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Marc Cuniberti: Investment strategies

There are many reasons to invest: saving for retirement, saving for the kids education, providing income now or in the future and passing along the estate to the heirs among others.

Although the term “investing” applies to all these reasons, the methods to accomplish each goal might be different.

Considerations depending on why one is investing could involve preferences such as an all growth strategy (aimed solely at increasing the balance and might contain a higher degree of risk), a conservative strategy (that puts conserving principal first and foremost before gains), a target strategy for college funds (structured for moving from risk investments to more conservative holdings as college age approaches), an income strategy later in life, an immediate income strategy, or a tax minimizing strategy for trusts or non-IRA type accounts.



As shown above, in investing, not one size fits all.

Most investors might think their first and foremost desire is to make money but in truth, there is much more to investing than that one consideration.

One of the most critical areas of discovery between clients and financial advisors is to get to know your client and find out exactly why they are investing.




Strategies

For many, a conservative approach that attempts to conserve principal first and foremost before attempting to grow the portfolio is adequate. For others, particular situations require specific strategies and these strategies can be quite different in their construction.

I have reviewed literally thousands of portfolios over the years both managed by the client or an advisor and the similarities between portfolio holdings despite different individual situations has been somewhat disturbing.

It’s almost as if there is a standard belief that holding a basket of stocks and/or funds mixed with some bond funds fits all situations.

In my opinion, this structure may be good for some but definitely should not be used in all situations. In fact, I could think of half a dozen strategies one could implement depending on a particular situation.

The net worth of the individual, their age, how many kids they have, their level of perceived risk and what exactly they need from the investment all have a bearing on what strategy should be considered.

Most investors might think their first and foremost desire is to make money but in truth, there is much more to investing than that one consideration.

What to hold, how much to hold, when to hold and what not to hold are all considerations for the client and his professional.

Certain investments might be purchased that yield income now or in the future or both, while other investments might have a tendency to garner gains yet might also contain higher risk.

Certain investments might have tax advantages such as deferral or lower rates while other strategies may have no tax implications at all.

Have a goal

If you are invested or are considering investing, you likely have a goal in the back of your mind somewhere.

Distilling that thought into a concise and definable intention and then writing it down will go a long way in finding a strategy that best fits that need. I have always said you can’t hit the target unless you know what you’re aiming for.

Once you know exactly why you are investing, the next step is implementing a plan which encompasses that goal and all its considerations.

These considerations might include taxation, length of investment time, desired income stream, safety and timeframe, growth potential and other preferences and needs.

Mix all that into a big bowl and have it prepared by a knowledgeable and market educated financial advisor, or even doing it yourself if you’re brave enough, by becoming your own educated advisor.

Spending the time to learn the ins and outs of the markets may be something some might consider and even enjoy.

To get good results in the kitchen you must not only know your ingredients but know how to prepare those ingredients. It then goes without saying that the first obvious step is knowing exactly what it is you’re trying to accomplish.

This article expresses the opinions of Marc Cuniberti and our opinions only and should not be construed or acted upon as individual investment advice. Mr. Cuniberti is an Investment Advisor Representative through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Marc can be contacted at 530-823-2792 and MKB Financial Services 164 Maple St #1, Auburn. MKB Financial Services and Cambridge are not affiliated. His website is http://www.moneymanagementradio.com. California Insurance License # OL34249


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