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Marc Cuniberti: Keeping your eye on your investments

Marc Cuniberti
Columnist
Marc Cuniberti
Laura Mahaffy/lmahaffy@theunion.com | The Union

Knowing where your money is an important aspect of an investment plan. Like knowing where your kids are, knowing where your money is may help you not lose some of it.

As an advisor, I have clients that tell me they do not want to own a particular company stock because of their moral convictions. Think tobacco or oil companies. Other investors might try and second guess the economy based on what they might feel about the administration, their view of the unemployment environment, or perhaps even which way the wind blows.

Although not owning something due to a moral conviction is a valid one, second guessing which way the market will go is impossible for the experts, let alone the novice retail investor like Mr. and Mrs. Smith on Main Street.

You can however at least get a feel as to what your money is invested in to start down the road of being a better informed investor.

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You might not fully understand the entire investment makeup of the portfolio but knowing at least what asset classes you’re in and what kind of companies you hold will go a long way in improving your knowledge of money. After all, investing is more like a sociological study than a science. There are many outside events that can influence overall market direction so the more eyes looking at a portfolio the better.

For example, do you think there is a lot of debt in the world today?

If you do, you might not want to own a lot of bonds. That’s just another word for debt. Bonds can also be held in income funds or other funds with names indicating they hold a wide variety of investments, bonds being one of them.

High income funds or funds that have the name “high yield” in them might hold what is called “junk bonds.” These are riskier than an investment grade bond. They hold these to get that “high” yield. If you told your advisor you are a conservative investor, perhaps he placed you in something that has higher risk investments that might not suit your risk level. Knowing a little bit about what is riskier and what is safer will help you steer him in the right direction if he took a wrong turn somewhere or misunderstood your risk profile.

Momentum funds trade on something like the waves of favor sort of speak. Certain formulas and methods are used to track which way the investing wind is blowing, then managers of these funds put a money sail up to catch it. The sail being my metaphor for buying certain stocks managers think might move in the upward direction.

A “dog” fund might hold out of favor Dow stocks while an exchange traded note fund (don’t confuse this with an exchange traded note) might not hold anything at all. Its movement relies on the manager’s ability to track an underlying investment area of some sort.

A leveraged fund ratchets up the risk by in essence doubling down and these can fall in value just because the clock is ticking. They can also move faster than the overall market, meaning they are more volatile. A contrary fund (versus some funds that may have the word “contrarian” in them) or “bear” fund might actually be designed to move opposite the general market.

Like knowing where your kids are, knowing what your money is invested in may be just as important and probably a good practice for you to consider in order to maximize your success in the markets.

This article expresses the opinions of Marc Cuniberti 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 SMC Wealth Management, 164 Maple St #1, Auburn, CA 95603 (530) 559-1214. SMC and Cambridge are not affiliated. His website is http://www.moneymanagementradio.com. California Insurance License # OL34249. Indices mentioned may not be invested into directly.


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