investment evaluation tool

Note: After reading the following true story, try the free Investment Evaluation Tool to determine if you are invested more aggressively than you should be. Details for accessing the tool are below.

When I talk with people about how they should structure their U.S. investment accounts, one of the common questions I ask is how long do they plan to keep the money invested. Folks who see themselves as “long-term” investors can often take on the added risk of the stock market.

What about long-term investors who don’t need growth?

I recently met with a couple who were good earners, solid savers, and on top of it all, had inherited a sizeable amount of money.  They told me that they thought they should invest mostly in the stock market.

“Why do you need to take on the added risk of stocks?” I asked.

They felt that they should invest for growth because “that’s what everyone does.” I told them that even though the media and popular websites might tell people that they must invest in the stock market if they’re long-term investors, it’s not always true. In fact, there might be a much better way for them to invest. Rather than focusing on growing their money in the long term, they could consider improving their life in the short term.

I explained that they could convert some, or all, of their portfolio into investments that would produce regular income and then they could cut down the number of hours they worked. Alternatively, they could use some of that extra income for enjoyable expenses like vacations and renovations.

“I’m surprised you say that, Doug,” the wife said. “I assumed you would tell us to invest in the stock market.” I replied that people should invest not only based on their tolerance for risk, but also on their specific needs.

Is your portfolio invested more aggressively than it should be? Try this free Investment Evaluation Tool or call (02) 624-2788. Consult with a financial advisor before investing to better evaluate the risks, costs, and potential benefits given your specific situation. An investment suitable for one person may not be suitable for another.

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 July 26, 2016.

Read more articles