side of the table. It keeps them independent and not tied to a company’s research or investment banking strategies.
2) They are associated with and have custody of their assets in a large and well-known company such as Fidelity, Schwab, Vanguard or TD Ameritrade.
3) They listen to your needs and carefully assess you to find the right risk and allocation for you and your family.
4) They hold events and write newsletters to educate you and your family about investing, strategies, and the current economy. An adviser must take the emotion out of buying and selling investments.
After choosing an advisor, how do you build a portfolio that beats inflation and avoids outliving one’s wealth? Here’s the recipe: Take a look at US large-cap domestic stocks, US small-cap domestic stocks, and international companies in both developed and emerging markets. Another ingredient, short-term fixed income, prepares for rate hikes by keeping some cash in the portfolio. You need to strike the right balance between Growth and Value Companies, those companies that pay dividends versus those that don’t.
I use this recipe, Inc., it uses the following ingredients:
Stocks, ETF’s (Exchange Traded Funds), mutual funds, separately managed accounts (a group of stocks managed by a well-known professional money manager), bonds, preferred stocks, commodities and derivatives (stock options). Mixing all of this becomes more of an art than a science. The goal in inventing a mix is ​​diversification, risk reduction, avoiding concentration disasters, cost reduction, and perhaps tax control. Some high net worth clients won’t touch mutual funds outside of their retirement accounts because they spread out capital gains and really make tax planning a nightmare. Others invest only in mutual funds because of the great diversification they offer. “Making instant millions on Wall Street would be a piece of cake if you knew whether the economy was expanding or contracting at any given time. You could make a killing in the commodity market if you could predict the weather for next year’s growing season.” says Sherden. The Statistical Summary for the United States reports 148,000 people claiming to be economists, whatever that means.
“I studied economics in college, but I’ve never become an economist,” says Kristine Suber Hanchar, president and wealth strategist at Platinum Investment Advisors, Inc. Economists generally forecast the impacts of proposed policies and programs on the economy and its industrial sectors. but there is no professional accreditation for economists. Although effective wealth planning and management may seem difficult in today’s volatile market environment, it can be accomplished when you work with and hire the right professional for the job.