Page 54 - AAA Magazine – AAA Ohio Auto Club – January 2019

Continued from page 51
Should you misgauge your need for liquidity, you can end up selling at the wrong time as a consequence. It hurts to let go of an investment when the expected gain is high and the P/E ratio is low.
You learn the merits of rebalancing your portfolio.
To the neophyte investor, rebalancing when the market is hot may seem illogical. If your portfolio is disproportionately weighted in equities, is that a problem? It could be.
Across a sustained bull market, it is common to see your level of risk rise parallel to your return. When equities return more than other asset classes, they end up representing an increasingly large percentage of your portfolio’s total assets. Correspondingly, your cash allocation shrinks as well.
The closer you get to retirement, the less risk you will likely want to assume. Even if you are strongly committed to growth investing, approaching retirement while taking on more risk than you feel comfortable with is problematic, as is approaching retirement with an inadequate cash position. Rebalancing a portfolio restores the original asset allocation, realigning it with your long-term risk tolerance and investment strategy. It may seem counterproductive to sell “winners” and buy “losers” as an effect of rebalancing, but as you
do so, remember that you also are saying goodbye to some assets that may have peaked while saying hello to others that you might be buying at the right time.
You learn not to get too attached to certain types of investments. Sometimes an investor will succumb to familiarity bias, which is the rejection of diversification for familiar investments. Why does he or she have
13 percent of the portfolio invested in just two Dow Jones Industrial Average components? The investor just likes what those firms stand for, or has worked for them. The inherent problem is that the performance of those companies exerts a measurable influence on the overall portfolio performance.
Sometimes you see people invest heavily in sectors that include their own industry or career field.
iStock.com/Wavebreakmedia
An investor works for an oil company, so he or she gets heavily into the energy sector. When energy companies go through a rough patch, that investor’s portfolio may be in for a rough ride. Correspondingly, that investor has less capacity to tolerate stock market risk than a faculty surgeon at a university hospital, a federal prosecutor or someone else whose career field or industry will be less buffeted by the winds of economic change.
You learn to be patient. Even if you prefer a tactical asset allocation strategy over the standard buy-and-hold approach, time teaches you
how quickly the markets
rebound from downturns and
why you should stay invested
even through systemic shocks.
The pursuit of your long-term
financial objectives should not
falter – your future and your
quality of life may depend on
realizing them.
This material was prepared by MarketingPro Inc. and does not necessarily represent the views of the presenting party nor their affiliates. This information has been derived from sources believed to be accurate. Please note: Investing involves risk and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
* S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. You cannot directly invest in the index.
Securities offered through Kestra Investment Services LLC (Kestra IS), member FINRA (www.finra.org)/SIPC (www.sipc.org). Investment advisory services offered through Kestra Advisory Services LLC (Kestra AS), an affiliate of Kestra IS. The Strategic Wealth Management Group is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS does not provide tax or legal advice.
Citations: 1 - fc.standardandpoors.com/sites/client/generic/axa/axa4/Article.vm?topic=5991&siteContent=8088 [6/4/15]
52 | AAA MAGAZINE
Jeremy Swank may be reached at 419-522-6636 ext. 101 or jswank@thestrategicwealthgroup.com.