Develop a Long-Term Perspective

Just as no two people are alike, neither should their financial plan be the same. However, there are a number of investing fundamentals that apply to virtually everyone. Understanding these can help you develop a plan and remain on track to achieve your financial goals, even during the inevitable periods of market volatility.

While there are no guarantees, when done wisely, investing can help you meet your short-, medium-, and long-term financial goals. The following investing fundamentals can help make your goals a reality.

  • Four Basic Investment Categories - There are four basic investment categories: stocks, bonds, property, and cash. You can choose to invest directly in any combination of those categories, or indirectly, through certain investment products, such as mutual funds. Finding the right mix of investments depends on your available assets, your goals, your time horizon, and your tolerance for risk.
  • Diversify Your Portfolio - Asset allocation means to strategically divide your portfolio across various types of investment categories that are in line with your financial goals and tolerance for risk. As your needs and goals will change throughout your life, your investment mix will likely need to be adjusted
  • Understand Risk - There is no such thing as risk-free investing. Therefore, you also need to ask yourself how much risk you’re comfortable with. As shown in the chart below, generally speaking, the greater the risk, the greater the potential for greater financial reward.
  • Balance Risk and Reward - As a rule of thumb, the more time you have to achieve your financial goals, the more risk you can tolerate. In other words, you may be able to invest more comfortably in a more aggressive investment because you have more time to ride out any ups and downs in the return. But, the closer you are to your target date, the less risk you can generally tolerate.
Risk vs. Reward: Determine the Best Fit for You

Action Steps

Keep these investment fundamentals in mind when developing a plan with your financial professional. Having clearly defined goals, an understanding of the importance of diversification, and the amount of risk you're comfortable with will go a long way in developing a strategy that's most suited to your individual needs. We also offer a number of tools to use to help you on your financial journey. To learn more, call 800-MAINSTAY (624-6782).