How to Invest While Getting a Tan

June 10, 2015

June signifies summer, a time when millions of Americans flock to frolic in the sand and soak up some sun. If only investing were as easy as a day at the beach…or is it? It can be if you follow these simple guidelines:

  1. Pick the Right Location

Do you want to find the biggest waves, the least crowded hangout spot, or somewhere near the lifeguard? Think of your investments the same way. If you are comfortable riding the big waves of the stock market then you are probably an aggressive investor.

If the only waves you want to see are the ones you get from family and friends, then stick with more conservative investments. Your potential rate of return may be lower, but you probably won’t be tempted to bail when the market gets rough. If you need more help figuring out which locations are right for your money, check out https://www.calcxml.com/do/inv01.

  1. Prepare Your Lunch

When hitting the beach, do you pack your own lunch to ensure you have everything just the way you like it, or do you prefer to wing it at the snack bar or indulge at a beach with restaurant service? When investing, you are either hands on, meaning you like to build your own portfolio and choose the investments, or you are hands off, in which case you prefer to utilize help either through online advisor programs or target-date funds. Some investors may even prefer to pay a little extra for the customized services of professional account management. Check with your account provider to see what options are available to you then choose your preference.

  1. Remember Your Sunscreen

No one likes to spoil the day by having too much exposure to the sun. Similarly, having too much exposure to a single company or asset class can spoil your portfolio. In general, keep exposure to any one company (including the one you work for) to no more than 10-15% of your total portfolio. For hands-on investors that prefer to build a customized portfolio, consider rebalancing your investments (either manually or automatically) at least once a year to maintain your overall asset allocation strategy.

  1. Watch Out for Sharks

Okay, so shark sightings are extremely rare. Still, no one wants to be in the water when Jaws is lurking and the same goes for investment advisors. While the vast majority of advisors are good people who want to help, it’s difficult to differentiate a dolphin from a shark when all you see is the fin. You can take several steps to protect yourself by checking their registration with FINRA, the Securities & Exchange Commission, or your state security commissioner to make certain they don’t have any complaints on their record.

If you choose to work with an advisor, find out how they are paid. If by commission, probe further into how those commissions work and if they receive upfront payments. Question what incentivizes them to service your account. Be sure they aren’t “churning” your account by selling you new funds with upfront charges every few years, and keep in mind that annual management fees should generally not exceed 1%.

Ready for summer? Follow these tips and you should be investment-ready. About that beach, becoming swimsuit-ready is an entirely different feat!