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Building and Managing Your Portfolio Is Step #3

In my prior articles, I talked about planning for retirement and then managing your retirement. The key is getting to the end goal, and that’s to have a worry-free retirement. Once you’ve gone thru the steps, all that’s left is to build and manage your portfolio.
Portfolio management is perhaps the most critical aspect to any retirement. With the help of a trusted adviser, it’s actually quite simple and doesn’t require too much time or effort. With many of my clients, we meet and evaluate the portfolio on a quarterly basis. Some wish to not even meet that often and prefer to meet just once a year. Either way, the key to success is to develop a diversified portfolio, create a plan and stick with it through the ups and downs of the market.
The key to building your portfolio is with low-cost ETFs and US traded blue chip stocks. I recommend the low-cost ETFs from Vanguard. Vanguard has been around since 1975 and manages over $2.4 trillion in client assets. I don’t know of a safer or more dependable firm for me or my clients.
The first thing to think of is separating your long-term goals from your short-term goals. Remember, investing is for meeting long-term goals and saving is for meeting short-term goals. The risk of a decline in stock and bond prices is something to consider for money that you may need in the short-term. Investing in the stock and bond markets is for money that you need many years from now. That’s why asset allocation according to your long-term and short-term goals is extremely important.
The second thing to think of is diversification. You don’t want all your eggs in one basket. You want to own several different ETFs that limit your overall risk or a diversified stock portfolio which invests in healthcare, industrials, materials, energy, and the technology sectors. Not everything goes up or down together. By being diversified, it reduces your risk profile, which is very important in retirement.
When you diversify, you are choosing the right mix of assets for your portfolio. In other words, what percentage should you have in stocks and which percentage in bonds. Then of these percentages, how much should be in growth stocks, value stocks, dividend stocks, long-term bonds, short-term bonds, corporate bonds, tax-free municipal bonds, government bonds, corporate bonds, etc.
Well, how do I determine my percentages? There are a number of factors to take into consideration when determining your portfolio allocation. Factors include age, objectives, time horizon, cash-flow needs, and finally, your risk tolerance. How much risk do you want to take with your portfolio? Some clients just want to protect the principal and live off the income. Others want to have more stocks and look to build their portfolio. Again, it all comes down to what is right for you. Not everyone is alike and we all have different circumstances. That’s why a custom portfolio that is right for you is so critical.
Once, we determine your percentages, we turn to buy-and-hold index funds from Vanguard. The reason we do this is to keep costs low. One thing that eats away at a retirement is high fees. Minimizing costs help you keep more of what you earn. Anyone that has dealt with commission sales people know what I’m talking about.
In my next series of articles, I’ll get more into the types of stocks and exchange-traded funds (ETFs) I recommend and how they can help your portfolio grow. As always, remember it’s never too late to start investing. The key is developing a custom plan that’s right for you. Feel free to give me a call, email or Skype and we can discuss that custom plan for you.
Don Freeman is president of Freeman Capital Management, an independent US Registered Investment Advisor. He has over 15 years experience and provides personal financial planning and wealth management to expatriates. Specializing in UK and US pension transfers. Call 089-970-5795 or email: [email protected]

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Building and Managing Your Portfolio Is Step #3