A Wiser Retirement®
From retirement strategies to investing tips and financial planning guidance, our goal is to empower you with the knowledge you need to make smart financial decisions. Join us every week as we simplify complex financial topics, share real-life success stories, and guide you on your journey to financial independence!
A Wiser Retirement® Podcast is produced by Wiser Wealth Management, based in Marietta, Georgia. We specialize in Wealth Management and Flat Fee Financial Planning. To learn more about our services, schedule a complimentary consultation to meet with one of our financial advisors: https://wiserinvestor.com/schedule/.
Disclosure: This podcast is strictly for informational purposes only and is not to be considered as investment advice or a solicitation to buy or sell any financial products, securities, digital assets, or any other investment vehicles, or a basis to make any financial decisions. Wiser Wealth Management, Inc. is a registered investment adviser with the SEC. The hosts and/or guests may personally own securities, digital assets, or other investment vehicles mentioned on this podcast. Neither the hosts nor guests of the show are compensated for their participation and no referral fees are paid to or received by any host or guest for clients, listeners, or similar interest. Investments involve risk, and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser, tax professional, and/or legal professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.
A Wiser Retirement®
92. Choosing The Right Investment Fund is Crucial
Casey Smith and Brad Lyons, CFP® talk about why choosing the right investment fund is crucial. They talk about the differences in the three big asset classes, how to pick an investment, trade volume, and give advice for the DIY ETF investor. It is important to understand how much risk you should be taking on inside your investment portfolio. You need to have a financial plan in place with set goals, and a plan to achieve those goals.
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Different Asset Classes
The big three asset classes to invest in are stocks, bonds, and cash. Stocks can come in many forms, such as US stocks, international stocks, large company stocks, and small company stocks. These three different asset classes have varying expectations for their returns going forward. Each asset class has a historical rate of return as well as a historical standard deviation, and that is how we measure risk.
Protecting Your Portfolio
As you are approaching retirement, you should have about two years worth of cash set aside. This cash could be in your portfolio, in savings, or a combination of both. If the market were to tank, you then can go two years without having to liquidate any type of security. Having debt eliminated also allows you to protect your portfolio if the market were to crash. Prior to retirement, you also need to have an emergency fund in place, with enough cash set aside to get you through a difficult time.
Alternative Asset Classes
Real estate is fairly simple, you can buy a fund that is domestically focused or one that is internationally focused. Through REITs, you can buy into the publicly traded real estate market, and get those non-correlated returns.
Choosing the Right Investment Fund
Start with choosing the type of asset class. It is important to pick something with a solid reputation that has the financial strength to back their products and services. You need to look both qualitatively and quantitatively at the investment. When choosing an ETF, you should also look at the top 10 holdings, to see how it is made up. It is important to understand the index methodology of that fund, and know how the stocks got in the ETF.
Trade Volume
ETF.com can also show you trading volume. For larger investors, you want to make sure when you place your trade, that there are enough sellers on the other side to meet your trade. Trade volume is an indication of liquidity in the marketplace. Trade volume includes how easily you convert that ETF to cash or until you can buy another one, and also the liquidity of the ETF. You want a high trade volume with your ETFs.
Advice for the DIY ETF Investor
Look for ETFs that have reputable companies, are big enough (over 100 million dollars in assets), have the right fee structure, and avoid trading fees at all cost. Don't just search for a fund based off rate of return, you're looking for best fit. You need to find an ETF that best represents the asset class that you are looking for. It's not about picking an ETF that has great performance, it's about picking the asset class you want to be in, and then finding an ETF to then attach to the portfolio. That's how you properly construct an ETF portfolio.