Hi, I’m Megan Jones, Welcome to Money Matters. Today, I want to talk to you about your philosophy of investing. Your philosophy of investing may be different than your spouse if you are married, or it may be different than your parents, co-workers or friends. Are you conservative? Are you aggressive? What phase of your financial life are you in? The answers to those questions, will shape your investment philosophy.
At Jones Advisory Group we sit down with our clients and get an understanding of what phase of financial life they are in, and what they want their money to do for them. First you have what we call the Accumulation phase. That is when you are swinging for the fences; you are trying to earn as much money as you can. You are OK with some double digit swings, even on the downside, because you have time on your side. You can get into stocks, bonds, mutual funds, even options trading or commodities. You are investing knowing that you have time on your side.
Now, let’s say you are retired or getting ready to retire. You are going to need this money you have accumulated over all these years. You are now in what we call the Preservation phase. This phase starts around age 55. During this phase of life you are more concerned with return of your principal than return on your principal.
You are going to have to start pulling money out of your portfolio and using it for income. The question is, how much are you going to have to pull out and where can we position that money, so that it will have protection and last as long as you do? We start repositioning assets from a risk situation, like we had in the accumulation phase, over into safety during, this preservation phase.
Now why do we do that? We look at your finances as a pyramid. You need that foundation. Your foundation should be protected. Assets in your foundation, should be in a position that will not go down based on what the market does.
The foundation, just like in a home ,is what is going to keep your portfolio stable. The older you get, the bigger the foundation you need, because you don’t have time on your side anymore. The next step up in the pyramid are your conservative investments. Then your moderate investments and the final step is where you have your aggressive investments. But don’t worry, we’ll help you determine what’s the right balance for you.
Make sure when you are determining your investment philosophy, you are taking into consideration what financial phase you are in. I know change can be scary sometimes, but change within your portfolio between phases is critical. We meet with people, and they are investing the same at age 65, as they were at age 45. Chances are, you and your situation have changed. Why haven’t your investments?
If you are interested in learning more, or you are within 5 years from retirement or already retired, and you would like to attend one of our retirement planning classes, please call our office today at 877-374-4524. Also don’t miss us on Money Matters this Sunday at 11:00 on WIBW AM 580.