VOL. 131 | NO. 21 | Friday, January 29, 2016
Rays of Wisdom
Dana and Ray Brandon
Things to Consider Before You Invest
By Ray and Dana Brandon
Ray’s Take The great recession of 2007-2009 and its associated bear market seem like a long time ago. The relatively small setback of 2015 seems very tame in the context of the gains since March of 2009. This is a good time to take a few steps back and review investment goals and expectations.
We all need to invest for our financial future. But there are some important things to consider before putting wealth at risk, so that we accomplish our goals without exposing ourselves to risks that we didn’t consider.
Liquidity is the term for how fast we can get our money back from the place where we invested it. Not necessarily all of it … or even at a profit. Sometimes we invest more than we can actually afford to and need to get some back. Stocks, bonds and mutual funds are all forms of investment that are liquid investments that carry risk or not getting back all of your money. CDs, on the other hand, are much less risky, but can be less liquid too, depending on the length of time on the CD.
How about the return on your investment? What is your goal for returns? Bonds typically pay a fixed interest, while stocks and other equity investments go up and down with the market.
What kind of earnings can you expect? Are you looking for interest, growth or maybe dividends?
What is your risk tolerance? There is usually a trade-off between risk and reward. But you should never take more risk than you can stand without panicking.
Diversification is important. As we noted already, markets do things other than go up, and you want to be prepared as much as possible for the vagaries of the market. If you are well-diversified, you can ride the market roller coaster with a little less stress. Trying to time the markets or jump from one investment type to another mid-stream will usually lead to disaster.
Dana’s Take A couple’s finances can turn into a game of chicken. Both members know that their finances are not sound, but neither wants to be the one to sacrifice his or her pet splurges, so both keep their mouths shut. This game can go on until both players lose.
Retaining a certified financial planner can help both members of a couple remain accountable for their financial futures. An experienced CFP looks at the couple’s long-term goals and compares that to current behavior and choices. He or she then helps steer both members to choices that will benefit both in the long run and keep them on track to realize their goals.
Facing up to financial realities can lead to a long-term win for the marriage and family.
Ray Brandon, CEO of Brandon Financial Planning, and his wife, Dana, a licensed clinical social worker, can be reached at brandonplanning.com.