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Strategy
Investing Offensively & Defensively
By Rick Bain
Financial Advisor, Lighthouse Financial Strategies
Have you ever wondered why your investment returns don’t match the advertised return of the investment product you are using? Investor return differs from investment return due to the order or sequence of returns on the principal amount, and changes to the contributions or withdrawals over time. How many dollars you have invested, and over what time period, determines your personal investment return. The return on a lump sum invested during the same time period in which an account with periodic additions or withdrawals is made can differ significantly.
Like football, winning in investing requires effective offensive and defensive strategies!
If you lose 7% on your investment portfolio it will take 7.5% return to get even again. If you lose 50% of your money, you need a 100% return to get whole again! Passive investment portfolio management (or buy and hold) MAY meet your expectations over decades of time. The question is how long do you have or are you willing to wait?
How often do you review your investments - you do open your statements right? How do your investment returns compare to the market benchmark indices?
Diversification by asset class is an important strategy to portfolio performance - never put all of your eggs in one basket right? Does that mean divide your money evenly in all of the asset classes regardless of current market conditions and the risks involved? What are you doing differently today than you were just a few years ago to avoid the negative effects of difficult markets?
Tactical portfolio asset allocation strategies are designed specifically for current market conditions. Tactical asset allocation is the process of overweighting those asset classes that have the potential for upward movement and/or lower downside risk (considering your personal risk tolerance).
Active investment portfolio management (changing between offensive and defensive strategies as appropriate) MAY help you meet your objectives earlier!
Financial advisory services are provided through Creative Financial Designs, Inc., a Registered Investment Advisor.
Securities are offered through CFD Investments, Inc., member NASD/SiPC.
Lighthouse Financial Strategies is not a subsidiary of nor controlled by Creative Financial Designs, Inc., nor CFD Investments, Inc.
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