Sage investment advice… Almost two decades ago, the CFA Institute published an article that included a letter from a father who was a financial professional to his daughter. His missive included some timeless and practical advice about investing. Among the thoughts he shared with his daughter were the following principles for investing:
- A fool and his money are soon parted. Pay close attention to financial matters because investment capital is a perishable commodity when not managed properly.
- There is no free lunch. Risk and return are interrelated. Generally, the greater the risk, the greater the potential return and vice versa.
- Know thyself. Be honest in assessing your risk tolerance because it’s easy to underestimate the stress of a high-risk portfolio when markets move south.
- Don’t put all your eggs in one basket. Diversification helps determine potential rates of return and manage exposure to risk. Make sure you have a well-diversified and well-allocated portfolio.
- Take the long view. Make a plan and stay with it. Don’t let short-term market fluctuation or media-fueled frenzies cause you to panic. Investment decisions should result from a rational trade-off of risk and return. Unfortunately, those decisions often reflect fear and anxiety
about current events.
- Remember the value of common sense. Investing is not a competitive sport. It should be an effort to achieve a pre-determined financial goal within a specific risk-tolerance framework. No system works all of the time and you should not expect it to.
Sound financial advice may prove particularly important during 2013. During the
fourth quarter of 2012, markets were volatile as Congress argued fiscal cliff
issues. The solution – The American Taxpayer Relief Act of 2012 – resolved
matters related to taxation, but left spending issues to be hammered out in the
future. As a result, we may see additional volatility during the first few
months of this year. If you begin to experience fear and anxiety when listening
to news reports or checking market performance, just review the principles
Weekly Focus – Think About It
If you want to be successful, it's just this simple. Know what you are doing. Love what you are doing. And believe in what you are doing.
--Will Rogers, humorist and social commentator
The rest of the report can be found here.
Please be sure to visit the Parks Wealth Management website at www.parkswm.com.
James T. Parks, CFP®, AEP, AIF
President and Wealth Advisor
216 East Ridgewood Ave., 2nd Floor | 201.689.2020
Securities offered through LPL Financial, Member FINRA/SIPC