Homework

Highlighting Your Current Investments

You now have investments listed for your short term goals (Cornerstone 3) and long term goals (Cornerstone 4).

Lay those goals out on a sheet of paper or spreadsheet, listing the investments below them. For your investments, write the following headers:

• Investment
• Morningstar Category
• 10 Year Return
• Fee Ranking
• Star Ranking
• Keep?

We’re going to inventory all of your investments for diversification, fees and whether they fit your goal or not. That’s later. For now, we’re just going to list the investments in the far left column. Leave the rest blank.

While we aren’t sure if investments are perfect or not, you may see some that need to go. If so, write “sell” in the “keep” column.

Why would you sell investments?

There are many reasons, but let’s focus on the most basic one:

If the investment doesn’t fit the right risk for the time frame you should sell it.

Investments in the 3rd Cornerstone box should NOT be in stocks unless they’re at least five years away and preferably 10 years from now. If you have money in stocks with a goal that’s less than five years away, history says you should sell it.

Why?

The stock market, over short periods of time, is an incredibly volatile place. Over long periods, the markets reliably return much higher amounts. If a goal is close at hand, the risks of losing money are high if you’re in stocks or REITs.

Those investments in the 4th Cornerstone box (long term goals) should NOT be in cash and should have very little in fixed investments like CDs or bonds UNLESS you’ll have enough money to make that work. Most people we see don’t have the luxury of earning very little on their money.

Fixed assets and CDs or cash should also be marked “sell” unless you have questions still. If that’s the case, place a question mark after the word sell.

What’s next?

Sell NOTHING. 

We won’t do any actual moving of investments until we have all the facts. We still don’t have enough information to make sales yet. If you’re learning from this class, hopefully it’s the fact that it’s really not terribly hard to make data-driven decisions once you know the system and the resources to use.

Head to Morningstar.com* and get acquainted with the website. We’ll be using it a TON in the next several lessons.

 

*Who is Morningstar? They are an independent rating company that evaluates risk/reward/returns on investments. Advisors love them because they aren’t a subsidiary of some big Wall Street firm, are used to giving “sell” advice about popular funds, and don’t mind pissing off the big boys (to put it bluntly). Morningstar does NOT pay us anything to say that….nor do we have any relationship with us (a Morningstar rep on Twitter sent me a tee shirt once, but if you think I’ll recommend something for a tee shirt, you’ve got me all wrong…..).