Five Years: Financial Thoughts

Note: This is my 8th post of the @projectdomino writer’s challenge.This a challenge for bloggers and writers to post for 30 consecutive days, beginning on May 31. I will receive a prompt, or idea, from them each day, which I may use as the basis for that day’s post. For more information on this, see my post on May 31, 2011.

Many of these suggested prompts could be personal, but I’m going to write this one based on being a financial advisor.

Prompt: What would you say to the person you were 5 years ago? What will you say to the person you’ll be in five years?

Do you see the pattern that follows?

5 years ago, June 2006:  What advice would I give now, to myself, for 2006?

Provide financial advice to your clients that is always in their best interest.

Be sure that your clients have well diversified portfolios, based on their personal need, ability and willingness to take risk.

A portfolio of stocks should be globally diversified, which means that there should be a significant allocation to international stocks, emerging markets, small company stocks, as well as real estate. A diversified portfolio is not just the S&P 500 index fund.

Remember that over time, the vast majority of mutual funds and money managers do not beat their benchmarks.

Do not take risk with bonds. Only buy very high quality. Reaching for higher yielding, but less quality bonds, is not a good practice. Fixed income is the place to be very safe.

Expect the unexpected, and plan for it. Talk to your clients about bad markets as well as good markets.

Assist your clients in remaining disciplined, especially during down markets. If they do this, they will be well rewarded, after a market downturn, when the market rebounds.

It is impossible to accurately time the market. It is almost impossible to be right twice, as to when to sell (get out of the market) and then again (when to buy back into the market).

Rebalancing is crucial to long term success. When an asset class does well, sell some of it. Use the money to buy an asset class that has not done as well. This leads to buying low and selling high.

Plan with your clients (and have a simple written document), so your clients can achieve a sense of financial comfort and security.

Buy individual bonds or CDs of very high quality, only, which will work well if interest rates rise or fall. Bond mutual funds will not do well if interest rates rise.

5 years in the future, June 2016: What advice would I give now, to myself, for 2016?



Provide financial advice to your clients that is always in their best interest.

Be sure that your clients have well diversified portfolios, based on their personal need, ability and willingness to take risk.

A portfolio of stocks should be globally diversified, which means that there should be a significant allocation to international stocks, emerging markets, small company stocks, as well as real estate. A diversified portfolio is not just the S&P 500 index fund.

Remember that over time, the vast majority of mutual funds and money managers do not beat their benchmarks.

Do not take risk with bonds. Only buy very high quality. Reaching for higher yielding, but less quality bonds, is not a good practice. Fixed income is the place to be very safe.

Expect the unexpected, and plan for it. Talk to your clients about bad markets as well as good markets.

Assist your clients in remaining disciplined, especially during down markets. If they do this, they will be well rewarded, after a market downturn, when the market rebounds.

It is impossible to accurately time the market. It is almost impossible to be right twice, as to when to sell (get out of the market) and then again (when to buy back into the market).

Rebalancing is crucial to long term success. When an asset class does well, sell some of it. Use the money to buy an asset class that has not done as well. This leads to buying low and selling high.

Plan with your clients (and have a simple written document), so your clients can achieve a sense of financial comfort and security.

Buy individual bonds or CDs of very high quality, only, which will work well if interest rates rise or fall. Bond mutual funds will not do well if interest rates rise.

Conclusion:  Do you see the pattern? 

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