When you think of investing, your thoughts may go pretty quickly to the stock market. After all, there’s always a lot of talk about how the stock market is performing, which companies are doing spectacularly well (or spectacularly awful), and why one industry is a better choice than another. People are very interested in and have a lot of opinions about what happens in the stock market.
But what does this mean to you? If you’re curious about investing in the stock market, you probably have plenty of questions. Perhaps you’ve even heard certain soundbytes from popular voices in finance or read about stock market trends on your favorite money blogs.
Before you decide to run with the bulls and bears, it’s important to understand how the stock market works and how to find quality information about the investments that you’re interested in. This way, you can discern whether investing in the stock market makes sense when planning for your financial future.
Choose a Trusted Advisor
The most important aspect of setting yourself up for the possibility of success in navigating stock market investments – even simply to discern whether investing is right for you – is finding a trusted guide to help you along the way. This is where finding a Certified Financial Planner comes in.
A qualified CFP can help you to research your investment options and narrow choices that align with your values and goals for investing. Once your plan is implemented, your financial advisor can help you handle the details and monitor your investments to determine whether they make sense for your portfolio in the long-term.
Evaluate Your Investment Style
One of the first things you’ll do when you meet with an advisor is to sit down to discuss your financial background, ideas for how you’d like to see your financial future unfold, and different tactics that you might take to get there. Your advisor will listen and take notes to learn more about your specific situation and may ask questions to get a better feel for what type of portfolio balance may be preferable.
Your advisor may prompt you to share information about your past investment history and show interest in learning more about how risk tolerant you as an investor (or couple) might be. These factors will work to inform your advisor of your personal investment style and will ultimately help the two of you to decide whether stock market investments are worthwhile, and which ones are more likely to help you to achieve your goals.
Typically, investment style is graded on a range from conservative to aggressive. If you have a conservative investment style, you’re likely to favor less risky investments that may potentially offer lower, yet more predictable returns over the period of your investment. If you tend toward the aggressive end of the spectrum, likely you have a higher risk tolerance and will favor investments that offer the potential for high returns along with greater volatility.
Establish Your Goals for Investing
In addition to knowing your investment style, you’ll want to establish certain goals for your investing activities. Are you saving for retirement? Looking to cash in within a certain number of years and use the returns as a nest egg for some new endeavor?
Whatever your ultimate investment goals may be, you need to be clear about them when discussing your investment strategy with your financial advisor. Perhaps you’re not even certain of what you should be aiming for, but have some ideas – your advisor can help you to work to prioritize your objectives for investing.
Determine How Much to Invest
As with any other aspect of financial planning, you’ll want to set a budget for your investing strategy. This is, again, something that your financial planner will work with you to establish, but some basics for determining an investment budget include setting a goal for how much money you hope to accumulate or how much income you want to draw from your investment later.
Additionally, you and your advisor will work to find investments that have the potential to help you start working toward some of those short-term and long-term financial goals. There are a variety of investment vehicles from which to choose, with some requiring a certain investment minimum, so it’s important to establish a budget to give your advisor an idea of which investments are both helpful for pursuing your goals and stay within a reasonable dollar amount for your specific situation.
Diversify Your Portfolio
Even when you’re ready to take the plunge and invest, you want to ensure that you don’t put all of your eggs into the proverbial basket. Diversifying your portfolio allows you to take advantage of the potential returns offered by multiple companies, industries, or investment vehicles while also being able to compensate for a loss or two along the way.
Diversification is helpful because it allows you to spread your investment dollars between investments to avoid a total loss from one failure. Your financial advisor should steer you in the direction of portfolio diversification while also keeping your budget, investment style, and goals in mind. Finding this delicate balance is part of where the experienced advisor will prove to be an invaluable guide as you work through your investment strategy and onto your financial future.
Monitor Your Investments
Once you’ve taken the steps to invest in the stock market, you don’t want to simply drop your money and wait for a future payout. You’ll want to stay up-to-date with your portfolio’s performance and make adjustments as necessary.
Now, it can be challenging for the average investor to view their portfolio objectively – after all, it’s your money on the line. Market fluctuations, as normal as they may be, take on a whole new meaning when it’s your potential returns rising and falling.
Emotional investing behavior is very common and can cause you to make split-second decisions that have large ramifications. This is another area where you can partner with your financial advisor – after all, their job is to view your investments in a professional manner and help you to decide whether to make adjustments or stay the course.
Your financial advisor should help you build a strategy and investment portfolio that fits your specific situation and gives you confidence. That way, you can enjoy your day-to-day life without waiting for financial news in your inbox every morning and stressing all day about which factors may influence your bottom line.
Do you have questions about your financial future? Do you have a portfolio you feel needs some attention? At Puckett & Sturgill Financial Group, we are a group of CFPs who are experienced in helping clients to navigate the ups and downs of portfolio planning and management.
Contact us today to learn more about our investment services and to schedule a discovery meeting with a CFP to start your investing journey!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification and asset allocation do not protect against market risk.
Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.