The advice provided in last month’s column focused on how to avoid scams that seek to take financial advantage of readers or their loved ones. A suggestion was to avoid potential financial loss by establishing and sharing a “code word” with family and friends to be used if a scammer claims to have access to your personal information.
As the “dog days of summer” lead us to spend more time indoors, July is a good month to assess financial goals set earlier in 2023. Mid-year is also a good time to calculate and update asset allocation strategies as also suggested this time last year. As a reminder, last July’s column included the following advice and perspective about very poor financial market performances in the first half of 2022:
“If recent events caused stress because you were gambling with your savings, use this as a teaching moment to avoid making such bets in the future. If you are an investor, do not stress and lose confidence in your investment plan. Investors know that market volatility is common in the short term and that the best strategy is to focus on the long term to ensure financial security. Take a deep breath and review your goals and investments. Do not panic.”
By heeding this advice, investors who remained disciplined last year experienced a significant rebound in performance and account market values for the 12-month period ending June 30. In fact, a broad measure of U.S. stocks rebounded by 19% for this period and a similar benchmark for stock markets outside the U.S. also rebounded by 19%.
Many may have avoided looking at their financial statements because of the volatility. Once again, a mid-year review of asset allocation is recommended, but this time the project will be easier to endure. Use the recent good news as an incentive to review all of your investment accounts.
The action item for July is to use the following steps to determine your asset allocation by:
- Gathering copies of all bank statements, retirement accounts and brokerage accounts for the period ending June 30. While some families consider monies as “mine” or “yours,” it makes most sense to pull all accounts together to meet financial goals more effectively and efficiently.
- Tallying the dollar amounts and assigning investments into three categories as follows:
- money market, bank balances and certificates of deposits (CDs) are considered “short term.”
- individual common stocks and stock mutual funds are considered “stocks.” If you are not sure of the investment strategy of a mutual fund, find the ticker symbol (usually 5 letters) and go to Morningstar.com to help you categorize correctly.
- individual bonds, bond mutual funds and stable value funds are considered “bonds.” Also, access Morningstar.com if you are not sure of the proper category.
With this information in hand, you will be able to calculate your asset allocation, which is the single most important decision to help gain financial security. Be prepared to consider making changes to the asset allocation if your short-term, bond and stock amounts do not reflect your short and long-term goals.
For example, if the recent increase in stock prices pushed your stock allocation from a goal of 60% higher to 70% of total assets, you might consider rebalancing these amounts.
The August column will revisit what allocations are considered reasonable based on time horizon, financial goals and risk tolerance.
Beth Stegner Peabody, CEO of Stegner Investment Associates, is a graduate of St. Agnes School and Sacred Heart Academy.
Previous Cents & Sensibility columns may be viewed at https://therecordnewspaper.org/editorials-commentary/cents-sensibility/