By Doug Feller, CFP, CFA, AIF,
principal/financial advisor,
Investment Partners, LTD, [email protected],
(Dublin office)
1.
TIME HORIZON – Earning money on your money (com-
pounded return) takes time. The longer we have, the better.
2.
Long time horizons afford us the ability to take more risk,
and aim for higher returns. In contrast, we’re likely to avoid
risk if we need our funds for a down payment in two years.
Unfortunately, we don’t always have as much of time as
we think. What if you’re offered a severance package,
or you need to retire early to take care of your mother?
Things change. Prepare for it.
SAVING AND WITHDRAWAL RATES – Trees don’t grow
if you don’t water them. Regularly contributing to your in-
vestments enable you take advantage of fancy terms like
“dollar cost averaging.”
3.
For those who might be in withdrawal mode, watch your
withdrawal rates. Investing is simpler when you’re ac-
cumulating wealth, but withdrawing funds needs to be
done wisely, because taking funds during capital market
declines is a complicating factor. Save more. Watch your
burn rate. Enough said.
to death. This lever involves allocation pie charts, security
analysis, and timing and is constrained by taxes, fees and
time horizon and requires us to separate ourselves from
our capital. We expect our return to compensates us for
the level of risk we take, but to do so, it needs to be done
well, and benchmarked.
There are volumes written on each of the above terms, but
you don’t need to read them. Instead, walk through the
finer details with a qualified professional, who, upon help-
ing you answer these questions, can provide you with your
newly minted investment policy statement.
Just don’t delay. As the Chinese proverb says:
“the best time to plant a tree was
20 years ago; the second-best
time is today.”
TARGETED RATE OF RETURN – Return on investment
garners most of our focus. It’s critical because it’s the en-
gine of a financial plan, and it’s analyzed (and advertised)
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