Does Market Timing Work?

By: Emilie Goldman

With so many ups and downs in the stock market over the past few quarters, investors may be tempted to try to predict the stock market to avoid declines and benefit from the gains. Yet there is already a group of professional managers—called tactical asset allocators—who are trying to time the market.

Tactical asset allocators generally tell investors they will avoid stock market declines and participate in stock market gains. This promise appeals to most investors since we are all interested in growing and preserving our wealth. But does the track record of tactical asset allocators supports their promise? Thankfully, we came across a 2019 study that sheds light on this subject. (more…)

5 Keys to Successful Investment Management

In real estate investment, as everyone knows, the key is location, location, location. When it comes to personal investment management though, the key is plan, plan, plan. In our view, investment management can only be done well within the context of the Comprehensive Financial Planning process.

Planning is the key to achieving your financial life goals – from short-term goals such as a longed-for vacation to critical long-term goals like living a life of dignity and comfort in retirement. Along with cash flow management, investment returns are one of the engines that will power you toward your goals.

By following the 5 Keys to Successful Investment Management, you will find a sense of freedom from the anxiety of watching the markets bounce around, and you will dramatically improve your chances of achieving a retirement of dignity and comfort. (more…)

I Feel Weird Saying This, But I Have Too Much Money

Dear Emilie: I’m panicking because I’m sitting on a pile of cash and feel paralyzed. What should I do with it? Save it for an emergency? Pay down my mortgage? Invest it? – Super Saver

Dear Super Saver: This is a good problem to have! Let’s set some priorities for using this money wisely and minimizing taxes.

First, do you have an emergency fund of readily accessible cash? Set aside three to six months of living expense in a money market fund or savings account. This is the money you can easily tap to cover living expenses if you lose your job. (more…)

A New Perspective on Risk Tolerance

When you are making an investment decision, do you intentionally weigh the potential risks and rewards?  Is weighing that balance more of a rational or emotional process for you?  In other words, do you tend to rely more on facts or on feelings?

For investors, “risk” is defined as the chance to experience loss versus the chance to experience a gain.  At one end of the risk tolerance continuum are those individuals who are averse to risk.  They focus their thinking on the “loss” part of the equation.  For them, risk is anxiety producing and a factor to be avoided.  They want to stick with the known and predictable.  In addition, those who are risk averse value financial stability above all else.  Therefore, they are willing to sacrifice higher returns to achieve that sense of guarantee. (more…)

Tune Out the Noise

There’s a reason that investors tend to only hear about “looming” market doom or “imminent” market growth. While many news outlets have incentive to draw viewer attention with wildly bullish or bearish predictions, these sensationalized views may be a distraction to a sound investment approach. When tempted to make a radical change to your investment portfolio based on these headlines, it is important to recall some basic fundamentals to keep your plan on track.

Drown out the noise. Market movements are notoriously difficult to predict. The media outlets that scream the loudest are not always the most accurate. The fallout from attempting to time the market in response to one of these predictions can be dangerous to your portfolio. (more…)

Risk, Not Volatility, Is the Real Enemy

What would you do if your investments lost 10% in a single day? A) Add more money to my account. B) Hold steady with what I’ve got. C) Yank my money; I wouldn’t be able to stand any more losses.

If investors buy the right investments but sell them at the wrong time because they can’t handle the price fluctuations, they may have been better off avoiding those investments in the first place. Most investors are poor judges of their own risk tolerance, feeling more risk-resilient in up markets and more risk-averse after market losses. However, focusing on an investor’s response to short-term losses inappropriately confuses risk and volatility. Understanding the difference between the two and focusing on the former is a potential way to make sure you reach your financial goals. (more…)