What is your true Investment Objective? Most people think that their investment objective is to beat the stock market, like beating the S&P 500. But your true Investment Objective is to make sure that you can accumulate a nest egg that will provide cash flow that keeps up with inflation and lasts as long as you do. Better defined as “Long Term Financial Independence”.
To achieve this goal your assets need to grow, which is measured by rate of return. But that’s only half the equation. The other half of the equation is the stability factor. How much does your portfolio bounce around? How much risk are you taking?
In recent years, the S&P 500 has had some of the best performance versus many other indices. Did you beat the market? If you did, good for you.
Now, let’s say that the stock market had a tough two year stretch and was down -25% each year. You again beat the S&P 500 and were down -22% each of those years. You accomplished your goal of beating the market. How are you doing if your goal is “Long Term Financial Independence”? You’ve heard the expression "winning the battle, but losing the war"?
Keep in mind why you are investing: “Long Term Financial Independence." You are accumulating assets so that your portfolio can provide you income in retirement that keeps up with inflation and lasts as long as you do.
Your goal should be to build a portfolio that provides the growth you need without taking on undue risk.
If you’re focusing on return without factoring in risk then you may be setup for failure. Find someone to partner with that will construct a plan focused on your “Long Term Financial Independence”. Listen to my full podcast below:
If you’d like help reviewing your investment strategy, please contact Casey Boland via email [email protected] or 513-598-5120.
Date Posted: 06/20/2016 Advice provided in this article is meant for educational purposes only and financial education is important to us. Before making decisions regarding your personal financial situation, please consult an advisor or conduct your own due diligence. If you would like to discuss your Retirement Income Plan with an HCM Wealth Advisor, please give us a call – 513-598-5120. Located in Cincinnati, Ohio, we serve clients in 28 states, and we’d love to help.