FINANCIAL MANAGEMENT
personal wealth health

Riding the Wave

Approach the market's ups and downs with common sense.

WILLIAM J. LYNOTT

The roller coaster ride of the economy during 2013 has been enough to cause stomach churning in all but the most steely nerved passengers. Most experts predict a steady pattern of economic growth with periods of expansions, recessions and downturns in the market.

Use the following fundamentals to invest in a financially healthy retirement.

Don't try to time the market.

“It's better to invest regularly, without regard for the general condition of the economy or the direction of the stock market,” says Darrell J. Canby, CPA/CFP, president, Canby Financial Advisors in Natick, Mass. “Timing the market, trying to determine the best time to buy specific stocks, rarely works.”

Rick Willeford, MBA, CPA/CFP, in Atlanta, Ga., agrees. “Market timing and day trading are for suckers,” he says. “Waiting for stocks to hit the ‘bottom’ before you buy or hit the ‘top’ before you sell has long since proven to be a loser's game for investors. Select stocks or mutual funds on the basis of sound fundamentals.”

Avoid reacting to daily economic reports.

“In an effort to sell newspapers and air time, many investors are persuaded by the media to look out for the next economic number of the day,” says Jordan Kimmel, managing director, Magnet Investment Group in Randolph, N.J. “Whether it's employment numbers, capacity utilization, or inflation statistics, there is always a number of the day to tempt investors into overreacting.

Mr. Kimmel adds, “No investment strategy is better than identifying superior companies and holding them while letting your money compound over time.”

Maintain an appropriate asset allocation.

The right mix depends on factors, such as your age and your tolerance for risk.

If your retirement is years away, most experts recommend relatively heavy investments in equities, perhaps 60% or more of your total portfolio.

“However, if your time horizon is less than three years,” says Certified Financial Planner Greg Womack, Edmond, Okla., “go more heavily in fixed investments like CDs, short-term bonds and money markets.”

Diversify your equity investments.

Don't invest too heavily in a single industry or company. Otherwise, you put yourself at risk should that industry or company experience serious downturn.

Rebalance your portfolio.

Once you have allocated your assets in the proportion that is right for you, rebalance at least once a year. As the price of equities fluctuates, the ratio you began with changes.

If the value of your equities rises, consider selling some of them to restore your original ratios. If their value has drops, moving more cash into equities may be appropriate.

Stay the course.

The maintenance of an investment portfolio that promotes a good night's sleep during these scary investment times involves much more. However, sticking with these fundamentals goes a long way toward achieving that end. OM

Information in this article is provided for educational and reference purposes only. It is not intended to provide specific advice or individual recommendations. Consult an accountant or tax advisor for advice regarding your particular situation.

MR. LYNOTT IS A FREELANCE WRITER WHO SPECIALIZES IN BUSINESS MANAGEMENT AS WELL AS PERSONAL AND BUSINESS FINANCE. VISIT WWW.BLYNOTT.COM, OR SEND COMMENTS TO OPTOMETRICMANAGEMENT@GMAIL.COM.