Investing can be a very stressful endeavor, especially for us in or nearing retirement. Protecting the nest egg becomes very important as we near the time when distributions become a reality. Behavioral finance studies have repeatedly shown that many Americans would rather live on less when they retire than spend their retirement savings. And that mentality gets exacerbated in unfavorable market conditions.
What can we do to remove emotion from the equation so that we can enjoy our retirement savings? The answer is simple; stop relying on luck to grow your portfolio. We are more often rewarded when our process and planning meet proper execution.
No one has quite figured out how to time the market, and if they had, we would all be following their example. This is where most investors stop and leave their money to chance. The typical investor will take “stock” tips from their colleagues, family, or neighbors, and when the getting is good, sometimes they can make a profit. However, market volatility has a way of pulling the rug out from under that type of investment plan. Instead, we should follow a process that removes as much emotion as possible from the investing strategy. At the Financial Enhancement Group, our portfolio managers built the Risk Barometer to do just that. The Risk Barometer combines economic factors, technical analysis, and seasonality that guide our team as we invest for our families across 31 states. No process will be perfect; however, it provides you a much better chance of staying the course long term. And when market uncertainty arrives, you can be prepared.
Planning is also a critical part of the investment process. When we hear, “You shouldn’t have all of your eggs all in one basket,” our minds often immediately visualize our investments. Don’t forget that this is also the case for the types of investment accounts. If we as investors are not building proper tax diversification in our financial plans, we set up Uncle Sam as the primary benefactor of the wealth we worked so hard to create. What do we mean by tax diversification? We recommend having Roth money, non-retirement money, and deferred tax money. Our 401(k)s will be the largest pool or bucket of investment dollars for many of us. With that said, our 401(k)’s should not be our only investment vehicle. Tax diversification helps spread your exposure to tax code changes and potentially higher future taxes.
Once you have a process and a plan in place, following through with execution is paramount. We also must remember to monitor our plans and make adjustments as the world changes. If you do not review your goals and make calculated adjustments when circumstances change, you could be finding yourself off track down the road. If you want to handle things yourself, that is your business. However, if you are looking for a fiduciary to manage the financial realm for you, that is our expertise. Please feel free to connect with our team for a complimentary next steps meeting.
The Financial Enhancement Group is an SEC Registered Investment Advisor. Securities offered through World Equity Group, Inc. Member FINRA/SIPC. Advisory services can be provided by Financial Enhancement Group (FEG) or World Equity Group. FEG and World Equity Group are separately owned and operated.
