An End ... and a Beginning

December 2016

By Laura Hall, CIMA®, AIF ® Senior Portfolio Manager/Director of Client Services

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s 2016 comes to a close and we look forward to 2017, it’s a good time to review those basic investing decisions that all investors must make to increase the likelihood of achieving their financial goals and objectives. The basics of investing are just that—basic tenets to follow that may result in accumulating assets that can help investors successfully attain whatever goal they have established, such as paying for a college education, taking the family on a vacation to celebrate a significant event, buying a first or second home, or funding a rewarding retirement.

Start The first step is to START. Begin saving as soon as possible, even if you haven’t established a specific goal. You may have heard the phrase, “It is not timing the market that is important, but time in the market.” The power of time in the market and compounding are amazing. Here is an example: Jane and Joan are 22 years old. Jane begins saving \$2,000 a year for 16 years and then stops. Joan waits awhile to start investing, beginning at age 31 to save \$2,000 a year and continuing until she is age 65. Both Jane and Joan achieve the same annual rate of return of 7% from age 22 to age 65. Jane invested a total of \$32,000, less than half of what Joan invested, which totaled \$70,000. Who had the larger balance at age 65? Jane managed to accumulate \$396,805 while Joan accumulated \$295,826—a difference of more than \$100,000! I can think of lots of things to do with that amount of money. Here is another example of the power of compounding: If someone asked if you would take a \$1,000,000 today or wait and receive the result of a penny doubling every day for 30 days, what would your answer be? If you think this is a trick question, you’re right. Starting on day one with one penny and doubling the result every day, on the 31st day the result would be \$10,737,418.24.

Set a Goal Establish a goal for those dollars you are saving. If you are excited about the goal, about what you are saving for, saving

then becomes something you want to do. Several people I know who worked for a living and ultimately achieved their financial goal have told me, “I saved because achieving my financial goal was important to me.” Once you have established a goal, you should occasionally revisit that goal, as goals can change due to life circumstances. Make sure the goal you have set remains important to you.

Repeat the Routine Once you have begun saving and have established a goal, make it part of your routine to save regularly and consistently. Find a way to automate your savings schedule so you don’t have to think about it. Many people have dollars withheld from their paycheck and deposited into a savings or investment account so they never see those dollars. Revisiting your goal and working toward it should become a regular part of your financial life and can contribute to the success of achieving your goal.

Live on Less This is a corollary to the idea above. If you don’t see the dollars you are saving, chances are you won’t be tempted to spend those dollars. If you get a raise, consider paying yourself first by increasing your savings. Then take a portion of the raise and reward yourself on a job well done by treating yourself to something special to you. But keep in mind that many successful investors don’t drive new cars every three years, buy a larger house or take expensive vacations, but intentionally live on less now so that they can enjoy the benefits of achieving their financial goal in the future.

Know Your Risk Tolerance Be honest and recognize that risk comes in many forms: credit risk, market risk, interest rate risk, inflation risk, loss of principal, risk that can be reduced by diversifying your portfolio, and risk that exists in any portfolio. Work to understand what level of risk you can tolerate and invest accordingly. Once you establish your risk level and are ready to invest your portfolio according to that risk level, take the next step which is to: Continued...

Copyright 2016 REDW Stanley Financial Advisors, LLC. All Rights Reserved. This publication is intended for general informational purposes only and should not be construed as investment, financial, tax, or legal advice.

Did You Know? 1. Firm section: REDW just successfully concluded its seventh annual Tribal Finance & Leadership Conference, held November 16-18 in Seattle, WA, netting record attendance and glowing reviews. Over 100 tribal leaders from across the nation came together with REDW professionals and other industry experts to discuss top issues impacting Native American tribes today—and came away with innovative approaches for improving the financial and operational prospects of their people. 2. Economic section: On January 31, 1940, the first monthly retirement check was issued to Ida May Fuller of Ludlow, Vermont, in the amount of \$22.54. She started collecting benefits in January 1940 at age 65 and lived to be 100 years old, dying in 1975. Ms. Fuller worked for three years under the Social Security program, and the aggregate taxes on her salary during those three years totaled \$24.75. During her lifetime she collected a total of \$22,888.92 in Social Security benefits. 3. Client section: For the first time in many years, the Chicago Cubs and Cleveland Indians played in this year’s Baseball World Series, also referred to as the “Fall Classic.” The father of one of our clients played for a short time in the major leagues with the Cleveland Indians until, sadly, his career was cut short due to injuries. (I was rooting for the Indians even before I became aware of this interesting client factoid!)

©Charles Barsotti / cartoonbank.com

REDW Stanley Financial Advisors, LLC, an SEC-registered firm subsidiary of REDWLLC, is a highly respected investment advisory firm with a primary focus on serving clients in the Southwest. As fee-only advisors, we do not receive commissions or sell investment products, so you can be confident that our recommendations and advice are based solely on your needs and with only your success in mind.

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Capital Conversations (December 2016)

REDW Stanley Financial Advisors, LLC

Capital Conversations (December 2016)

REDW Stanley Financial Advisors, LLC