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The basics of successful investing

Ideas to consider for keeping your portfolio properly balanced.

While most people know the importance of regular investing, they frequently overlook the crucial role their investment mix plays in reaching their financial goals.

Your investment mix

Your financial professional can help you develop an appropriate combination of asset types — stocks, bonds and cash — in your portfolio. As you determine your investment mix, two key factors to consider are your time horizon and risk tolerance.

  • Time horizon

    If you are in the accumulation or saving stage, your investment mix should be determined primarily by when you will need to use the money. In general, the further you are from your goal (e.g., saving for your retirement in 20 years), the more you can afford to be invested in more volatile investments like stocks. The shorter your time horizon (e.g., saving for a child’s college education in five years), the more conservatively you should be invested.

    If you are in the distribution stage, such as retirement, your investment mix should be determined primarily by the need for income from your portfolio. Your financial professional can help you make this determination.
  • Risk tolerance

    All investments carry risk — some more than others. The amount of risk you are comfortable with should also play a role in the makeup of your investment mix. For example, if you are a risk-averse investor, you may prefer more conservative investments in your portfolio, even if that means forgoing the potential for greater returns.

One size does not fit all

It’s important to remember that there is no standard solution that will determine the right investment mix for every individual.

While your time horizon and risk tolerance are important, other factors can also influence how you should be invested, including how much money you have already saved and how much you can afford to invest.

Keeping your asset mix on track

Maintaining an appropriate asset mix is a lifelong series of shifting goals, life changes and fine tuning. When your personal circumstances change, your goals, time horizon and risk tolerance are also likely to change, sometimes significantly.

Online rebalancing

Keep your asset mix on track by rebalancing your account online. You can also establish an automatic rebalancing plan.

When your investment mix is no longer in sync with your financial goals, your financial professional can help you rebalance your portfolio. But, it is always a good habit to evaluate your portfolio with your financial professional on an annual basis — regardless of whether or not your situation has changed.

Here’s a helpful checklist of what to review with your financial professional.

Steps to keeping your portfolio properly balanced

  1. Evaluate your current financial situation. This includes your family situation, how much money you have accumulated, your financial objective and target rate of return.
  2. Determine your time horizon.
  3. Calculate your need for income, if any, and how many years you will need that income.
  4. Select your investment mix to reflect your goals and objectives.
  5. Adjust your mix to reflect your risk tolerance level.
  6. Review and adjust your portfolio on a regular basis.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.