2022 is officially here and between scheduling new goals your business will go after this year to deciding if you’ll take the kids on vacation sometime soon, it can be tempting to put off making updates on your long-term investment plan. This year, resolve to have all your financial puzzle pieces locked into a big picture.
We believe that great questions are the basis for great answers—let’s dig into 7 smart strategies for upgrading your investment plan!
Tip 1—Cash Flow
Why is portfolio cash flow important in the long term? Retirement means big changes in your overall finances and requires a mindset shift from spending most of your life focused on saving to generating income from that savings. Keeping a close eye on cash flow provides a framework for allocations and expense planning and helps you make smart decisions for retirement. For many retirees, the ideal ratio is reinvestment of 20% of portfolio cash flow. Your financial advisor can help you set targets to keep generating income from what you’ve worked so hard to save.
Tip 2—Tactical Safety Allocation
What is a “tactical safety” allocation, and how can it benefit me? Strategic Asset Allocation (SAA) keeps your allocations the same with some rebalancing, whereas Tactical Safety Allocation (TAA) allows for more shifting of allocations to respond to changing scenarios. This can be an overall shift from your SAA to increase/decrease percentages of your target weights, or within your asset classes (e.g., changing the percentage of long-cap v. small-cap holdings). Goldman Sachs recently cut its projection for US economic growth in 2022 from 4.2% to 3.8%, with Q4/Q4 growth down to 2.9% from 3.3%. With slowing growth through 2022, TAAs allow for reactions to future corrections.
Tip 3—Allocation Planning
Why should high-yield global lending be a permanent allocation? Well-managed portfolios of loans and high-yield bonds provide opportunities for increased income and gain potential. Both are aggressive investments, and careful allocation planning builds in rebalancing.
Tip 4—Preparing for Market Corrections
How do I prepare for market corrections? Market corrections are inevitable—and downturns are temporary. Diversification is key to making it through a market correction. Remember, your investment plan is long-term, and markets do recover (the average fall lasts about 4 months). Working with your financial advisors to create that big picture of short- and long-term goals and a smart allocation strategy will provide the best protection for a market correction and help you avoid drastic reactions to a downturn.
Tip 5—Choosing the Right Team
Why is excellent service so important? A long-term plan executed by a well-managed, devoted team helps avoid service distractions. Excellent service is the basis for staying focused on opportunity because of the peace of mind created by your team’s personalized dedication. At McGowanGroup, our Dallas-based team is devoted to the daily, global search for the best assets to exceed your expectations along with a strong focus on empowering clients through education. The more you know, the more secure you’ll feel in the strategies we develop together.
Tip 6—Automated Performance Tracking
How can automated performance tracking improve my decision-making? Focusing on headlines often results in anxiety-induced poor investment decisions. The database record of actual overall performance provides guidance for your future decisions with a more scientific process. Automated performance tracking along with quarterly meetings with your financial advisor to evaluate performance and adjust goals keeps your eye on that big picture—not the daily news.
Tip 7—Adjusting for Inflation
How do I adjust my plan for future inflation? The Consumer Price Index (CPI) rose 6.2% in 2021, and inflation is one of the biggest concerns of retirees today. The oversupply crisis has become one of increasing demand and dwindling supply. Shifting allocations to more inflation-protected assets, like stocks (which have historically outpaced inflation rates), Treasury inflation-protected securities (TIPS), or real estate may give you some protection—but be sure to discuss inflation with your financial advisor and ensure they’re factoring decreasing purchasing power into your long-term plans and what options may work best for your life and investment goals.
The beginning of the year is the ideal time to reassess your financial position. Make a meeting with your financial advisor part of your seasonal festivities each year lets you start each new year secure in all the new years in your future, and the futures of all future generations.
2022 is officially here and between scheduling new goals your business will go after this year to deciding if you’ll take the kids on vacation sometime soon, it can be tempting to put off making updates on your long-term investment plan. This year, resolve to have all your financial puzzle pieces locked into a big picture.
We believe that great questions are the basis for great answers—let’s dig into 7 smart strategies for upgrading your investment plan!
