Get Educated about Investing

FINANCIAL FOCUS
By Mike Allen


If you have children at home, you’re no doubt aware that it’s
the traditional back-to-school time. But even if your days of
parent-teacher conferences are in the past, or even in the
future, you can still find a place in your life for education.

You might want to start by educating yourself about investing.
To get the most out of your investment education, ask yourself
these questions:

• What are my goals? Your financial goals should drive your
investment decisions. You probably have short-term goals, such
as making a down payment on a home or paying for a vacation,
and long-term goals, such as saving for your children’s
college education or building resources for your retirement.
Once you’ve identified your goals, you can create an
investment strategy to help achieve them.

• What is my risk tolerance? Self-awareness is important in
every aspect of life, including your approach to investing. As
you create your investment portfolio, you need to understand
your own views on risk. Would you consider yourself an
aggressive investor — that is, someone who can accept a
relatively higher degree of investment risk in exchange for
potentially higher returns? Or are you a more conservative
investor — someone who is willing to take lower returns in
exchange for lower potential risk? Or perhaps you’re a
moderate investor, less risk-averse than some but less
aggressive than others. However you’d characterize yourself,
it’s essential that you factor in your risk tolerance when
choosing investments. Otherwise, you’ll likely end up causing
yourself needless worry over your investment portfolio’s
performance.

• When should I make changes to my investments? Once you’ve
built an investment portfolio, you shouldn't leave it on
“autopilot.” Over time, you most likely will need to add new
investments or sell others. However, try to avoid selling
quality investments just because their share price has dropped
— they may still have good long-term prospects. In general,
you should sell an investment under certain circumstances. For
example, if your goals have changed, you may find the need to
sell some investments and purchase others. You may decide to
sell an investment if it’s no longer what it was when you
purchased it. For example, maybe you’ve invested in a company
whose products are less competitive than they once were, or
perhaps the company belongs to an industry now in decline. And
finally, if your portfolio has become “overweighted” with
certain types of investments, you may decide to sell some of
them to bring your holdings back into balance, based on your
goals, risk tolerance and time horizon.

• Whom should I consult for help? You can do a lot to educate
yourself about investing, but when it comes to making the
right choices for your future, you may need help. A
professional financial advisor who is familiar with your
family situation, short- and long-term goals and investment
preferences can help you build and maintain a portfolio that
can help meet your needs. The investment world can be complex,
so the more knowledge you have on your side, the better off
you’ll be.

Take the time to learn as much as you can about investing.
It’s an education that can pay off in the long run.