|
Taking Steps to Safer Investment Decisions
in 2009
It's tough to tell how much one investor can do alone to
preserve their assets in 2009, particularly with unprecedented
government intervention in world markets. But there are some
general ideas to employ as markets and economies hopefully
stabilize in the New Year:
Start with a plan — or review an old one. If
you've worked with a good financial planner, you should be able
to articulate your long-term investment goals by yourself. If
you can't discuss such goals in detail, it might be time to meet
with a financial advisor including a CERTIFIED FINANCIAL PLANNER™
professional. Much of the riskiest investing, overbuying and
panic selling during the late 1990s and early 2000s could have
been avoided if individual investors had sought advice for
achieving long-term specific goals such as retirement or a
college education.
Check all your assets in banks. As a result of federal
economic bailout legislation, the Federal Deposit Insurance
Corporation (FDIC) temporarily raised the per-deposit account,
per bank coverage level from $100,000 to $250,000 through
December
31, 2009. Certain retirement-related accounts carry $250,000 of
FDIC coverage, but again, check in with your bank to make sure
you're covered, and if not, get the right advice for moving
funds so you don't incur an unexpected tax liability or fees.
Review your risk tolerance. Having a plan doesn't mean
make the plan and leave it to sit for years. You and your
planner should decide when it's time for a review of your
investment goals and your feelings about them. An annual
conversation makes sense if nothing's going on, but when unusual
circumstances in life or the markets take place, a phone call
might be a good idea.
Prepare to stay invested. Stock downturns are always
filled with panic selling — and buying. If your financial plan
is sound, be prepared to stay the course, but work with your
advisor to make sure you have your priorities covered. While
times are tough, it's wise to examine all your investment
choices, but if they make sense, definitely put what you can
afford in. You'll reap rewards when the market returns.
Check your credit. No one knows how long it might take
to unravel the nation's current credit situation. That's why
credit-worthy individuals might want to delay looking for new
lines of credit until things loosen, and it's definitely a good
time to schedule review of each of your latest credit reports at
staggered intervals throughout the next year. Why? Because in
tough economies and times of tight credit, identity theft might
be on the rise, and you'll need to make sure the information on
your credit data is truly your own.
Pay attention to your cash. You should have an
emergency fund of three to six months' worth of living expenses
in case your job situation goes south, but the market turbulence
we've experienced also highlights the need to be somewhat liquid
in your investment positions so you can take advantage of
certain opportunities. Not every investment that's lost value is
necessarily a bad investment, and with careful study, you should
be able to have cash on reserve so you can capitalize on
legitimate opportunities.
Re-budget. It's a good time to make a budget or
re-assess the one you have. Though the federal government would
love for consumers to start spending again to lift the economy,
that doesn't mean you have to jump in with both feet. Keep your
spending smart and your debt low so it's easier to set savings and
investment priorities that will do you the most good when the
economy and the market come back.
Check your retirement. How will the activity in the
market affect your retirement timetable? You might want to
continue working full-time or plan a phased-in approach as you
continue to build assets. There is a great danger now that
people may become either too risk-averse or assume too much
risk in planning for their retirement, and that's why it's wise
to get advice.
December 2008 — This column is produced by the Financial
Planning Association, the membership organization for the
financial planning community, and is provided by Don McCarty of
Financial Decision Partners, a local member of the FPA.
|
