Spring 2017 Issue of Horizons

One of the most critical elements to achieve the goals and objectives in your financial plan is making the right investment choices. Making the wrong choices can be costly and result in failure in achieving your long-term goals. RubinBrown Wealth Advisors share the most common mistakes investors make, as well as provide guidance to avoid them. 1. Not understanding the all-in cost of your portfolio Fees can include transaction costs (commissions, mark ups and loads), ongoing investment advisory fees charged by advisors, embedded fees contained in investment products (mutual funds, annuities, exchange traded funds, separately managed accounts, etc.), custody fees and the like. Fees can have a significant impact on the performance of your portfolio. Ask your broker or investment advisor to disclose the “all-in cost” of managing your portfolio, including all the fees you see and especially those you do not see. 2. Investing without identifying goals or assessing your risk tolerance Quite frequently, RubinBrown Wealth Advisors find individual investors take on more risk than they need or can tolerate. As a result, when markets are volatile, they panic, sell at the wrong time and often do not get back into the market until it has recovered. It is important to know and clearly articulate what you are saving money for. This will enable your advisor to create a plan, and design a portfolio as part of that plan with an appropriate asset allocation. This approach will help you achieve the long-term return you need to achieve your goals and objectives at a level of risk you can tolerate. 3. Chasing returns Many investors look at the past performance of an investment and mistakenly assume that the same performance is repeatable in the future, only to be disappointed when the investment does not meet their expectations. Because the performance of different asset classes (stocks, bonds, real estate, commodities and cash) fluctuates at different times in the business cycle, and the timing is not easily predictable, investors shouldn’t chase returns. Our experience has shown this is the primary reason that past performance is not necessarily a good predictor of future performance. 4. Not rebalancing your portfolio It is important to review your portfolio periodically to be sure that its asset allocation is consistent with your plan. Left to its own devices, a portfolio can quickly get out of balance as different asset classes move in and out of favor over the course of the business cycle. Especially after a period of volatility, you can easily find your portfolio over weighted to one or more asset classes. This change in asset class weightings can result in a portfolio with a different risk/return profile from the one your advisor originally designed. Look at the portfolio asset class weighting periodically with your advisor and make adjustments to the allocation as needed to maintain your desired risk/return profile.

Spring 2017

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