Page 122 - June_2023

FINANCIAL PLANNING
When deciding what to do with a
large sum of cash, there are several strategies to consider. Utilizing a conservative strategy is certainly on the table, especially for someone who may need the money for short-term needs. For someone who has
20-30 years before they need to draw on their investments, a conservative strategy might not be the best option. It’s extremely important
their money to a corporation, and they will pay them interest in return. After their bond matures, they will get their total investment back. Long-term government bonds are averaging roughly 5% since the 1920s. Bonds have historically been the place to hide when stocks are struggling. This was not the case last year as bonds were down double digits along with stocks, which is virtually unheard
T T H H E E R R I IS SK K O OF F B BE EI I N NG G TOO CONSERVATIVE
by Cade Peterson, Financial Advisor
it simple. What will be the best for your
situation? To be totally transparent, I have no idea. It would take some discovery questions and risk analysis to make a proper recommendation. What I can do, however, is walk you through the long-term performances of each of these investment options. The key here is long-term. Short- term money for a home or a business should
to take off the blinders and look at your own situation in great detail before locking down a long-term strategy. Some of the factors to consider include long-term growth, inflation, goals, and risk tolerance. People talk about their goals and risk tolerance, yet quite often their investment strategy doesn’t match their situation in the slightest. I hope I can make you think twice about keeping tabs on your investments and checking to see if they are in line with your goals.
LONG-TERM PERFORMANCE
When discussing investment opportunities with someone, there are usually a few different investment vehicles that come to mind. There are stocks, bonds, real estate, and savings accounts - to keep
have a different strategy than long-term money for accumulation or retirement.
FIXED INCOME
One of the first accounts we ever open is a savings account. It’s no secret that a savings account doesn’t perform very well. The long-term average return dating back to the 1920s is about 3.3%. I will add that in recent years the average is much lower than 3.3% and it’s not even coming close to competing with inflation. Money left at the local bank might not be the best use of funds. What
can people do if they are still conservative but don’t want to leave large amounts of cash at the bank? This is the question that leads me into bonds. For those of you who don’t know, bonds are essentially someone lending
of. Nonetheless, bonds are a great tool to round out a portfolio.
REAL ESTATE
With rates being hiked so rapidly this last year, real estate has been a hot topic. Many people believe that real estate is the best investment to have. Long-term averages tell us that 4.2% is the average return each year. I know several people who have done very well with real estate, and it can be a great way to generate some extra cash flow. But like most things in this world, there is
a downside, and my job is to inform people so they can make the best decisions for their unique financial situation. In my eyes, the number one issue with real estate is the lack of liquidity. If someone gets to a point in life
120 SPEEDHORSE June 2023