Investment Solutions are strategies developed after assimilating your short- and long-term financial goals, risk tolerance and investment time horizon. They may include strategies that help to reduce your portfolio’s exposure to certain market risks, such as hedging concentrated stock positions.
One can make money through investments in three ways: lend your funds to someone and collect interest; become a part-owner of something, like buying shares in a company; or buy assets that tend to appreciate in value over time, such as real estate or gold. These three asset categories are known as fixed income, equities and cash and cash equivalents (money market instruments). Each type of investment involves different types of risks.
Generally, the longer you are willing to hold an investment, the more you should be willing to accept the potential for higher returns. Your risk level is a personal choice, and it is important to be honest with yourself about your comfort level with taking certain risks. Your advisor will help you to understand the risks involved in investing and can assist you in finding investments that meet your risk tolerance.
The most common investments are stocks, bonds and mutual funds. Each of these has its own advantages and disadvantages, depending on your situation. For example, stocks are more volatile than bonds, but they also have the potential to deliver significantly higher returns. Bonds are more stable than stocks, but they typically offer lower returns.
A properly diversified investment portfolio is designed to achieve your investment objectives and manage risk by incorporating investments that are complementary. This helps to limit losses when one of the asset classes in your portfolio experiences a downturn.
In addition to analyzing your financial goals and risk tolerance, your advisor will consider any special circumstances that you have. These could include a need to provide for a disabled family member, pursue philanthropic interests or support a blended family. Special circumstances can have a significant impact on your investment decisions and can lead to unique opportunities to create a personalized investment plan that aligns with your short- and long-term goals.
Investments should be reviewed on a regular basis to ensure they remain aligned with your goals, risk tolerance and investment time horizon. Your advisor can recommend changes to your investment portfolio when necessary.