On This, We Can Actually Agree

There wasn't much agreement between or even within the political parties leading up to the election and I suspect that the deep disagreements will continue well past the election. I'll let the political pundits blog and pontificate on that.

Likewise, there is much disagreement in Financial Services and Investment Management, but there are also some broadly accepted principles and strategies.

One in particular.

J. Bradford Investment Management thinks it's a good idea

Forbes thinks it's a good idea

Morningstar thinks it's a good idea

NASDAQ thinks it's a good idea

CNBC thinks it's a good idea

In fact, just about every major financial institution and publication will espouse the virtues of this fundamental investment activity – rebalancing.

There aren't many universal truths in the investment management industry, and even rebalancing has some detractors, but the importance of periodically rebalancing your portfolio is probably one of the few things that the investment community is largely in agreement with. Sometimes you'll hear it referred to as a “free lunch”.

There has been a significant amount of institutional and academic research on the topic and generally speaking, over time, investment outcomes improve through periodic rebalancing. You'll find different opinions on how often to rebalance, the tax considerations of rebalancing and how wide to cast your asset allocation net, but there is broad and general consensus on the need to diversify and rebalance.

If you are working with an investment manger or financial planner, it is likely that rebalancing is one of the specific tasks that they are working on for you. They'll determine what is the right mix of asset classes and how often should they be rebalanced.

If you own a target date mutual fund or are part of a robo-advisor platform, there too, one of the key tasks of the portfolio manager undertakes is to ensure that the portfolio assets are closely aligned with the fund's objective and periodically rebalanced. That task is covered by the management fee you pay.

But what if you are in “do-it-yourself” financial planning mode? What are the steps to rebalancing?

Very generically the steps would be:

1) Determine an appropriate level of risk and your individual risk tolerance – your willingness and ability to take risk. This on-line tool from Vanguard can help you get started.

2) Build an asset allocation model that aligns with your level of risk – this on-line tool from investor junkie can help you work through some of the individual considerations

3) You can also inform your asset allocation by understanding how institutional managers allocate their portfolios and why.

4) Determine what your existing asset allocation is. Sometimes you can find this information on-
line or on a recent statement, but sometimes you'll have to ask the company you are doing business with for this info.

5) Then you can compare your existing asset allocation with your desired asset allocation, given your level of risk, and determine the magnitude of the gaps. The bigger the gaps, the more important it is to consider rebalancing. One strategy is to establish "bands" and when one asset class moves outside an established band, it triggers a rebalance.

This whole process can be confusing and overwhelming, so    J. Bradford Investment Management does offer very targeted services for investors who want an assessment of their portfolio positions and detailed insights that may help them bring their portfolios back into their desired alignment.

You can use the link below to schedule a free consultation.

PLEASE REMEMBER:

- Investing and investment management involves risk, including the loss of your initial investment or any investment gains.

- Past performance is no guarantee of future results.

- This generic information is provided for educational purposes only and should not be construed as a recommendation for any individual to take a specific action.

- Please invest prudently and seek professional help from a financial advisor, investment manager, accountant, lawyer or other professional on matters that you are unsure of or that are unique to your personal circumstances.

- Financial Planning and Investment Management Services provided by J. Bradford Investment Management, Nashua NH.

National Be a Millionaire Day - Will You Be One?

It's May 20th and it's National Be a Millionaire Day! You may be surprised to learn that most Americans will in fact earn over a million dollars in their lifetime.

According to inContext -"By retirement, graduates with bachelor's and advanced degrees can expect to have earned an average total of $1.8 million while associate's degree graduates only reach $1.1 million—a 61 percent advantage."

But that's probably not what most of us have in mind when we think millionaire. Most of us consider a millionaire as someone who has a million dollars plus saved or on hand. Fair enough. But 99%+ of us are not going to become millionaires by winning the lottery, answering questions on a game show or by finding that high flying stock.

We're going to become millionaire in these 5 easy steps:

1) We're going to save a bunch ourselves.

2) We are going to let the market do some of the work by investing in a risk appropriate portfolio.

3) We are going to take advantage of all opportunities to boost savings, like 401(k) employer match.

4) We are going to diversify our portfolio and periodically rebalance.

5) We are going to use optimal tax strategies.

Real simple example with very simplistic assumptions, but check it out. 30 year time horizon. 6.5% annual interest rate compounded monthly. You invest $280 every two weeks and your employer matches 50% or $140. With those and other simplifying assumptions, viola, the portfolio grows to just over $1,000,000 in 30 years.

$218,400 came from our savings and $109,200 from our employer. If we didn't have an employer match, we would have been on the hook for $327,600. But tax efficiency and a diversified portfolio invested in the market did roughly 2/3 of the work!! And that's the point. There is tremendous power in simply being invested in a diversified and risk appropriate portfolio that you rebalance periodically.

So go ahead and occasionally buy that lottery ticket so that you can dream about your life as a millionaire -- that you earned by hard work and smart investing.

PLEASE REMEMBER:

- Investing and investment management involves risk, including the loss of your initial investment or any investment gains.

- Past performance is no guarantee of future results.

- This generic information is provided for educational purposes only and should not be construed as a recommendation for any individual to take a specific action.

- Please invest prudently and seek professional help from a financial advisor, investment manager, accountant, lawyer or other professional on matters that you are unsure of or that are unique to your personal circumstances.

- Financial Advisor and Investment Management Services provided by J. Bradford Investment Management, Nashua NH.

Investment Inspiration from 7 sage Emoji

Investing and finances can be complicated. So here’s a little reprieve.

Everything you need to know about investing summed up by seven sage Emoji!!

PLEASE REMEMBER:

- Investing and investment management involves risk, including the loss of your initial investment or any investment gains.

- Past performance is no guarantee of future results.

- This generic information is provided for educational purposes only and should not be construed as a recommendation for any individual to take a specific action.

- Please invest prudently and seek professional help from a financial advisor, investment manager, accountant, lawyer or other professional on matters that you are unsure of or that are unique to your personal circumstances.

- Financial Advisor and Investment Management Services provided by J. Bradford Investment Management, Nashua NH.