The last several months have left investors with a range of attitudes and feelings about investing. I personally think I have had an upset stomach since last fall which I think is finally going away. Can anybody else relate to that? Finding investments that resonate with your attitude is essential in getting your investment portfolio moving forward from here. I’ve put together a thumbnail sketch of the four common client attitudes I’ve encountered recently, and for each one I’ve provided a possible investment solution for you take take an actionable step forward. What kind of an investor are you?
Type 1: Thinks cash is king
This investor is not ready for a big plunge into stocks. But if you see the threat inflation poses to an all cash strategy in the long run, you may be able to encourage yourself to take steps to avoid that situation. Take action with investments that invests in Ginnie Mae securities and pays a monthly dividend. If your tax bracket is a concern, consider short/intermediate term investment grade insured municipal bonds. If tax is not an issue, then high grade corporate bonds might be a valid choice. Be sure you understand all the risks that comes with investing in bonds.
Type 2: Not content with cash, but not ready for an all stocks
Despite the rally, this investor is not prepared to fully embrace equities, but she knows she can’t win by letting her cash sit stagnant in a money market account. Take action with diversified portfolio with an allocation holding mix of bonds, stocks, and short-term investments. Initially, the focus should be more in bonds representing 60%-80% of the entire investment portfolio. As time goes by, you can consider dollar cost averaging your portfolio into more stock holdings.
Type 3: A little gun-shy about stocks, but fears missing a recovery
This investor’s long-term perspective is trying to break free of his short-term anxiety about the direction of the markets. An investment focused on finding high-quality, sustainable growth companies may be just what the doctor ordered. Take action with an investment which looks for quality companies of all sizes that the look to have solid or strong growth potential.
Type 4: Thinks stocks are cheap; senses a world-wide buying opportunity
This investor typically has a long-term view, is willing to assume more risk, and believes the chance to buy equities low is an opportunity to add some velocity to reaching his long-term goals. Take action with and invest in worldwide securities of smaller companies identified by the portfolio managers as good value opportunities.
Do you fit any of these investor profiles? If so, what kind of an investor are you?
A Brief Word From My Compliance Department……..
- The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
- Government bonds and Treasury Bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of funds shares is not guaranteed and will fluctuate. The market value of corporate bonds will fluctuate, and if the bond is sold prior to maturity, the investor’s yield may differ from the advertised yield.
- Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and are subject to availability and change in price. High Yield/Junk Bonds are not investment grade securities, involve substantial risks and generally should be part of the diversified portfolio of sophisticated investors.
- GNMA’s are guaranteed by the U.S. government as to the timely principal and interest, however this guarantee does not apply to the yield, nor does it protect against loss of principal if the bonds are sold prior to the payment of all underlying mortgages.
- Muni Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and state and local taxes may apply.
- Investing in international and emerging markets may entail additional risks such as currency fluctuation and political instability. Investing in small-cap stocks includes specific risks such as greater volatility and potentially less liquidity.
- Stock investing involves risk including loss of principal Past performance is not a guarantee of future results.
- Small-cap stocks may be subject to higher degree of risk than more established companies’ securities. The illiquidity of the small-cap market may adversely affect the value of these investments.