Date Night Club (September 2020): What’s Your Investment Style?
This month I’m zeroing in on the topic of investing - particularly investing for retirement. When it comes to investing there’s no one size fits all—your approach is unique as you. Let’s get to know your investment style.
Here's why this month's topic is so important ...
Take a Bite:
What risks, if any, are you willing to take with your money?
DATE NIGHT MATERIALS LIST:
A copy of last month’s budget (if you plan to do a budget check-in)
Paper and pen or an electronic device where you can each take notes
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5 MINUTE SNACK:
What’s Your investment style?
Let’s sum up your retirement investment style in four words. There are no right or wrong answers here, it all comes down to preference.
What lifestyle are you envisioning in retirement?
Ambitious: I’d like to have more income than I have today.
Content: I’m hoping to live on the same or a little less than I have today.
Frugal: I’m fine living on less in retirement.
When are you hoping to retire?
Early: As soon as I have enough money to do so. I’m hoping to retire early.
Traditional: Hopefully in my mid-sixties, if not before.
Late: I love my work and hope to do it as long as I’m able.
In this week’s blog article, I explore what risk tolerance means and why it matters. Which phrase best fits your approach to risk:
Hot: I’m willing to take just about any risk for the chance to increase my investment.
Warm: I prefer to take a diversified approach exposing some of my savings to a moderate amount of risk.
Cold: I’m pretty risk averse. I’d rather keep my savings, then lose them trying to chase a bigger return.
How involved do you want to be in the investment process? Some people find the stock market to be really interesting and are willing to be more hands-on, while others prefer to have an expert do it for them.
Architect: I enjoy following investment trends and being more hands on in my investment strategy.
Dabbler: I don’t mind putting in a little bit of work if that means my investments will be a better fit for my unique needs.
Autopilot: I care about retirement, but not investing. Please just do it for me!
What are your four words? What are your partner’s four words? Are you the same or different?
While these words may seem a bit silly, the ideas behind them are incredibly important. Be sure to create, or find, an investment plan that aligns with your style.
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If you like, you can take this month's topic deeper ...
MAKE IT A MEAL: APPLY WHAT YOU'VE LEARNED TO YOUR CURRENT BUDGET
Ready to create, or find, an investment plan that aligns with your unique style? Begin by seeing what your investment provider offers. Start by working backwards from the last word in your style profile.
Involvement in the Investment Process: If you’re an autopilot, see if your plan offers target date funds or the opportunity to work closely with a trusted financial planner (someone who is a fiduciary: motivated by your best interest, not their commission) who can choose the right investments for your needs. In contrast, if you’re an architect, you’re going to want the flexibility to create your own combination of funds. While most retirement plans offer this flexibility, if your employer plan does not, you may want to start an IRA (in addition to contributing to your employer plan) where you can have a bit more autonomy.
Investment Profile: The other three words make up the most critical building blocks of your investment profile. Before you settle into an investment mix, make sure you take these three things into account. Most retirement providers have online tools or investment advisors you can talk with who can help you select your investments based on these three pieces of information: When are you planning to retire? What % of your income will you need? And, what’s your risk tolerance? In addition to helping you settle into your mix, they can generally give you an estimate of how much money you’ll need and how much you’ll need to contribute to get there.
Got different results than your spouse? That’s ok. Having separate accounts allows you to take different approaches to get to the same destination.
MONTHLY BUDGET CHECK-IN
Take a moment to look back at last month's budget together.
Did you stay on track?
If you got off track, what 1-2 steps can you each take to get back on track again?
Did any surprises come up - positive or negative?
Take a look over the expenses, did the way you used your money align with your values?
What changes will you make for next month?
Grace Pomroy provides general information about investing for educational purposes only, this is not advice about specific investments or investment strategies.