Today’s investing landscape is making history in many ways. In the beginning of the year, the Dow Jones, S&P 500, and the NASDAQ all had record highs. In 2017, the Fed finally started to raise interest rates after going almost a decade without an increase. Some economists believe that our economy is growing and will continue to perform well. And at the time of writing, we have been in the second longest bull market ever. All of this is creating a very high performing market.
What does this mean for your investments?
At Varra Financial, we help our clients understand the current investing environment, make sense of their portfolio performance, and stay focused on long-term goals. Let’s examine two of the most important investing principles, diversification and discipline.
Diversifying your portfolio is key when approaching personal investing. Our professionals always educate our clients on what diversification will look like for them. At its essence, diversification refers to the breakdown of your portfolio and the fact that you should be invested in many different arenas, such as stocks, bonds, mutual funds, and other asset classes. While diversification can’t guarantee against a loss, many financial professionals consider it one of the most important components to helping you reach your long-term financial goals by minimizing your risk.
One way we recommend our clients approach diversification is to look at their asset classes, such as equities, fixed-income securities, and real estate as long-term strategies and not jump in and out of these classes to try to chase the most return. Generally speaking, investors may experience market volatilities when investing for the long term and changing your investments regularly or making frequent changes to your asset classes can be detrimental in the long run.
One of the most important principles we teach our clients is discipline. Without discipline, personal investing can be an emotional roller coaster that many individuals can’t stomach. As part of our service, we work with our clients to teach them what discipline looks like for them and how not to get hung up on the daily market swings or hot new investments. Disciplined investing means setting goals and identifying a long-term strategy of investing that achieves those goals.
When we speak about discipline to our clients, we remind them of the long-term plans they have in place and how staying committed to their strategy is key to big picture returns. The trendiest investment on the late night news or your friend’s recommendations for your portfolio may not be the best fit for you. All of our clients’ plans are aligned with their personal goals and needs, therefore we practice an educated, long-term investing approach.
Another reason discipline is important now more than ever is because many investors and economists are warning of a market correction in the future. While no one can predict the market, if we look at past performance we know that what goes up must go down. Extended bull markets are often followed by bear markets and there’s no telling what stock valuations will do. Because of this, it’s important to articulate the time frame for your goals and adjust your risk appropriately. We will be happy to answer any questions you have about risk evaluation.
It is an interesting time in both the domestic and international markets. We diligently monitor current trends to provide our clients the education and level of service they deserve. We always serve in your best interest and are happy to educate our clients on the most up to date news regarding stock valuations, market swings, and international elections. Let us help you stay disciplined and keep on track with your goals.
About Gina Varra
Gina is our President and has worked with the Varra Team since 2002. She is dedicated to the firm's mission of helping you make the most of your finances now and for generations to come. Outside of work she enjoys spending time in the Great Colorado outdoors which includes her newest activity of exploring Colorado and Wyoming waterways in her alpacka raft. She is also actively involved in the Louisville community and numerous non-profit organizations. Email Gina or contact Varra Financial Associates to schedule a meeting.
These articles are historical and based on information that was current at the time of initial print. They contain information that may have or has changed. Information including staff and business names may have changed and we now offer access to securities through LPL Financial. Investment markets have changed and retirement plan rules have changed, in addition to other content that may have changed. Varra Financial Associates has transferred its assets to LPL Financial.
The opinions voiced are for general information only. To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual's goals, time horizon, and tolerance for risk.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against a loss in periods of declining value.
Indices are unmanaged measures of market conditions. It is not possible to invest directly into an index. Past performance is not a guarantee of future results. S&P 500 is an unmanaged index of 500 widely held stocks. Dow Jones Industrial Average is an unmanaged index of 30 widely held securities. NASDAQ Composite Index is an unmanaged index of all stocks traded on the NASDAQ over-the-counter market.
Investment in stocks will fluctuate with changes in market conditions. In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.Mutual funds are sold by prospectus. Investors should read the prospectus carefully and consider the investment objectives, risks, charges, and expenses of each fund carefully before investing. The prospectus contains this and other information about the investment company. Please contact your representative or the investment company to obtain the prospectuses.
Diversification helps you spread risk throughout your portfolio, so investments that do poorly may be balanced by others that do relatively better. Neither diversification nor rebalancing can ensure a profit or protect against a loss.