Investment management is challenging to think about, and since much of the conversation with your financial advisor can seem like a lot to conquer, we’d like to offer some tips.
A good start includes deciding what is most important to you personally. Consider reviewing our Financial Advisor Checklist as you think through your goals.
Preparing for a Conversation
It’s beneficial to be able to converse with your financial advisor, and understand your investments, to have the ability to understand your advisor’s recommendations and to help you make important financial decisions. Being active with your financial advisor can ensure a personalized plan that is in-line with your current financial situation.
Let’s start with some basic, key terms that are essential to understanding portfolios and retirement investing:
A group of investments that have similar characteristics and behavior, and are therefore subject to similar forces in the market. The main asset classes are stocks, bonds, and cash/cash equivalents.
There are also many sub-asset classes such as Large-Cap, Mid-Cap, Small-Cap, International Developed Markets, Emerging Markets, Real Estate, Corporate bonds, Municipal bonds, and Treasury bonds.
Referred to as “equity”, a stock is a security in which the investor owns share(s) of a corporation. Shareholders are entitled to part of the corporation’s assets and profits.
Referred to as “fixed income”, a bond is a debt investment where the issuer holds an obligation to pay the investor back in full plus regular interest payments.
A statistic measurement indicating the degree to which two securities move in relation to one another.
A risk management technique in which a portfolio is invested in many different asset classes in order to minimize overall portfolio volatility and risk.
Exchange-traded funds are securities that track an index such as the S&P 500 Index, bonds, or commodities. Benefits to investing in ETFs include high liquidity, diversification, low fees, and access to specific investment strategies and styles.
An account that does not have the tax-deferred benefits that a retirement account offers, because the contributions have already been taxed. Taxable accounts can be more flexible than retirement accounts and do not require minimum required distributions (RMDs). When you make a profit on a sale of a security, you are taxed on the profit. Examples: individual taxable account, joint tenants, trust account.
The difference between the cost paid for an asset and its value when sold (profit). Capital gains are categorized as short-term or long-term and must be claimed on income taxes. Short-term (sold position held one year or less) capital gains are treated as ordinary income. Long term (sold position held more than one year) capital gains are taxed at a special capital gains rate, a sliding scale depending on your tax bracket.
A holistic term used to reflect all assets belonging to an investor, and may include a variety of non-retirement and/or retirement accounts. When looking at asset allocation or investment goals, the overall portfolio should be considered.
A statistical measurement often used when talking about risk tolerance. Applied to the return of an investment, a standard deviation provides insight into the potential volatility of an investment.
Above all else, remember that your relationship with your financial advisor is just that, a relationship.
To be your advocate and make you feel completely comfortable, maybe even a little excited about your investments and financial future!
Lost in conversation?
Just ask us to pause! We are more than happy to answer any question – big or small – to help you have a complete understanding.
Contact Vision Capital Management to see how your financial health and future can benefit from our services.
We look forward to meeting you and getting to know you better!!