Summertime Financial Strategies

With summer here, we hope you take some time to relax and unwind. In the spirit of summer days, we’ve assembled a short list of ‘quick’ financial planning wins. These low effort, high impact strategies are easy to implement, so you can quickly get back on the beach with your book in hand.

Investing: Be There, and Stay There

You could do far worse than to invest according to a sentiment attributed to Woody Allen:

“80% of success is showing up.”

Going back to 1926 and after adjusting for inflation, U.S. stocks have delivered about 7.3% annualized returns to investors who have simply been there, earning what the markets have to offer over the long haul. Those who instead fixate on dodging in and out of hot and cold markets are expected to reduce, rather than improve their end returns. That’s because, when markets recover from a downturn, they often more than make up for the stumble quickly, dramatically, and without warning. Instead of chasing trends, simply stay invested over time.

Portfolio Management: Use Asset Allocation, and Don’t Monkey With the Mix

Asset allocation is about investing in appropriate percentages of security types, or asset classes, based on their risk/return “personality.” For example, given your financial goals and risk tolerances, what ratio of stocks versus bonds should you hold? What percentage of small value stocks versus large growth? How much domestic and how much international?

Both practical and academic analyses have found that asset allocation is responsible for a great deal of the return variability across and among different portfolios. So, to build an efficient portfolio, we advise paying the most attention to your overall asset allocation, rather than fussing over particular securities. And by the way, once you’ve got a personalized asset allocation in place, the only reason to change it is if you change. If you’re tempted to alter your allocations based on current market conditions, circle back to our first point.

Financial Planning: Do It, But Don’t Overdo It

An ounce of financial planning can alleviate pounds of doubt. It connects your resources with your values and priorities. It’s your touchstone when uncertainty eats away at your resolve. It guides how and why you’re investing to begin with.

Here’s some good news: Your plan need not be elaborate or time-consuming to be effective. Your plan can be a one or two page summary that highlights your goals and some action items that need to get done along with a reminder of why you’re doing them.

If you’d like to do more, great. But a one-page plan will give you a huge head start. When in doubt, read through your goals and “to do list”. Is it still “you”? If so, your work is done; stick to the plan. If not, consider what’s changed, and contact your financial advisor to update your plan accordingly. It can be that easy.

Financial Security: Freeze Your Credit Reports

Even the best-laid financial plans can be thwarted if your assets are exposed to financial scams and identity theft slams. Fortunately, there’s a lot you can do to secure what you most easily can.

If we were to pick one practical, but often overlooked punch that delivers among the biggest blows to identity theft (at least here in the U.S.), it’s the ability to freeze your credit reports.

Freezing each of your accounts with the three major credit bureaus (Equifax, Experian, and TransUnion) is like locking the doors to your home or vehicles. It creates a few extra steps for you, as you’ll need to temporarily lift the freeze when you wish to take out an occasional loan. But it costs nothing to set up and manage. And if an identity thief does get ahold of your information, it should stop them cold if they try taking out lines of credit in your name.

Building Lifetime Wealth, One Step at a Time

At ShankerValleau, we aim to help minimize the time and energy you have to put into maximizing your financial well-being. Whether you’re saving for retirement, funding your kids’ college education, preparing for a wealth transfer, applying for insurance, or otherwise managing your hard-earned wealth, we can help you identify and execute these and other actions that matter the most, so you can get back to the rest of your life.