In recent weeks, investors have been inundated with headlines and messaging urging them to stay the course and focus on the long term. But what does that really mean for you and your financial goals?
According to Jim Daniello, CFP®, a wealth management director at TIAA Individual Advisory Services, staying the course doesn’t mean sitting still and doing nothing. In fact, it’s just the opposite.
“The single most important step those in retirement or nearing retirement can take is to meet with their advisor—over the phone or via video conferencing—to revisit their asset location strategy, which will help them determine the levers they can pull now to better protect their assets and their goals,” Daniello said.
Daniello believes that determining which levers to pull and when begins with reviewing the location of your assets.
“The types of challenges savers and investors face today are exactly what the asset location review process is designed to help solve,” he said. “It’s important to remember that while equally important, asset allocation is different from asset location. While asset allocation is about having the right mix of investments in your portfolio, asset location organizes assets by account types based on how you plan to use them, as well as when they’ll be taxed.”
“First, you want to ensure you have the right allocation in place during periods of increased market volatility,” Daniello continued. That’s because over time, market swings can throw your asset allocation—and potentially your risk targets and investment goals—out of balance. When this happens, you can rebalance your portfolio by moving money from investments that take up a greater portion of your portfolio than desired into those that could use a boost—to get back to the initial (or target) asset allocation. Keep in mind, rebalancing does not protect against loss or guarantee that an investor’s goals will be met.
Daniello says that reviewing the location of your assets is also highly beneficial because it helps to ensure:
- You have the right kind of asset in the right account
- Each asset has a purpose in your overall financial plan
- You're using smart strategies to help reduce the impact of taxes and market volatility