Even long-term investors can find themselves feeling uncomfortable about short-term losses in this stock market environment. After all, nobody likes to lose money, and a double-digit loss in your portfolio could have negative implications for your long-term financial plans. In order to successfully build wealth, you have to learn to stop worrying about short-term losses.
We’re not attempting to predict the next market downturn, and certainly not a market crash. But it is actually certain that a downturn of some sort is already happening and will continue to do so in the future. It’s always best to have at least a loose plan in place to protect yourself and your investments from such an event.
“Asset allocation has to do with your risk tolerance,” says Rick Ferri, the founder and managing partner of Portfolio Solutions. “What you hope to achieve, and when you hope to achieve it, matter when figuring out your asset allocation.”
Diversification is good for an investment portfolio, right? That’s the conventional wisdom, but can your investments be too diversified? As the saying goes, too much of anything isn’t good and this principle applies to diversification, just as it does with virtually everything else in life.
No one likes to make sacrifices. This is especially true when it comes to shopping or buying something you want. But making sacrifices in the short-term can have big long-term gains, that can make the sacrifices you made totally worth it. Want to know how you can build wealth for the future?
As an investor it’s important that you periodically rebalance your portfolio. This is the process by which you make sure that your portfolio allocation stays in approximate alignment with your original diversification strategy. In other words, it’s a re-evaluation of your investments to ensure they’re still meeting your financial goals. There are different ways to rebalance your portfolio, based on life events and personal needs.
Smart beta — also known as advanced beta, alternative beta or strategy indices — isn’t a new investment strategy. But lesser known strategies have a way of surfacing and gaining credibility during times of market stagnation, volatility, or other conditions of uncertainty. Such was the case during the stock market meltdown of 2007-2009. In such a market, investment managers were looking to reduce risk, rather than just purely pursuing return.
There are only a few investment options when you have $1,000 or less to invest, but you have to start somewhere. And though it doesn’t get a whole lot of publicity, there are actually numerous options available to you even with a relatively small amount of money.
Thanks to the rise of robo-advisors investing for the future is now more accessible than ever. You don’t have to spend a lot of time, or money, hiring a portfolio manager to create a complicated asset allocation to receive the best returns possible. Robo-advisors now have the technology and computer software that does this for you — all at a much less costly price.
There are financial milestones that need to be achieved in your twenties and thirties, in order to reach financial success. Some of them will just happen in the normal course of life. But others may require you to be more proactive. This is especially true if you want to master the milestones, rather than just backing into them.