Although every day is a new opportunity to begin again, there is something about the start of a fresh season that empowers people to take action. In addition to ushering in 2017, we are also welcoming a new President into the White House to lead our nation.
While rising interest rates are eminent and a 7 year bull stock market run are both cause for concern, the President has made promises that could strengthen our economy, thereby maintaining the stock market run for a bit longer than anticipated.
Throughout this season of change, the key to positioning oneself for the ebb and flow is to diversify and include alternative investments such as non-stock, non-bond assets. While it’s impossible to know what the future will hold, implementing a forward thinking strategy that works towards your individual goals will pay off in dividends.
5 Wealth Building Recommendations
Having been a CFP for 25 years, I am often asked what my top tips are for making smart investments. Here are my top 5 recommendations that everyone should consider when making strategic decisions to their wealth building strategy:
- Avoid Self Destructive Investor Behavior. Be an Investor…not a Trader. From 1994 to 2013, the average stock fund returned 8.7% per year while the average stock investor earned only 5%. We call the gap between these results “investor behavior penalty”. Driven by emotions like fear and greed, they succumbed to negative behavior such as: 1) Pouring money into the latest top performing fund or asset class expecting the winning streak to continue 2) Avoiding areas of the market that have performed poorly, assuming recovery will never return 3) Abandoning their investment plan by attempting to successfully time moves in and out of the market, a near impossible feat.
- Keep long term goals and objectives in mind while refusing to be swayed by emotions or “Hot Tips”.
- Diversify. There is something to the old adage “do not keep all of your eggs in one basket”.
- Consider adding Alternative Investments. These would be investments that are not stocks or bonds. Examples are Commodities, Real Estate, Reinsurance, Life Settlements, Managed Futures.
- Pay attention to your Bond holdings. Rising interest rates could have negative effect on the value of exiting bonds. There is no time like the present to take inventory of what works, what doesn’t and what can be improved upon.