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Whenever we tell people we’re financial advisers, the first question we get asked is ‘what is a good investment?’ or ‘what should I invest my money in?
 
Unfortunately for the person asking, this usually results in a non-answer – because the answer really depends on a lot of things. First and foremost, it depends on an individual’s life goals.

We call a person’s group of assets their portfolio. And we like to say that building a portfolio is a 3-part process.
 
  1. Goals. What are your goals? That is, what do you want to achieve? A 21-year-old might want to buy a new car. A 75-year-old might be worried about running out of money. You can see these would lead to very different goals. If we are talking about life goals, sometimes we replace the word ‘goal’ with ‘where do you want to end up?’ For some people, having enough to draw $40,000 a year in retirement is enough. For others, 3 times this amount wouldn’t even come close. And of course, there are other variables such as how much time is left between now and retirement. A rule of thumb is to look at your current lifestyle, and remember it would be unrealistic to think you could survive on much less than what you’re used to now.
  2. Plan. This is the path we follow in order to achieve our goals. It includes decisions such as where to invest our money, how much money we need right now, and the amount we would like to reach by the time we are ready to retire. 
  3. Portfolios. We need to ensure your portfolio will give you a rising income stream during retirement. We look at your current situation and make a tailored plan that would work to achieve this. Regular meetings are invaluable, though – as goals tend to change as our lives do, too. One thing we advise our clients is never to make changes to their portfolio without looking at the plan. We saw this happening a lot during the pandemic in 2020 – lots of people sold their shares at 63 cents on the dollar when the markets dropped by 37%. But they skipped parts 1 and 2 – looking at their goals and their plans. And as they discovered, reacting to something and making changes to our portfolio is not a good way to operate.
 
As one of our mentors says: All unsuccessful moves are based on a reaction. And all successful ones are based on a plan.
Published by Dallas Davison, Michael Hogue and Ali Hogue. April 15, 2021