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New Year’s Resolution: Polish Up Your Investment Plan in Four Steps

Posted by WrapManager's Investment Policy Committee
January 7, 2014

As we enter the New Year, many folks will set out to focus more attention on their health and wellbeing. Indeed, the month of January experiences almost 50% more gym membership sign ups than other months. According to the International Health, Racquet, and Sportsclub Association, “more than 12 percent of gym members join in January, compared to an average of 8.3 percent per month for the full year.”1

While improving your personal health is a wonderful goal, we are encouraging investors to put more time and energy into strengthening their financial health. Taking a fresh look at your investment plan—or creating one for the first time—is a great way to get started.

Four Steps to Strengthen the Health of Your Investment Plan

Taken together, the below four steps can help put you on a better path to knowing where you stand financially, relative to your long-term goals.

Try you to review these four things in detail with your financial advisor. If you don’t have one, it could be a good opportunity for you to seek one out, using this process as a means to evaluate the type of job a financial advisor could do for you.

1) Put Your Entire Financial Life on the Table

It may seem a bit of a daunting task at first, but it can also be quite liberating (if not eye opening) to put everything on the table to see where you stand. In other words, take a fresh look at your financial balance sheet. This means collecting bank statements, investment statements, assessing expenses and debt, and so on, and sharing them with your financial advisor in order to create, or update, your investment plan. We’ve created an easy list here to help you get started: Checklist.

2) Outline Your Financial Goals and Needs

It’s important to think about what you want to accomplish not only in 2014, but also for the long-term. Start small and then work your way out—what are your financial goals for 2014? What are your cash flow needs? What is your risk tolerance for the year? Then, answer all of those same questions looking out five and ten years.

3) Determine your Asset Allocation for the Year

When you consider what your assets are and what you hope to accomplish for the year and beyond, your financial advisor can then help determine what percentage of cash, fixed income, stocks, and other assets you want to hold in your portfolio.

This decision happens in two steps. First, it should be a direct reflection of your short and long-term goals and risk tolerance.

Second, it should reflect your market outlook for the upcoming year. This latter point is critical enough in the process of building an investment plan that we’ll take a moment to discuss it below before moving on to the fourth and final step to polishing up an investment plan.

Step 4 is below, but first let’s look at how a market outlook can impact your investment plan.

The Impact that Market Outlook has on an Investment Plan

Dr. David Kelly, Chief Global Strategist for JP Morgan, sums up their view for 2014 concisely in stating that US stocks “remain attractive relative to the expected returns on cash and fixed income and could continue to rally in 2014. Although at current loftier levels, they are clearly vulnerable to a correction.”2

Looking to fixed income, as we wrote in our October newsletter, “It's Time to Talk to a Financial Advisor About Your Fixed Income Strategy,” we considered the possibility of rising interest rates affecting the performance of some fixed income strategies, and we emphasized the importance of taking a look at your fixed income holdings to see if you were prepared and properly diversified.

Whatever your personal outlook may be, it will be a factor in determining your asset allocation. It’s important to speak with your financial advisor about how the interaction of your goals with the market outlook may ultimately determine your asset allocation.

4) Find Money Managers to Implement Your Investment Plan

Once you’ve determined the appropriate asset allocation for your portfolio relative to your goals, risk tolerance, and market outlook, the next step is to select money managers to oversee the assets in your portfolio. There are several steps an investor should take before hiring a money manager, and taking time to make these decisions carefully is important. Investors shouldn’t shy away from seeking help during the research and evaluation process, leaning on their financial advisor for guidance or hiring a financial advisor to conduct research for them on various money managers.

WrapManager Creates Investment Plans and Provides Research on Money Managers

WrapManager can guide you through each of these steps. Building an investment plan and having us recommend money managers we think can fill the needs of the plan won’t cost you anything other than time, which we know is valuable. Give us a call today at 1-800-541-7774 to learn how you can get started, or click here.

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1 JP Morgan Asset Management

2 US News


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