This is a question we ask ourselves every day. Then of course we get reminded of the anguish caused by the last crash and that raises even more questions. Finding that proper balance, one that gets us a great return with the least risk possible, as well as a forward-looking tax strategy is increasingly critical as we approach retirement. “Invest for need, not for greed!™”
The reality is that most people simply do not take enough risk with their portfolio. We tend to get a little too cautious as we age and think risk avoidance is the same as risk management. It’s not. Your money must be invested properly, in the right asset classes (there are six), at the appropriate times. Of course, it must be managed “tactically” to succeed in today’s difficult market. Actively managed daily, never passively managed, also known as buy-and-hope.
A recent interview with Richard Turnill from Blackrock, the World’s largest money manager says investors need to take more risk, because the majority of investors are still afraid of equities and not committing enough for risk in their portfolios.
“We know that many investors have been cautious about investing in risk assets really since the global financial crisis, and recently that caution was ironically exacerbated by a period of low market volatility,” says Richard Turnill, global chief investment strategist at BlackRock. “The slow pace of economic gains actually suggest that the recovery has room to run and the timing of the next recession could be measured in years rather than quarters.”
Another important investment direction is the decision in regard to bonds. Many people own bonds in their portfolio and most passively managed portfolios insist on holding bonds because of what the long-term asset allocation models illustrate. However, why would anyone own bonds if they believe interest rates will be rising? They wouldn’t. Therefore, you may believe you are taking less risk with bonds but really you are taking on more!
However, why would anyone own bonds if they believe interest rates will be rising? They wouldn’t. Therefore, you may believe you are taking less risk with bonds but really you are taking on more!
It really comes down to being the expert or hiring one. As you approach retirement, work with a Retirement Advisor that understands what it takes to be successful with a proper investment strategy and a forward looking tax strategy.
Feel free to contact me with any comments or questions.