This task list is taken from the Financial Planning Association (FPA) website. I've divided the list into four posts, one for each calendar quarter starting with Jan-Feb-March 2011. There is much to do in January, but Feb and March are much lighter task months.
If you’ve made a New Year’s resolution to get control of your finances in 2011, here’s a list of important planning and execution tasks that should be on your money calendar for the year:
Out of my many annual rituals that I engage in right after the New Year, one of my all time favorites is listening to the classic Stephen Covey book: The Seven Habits of Highly Effective People.
In particular, Habit 7 has always been my favorite. Habit 7 is: Sharpening Your Saw. If you haven’t read or listened to the book, here’s a brief summary of what Covey means by this phrase.
For the investor that loves a high degree of uncertainty, these are the best of times. More volatility offers more opportunity to make money. For the investor that prefers calmer more predictable markets, these are stressful times indeed.
Yet the truth is that even the most detailed, well thought out investment plan I could possibly develop for a client could go kaput next week due to a million reasons beyond our control.
Should you choose a ROTH IRA or a Traditional IRA? That’s a tax planning question that deserves much scrutiny. First thing you need to do is find out if you’re eligible to contribute to a Roth IRA. Here’s a link that can help determine the answer: Roth IRA Income Eligibility
Let’s say for argument sake you’re eligible to contribute to either a Roth or a Traditional IRA. If you take the Traditional IRA route, you’ll deduct the IRA contribution from your reported income which will have the effect of lowering your income tax bill.
There have been a lot of books written, articles published as well as countless TV and Radio shows on the who, what and why of the recent stock market crash. In my opinion, “Inside Job” a new documentary is one of the best out there and is in the running for an Oscar. Documentarian Charles Ferguson’s exploration of the 2008 financial crisis and its deep roots walks a fine line, explaining complicated economic concepts while trying not to talk down to lay viewers. If you don't have time for the whole documentary - check out the trailer.
Before I write about a must have insurance policy, let me make it clear that I do not sell insurance. I’m a fee-only financial planner and never sell anything, period.
Upon engaging a new client, one of the first steps in our financial planning process is to assess your current risk management plan. Playing devil’s advocate, I simulate worst case scenarios. What I’m looking for is your current exposure level to risk or put another way, what’s your asset protection strategy. Do you have an asset protection strategy that’s bullet proof? Can you withstand an aggressive attorney’s attack on your hard earned assets or are you vulnerable and exposed?
Is it just me, or does it seem that lately there are an abundance of investment professionals that have suddenly been gifted with a crystal ball? Why do I say that? Because every time I turn around there seems to be another “expert” predicting where the economy will be two, four, ten years from now, where the stock or bond market will be or where the price of gold, other precious metals, wheat or oil will be in the future. How can so many so called “experts” have such a diverse set of predictions? The answer is simple-being quoted with a prediction is good for business. So please…take these predictions with a heavy dose of salt.
Before I go much further, let me distinguish between those seeking press for the sake of boosting their business vs. the investment professionals that are truly adding value and knowledge to the community of interested and financially intelligent investors.
A chef would tell you that it is very important to have the right balance of ingredients while preparing a meal. An incorrect proportion or combination of spices can result in a disastrous attack on the taste buds. Creating an investment portfolio is like preparing an entrée. Each investment vehicle placed in the portfolio is like an ingredient for an entrée. The proportions of securities used to build the portfolio will define its expected risk and return.
Asset allocation and portfolio diversification are both techniques used to identify the right combination of securities to put into a portfolio. Asset allocation identifies the asset class proportions while portfolio diversification suggests the correct mix of securities within the asset classes. However, just like an entrée should be created considering the taste preferences of the person eating it, a portfolio’s diversification and asset allocation methods should be suitable to the investor’s needs.
