Now that we’ve gained at least some space from the COVID-19 pandemic, summer travel is heating up. But while you might be anxious to hit the road, you don’t want your investments to take a vacation – you need them to work hard for you all the time. But how can you do it?
Here are some ideas:
Know your destination. “If you don’t know where you want to go, it doesn’t matter which route you take.” This piece of wisdom, paraphrased from the classic children’s book, Alice’s Adventures in Wonderland, may be suitable, for example, for hikers exploring a new landscape. But as an investor, the path you take is very important. investing, occasionally putting money into one investment or another, it will be difficult to build a portfolio that always works in your best interest. It’s important to create a long-term investment strategy based on where you want to go in life, how long you plan to work, what kind of retirement lifestyle you envision, and so on.
Match goals with investments. Some investments are designed to achieve certain goals. To illustrate: When you contribute to an IRA and employer sponsored 401 (k) or similar plan, you are investing for a specific long-term goal: a comfortable retirement. While you can tap into these accounts for other purposes – although this can result in immediate taxes and penalties – they are designed to provide you with income during your retirement years. Likewise, you may have other investments for other purposes, such as a 529 Education Savings Plan. Here’s the key point: Goal-oriented investing, by its nature, can help ensure that your wallet still works on your behalf, as you intended.
Investing for growth. Ideally, hard work produces results, and one of the main results you want from your investments is growth, that is, you want your investments to grow in value so that they can eventually help you. help achieve your goals. But if you’re too focused on vehicles like certificates of deposit (CDs) and government securities, you risk reducing your potential for growth. That’s not to say that CDs and Treasuries are somehow “lazy.” They can provide you with income and help you reduce the impact of market volatility on your portfolio. But to achieve most of your goals, you’ll need a reasonable number of growth-oriented investments that work for you, with an exact percentage depending on your needs and stages in your life.
Check your progress. How else can you make sure your investments aren’t just easy? By checking them. If you follow a buy and hold strategy, your portfolio shouldn’t need much change if it already reflects your goals, risk tolerance and time horizon. Too much buying and selling could compromise your ability to follow a consistent long-term strategy. However, “buy and hold” does not mean “buy and forget”. By reviewing your portfolio at least once a year, you can determine if your investments are performing as they should. If they don’t work for you the way you would like, you might need to make some changes.
If you are traveling this summer, relax and have fun, but keep working hard on those investments.
Jennifer Barrett (AAMS) is a local financial advisor to Edward Jones.
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Edward Jones, its employees, and its financial advisors are not estate planners and cannot provide tax or legal advice. You should consult your estate planning lawyer or qualified tax advisor about your situation.