Future-Proofing Your Portfolio: Investment Strategies for the Next Decade

Building a secure and diversified portfolio is essential for long-term financial success. With a focus on government securities, corporate bonds, bond mutual funds, precious metals, and Real Estate Investment Trusts (REITs), investors can create a balanced strategy that meets their specific financial goals and risk tolerance. By emphasizing customized investment strategies, clients can gain peace of mind, knowing their portfolios are designed to endure market fluctuations while aiming for consistent growth.

Here is the information you should look at:

Your Shield Against Volatility

Diversification is at the heart of a balanced investment strategy, allowing investors to distribute their capital across various asset classes. This strategy can reduce exposure to risk, as different assets often react differently to economic changes. Government securities, for example, provide a low-risk foundation backed by the stability of the federal government. Treasury bonds offer predictable interest payments and principal repayment, making them ideal for those seeking a stable income stream with minimal risk.

Corporate bonds, on the other hand, enable clients to support corporations in exchange for attractive returns. Investors can select from a range of bonds, from high-quality, lower-yield options to high-yield bonds from emerging companies. Bond mutual funds take diversification to the next level by pooling a variety of bonds across sectors, giving clients broad exposure to the market with a single investment. This blend of steady income and reduced risk makes bond mutual funds a valuable component in any portfolio.

Why Precious Metals Still Matter

Gold and silver are time-tested investments for preserving wealth and are integral to effective investment risk management. As tangible assets, precious metals often move independently of the stock market, providing a hedge against inflation and economic turbulence.

By adding gold and silver to a portfolio, investors gain an anchor that helps stabilize their investments during unpredictable times. Precious metals play a vital role in any diversified strategy, making them an attractive choice for those focused on protecting their wealth while balancing risk with stability.

Real Estate Investment Trusts (REITs): Real Estate the Smart Way

REITs provide an exciting opportunity to tap into income-generating real estate without the burdens of property management. Investing in REITs allows clients to participate in commercial properties, apartment buildings, and healthcare facilities, all while enjoying regular income through dividend distributions.

Because REITs must distribute a substantial portion of their earnings, they are particularly appealing to those focused on generating steady income. Additionally, REITs offer the liquidity of publicly traded assets, allowing investors to buy and sell shares without the complexities tied to direct property ownership.

Final Remarks

Our commitment to clients’ success includes continuous monitoring and strategic rebalancing, helping each investment stay relevant and effective over time. With the right blend of asset classes and a focus on managing risk, our clients can experience the stability and growth they need to achieve their long-term financial objectives.

Footnote

Explore how a personal investment plan in Florida can help you achieve financial resilience and long-term growth. Contact us today to start building a secure and diversified portfolio tailored to your unique goals.

The Importance of an Investment Philosophy

If you listen to any of the world’s leading investors they will tell you that nothing is more important to long-term investment success than a clear investment philosophy. More important than a sound investment strategy? Yes, they will tell you, because strategy, while important, is nothing more than a manifestation of an investment philosophy. Strategy can evolve as circumstances might warrant; however, an investment philosophy is based on the intractable belief you have in the principles and practices that guide your decision-making. In times of market upheaval and through the dark of uncertainty, your investment philosophy enables you to control your emotions, shut out the noise and focus on the things that really matter over the long term.

Too often investors want to focus on the short-term outcome of their decisions when, in reality, it has very little impact on the long-term results of a well-conceived investment strategy. A random 300 point drop in the market in reaction to the news of some calamitous event, while entertaining and maybe a little disconcerting, will be nothing more than a microscopic blip along the way in a long-term time horizon. Your investment philosophy is in place to remind you of that. It can also remind you that short-term results are random and fleeting, which means you have absolutely no control over them.

Instead, your investment philosophy keeps you focused on the process which is your investment strategy. If mistakes are made, you have a rational process for uncovering and learning by them. No panic reactions or second guessing, just a clear assessment of where you are today in relation to where you want to be, and whether the current strategy is the one to get you there. At worst, you adjust the strategy. At best, you leave it alone because it still supports your core beliefs about the market.

Keep it Short, but Pointed

An investment philosophy doesn’t have to be elaborate or eloquent. Most successful investors keep their investment philosophies short and pithy while expressing their core belief. For example, the greatest investor of them all, Warren Buffet has an investment philosophy that consists of just one sentence: “Buy wonderful businesses at a fair price with the intention of holding them forever.” You obviously have to know something about Buffet to know how that translates. Essentially, he believes in buying companies at a price at or near their intrinsic values that can consistently increase their intrinsic values over a long period of time. While many people may not grasp the meaning of his investment philosophy, all that matters is that Buffet does.

