PROVIDENT FINANCIAL CONSULTANTS, LLC

Combatting Forces Working Against Investment Strategy

“As investors, it’s important to have a sound investment strategy in place that is designed to carry you through market ups and downs,” shares Brenda Rolli, AAMS and Financial Consultant with Provident.  “While you and your financial consultant are creating that strategy, there are two factors in particular that work against investor returns to take into consideration and those are market timing and taxes.” 

“Trying to time the market and making emotional decisions really doesn’t have a strong track record in the investment world.  It’s difficult to consistently get in on rising returns at a profitable time, which can lead to exiting at the bottom and coming out feeling defeated,” Brenda says. “Instead of trying to time the market, it would be sensible for investors to invest for a long enough period of time to reap the rewards that the market can offer,” notes Brenda. 

“To reduce losses from poor market timing, it’s wise to be disciplined and methodical in your investments.  If your portfolio begins to stray off target more than what is deemed acceptable, your financial consultant may look into rebalancing your accounts or taking other measures,” shares Brenda.  “Using a dollar cost averaging strategy may provide beneficial pricing in this market.” 

It’s also important to be mindful of taxes when creating or reviewing your investment strategy, because taxes on short and long-term capital gains can really eat in to your bottom line if not planned out efficiently.  “The impact and rates of taxes may change over time, but at the end of the day taxes can be a considerable expense that investors will want to monitor closely,” notes Brenda.  “With multiple Certified Public Accountants on the Provident team, we work with clients to help reduce the tax impact on investments.  You can also consider taking advantage of the types of investments that generate less taxable income, such as exchange traded funds (ETFs).”

For help creating your investment strategy, schedule a consultation with Brenda by calling 920-230-6898.



Disclosures: 

Investing in stocks and mutual funds involves risk, including possible loss of principal. 

An investment in ETFs, structured as a mutual fund or unit investment trust, involves the risk of losing money and should be considered as part of an overall program, not a complete investment program.  An investment in ETFs involves additional risks, such as not diversified, price volatility, competitive industry pressure, international political and economic developments, possible trading halts and index tracking errors. 

Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against loss.

Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.