10 General Planning and Investment Concepts
I spoke with a sophisticated investor this week and she asked me if I might consider highlighting a few investment and planning principles that we believe are key. While many of these items you may have previously considered, it’s always good to have a quick review. These concepts are a few of the beliefs that guide our advice.
- An emergency fund of cash and short-term fixed income is a good safety net. It does not necessarily have to be all cash as long as the fixed income available is short term and easily marketable.
- Expenses should be indexed for inflation to note the true reduction in purchasing power as years in retirement accumulate.
- Investment time horizon is a key factor in determining the allocation of a portfolio strategy.
- Taxation matters. One should consider analyzing tax responsibility each year and determine if one can reduce that liability.
- Market volatility is permanent; it will never go away.
- The determination of whether an asset is domestic or international is solely determined by the location of the corporate office. Look at the source location of revenue received by a corporation to determine how much international exposure is actually held within a portfolio.
- Overall global growth will likely slow as interest rates rise, and deficits remain a problem in many countries.
- Trusts can be designed to assure that assets are bequeathed in a way that is consistent with your wishes. For this reason, trusts should be reviewed to determine if any changes are required.
- Fixed income risk is measured by assessing bond duration and credit quality.
- Share buybacks increase company earnings. This is an often-watched measure and is considered a bullish sign for a company‘s stock price (excluding other issues).
These are just a few general thoughts on planning and investment issues. I trust you will find these items of interest.
Any questions, please let us now. Always happy to help.