[
Investment advice for every investor—offered by Ron Redfield, CPA, PFS—promoting wise choices, regardless of differences in investment term and risk tolerance—investment advice you need, today.
Full Article - Table of Contents
What investment advice will help an investor who is unsure of his own investment risk tolerance? How does an investor determine if they should be in pure safety, or if they should have an emphasis on a more aggressive portfolio? Here is our top investment advice.
The investor, in making this decision, should understand the fee structure of that investment professional. The investor should understand the difference between an advisor that is fee only versus one that collects commissions (either directly or indirectly) from selling an investor a specific investment.
For some practical advice in selecting an investment advisor, take a look at Questions to Ask a Financial Adviser.
Yet another excellent resource is a book, entitled Winning the Losers Game, written by Charles Ellis—which emphasizes the need for a teamwork approach between the investor and the investment advisor.
We discussed fixed income issues in more depth, elsewhere. For now, here are some of the risks of fixed income investing:
This means that there should be an investment allocation that contains both common stocks and high credit quality bonds. The allocation will differ based on a particular investor's risk tolerance and the investment environment.
Yet, an aggressive investor should generally have a bond allocation. Similarly, a conservative investor should consider alternatives to pure fixed income (be it only small allocations) investments.
Patience is vital to investing. Very often we are buying investments that are out of favor and being tossed aside by most investors.
An example of this was our accumulation of high quality bonds in the late 90's. We were accumulating bonds, quite inexpensively as Wall Street was dumping bonds to generate investment funds to put into the high flying NASDAQ stocks.
We also had been accumulating technology shares near the bottom of the 2000 Crash. Nevertheless, we based our decisions on our perspective of future revenues and cash flows of the companies we invested in.
Professional skepticism is not popular, yet we find it incredibly necessary in helping us research an investment. Ultimately we trust the markets and our financial system, but questioning that system until it makes sense is a vital step in investing.
Peter Lynch wrote an excellent book, called Beating The Street. (I invite you to read my summary notes, here.)
Lynch suggests that you should never invest in any idea you can't illustrate with a crayon. He feels that you should be able to explain any investment to a 10-year old. If you can't explain it to a 10-year old, then you should consider passing on the investment.
Whatever has happened in the past is over. Use your knowledge of the past in your investment philosophy going forward. We refer to using the costly lessons of the past as "sunk costs."
In summary, remember that investing requires patience, research, understanding, and a teamwork approach with your advisor—and an open mind, doubt, balance and the ability to recognize mistakes and implement action to correct those mistakes.
And that is the best investment advice that we can offer you, at this time.
Ronald R. Redfield, CPA, PFS, is available for a free consultation and sample portfolio based on your investment risk tolerance levels. And you're warmly invited to request a complementary copy of Ron's text on investment philosophy.
Please contact Ron by visiting him at Redfield, Blonsky & Co., sending him an email, or calling him at 1 (908) 276-7226. Be sure and read Ron's latest commentary on financial investments, to keep up with market changes.