At long last, summer is here, which may mean it’s time to put together your traveling plans.
Still, while you and your family may enjoy going a summertime trip, there’s one part of your life that should not go on vacation – and that’s your investment portfolio.
So, what can you do to help your investments keep on working all year long, year in and year out? Here are a few suggestions:
Don’t chase hot investments – Many times, you will hear about a hot investment, usually a stock. However, by the time you hear about such an investment, it may already be cooling off. More importantly, it might not have been appropriate for your needs, and any investment that has either flamed out or wasn’t right for you in the first place will not be a hard worker in your portfolio.
Monitor lazy investments – Under the right circumstances, just about any investment could be of value to you. However, under different scenarios, those same investments may not be doing as much for you.
To cite one example, when interest rates are at historic lows, as has been the case recently, and your portfolio contains a relatively large amount of short-term, fixed-rate vehicles whose interest payments don’t even keep up with inflation, they could be considered lazy investments.
Look for the multi-taskers – In most aspects of life, multi-taskers are valuable, and it’s the same in the investment world.
Can you find a particular type of investment that may be able to achieve multiple goals at the same time? Consider dividend-paying stocks. If you need the income to supplement your cash flow, you can cash the dividend checks. And since some companies tend to increase their dividends, your investment in these stocks can serve as a source of potential for rising income, helping keep you ahead of inflation.
Furthermore, if you don’t actually need the dividends to support your income stream, you can reinvest them to increase your ownership stake, which is a useful method for building your overall wealth.
Finally, many dividend-paying stocks also offer significant growth potential. Keep in mind, though, that there are no guarantees, because companies can lower or discontinue their dividends at any time. And, as you know, stocks are subject to market risk, including the potential loss of principal invested.
Don’t take a time-out from investing – The financial markets regularly move up and down. During the down times, it’s important not to get so discouraged that you decide to take a time-out from investing until things get better.
No one can really predict when a downturn will end, but you don’t want to be on the investment sidelines when the market turns around because the biggest gains can occur in the early stages of a rally. And in any case, if you’re not constantly investing, or at least exploring new investment opportunities, your portfolio could begin to stagnate, or even become unbalanced, in which case it may no longer fit your objectives or your risk tolerance.
By following the above suggestions, you can help keep your investments working for you this summer, and year-round for that matter. The road toward achieving your financial goals is a long one, so try to keep moving.
Ben Moore is a financial advisor with Edward Jones. This article is provided for information purposes only. Please consult with a professional advisor before implementing a strategy.
