It’s never too late to make smart choices

John Osbon - November 2, 2011

In recent weeks I’ve described the plan of an impressive 20-year-old investor seeking to amass a comfortable retirement nest egg. Some readers were no doubt mumbling to themselves: great for him, but I don’t have 42 years of investing ahead of me.  How about me, right now?

Yes, time is a great advantage, but no matter your age, you have some real choices you can make right now to improve your investment situation.

Opt out of the news cycle – The news and the markets are not the same.  Amid all the dire news in October – threats of recession, congressional dysfunction, and stubborn unemployment – the S&P 500 soared more than 13 percent, the best monthly gain since 1974. The news can be entertaining, but can also drive emotional short-term investment choices that may work against long-term goals.

Drain excess liquidity – If you’re managing your portfolio to have immediate access to all of your cash all the time, you’re probably not holding the portfolio you need to meet long-term goals.  Determine your cash needs for the next two years and let the rest of your assets work for you to reap their just returns.

Spend less – Every dollar spent today is a dollar less that can compound for years toward your health and comfort in retirement. Challenge yourself to spend your money on what matters today and invest the rest for your future.

Be your own bond – Many investors overlook their employment earnings when designing their asset allocation and assessing portfolio risk.  You are your own best human capital, so if you expect to make $100k-$1m per year for the next 10 years, think of that income as a high value bond when you look at your overall asset allocation (risk-adjusted based on your job security).  Other, smaller bond-like portfolio pieces are retirement savings accounts and Social Security.  Keep all these in mind when you build your portfolio. The point is to consider all assets when investing, especially your own earning power.

Cut costs – This is an easy one that we have written about repeatedly. Costs go down with investment size.  Consolidate. Simplify.  Do a cost audit.  Look for savings.  Take advantage of the low cost structure of index ETFs. Be wary of “exclusive” high cost solutions.

Think multi-generationally – Add 25-75 years to your investment time horizon by managing your investments for future generations. Let investments for your beneficiaries – family, charity, or other – compound for a few extra decades.  History shows that returns are more likely to be positive over longer time periods. Give your estate the gift of time to achieve your legacy goals.

Keep score – Demand clear reports from your investment advisor that show how you are doing – after expenses and after taxes – compared to your goals. Good reports reveal opportunities.

Enjoy your money – They say you can’t take it with you, and with no reports to the contrary, they must be right!

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This article may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.

Nothing in this article is intended to be or should be construed as individualized investment advice. All content is of a general nature. Individual investors should consult their investment adviser, accountant, and/or attorney for specifically tailored advice.

Any references to third-party data or opinions are listed for informational purposes only and have not been verified for accuracy by the Adviser. Adviser does not endorse the statements, services or performance of any third-party vendor without specifically assessing the suitability of a third-party to a client’s or a prospective client’s needs and objectives.

Any securities listed in this article are for illustrative purposes only. These securities may or may not be held in actual client accounts. Specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients, and the reader should not assume that investments in the securities identified and discussed were or will be profitable.

 

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  • This communication may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.”
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