My clients often ask me how I manage my own money. I’m happy to answer this question.
Not everyone should invest the same way
Investments aren’t a matter of “one size fits all.” All folks have their own personal circumstances, risk tolerance, and goals. Therefore, I wouldn’t recommend you copy my portfolio because my needs are probably different from yours. However, I will tell you what my wife and I do when planning our investments, as these steps are useful for most people.
How to deal with a financial emergency
Before we began to invest, we put aside money in an emergency fund. An emergency fund should ideally be between 6-12 months’ worth of spending and it should be liquid rather than tied up in an investment or a line of credit. Putting aside money for unforeseen emergencies makes sure your investments won’t be derailed by a crisis.
Use a money manager to oversee the day-to-day trading
Somewhere about 95% of my long-term investments are handled by institutional money managers. Money management companies handle funds for institutions and also, by working with investment advisors, they can help individual investors, too. Money managers handle daily operations, such as researching investments and buying and selling stocks in the portfolio.
A money manager saves you time, effort, and worry, as most individual investors aren’t able to research their investments and make buy/sell decisions on a daily basis. Additionally, a money manager doesn’t have the emotional considerations of the individual investor, whose judgment may be clouded by sentiments such as fear or greed.
So what do I do with the remaining 5% of my investments? To find out, watch this 4-minute video that I made.
Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published August 31, 2015.