Face it. Your portfolio stinks. It’s probably not invested as well as you think, but don’t worry, we’ve got a solution for you.
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Puzzle Of The Week:
[4:20] – Your Portfolio Stinks.
- In truth, your portfolio might not stink, but regardless, if you’re a well-diversified investor, you probably don’t scare easily when the market corrects.
- Your portfolio should be boring. Sure, that means you might not get all the gains of the market as it rises, but that also means you’re protected from the Wall Street roller coaster. You don’t have to worry about your portfolio getting cut in half as the market corrects. Over time, a broadly diversified portfolio is going to give you the greatest chance of success.
[10:38] – A Properly Diversified Portfolio Yields A Range Of Returns.
- While you can’t know exactly how your portfolio will perform, you can get a pretty good idea. In Cincinnati, there’s a range of temperatures in October you can expect. That range is between 40 degrees and 75 degrees, and most of the time, that range is exactly what you’ll experience. We all want 70 degree days in October, but when you get 40 degree days, it’s totally normal.
- Your portfolio works the same way. You should expect a range of returns in your portfolio. You might not always like the returns you get, but they should be consistent. The market timer wants you to believe that he can give you a high rate of return each year. He wants you to believe he can narrow your range of returns around a high group of numbers, but that’s not how investing works.
[12:40] – The Ability To Rebalance Your Portfolio Comes From Market Declines.
- Logically, you want to buy when the market is low and sell when it’s high. However, we’re emotional beings, and so often we’re chasing returns and doing the opposite. We panic as the market drops and get greedy when it’s up. Instead, we should use the drops as a chance to rebalance our portfolio and take our chips off the proverbial poker table when the market is high. Remember, today’s loser is tomorrow’s winner. Just look at the 2017 World Series Champion Houston Astros. They were terrible for years, they adjusted their team, and they eventually came out on top. Don’t let your emotions get the best of your decision-making process when it comes to investing.
- [18:42] – Deardra is about to take on a new job, and her employer offers a 401(k) plan. She wants to know what funds to invest in within her 401(k).
Puzzle Solver Assignment:
- [23:08] – Get your financial statements, a computer, and a notepad. Take a look at your investments, and determine what asset classes you’re invested in. Look at the percentage of funds you own that are invested in U.S. large cap stocks, real estate, international funds, etc…Then, determine the ideal percentage for you. If you don’t know the answer to that question, work with an advisor to help you find out.
The Full Picture:
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The host: Dan Cuprill – Schedule A Time To Meet – Or Call: (513) 563 – 7526
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