Keep Your Investments from Taking a Vacation

The arrival of summer means that it’s almost time for many people to travel. However, you’ll still want other aspects of your life to continue operating, particularly your investments, even if you choose to take a vacation.

What can you do, then, to keep your investments and your whole financial plan from taking a “vacation”? Here are some recommendations:

• Evaluate your development. You should regularly monitor the performance of your investments if you want them to be making a profit, but exercise caution in how you assess the outcomes. Avoid comparing the performance of your portfolio to a market index, like the S&P 500, which follows the stock performance of 500 major American companies that are listed on stock exchanges in the United States. Since your own portfolio should ideally consist of a variety of investments, such as foreign and domestic stocks, corporate and government bonds, certificates of deposit (CDs), and other securities, this comparison might not be very relevant. Therefore, use benchmarks relevant to your particular situation rather than comparing your progress to a market index. For example, you can use benchmarks to determine whether your portfolio has enough growth potential based on a compounding rate of return to keep you moving toward long-term goals like a comfortable retirement.

• Invest with intention. When you put a lot of effort into something, it’s usually because you want to achieve a specific outcome. This same sense of purpose extends to investing. Purchasing stocks randomly, based on “hot” tips you may have seen online or on television, can result in a disorganized portfolio that doesn’t truly represent your needs. Rather, aim to adhere to a long-term investment plan that takes into account your financial objectives, risk tolerance, asset accumulation requirements, liquidity, and time horizon. Don’t forget to keep an eye on your future self, including how long you want to work, the kind of retirement you picture, and other factors.

• When making investments, use strategy. You will probably have several conflicting financial objectives over time, and you want your investment portfolio to help you reach them all. That implies, however, that you will probably have to align certain investments with particular objectives. Contributions to an IRA, 401(k), or other comparable plan, for instance, are examples of setting money aside for retirement. However, if you wish to support your children’s post-secondary education or training, including college, you may want to consider saving in a 529 education savings plan. These plans permit tax-free withdrawals for eligible educational costs. Alternatively, you could select an investment that offers high principal protection if you want to save for a short-term goal like a wedding or a lengthy vacation, ensuring the money will be there when you need it. In the end, goal-based investing of this kind can guarantee that your portfolio is consistently performing for you, as you had intended.

• Hopefully, you’ll feel more rejuvenated and at ease after your vacation. It could lead to stressful outcomes, though, if you allow your investments to stop performing as hard as they should. As such, exercise diligence in developing your investment strategy, keep a close eye on it, and adjust as necessary to suit your circumstances. By doing this, you’ll increase your chances of having a sunny outlook even though you can’t guarantee a long day at the beach.