Posts Taged ask-aaron

Ask Aaron: What Steps can I Take to Manage My Investments?

As an investor, you want your investments to perform well and are poised to help you meet your financial goals. Today we’re talking to our own Aaron Puckett, CFP® about some steps that you can take to manage your investments.

Diversification is Key

Even if you’re new to investing, you’ve probably already heard someone mention diversification as a way to position your investments to handle market fluctuations and unexpected loss. But it can be tough to understand exactly what diversification is, how it can help, and how to employ a diversification strategy in your portfolio.

A diversified portfolio is one that is comprised of a variety of investments. One main advantage to the diversified portfolio is that you have the ability to choose investments all along the risk spectrum. This means that if you are interested in a particularly high risk investment, you can balance that investment with other lower risk ones in seeking to insulate your portfolio from total shock should the high risk investment play out badly.

But, of course, all investments carry with them some type of risk. Even supposed “low risk” investments can perform poorly or suffer with a market downturn. So, risk shouldn’t be the ultimate test of whether an investment makes the cut for your diversification strategy or not.

Paths to Diversification

It’s important to note that even a portfolio with seeming diversity may not actually be all that diversified. For example, investing in a bunch of corporate stocks might feel like a diversified activity – after all, there are a variety of differently sized brands across many industries, all with different stock offerings. However, filling your portfolio with a whole bunch of one type of financial product still leaves you vulnerable to weaknesses specific to that financial product.

To achieve true diversification, you want to consider a variety of different financial products with which to fill your portfolio. This mix might include stock products, bonds, and other investment vehicles.

Or you may prefer to participate in a managed fund, like a mutual fund, that pools your investment with those of other investors so that you can participate in a selection of investment opportunities that would otherwise be closed to a single investor. In addition to attended portfolio management, a managed fund generally offers simple way to diversify without a lot of extra effort.

Choosing Your Diversification Strategy

There’s no right path that offers the perfect blend of diversified investments for every investor. In fact, there are a lot of factors that go into determining exactly which portfolio mix is preferable for your investment activity.

Factors like your long-term savings goals, investment threshold, risk tolerance, and value orientation play a large role in narrowing the investment field and developing a custom diversified portfolio. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

You want to work with a professional financial advisor, like a CERTIFIED FINANCIAL PLANNER™ professional, who can help you to connect the dots between where you are now and where you want to be financially. Your advisor should ask questions, not only about your long-term financial goals, but about your personality and your lifestyle to get the best feel for which diversification strategy may likely bring you both confidence and help you pursue desired financial performance.

To learn more about how a CFP® professional can make a difference in your investment strategy and long-term financial outlook, contact Puckett & Sturgill Financial Group today to schedule a discovery meeting with one of our five CFP® professionals!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Stock and mutual fund investing involves risk including loss of principal.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

Ask Aaron: Are Annuities Bad?

When it comes to researching your investment options, you’ll find a plethora of choices and lots of chatter about what the “best” investment options are. Among this chatter, you’ll no doubt hear the amazing benefits of annuities as investments. You may be thinking: “are annuities a good investment for me?

On the other side of the spectrum, you might have friends or family members who have had poor experiences with investments in annuities and are quick to tell anyone who will listen. Their stories aren’t unique, as sadly there are many investors who have been hurt by overzealous salespeople, disadvantageous contract terms or a lack of understanding of what is one of the most complex investment products available.

So which is it? Are annuities bad? Or are they all they’re cracked up to be?

Let’s take a deeper look…

What is an Annuity?

First things first, let’s look at what an annuity is. An annuity is an agreement between an insurance company and an investor that includes a stream of regular payments. However, all annuities are not created equal, and it’s imperative to make investment decisions with your eyes wide open before you ever sign on the dotted line.

Who Offers Annuities?

Annuities are investment contracts offered by insurance companies. Insurance companies are able to offer certain guarantees that other financial institutions might not be able to offer such as death benefits, income benefits, or crediting benefits, also called riders.

On the outside, this seems like an appealing proposition. But if you come across an agent who seems to pressure clients toward one type of product or company, you might want to steer clear. Someone with a certain product to sell may not have much more in mind than selling as many of those products as possible in order to earn a commission, even though those products may not truly be best for their clients.

Perks of Annuities as an Investment

There are certainly perks to annuities as investments. After all, they’re still a popular investment vehicle for long-term investing.

The biggest perks to investing in annuities are the accompanying tax deferral and other possible guarantees. Many annuities are paid out in consistent, recurring amounts, which is very appealing to individuals looking to set up a consistent stream of income or obtain some type of certainty.

Downsides of Annuities as an Investment

On the flip side, annuities are often not the best investment choice. While they may come with a guaranteed return and other appealing incentives, there are almost always strings attached.

Unseen internal costs or penalties and long surrender schedules can impact your bottom line significantly. Depending upon the specifics of an annuity contract, the payout might not end up as all it’s cracked up to be. And if you’re already committed to an annuity, removing your funds could prove challenging and expensive.

Some Important Things to Remember about Annuities

The most important thing to remember when it comes to annuities is that there is no single financial product that’s best for every investor. For some investors, certain annuities might be an ideal choice. For other investors, those same annuities might be a costly mistake.

And some annuities might be terrible investments, period – even for the most likely candidate. If it sounds too good to be true, it probably is.

Your individual financial situation is an essential driver behind which investments are the best for your portfolio. Instead of a sales pitch, you deserve a personalized recommendation based on an objective review of your specific situation.

At Puckett & Sturgill Financial Group, we take the time to get to know you personally before ever making recommendations for specific financial products. Are you curious about whether annuities are right for you? Reach out and schedule a consultation today!

Disclaimer: Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 1⁄2 are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value. Riders are additional guarantee options that are available to an annuity or life insurance contract holder. While some riders are part of an existing contract, many others may carry additional fees, charges and restrictions, and the policy holder should review their contract carefully before purchasing. Guarantees are based on the claims paying ability of the issuing insurance company.