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December 27, 2022 | Article | 3 min Personal insights

4 Tips for Building an Investment Strategy

Whether you’re fairly new to investing or a seasoned veteran, it’s always a good idea to make sure you’re leveraging solid investing fundamentals as part of your approach to investing. Here are some key ways you can help ensure you’re building a solid investment strategy.

Determine your risk tolerance

When it comes to investing, everyone is unique. Some people may prefer a more aggressive approach, especially if they are younger and have a lot of saving years ahead of them. Others may prefer a more conservative approach, especially if they are nearing retirement. Others may be most comfortable with a moderate approach – an equal balance of aggressive and conservative investments. You should review your appetite for investment risk on an annual basis – especially if there have been any life changes, such as marriage, birth or adoption of a child, divorce, nearing retirement, or adding new financial goals in addition to retirement.

Embrace diversification

Putting your money into a number of different types of investment options that include different types of asset classes can help reduce risk. Generally speaking, if your dollars are invested in materially different types of investments, and market conditions cause one of your investments to not do well, all of your money shouldn’t be affected.  There is perhaps a no better way to illustrate this than to look to the story of Life Savers candy.

Clarence Crane invented Life Savers in 1912. He manufactured only one flavor of Life Savers: Pep-O-Mint. In 1913, Crane was approached by Edward J. Noble. Noble suggested that offering different flavors of Life Savers would attract more customers. Crane wasn’t interested in the concept but agreed to sell the Life Savers business to Noble for $2,900. In his lifetime, Noble went on to develop a billion dollar business manufacturing different flavored Life Savers. By diversifying his product, he appealed to more people and protected his business from the risk of one flavor losing popularity.

Diversification works with investments, too. Spread the risk to help protect your potential rewards!

Rebalance your investments

It’s no secret that investments rise and fall over time. And asset classes do not always rise and fall together. As such, your original game plan to diversify across different asset classes may drift over time. Let’s say that last quarter there was a recent stock market upswing and your original desired investment allocation of 60% in stock funds has now grown to 70%. Meanwhile, your intended investment allocation to bond and money market funds has now decreased.  The current overall investment allocation no longer matches your wishes and may likely have become too risky than what you are comfortable with.

It’s easy to rebalance your investments yourself. In the example above that means going into your account and selling off 10% of your stock fund investments and reallocating those funds back into your bond and money market investments so that they are aligned again with your chosen allocation percentages.

Seek professional help if you need it

Many people consult with an investment advisor for guidance and advice regarding their retirement plan investments. An advisor can help you determine your retirement goals and how you can achieve them. Here’s how they can help:

  • Provide ongoing portfolio rebalancing on your behalf (see above).
  • Help you understand different types of investments and their place in a balanced investment portfolio.
  • Help you determine your financial goals beyond retirement, such as buying a home, funding a college education, starting your own business or just getting better at budgeting and paying down credit card debt.
  • Help you determine an appropriate investment strategy to achieve your financial goals, based on your risk tolerance and timeframe.
  • Meet with you on a regular basis to track progress and make adjustments as necessary.

Heartland Retirement Plan Services are offered through Dubuque Bank and Trust Company. The information provided herein is general in nature and is not intended to be nor should be construed as specific investment, legal or tax advice. The factual information has been obtained from sources believed to be reliable, but is not guaranteed as to accuracy or completeness. Heartland Retirement Plan Services makes no warranties with regard to the information or results obtained by its use and disclaims any liability arising out of your use of, or reliance on, it. Products offered through Heartland Retirement Plan Services are not FDIC insured, are not bank guaranteed and may lose value, unless otherwise noted.