Balancing Act

Both life and investing requires balance. In life we seek to achieve a balance between diet and exercise, work and play, family and friends, and time and money. Successful long-term financial plans incorporate just the right blend of spending, savings, income, growth, risk, reward, safety, liquidity, stocks and bonds to create a sustainable lifestyle and a secure financial future.

After a year like 2013 one may question the need for a balanced investment approach, but January reminds us the road to wealth creation has a few potholes. After a bumpy month, the markets found themselves back on track in February. The bond market digested the second round of Federal Reserve tapering without a problem and traded in a very narrow range for the month. The stock market reversed course and recaptured January’s losses.

Stocks lead bonds in February while every asset class posted positive returns. For the month, the S&P 500 gained 4.57%, NASDAQ Composite 5.15% and the MSCI Europe, Africa, Far East (EAFE) 5.56%, MSCI Emerging Markets 3.31%. In the bond world, investment grade taxable bonds gained 0.53%, municipal bonds were up 1.17% and high yield bonds appreciated 2.02%. After a forgettable 2013, commodities rose 6.24% in February.

On the economic front, the U.S. continues to make progress toward a real recovery as the experts debate the economic impact of a harsh winter. Corporate earnings reported strong once again, new home sales improved, inflation and interest rates remain low, the consumer is still confident, while the employment picture is better, it is still unclear. The foreign markets always seem to provide cause for concern. This month it was slower economic growth in China and political instability in the Ukraine. It is truly global marketplace and international developments will impact the domestic economy and our personal portfolios.

As an individual investor it is paramount to build a balanced approach to long-term investing that reflects both your emotional and economic state. Whether your nest egg is $100,000 or $5,000,000 it is important to first establish your future income and liquidity needs. Once this piece of the plan is solved then you can begin building an emotionally free investment portfolio with the proper long-term focus.




Posted on March 4, 2014
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