Broker Check

Do’s and Don’ts of Investing

By Jeffrey Eisenberg, MBA

It’s been some time since investors have seen so much uncertainty amid so much good news.

The first six months of the Trump presidency have provided the sort of economic results that normally gladden an investor’s heart. The U.S. economy added nearly 1.1 million jobs in that period, producing a 4.3 percent unemployment rate in August – the lowest in 16 years. Inflation remains sluggish, and the prospects for Trump-driven reductions in government regulations have helped drive the Dow Jones Industrial Average up 10.8 percent through late August.

Individual portfolio values have followed suit. Yet headline-driven uncertainty remains. Saber-rattling between the United States and North Korea have raised speculation over the catastrophic use of nuclear weapons. The Trump administration continues to move top officials in and out of the White House, while critics raise questions about his ability to deliver tax reform and other items on his legislative agenda.

It’s enough conflict to make investors wonder if their portfolios are likely to appreciate still further, or if it’s wise to take profits and wait out the rest of the year.

The problem, of course, is that most crystal balls are cloudy when it comes to guessing at where markets are heading. It makes far better sense to use this period to take a closer look at your situation. The better questions to ask are: how is my financial position doing right now? Am I still on track with the goals in my financial plan? If not, what needs to be done?

Taking stock
It’s a good idea to review your situation and investment strategy at least annually, preferably with a financial advisor. This will allow for timely adjustments to be made in the approaches to your investments, so that each year you are moving closer to your goals.

Strongly consider using a financial advisor. Expert advice comes at a cost, but it may prove to pay for itself many times over through better investment decisions and strategies that lead to improved returns over the long term.

Be sure to use someone who is independent and objective, and is able to customize a portfolio using individual stocks, mutual funds and bonds that are optimal for you. These professionals should also closely monitor your portfolio and act on or notify you of important changes that will affect your positions.

You can discuss some key moves with your advisor, such as:

  • Diversifying your portfolio, not only by the number of investments held, but by the type of investments, asset class and industry exposure as well.
  • Removing emotional ties to your investments, such as stocks received from a beloved relative. Portfolios should be flexible enough to allow you to minimize risk and maximize long-term returns.
  • Maintaining cash savings. Keep enough to not only cover daily living expenses and emergencies, but also to be able to take advantage of investment opportunities.

At the same time, you want to avoid putting money to work at the height of the market and selling at the bottom of a downturn. It is easy to get caught in the hype of our 24/7 news cycles. Avoid both panic and giddy optimism. It’s normal to see ups and downs in investment values, and such variations tend to even out over the long term.

Abstain from trying to time the market. Studies have shown that dollar-cost-averaging over time—investing a set amount at regular intervals—almost always yields better results than trying to anticipate a market move by buying or selling ahead of time.

And forego putting all your eggs in one basket by trying to pick the next single winner that will get you rich quick, a la Powerball. A broadly diversified mix of investments will be more likely to lead to greater long-term returns by minimizing large portfolio fluctuations. Typically, investment values over-shoot on the upside on good news and on the downside on bad news. Have patience and try to stay level-headed.

If you own a security that is no longer a good fit for your portfolio, do not wait until you have something else to buy—sell it while it is most advantageous. Remember the adage, “Cash is king.” Among other things, it means having the ability to invest in new positions as opportunities arise.

You can be sure they will. Make sure you’re ready when they do.

Jeffrey Eisenberg is president and CEO of SecuraWealth Investment Strategies, a Registered Investment Advisor, providing independent fee-only based wealth management services and strategic investment portfolio strategies. SecuraWealth Investment Strategies does not provide legal or tax advice. Please contact your attorney and/or tax advisor regarding any questions you may have specific to your situation. Information contained herein was obtained from sources believed to be reliable, but not guaranteed. Past performance is no guarantee of future results.

Copyright © August 2017 SecuraWealth Investment Strategies. All rights reserved.