A quote by John Bogle, named by Fortune Magazine as one of the Investment Giants of the twentieth century and who is credited with creating the world’s first index fund, has been adopted by many “Bogleheads”(followers of John Bogle) as their investment philosophy:

Buy-and-hold, long-term, all market-index strategies, implemented at rock bottom cost, are the surest of all routes to the accumulation of wealth.

Other examples of brief but all encompassing philosophy statements:

Diversify widely, rebalance regularly, minimize costs; rinse, repeat.

Anything is possible, and the unexpected is inevitable. Proceed accordingly.

Risk means more things can happen than will happen.

Of course, it does require at least some knowledge of how the markets work and some familiarity with investment principles and practices to develop an enduring investment philosophy. But, more important, it requires a deep understanding of your own values and beliefs about money, as well as sensitivity to your comfort level with risk over a long period of time.

A good financial advisor, who also functions as an investment coach – willing to educate and counsel you – will be able to help you ferret out the elements of an investment philosophy that fit your investment profile like a glove and is one whom you will be able to entrust with your utmost confidence. Be wary of a financial advisor who doesn’t bother to ask you what your investment policy is; and be especially wary of a financial advisor who can’t describe his or her investment philosophy succinctly and with conviction.

*This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2014 Advisor Websites.

How to Increase Your Returns with Tax-Savvy Investing

After market-risk and inflation-risk, which investors take great strides to mitigate through sound investment practices, taxation-risk presents the biggest obstacle to building wealth. A sound investment strategy not only seeks to generate returns on your capital, it also seeks to preserve as much of your capital as possible to keep it working for you. One of the surest ways to preserve your capital is to reduce the amount of taxes you pay on investment income and gains. By incorporating tax-saving strategies into your investment plan, you can minimize the impact that taxes have on your capital-at-work.

With Your Asset Allocation it’s all about Location

One of the first rules of wealth accumulation is to sock away as much of your income as possible into a tax-qualified retirement plan, such as a 401k, 403b, or an IRA. This gives you an immediate and long-term tax advantage. However, in terms of an overall asset allocation strategy, the placement of various types of investments among your tax-qualified plans and your non-qualified investment accounts is nearly as important as the selection of investments for meeting your particular investment objectives. At its simplest, you should place your tax efficient investment in your non-qualified investment accounts, and your non-tax efficient investments in your qualified accounts.

Non-tax efficient investments include securities and income-producing assets that tend to generate more taxable returns, such as taxable bonds, bond funds, actively managed mutual funds, and dividend-paying stocks. These should be placed in your qualified plans.

Tax-efficient investments include tax-exempt bonds and bond funds, tax-managed mutual funds, exchange-traded funds, broad market stock index funds. These should be held in your non-qualified investment accounts.

Watch What and When you Buy

If you are going to invest in mutual funds within your non-qualified accounts, it’s important to consider the portfolio holdings of the fund, how much the portfolio is turned over each year, and the amount of unrealized gains sitting in the portfolio. About the worst thing a mutual fund investor can do is to buy shares of an actively traded mutual fund with a high turnover ratio that’s sitting on a boat-load of capital gains. These types of funds are notorious for selling off their most profitable stocks, especially to meet share redemption demands, and distributing big gains to their shareholders, which are fully taxable to the shareholder. When that happens, the share price is reduced in some proportion to the distribution which means the shareholder is left with a lower share price and a taxable distribution.

Instead, consider investing in tax-managed funds which seeks to minimize taxes through tax-harvesting or broad index stock funds which are more passively managed.

Harvest Your Losses with Your Gains

If you feel the need to sell any securities to lock in gains, use that opportunity to “harvest” your portfolio for losses that can offset the gains. This can be done each year as a way to keep your target asset allocation in line with your investment objectives. You can use the proceeds of the stocks sold for gains and losses to add to portion of your asset allocation that needs to be increased.

Reduce Net Investment Income to Avoid the 3.8% Surtax

Beginning in 2013, if your modified adjusted gross income (MAGI) is greater than $200,000 ($250,000 for joint filers), your investment income above a certain threshold could be subject to an additional 3.8% surtax. This doesn’t affect investment income earned in qualified accounts, and income from certain investments, such as tax-exempt bonds and “qualified” dividend-paying stocks, are not included in the calculation.

By investing systematically in a well-conceived, disciplined, long-term investment strategy investors can achieve reasonable returns that can compound into substantial wealth over time. However, without consideration for taxes on their investments, the road to wealth could turn into a steep uphill climb. While it’s important to invest in a way that can generate the best possible returns commensurate with the amount of risk you are willing to assume, it’s your after-tax return on investments that really matters.

In all matters of taxation, physicians should seek the guidance of a qualified tax professional to thoroughly analyze the immediate and long-term implications of investment decisions.

*This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2014 Advisor Websites.

