Contributions & Allocation Take the Sting out of the Stock Market
Much is made of “timing” the stock market. Turn on CNBC or Fox Business and you’ll find literally an endless stream of updates and discussion related to the action happening among Wall Street’s biggest names.
But how does this fire hose of information practically help a high-income family looking to build wealth or a pre-retiree couple trying to make retirement decisions? In my opinion…IT DOESN’T!
I believe there is a better way to think about your financial life.
Instead of being consumed by the 24-hour, non-stop news cycle that you can’t control – why not focus on what you can control instead?
Your regular investment contributions and ongoing investment allocation decisions are the most critical components of control you can exercise over your financial future.
Regular contributions are usually thought of as bi-weekly paycheck deferrals into a company retirement plan, but there are other scenarios where this can be applied as well. When clients come into a large sum of cash from the sale of an asset, business, or inheritance, they are (rightly) apprehensive about dumping all of that into the stock market at the same time. In these instances, looking at monthly or quarterly installments can help balance out volatility and provide a dollar-cost-average advantage.
Investment allocation is a fancy name for the stocks, bonds or alternative investments that together, create your entire investment portfolio. Instead of having all the eggs in one basket, you can use broad-based and diversified funds to spread your risk/exposure across many different industries, markets, and asset types. This lowers the extreme ups and downs of the market, and provides access to growth in many different areas, both geographic and industrial.
When investors shift their thinking from daily waves to long-term impacts, it can reduce their stress, increase their feeling of control, and give them a better understanding of their financial data so they can make more informed and educated decisions.
If you have questions about your contribution or allocation strategy – or want to learn more about our comprehensive financial planning packages, please complete the consultation form below.
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Joshua Duvall, CFP®, RTP launched his own Registered Investment Adviser in 2017 after more than a decade in the financial industry, working for some of the world’s largest and most successful firms including LPL Financial, New York Life, and State Farm Ins. Co. Married with two children, Josh resides in Tabernacle, New Jersey and is an engaged member of his community. Josh enjoys coaching youth sports, rooting for The Ohio State Buckeyes, and sharing his passion for Jesus through biblical ministry and community service.