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VUE | March/April 2024

The Digest | New Jersey Magazine

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1. Buy Quality Investments! What does that even mean? Well for the most part I can promise you that the odds that the braggard in the bar knows about the next IPO with the cure for cancer, are infinitesimally low. Your f riend's girlf riend's brother's cousin does not have the inside line on the next GOOGLE. Look for companies with real products, track records, earnings, etc. A history of leading in their industry, or, a fund that has a legitimate track record, stable management, assets under management and no regulatory issues and is a top performer over time vs its' peers. 2. Seek professional help. If you have the knowledge, the time, the intestinal fortitude and the expertise to manage your own portfolio, do so, but be honest about your abilities. There is no shame in seeking professional help, and most of the wealthiest, most successful people do. When seeking an Advisor, you should know what questions to ask and what's important. First, what is the Advisors experience, expertise, track record, and style of management? Is he/she acting as a Fiduciary? Fee based or commission? Does he/she have access to a myriad of tools and intellectual capital, or are they affiliated with a firm that is going to find a way to fit their limited products to your need. If you have a complaint or a problem is there a robust compliance and legal department to back you? Do they possess the resources to right the wrong. Does the Advisor ask questions and provide planning for you, or is he/she a trading type Advisor with little regard for your goals? 3. Understand Risk. One of my recent columns talked at length on the topic of understanding the different kinds of risk. In simple terms you have market risk, purchasing power risk and interest rate risk. The reality is that you can NOT avoid all risks. You may be able to eliminate two and manage the 3rd. The most important thing to note here, is that if anyone ever approaches you with an investment that provides you with an opportunity with high return and NO risk… run from them as fast as you can. An investment that has no risk, would have no opportunity for upside in the real world. The riskless, high return investment does not exist, never has. It is within the uncertainty that the opportunities lie, ergo an investment with guarantees will not have any opportunity for upside and vice versa. Make sure your Advisor understands your tolerance for risk or your need for growth and creates a plan that manages both with you. Remember, risk goes both ways; a very safe investment, may lose money by way of inflation and subsequently be worth less over time. A $10,000 insured investment that, after a long period, only purchases $8,000 worth of goods and services, lost money, even though it had no market risk. You need to be aware of these risks and manage the risks wisely. 4. Diversify! Diversify! Diversify! Looking back at my 1st rule, no matter how "high quality" the investment is, never put your eggs in one basket, or stock or bond or asset class for that matter. Not only for safety reasons but also to create baskets of different asset classes based on your goals and tolerance. There are numerous studies that have shown that investing success has more to do with having the appropriate asset allocation then owning the right or wrong particular security. Some of those studies have shown that over 90% of your returns are attributed to asset allocation vs security selection. However, can you guess what most investors focus on? Yep! Security selection! They would rather talk about whether they should buy Company A vs. Company B when the evidence shows that being IN the market vs. OUT of the market or market sector should be the focus. Whether you have an appropriate allocation to accomplish your goals and if you are over-weighted in the right areas is paramount to goal based investing success as the market climate, or your situation changes, you should consider adjusting your allocation and or rebalancing back to the appropriate allocation or blend. I could write a book on the benefits of asset allocation and rebalancing. Hmmm… maybe I will. Tony's 5 "Golden Rules" VUENJ.COM 95

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