Action by the U.S. Congress may have averted the “fiscal cliff” crisis in the short term, but many investors are still uncertain about how to best handle their financial planning. To help people stay on track, Jeremy Welther, a senior financial advisor at wealth management firm Brinton Eaton, offers these eight tips:
- Stay diversified. While the bond market has “been on a tear” recently, investors shouldn’t over-concentrate in any sector, even if it’s performing well at the moment. A well-diversified portfolio should invest across a variety of industry sectors, and should
include equities, fixed income, and alternative investments to balance risk.
- Manage risks in a portfolio by rebalancing rigorously. As some sectors do better than others, regularly revising investments to make sure a portfolio keeps the intended balance is important. “Systematically buying low and selling high allows you to reduce your overall risk and can actually help improve your returns over time,” said Welther.
- Take the financial news with a grain of salt. “Many headlines contribute to negative investment behaviors,” said Welther. “Don’t let your emotions get the best of you… and cause you to enter and exit the markets at exactly the wrong times.”
- Review and update your financial plan periodically. Tax law changes, fluctuating markets, major life events and many other factors can require changes or adjustments, which the investor should discuss with their financial advisor.
- Review beneficiaries. Investors should review their designations to make sure the arrangements continue to reflect their wishes. These beneficiaries should also be included in their will.
- Remember retirement. Savings and investments look likely to play an increasingly important role in ensuring a comfortable retirement. It’s never too late to start planning. Every dollar saved ahead of time is helpful.
- Asset insurance coverage. It is important to review coverage in property and casualty, disability, liability and long-term care to make sure the individual is not overinsured or underinsured.
- Get a second opinion. If a financial plan is not serving the investor’s needs, or if the planner is not offering the explanations and education needed, it may be time to consider finding a new advisor.