Investments

When looking for a financial planner to help you create a retirement plan, you want to find someone who can assist you with creating a blended mix of investments that work towards your goals while managing risk. By blended, we mean a mix of asset classes that are spread amongst multiple sectors, and which take your risk-profile into account.  A person who is just getting started in retirement planning is going to accept much higher risk, but have a smaller amount of assets to invest than someone that is on the cusp of retirement.  As you approach retirement, you gradually alter your risk profile, and possibly invest in non-traditional assets that offer more stable returns.

This chart shows equity performance over the last seven years in the nine industry sectors that make up the US economy.  When doing your research for for the best IRA account, or the best performing funds, you should take multi-year performance into account.  Many Investment firms are now showing gains on returns starting in 2008, which was a brutal year for equities. Of course that skews up returns by as much as 10-20% compared to investments held prior to 2008. As an example, look at returns in the industrial sector. If you had invested in 2007, you would have 9.41% return over 7 years, but a 19.73% return over 5 years.   The Utility sector shows especially low returns over time, but doesn’t take dividends into account. It’s important to consider both capital gains and dividends when looking at the big picture. For instance, the Utility sector averages a 4% annual dividend, while Industrials average only about 1.5%.

 

While nobody knows for certain which sector will yield the highest gains over a given year, the best financial planners will be able to make educated guesses and put you in the correct sectors. They should also be able to recognize some of the warning signs of longer-term selloffs such as what occurred in both 2008 & 2011. Bear markets are inevitable, and you should know your planner’s strategy at both trying to predict them and how best to navigate the markets when they are volatile.

Select one of the tag links on the right or search for articles on each of these Asset Classes.

Traditional Asset Classes  

  • Stocks
  • ETFs
  • Bonds
  • Mutual Funds
  • Money Markets
  • Government Securities
  • Cash
  • Annuities
  • REITs

Non-Traditional Asset Classes

  • General & Joint Partnerships
  • LLCs
  • Debt Investments
  • Promissory Notes (secured or unsecured)
  • Corporate Debt
  • Real Estate

(see our article on alternative asset classes)