✓ Ongoing Discipline
Did you meet your expectations for planned savings or withdrawals? Smart investors plan in advance with recurring savings or a restricted “budget” for withdrawals. With advanced planning, you can look at your work. Did you miss out on savings opportunities or lean too heavily on your accounts via distributions? There’s no time like the present to get it under control for 2013. Here’s how to grade yourself:
- Consistent saving or withdrawals as planned? Congrats! Give yourself an A!
- No game plan but not too shabby? Give yourself a C.
- Have some making up to do after a rough year for discipline? D, but there’s always next year.
✓ Avoid Timing
2012 was a good year for stocks as measured by the S&P 500, but it was also a year that had stormy headlines that might have steered investors onto the sidelines and into cash. Did you avoid the pitfalls of market timing and stick with your investment plan or did you anticipate the future direction of the market in all the wrong ways?
- No major changes along the way, you stuck to your guns? Way to go – that’s an A!
- A few adjustments but everything was okay in the end? Whew…B-.
- Still sitting in cash in anticipation of the fiscal cliff? Too bad, that’s a D.
✓ Diversified Portfolio
While stock and bond returns were positive (as measured by the S&P 500 and BarCap Aggregate Bond respectively), stocks beat bonds last year. In recent years, some investors have missed opportunities by staying in low-yielding fixed income. Others have concentrated positions in a single company so they’re more subject to the whims of a particular stock rather than broader investment trends. How did you do?
- Your investments are well diversified across 5 or more asset classes? Great! You get an A.
- You’ve got all bonds, but this is comforting? Beware of rising interest rates when bond returns can go south. C for now.
- What is asset allocation or diversification? D, but if you ask for some help from a financial planner you may do better next year.
How did you stack up? If you’re licking your wounds, you may want to consider working with a financial planner to develop a long-term plan of action for your investments.
Ratings Range (A, B, C, D, F): A = Above Average, B = Slightly Above Average, C = Average, D = Needs Improvement, F = Insufficient.
Melissa Joy, CFP®is Partner and Director of Investments at Center for Financial Planning, Inc. In 2011 and 2012, Melissa was honored by Financial Advisor magazine in the inaugural Research All Star List. In addition to her frequent contributions to Money Centered blogs, she writes frequent investment updates at The Center and is regularly quoted in national media publications including The Chicago Tribune, Investment News, and Morningstar Advisor.
Financial Advisor magazine's inaugural Research All Star List is based on job function of the person evaluated, fund selections and evaluation process used, study of rejected fund examples, and evaluation of challenges faced in the job and actions taken to overcome those challenges. Evaluations are independently conducted by Financial Advisor Magazine.
Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. The above grading scale is for illustrative purposes only and does not constitute investment advice. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment decision. Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James. Diversification and asset allocation do not ensure a profit or protect against a loss.