Should I go with mid-risk investments?
My husband always penny pinched and put money in Fidelity retirement and DIY Vanguard acts. After he became diagnosed with advanced Alzheimers, I didn't know both offered financial counseling. I moved all of our money to a local financial advisor who wanted to purchase only conservative bonds. He has cost me money by not investing in profitable stocks. Am I wrong to be less conservative? I want to fire him and move to a company that takes more risks, but not high risk. What do you suggest? Along with my hubby having advanced Alzheimer's, I have a fatal lung disease. I'm ok now, but I will need a transplant in a about a year. I'll need money for my care at that time (3-4 months).
It sounds like the financial advisor recommended investments based on your age. There is a financial services rule of thumb that says that you should reduce risk as you are getting older. I see it a little differently. I help my clients with their investments based on their risk tolerance and their financial plan. Here's a basic idea of what I think would be the right way to invest:
1) Any money you will need over the next year should be held in cash equivalents. I know banks do not pay much right now, but I don't think it is worth investing in the markets and trying to get 5-7% gains and risk taking a 20% loss.
2) Any money you will need within the next 2-5 years would be invested conservatively.
3) Any needs that are longer than 5 years can be invested more aggressively depending on your risk tolerance.
The reason for this structure is that we know that stocks offer the best growth prospects for our investment in the markets over the long-term. However, we also know that they are volatile in the short-term. The idea is to shuffle money from Step 3 to 2 and Step 2 to 1 every year to meet your retirement needs while reducing the risk of having a drop in the market affect our lifestyle.
Not all financial advisors think alike. Finding one that helps you plan your finances in a way that makes sense to you is important. If your advisor do not offer the type of advice you need, it might be time for you to look for another one.
I hope this helps.
I think you could absolutely go with another advisor and have a better combination and strategy. And bonds aren't as conservative as you might think in this particular environment and the specter of rising rates. When rates rise, bonds will go down in value. Bonds just do not offer the risk/reward currently.
So you do not have enough upside versus the potential downside, and you will need some growth. I sympathize with your situation as I have a family member currenlty that has Alzheimers/Dementia and am going to speak quite frankly here, so do not take my comments as brisk. The problem is not if you die, but if you live. And live needing expensive care. If you are too conservative that you are almost guaranteed to run out of money, is that really conservative? Only you can answer that.
I will say that whatever way you decide, you should chose an adviser focused on strategy not products, and with a sell discipline. There are good fee based only, active advisers out there, you just need to look & interview.
I wish you and your husband the best of luck.
In my office one of the first things I ask my clients is "What's important for you to get out of our relationship?" This question is the foundation of how we move forward. Without knowing a lot more about your situation I can't really make a recommendation against what the other advisor is doing, because it could very well be in your best interest and I wouldn't be quick to fire him, but I would enourage you to seek out other opinions, because your thoughts and choices should always be taken into account. If you are wanting to take more risk and invest more in companies, then it should be our job to help you take on the right kind, types and amount of risk you would be comfortable with.
I am glad that you and your husband did a great job saving over the years, and sorry that you are facing these difficult situations.
The risk that is appropriate to take in your portfolio is a function of several factors. One of them is time horizon, or in other words, how long you will need the funds to last, and how soon you plan to draw on them. Your time horizon becomes shorter with age and in retirement. Another factor, related to time horizon, is liquidity needs, and how readily available the funds need to be. Another is your overall networth. Finally, your own attitudes toward risk should be considered.
It sounds like your current advisor was making decisions on your account based on the other factors, or their perception of them. The fact that you feel dissatisfied or uninvolved is cause enough (in my opinion) for you to find somebody else to work with. A good advisor will talk through the risk and other decisions with you, and implement based on your input and understanding.
You and your advisor are clearly not on the same page, and therefore you should find an advisor who encourages more communication. Advisors should give advice, not simply invest the way they want to. If an advisor truly believes you want to do the wrong thing despite his or her advice, then the advisor should initiate the separation.
That being said, if you view investments that don't keep up with the market as "costing you money," you will likely never be happy with an advisor. Investing involves risk, but it's only forward-looking risk. We don't know what will happen in the future. When looking backwards at results, there is no risk so it's very easy to say "you should have done this or that." Whether to take more risk or not depends on your financial situation, financial goals, etc, and that's why there needs to be a lot more communication between you and your advisor than what you seem to have now. Keep in mind that "higher risk" does not mean higher return. It means a higher chance of losing money. If you need this money in 3-4 months, then your advisor should be the one to explain the dangers of investing in stocks over such a short time.