Investors are like fingerprints: each one is different. But if there’s something every investor wants, it’s a sound financial foundation. When your finances are in order, so many other things seem to fall into place.
How can you create a sound financial foundation?
Create a plan of attack. Every plan begins with specific investment goals. Know what you want your money to do for you. Decide whether you need current income today or long-term growth for the future. Once you know where you’re going, you can start putting the building blocks in place.
Estabablish the right mindset. Determine the amount you can afford to invest comfortably on a regular basis.
How do you decide the amount to set aside?
Take inventory of your personal finances. Ask yourself, “How much do I feel comfortable putting away regularly – in good times and bad?” When you determine that amount, plan on sticking with it over time.
Identify your risk tolerance. Every investment moves up and down in price. Generally, investments with above-average profit potential go up and down in price more than those with less profit potential.
There’s no such thing as avoiding risk; your only choice is which risks to take. If you choose an overly conservative investment that entails little risk, you can lose purchasing power and even erode your standard of living if your returns fail to keep pace with inflation.
Knowing your tolerance for risk also narrows down the many investment opportunites available to you – from savings vehicles and fixed-income investments to stocks and mutual funds.
Determine your time horizon. Figure out how much time you have between now and when you need to reach your financial goals. Some investments that may appear attractive may be inappropriate because of your time horizon. If you’re investing for a long-term goal, you may want investments designed to produce attractive gains over the long haul. If you require monthly income, you may need investments that can generate a steady flow of income today.
Make your investments. You can select from innumerable investments to meet your financial needs. Which combination is right for you? That depends on your specific needs. What may be right for a friend or neighbor may not be right for you.
Rely on a professional Financial Advisor to help you choose the best investments for your financial needs. He or she should also be willing to discuss at length the many investment alternatives available to you.
This article was written by Wells Fargo Advisors and provided courtesy of Steve Fillingim, First Vice President – Branch Manager in Temecula at (951) 506-8570.
Investments in securities and insurance products are:
NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE.
Wells Fargo Advisors, LLC, Member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company.