Saving Versus Paying Off Debt

The saving versus paying off debt is an age-old quandary that has plagued people since the advent of consumer debt. Pose this question to a group of financial planners and the responses will be split, roughly down the middle. While there might be as many advocates for savings as there would be for paying down debt, the broad consensus will likely be that it really depends on the situation.

Much of the debt reduction argument stems from simple math. If you hold consumer debt that costs you 15% and the only available savings instruments yields 1%, then it would seem to be a no-brainer to pay the higher cost debt down. For as much as you can set aside in savings, the net effect is that you would be losing 14% on the money saved. So, the sooner you could pay the expensive debt off, the sooner you can be applying your cash flow to savings. Makes sense, right?

Most planners would agree that paying off high interest consumer debt should be a primary objective for all households, especially in today’s economic environment. The yields on savings accounts are stuck at historic lows and consumer debt interest rates and fees continue to rise for most people. There are two instances, however, where accelerating debt reduction should not come at the expense of savings.

Saving for an Emergency Fund

One lesson most people can take from this economy is that nothing is certain, especially when it comes to employment. And that may not be the biggest worry that an individual or household has to face. Life happens to everyone and unexpected emergencies can interrupt incomes for long periods of time. As tempting as paying off a credit card may be, having a six to twelve month cushion for meeting emergency expenses is a more critical need. Without that cushion, one emergency could cast you back into the debt spiral again, or exacerbate the one you are already in.

Retirement Savings

Unless you’re paying loan shark rates on your debt and it’s inhibiting your ability to make your other ends meet, you might want to think twice before sacrificing contributions to your qualified retirement plan, especially an employer provided plan. The opportunity to save money on a before tax basis and have your employer match your contribution may not always be around, and the lost opportunity to have that money accumulate tax deferred for many years is very costly. Better to pare your retirement contribution back a little and find other means to make debt payments.

For most people, the savings versus debt payoff solution is to arrive at some sort of balance between the two as a way to gain greater control over their financial future. It makes a tremendous amount of sense to get out from underneath the weight of crushing debt, however, in these uncertain times, it is vital to continue to weave that security blanket which might be the only layer of protection you have against the unexpected.

*This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2014 Advisor Websites.

Managing Investment Risks

In my opinion, it is impossible to predict future stock market returns. Investment models can produce hypothetical returns but they can’t account for future events. So, in my opinion, investors who manage their investments based on market performance or what they perceive as opportunities for better returns have very little control over the outcome.

On the other hand, there may be market risk, interest rate risk, inflation risk and taxation risk. If your investment portfolio is not vulnerable to market risk it may be vulnerable to interest rate or inflation risk. In my opinion, over the long term, taxes may impede returns and portfolio performance. If it were possible to control the risks to your portfolio, then you could try to improve the long term performance of your investments.

Understanding all Risks

Some investors understand the concept of risk and reward. The risk of loss associated with the stock market is called “market risk”.

In my opinion, the investors who were rattled from the steep declines in the market during the 2008 crash, and more recently in the August 2011 plunge, may have decided they have little tolerance left for market risk, and some of them may have moved their money to “less risky” investments. The problem for these investors is they have now left their portfolio vulnerable to other adverse risks. Effectively managing all of your risks entails allocating your investments along a mix of assets that can act as counter-weights to the various types of risk.*

Inflation Risk

There is going to be inflation. When there hasn’t been inflation, there could have been deflation or stagflation, which some would consider to more dangerous conditions for investments. When investors shift their assets to low yielding or fixed yield investments to avoid market risk, they may be exposing them to inflation risk.

Interest Rate Risk

We also know that interest rates may rise; and they could fall. Unlike changes in the direction of the stock market, changes in interest rates could come with some forewarning. For instance, when the economy slows down as it has these last few years, the Federal Reserve may lower interest rates to try to stimulate economic activity. Conversely, when the economy begins to overheat, the Feds may increase rates to try to contain inflation. Generally, when interest rates rise, the prices of debt securities decrease, and in a declining interest rate environment their prices will increase.

People who stash their money in fixed yield vehicles could also be vulnerable to interest rate changes.

Taxation Risk

At one time or another, the IRS will collect its share of your investment earnings. But, as imposing as the tax code is, it may allow investors to use means to minimize taxes. Deferring taxes, which can be done using qualified retirement plans and annuities, enables your earnings to compound unimpeded by taxes so they can accumulate more quickly; however, there is usually a tax consequence when you eventually access those funds. Understanding investment taxation, such as capital gains, loss carry forward, investment income, etc., may affect the the long term growth of your assets.

In my opinion, an effective way to manage and potentially minimize investment risks is through the broad diversification of assets under a long-term investment strategy. Investors should consider their long-term objectives and overall tolerance for risk when selecting investments.

* Diversification does not necessarily produce results.

This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2014 Advisor Websites.