Michael Callahan
There are certain things you remember to do each year. You go for your annual physical, have your teeth cleaned and meet with your tax accountant. You renew your insurance policies and get your car serviced. Maybe you review and update your estate plans at the end of every year. But what about your investment strategy? Your approach to investing should evolve as your needs evolve, so your investment strategy from five years ago isn’t necessarily serving you today. I have a few key questions you can ask yourself to assess whether your investment strategy is still in line with your goals, or if it’s time for a new approach.
Is your investment strategy in line with your financial plan?
There are plenty of personal and even emotional factors that may play into decisions people make when it comes to investing, and it’s easy to get caught up in “good days” and “bad days.” Ultimately, your investment decisions should support your long term goals, so disabuse yourself of arbitrary benchmarks, and take a look at the big picture. Everyone’s financial plan is unique. Your financial advisor should be able to help you understand if your investments are helping you reach your goals, or if it’s time to make adjustments.
Do you regret any investment decisions you’ve made in recent years?
Your answer to this question could reveal a great deal about how well your investment strategy is working for you. Maybe you occasionally kick yourself when you think about your losses after taking on a chance on a risky IPO. Or maybe you’re more likely to regret having been too conservative and missing out on investment opportunities that would have paid off. Either way, it may be useful to reflect on whether you feel good about your investment decisions over the past five or so years. If not, it could be time for a change in strategy.
Have your circumstances and/or needs changed?
Your major life events may have a direct effect on your investment strategy. Getting married or divorced could certainly change your approach to investing. So could a significant pay raise or a significant expenditure, like a child’s college tuition. Many people adjust their investment strategies as they approach retirement. If your life and priorities look a little different today than they did when you last amended your investment strategy, it may be time for an update.
Has your risk tolerance changed?
Risk tolerance is something that often fluctuates over time, particularly as retirement gets closer. The current economy, the political landscape, your portfolio’s performance and your life experiences are all factors that may affect your willingness to tolerate risk at any given moment. How you feel about risk will inform a lot of the decisions you make about your investment strategy.
Do you have any personal or social passions that could intersect with your investment strategy?
Many people are able to view investing as strictly business, managing their portfolios without emotion. But in recent years, an investment strategy called socially responsible investing (SRI) has become increasingly popular, and it could be a strategy that interests you. The principle behind SRI is to pour your money into investments that are profitable and that boost causes that you support. Say an investor is passionate about sustainability and supporting their fellow women—she might prioritize buying funds in women-owned businesses or companies that are working on clean energy sources.
What does your financial advisor say?
As financial advisors, we work with clients who run the gamut from investment novices to stock market aficionados. Some clients have little interest in or experience with investing, and rely heavily on their advisors’ advice to grow their wealth. Others come into meetings having done a lot of research and with their investment strategies already mapped out. It doesn’t matter where you fall on that spectrum, or how much investing knowledge you have—your advisor’s guidance is invaluable when you’re assessing your investment strategy.
As advisors, we’re here to analyze your overall financial picture. We help our clients identify growth opportunities and avoid pitfalls that they might not otherwise see coming. You aren’t beholden to your advisor’s recommendations, but asking for their input about your investment strategy could reveal really useful information.
At Sachetta Callahan, our guidance is always driven by our clients’ specific financial goals. I work with my clients to make sure they feel good about their investment strategies. Contact me today.
Michael Callahan is a Certified Financial Planner™ practitioner, Certified Public Accountant, and holds a Master’s Degree in Taxation from Bentley University. Mike has been involved in personal financial planning, as well as both business and individual taxation for more than 15 years.