5 Basic Things Investors Should Do in 2016
Most of us would prefer not to relive 2015 it is my guess. Equity markets weren't very friendly with treacherous volatility towards the end of the year. Moving sideways from about June on, markets sneaked slight gains but most investors felt the burn of "nothing to show" for the year. China fears of slowed global growth and the increasing stockpiles of crude oil put a lot of downward pressure on the growth in equity markets around the world.
The Federal Reserve finally gave us hope in a Federal Funds Rate increase of 0.25% in December. Monetary policy baffles me. Central banks are seemingly more influenced by "sunshine or doom and gloom" trading headwinds than actual economic data. When the smoke cleared, the NASDAQ was up 5.73%, the S&P 500 eeked out 1.36% (total return), while the Dow fell -2.23%. January sent investors running again with all markets negative year-to-date with the NASDAQ leading the way at -10.92% at the time this article was written. Take a deep breath. Take a moment to think about your long-term goals and stay calm. Question: What should investors be doing instead of watching sensationalized investment news programming? Answer: Getting back to work.
Now that 2015 is in the books, investors might take this opportunity to review and re-evaluate their current financial picture. Where should you begin? My advice is to start with the basics. There are many things to consider when structuring a plan for retirement. What's more, your success could depend on an approach that is reasonable and simplistic and geared towards your personal abilities and needs as an investor. Let's take a peek at 5 areas that might benefit investors in retooling their outlook for the upcoming year.
1) My investment Objective: - What are you trying to accomplish? Are you still a growth investor or should you take your foot off the gas a little and pare back your risk/return profile? Things change as you approach retirement. Your personal circumstances change - job changes, income variation, educational expenses, illness, inheritance, etc. Economic cycles are in flux and ever changing. As we approach what might be the end of another economic cycle, volatility has reared its ugly head causing panic among most investors. Staying true to your goals takes discipline and patience. If you're not comfortable in watching the ebb and flow of a growth style portfolio maybe you're taking too much risk. Speak with your advisor about ensuring you're investment objective is suitable and consistent with your perceived goals.
2) Portfolio Review: - Meeting with your advisor regularly will help you stay informed and ensure you're up to date with your investments. It should also provide you an opportunity to input your needs to your advisor. The more information you provide to your advisor regarding your personal needs, the better. Meet with your advisor as often as it takes to satisfy your understanding of the portfolio and direction.
3) Examine Your Savings: - The end game has everything to do with your ability to save now. When investors are in the accumulation stage of retirement, saving is necessary and should be proportionate to goals set forth in your financial plan. Saving properly should be a great priority as it's likely you'll be spending almost as many years in retirement as you did in the workforce. Remember, there are more vehicles for saving that just your employer-sponsored plans. The most popular of plan types, a 401(k), allows investors to save $18,000 annually plus employer contributions. If that's not sufficient for completion of your long-term goals, then consult an advisor about options for saving outside of a qualified work plan.
4) Control the Controllable: - You can't predict market changes not even by watching the sensational daily programming that surrounds the financial world. Keep it simple and formulate a rules-based system for moving forward. Your success as an investor just might be predicated on your ability and discipline to follow a system. Debt obligations are not your friend when saving for retirement nor are they any less friendly when living on a fixed income in retirement. Speak to your advisor about opportunities to pay down debts over the long term. Asset preservation should be considered a part of your financial portfolio. Preserving your financial future against circumstances like long-term illness, excessive taxation or capital loss from legal judgment is worth considering depending on your personal and professional liability. Consult your tax advisor and insurance advisor for your personal protection needs.