If you are unsure about how to invest your money and hear what sounds like good investing advice, how do you know whether or not to follow it?
In “Investing rules of thumb: Why they don’t always work,” Walter Updegrave discusses why sometimes what is considered commonly held wisdom needs to be, as they say, taken with a grain of salt. Updegrave, a veteran financial columnist, writes about how these rules of thumb can seem easier and more successful than “more sophisticated methods” after a reader wrote in to say he’s heard that “100 minus your age gives you the percentage of your retirement portfolio that you should invest in stocks.” He further adds that at times simple methods work, but one should be wary of relying on them because while the same investing advice gets handed down repeatedly, standards change. Thirty percent of a person’s income in the 1980s or 90s is different than today.
In addition, you really don’t know how these rules of thumb will work for your individual situation. For example, your age should certainly play a part in your investing decisions. You also have to consider all of your financial resources—people who have a nest egg they don’t touch as well as money to invest have different options than those who are counting on investments to fund their golden years.
“Well, when investing for retirement you want to create a stock-bond allocation that can get you the returns you need without subjecting yourself to a level of risk that you can’t handle.”
If you need help sorting through financial planning advice, you can turn to a Fee-Only financial advisor. Fee-Only financial advisors are not obligated to fulfill quotas or market certain financial products to their clients. Instead, Fee-Only financial advisors take an ethical, all-inclusive approach to your financial future.