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As a financial adviser with an 80 year old mother who I helped deal with her 90 year old sister’s affairs, I’m acutely aware of the women’s retirement crisis. I was listening to Sallie Krawcheck on Morning Joe, April 27...
I have been reflecting on the plight of African American wealth and wondering whether or not an African-American financial advisor as part of the solution. Yes I am an African-American financial advisor so I may be biased. I have found that no matter the...
Many retirement do-it-yourselfers (DIY) are unaware that they might be better off hiring a retirement planning professional like a Chartered Retirement Planning CounselorSM. Retirement planning has evolved over the years. My father and mother have enjoyed a lifetime of company pensions. With a stream of...
For most of us, saving for retirement is done via some kind of employer-sponsored 401(k). We may also have an individual retirement account (IRA) of some kind. Traditionally, these are both tax deferred accounts, meaning you contribute the money income-tax free, and then pay taxes...
Getting a tax refund is exciting — who doesn’t love extra cash? But that check from the government can actually be harmful to your financial health. In fact, a refund is often a sign that something is amiss in your financial plan. The fallacy of...
Understanding the gap in what we know we should do and why we don’t do it is essentially known as behavioral finance. Having had many economics classes I have been puzzled at what some people call what a rational person would do. And who is...
Do you dream of retiring one day to a brighter future? Have you thought much about the journey, its uncertainties, twists and turns? I call that the pain. You probably need to invest in the markets to get a return to at least keep up...
Are these on your fitness list? See dentist Schedule physical Interview personal trainer Get a financial review You may have dental check-up, physical, on your fitness list, but do you include financial review? Many chronic conditions like high blood pressure are...
If you’re like many you hate the idea of a budget. I’ve heard many people find it to be constraining. However are you on track to reaching your long-term goals? Do you find yourself making resolutions that never seem to materialize? Then...
Most people I talk to haven’t taken a class on retirement planning, much less 401(k) investments like a QDIA. A QDIA — qualified default investment alternative — is where a 401(k) puts your money if you don’t select investments. Yet most employees don’t remember reading...
There’s a rule of thumb in financial media that you need a million dollars to retire. For some clients though, the idea of saving up a million dollars or more to retire sounds daunting. In my opinion, not everyone needs a million-dollar balance, and the...
One of the biggest mistakes investors can make is to invest using emotion instead of intellect. An investment policy statement can help take emotion out of the picture. In fact, it may be better named an emotional policy statement. While finance and economics are often...
One of the biggest mistakes investors can make is to invest using emotion instead of intellect. An investment policy statement can help take emotion out of the picture. In fact, it may be better named an emotional policy statement. While finance and economics are often considered logical disciplines, there’s a new way of thinking that looks at how emotions affect our decisions. It’s called behavioral finance.
I find that at the beginning of an investment voyage many people focus on investment returns. They often ask financial professionals like me about how investments performed in the past, to help them get a sense of potential returns. What people rarely ask about, though, is the ups and downs those investments went through on the way to those returns. And many financial professionals don’t get into that information, either.
That’s where an investment policy statement can help.
Simply stated, this should answer the one question: “Should I stay or should I go?” If the market fall suddenly, do you want to get out? Do you look for another investment? Or do you stay the course?
Investment policy statements are often associated with large institutional investing. I say, if it works for them, why not for you? Investment policy statements (or investment plans) can help you weather the inevitable turbulence of long-term investing. Some groupings of investments (asset classes) have different risk and return patterns over times.
For instance, wealth managers consider bonds to be safer than than stocks. They also return less historically. If you invest heavily in bonds, you may need to save more money to compensate for the lower returns, depending on your time frame. Or, if you don’t have enough time, or can’t save more, you may need to add “riskier” assets to your portfolio, as they often carry the potential for higher returns. Just remember, even that has its limits.
Think of an investment policy statement as guidance for the decisions determine your portfolio. Think of it like having a boutique store:
From a financial life values perspective:
Your investment policy statement determines what investments you will tolerate. To enact this policy statement, it helps to work with an investment advisor that understands Environmental, Social and Governance (ESG) investing. This is also called social impact investing, socially responsible investing (SRI), or values-based investing. Investment advisors who specialize in this, look for companies that fit your values. Your investment policy statement can serve as a guide.
You may also have issues not mentioned on this list, like concerns about international investing or weariness about investing in smaller startups that you’ve never heard of. Perhaps you prefer big-name corporations. And there may be areas where you don’t have any concern. In that case, focus on your risk tolerance. While you may have an aggressive risk tolerance if you need the money in a short time, it may not be wise to be aggressive as defined by being at all stocks.
Still, asking these questions makes sure your money manager uses your wishes as a guide.
Values-Based Financial Planning
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