Your investment
goals are as unique as the route you take to reach them. But regardless of your
course, we believe these 10 “rules of the road” can help you get where you want
to be.
1. Develop your strategy.
Your financial
advisor gets to know you – your long-term goals, investment time frame and
comfort level with risk – before recommending a strategy. The more you can
outline what you are trying to achieve, the more he or she can tailor your
strategy to you.
2. Understand
risk.
As a rule, the
higher the return potential, the more risk you’ll have to accept. To determine
what makes sense for you, your financial advisor will want to know:
What is your
comfort level with risk? Understanding this can help him or her determine how
you may react to market ups and downs over time.
How much risk are
you able to take? The amount of time you have to invest plays an important role
in determining how much risk you’re able to take.
How much risk do
you need to take? Your financial advisor will want to determine the return, and
therefore the risk, that may be necessary to reach your long-term goals.
3. Diversify for
a solid foundation.
Your portfolio’s
foundation is your asset allocation, or how your investments are diversified
among stocks, bonds, cash, international and other investments. Your mix should
align with your goals and comfort with risk.
4. Stick with
quality.
Of all the
factors to consider when investing, Edward Jones believes quality is one of the
most important. It’s also one of the most overlooked. Although it may be
tempting to buy a popular investment, it may not fit with the rest of your
portfolio, and it may be riskier than you expect. If it sounds too good to be
true, it probably is.
5. Invest for the
long term.
Despite stories
of fortunes made on one or two trades, most successful individual investors
make their money over time, not overnight. One of the biggest mistakes you can
make is trying to “time” the markets.
6. Have realistic
expectations.
First, you’ll
need to determine the return you’re trying to achieve – which should be the
return you need to reach your goals. Then you can base your expectations on
your asset allocation, the market environment and your investment time frame.
7. Maintain your
balance.
Your portfolio’s
mix could drift from its initial objectives from time to time. You can
rebalance to reduce areas where your investments are overweight or add to areas
where they are underweight. By rebalancing on a regular basis, you can help
ensure your portfolio remains aligned with your objectives and on track to
reach your long-term goals.
8. Prepare for
the unexpected.
Unforeseen events
could derail what you’re working so hard to achieve. By preparing for the
unexpected and building a strategy to address it, you’ll be better positioned
to handle the inevitable bumps along the way.
9. Focus on what
you can control.
You can’t control
market fluctuations, the economy or the political environment. Instead, you
should base your decisions on time-tested investment principles, which include:
Diversifying your
portfolio
Owning quality
investments
Maintaining a
long-term perspective
10. Review your
strategy regularly.
The one constant
you can expect is change. That’s why it’s so important that you and your
financial advisor review your strategy on a regular basis.
Think of your
financial advisor as your navigator on this journey. By working together to
regularly review your strategy and make the adjustments you need, you can have
a clearer picture of where you stand and what you need to do to help reach your
goals.