Aaron Katsman 58.
(photo credit: Courtesy)
With Hanukka upon us, gelt plays a central role. As both children and some
parents (especially those with generous in-laws) receive cash, the question is
what to do with the newfound bonanza. Should you use it to buy the latest gadget
from Apple that you “just can’t do without”? Or is there a better approach that
will help your financial situation in the long run? Here are some tips that will
help you become a better investor.
ALLOCATION Perhaps the most important
aspect in growing wealth is to allocate your portfolio correctly. This means
having the correct mix of stocks and bonds. Your stock portfolio should have
large companies and small, representing growth and value. Your bond portfolio
should have non-US-dollar bonds as well as a small percentage of high-yield and
This will help create a portfolio with lower
volatility, and the smoother ride can even potentially help increase returns
because it can compound at a greater rate if there are no huge
THINK INTERNATIONAL With the United States share in foreign equity
markets constantly decreasing, and with much of the world’s growth coming from
outside the US, international exposure is a must. While most allocation models
call for 20 percent-30% of a portfolio to be invested outside the US, I think
that number needs to be closer to 50%.
It’s important to note that I am
not referring to investing 50% of a portfolio in Europe; rather, one should have
exposure to Asian economies, as well as those in Central and South
REBALANCE Buy low and sell high. That is the holy grail of
investing. All too often I see portfolios that haven’t been touched in
What was an appropriate investment allocation for a 30 year old is
going to be different for someone who is 50. Additionally, due to market
movements, your allocation may be way too aggressive or conservative than you
JPOST VIDEOS THAT MIGHT INTEREST YOU:
A yearly rebalance solves this issue. You end up
selling assets that have increased in value and buy more of those that are
trading at lower levels. You get your stock/bond allocation back to the level
that is right for you. Many studies have shown that regular rebalancing and
strategic asset allocation is key to achieving solid investment returns, as
opposed to trying to generate huge profits from excessive stock
FORGET ABOUT BEATING THE MARKET There is a lot of noise in the
financial media about the need for investors to “beat the market,” pushing
investors to strive to somehow get better returns than could be had by just
tracking the market. This sounds all well and good if we were living in a vacuum
and if the entire point of investing was to make as much money as
Unfortunately for many of us, there is a point to investing.
That is to make enough money to help achieve our goals of marrying off children
or paying for our retirement, just to name a few. Most investors should have
portfolios that have nothing to do with beating the market, focusing instead on
meeting their goals and needs.
SAVE If the recent financial crisis has
taught us anything, it’s that we have to value money the way our grandparents
did. This means that we need to save. If you receive a dollar, save 20 cents.
This should be your first action. Then figure out what you need to buy. The
easiest way to build wealth is by saving. Investing is nice and highly
recommended, but without savings, its going to be an uphill battle to be able to
pay for the goals that you set forward.
Part of the Hanukka story is
about the Greeks wanting to secularize the Jewish people by making them forget
about religious observance and embrace Hellenism.
Today, we face our own
challenges of Hellenism.
If we are speaking in financial terms, this
means the fight against overblown consumerism and the need for us to have more
and more material goods.
Let us enjoy a rededication and go back to the
basic principles of investing and saving money.Happy Hanukka!
email@example.com Aaron Katsman is a licensed financial adviser in
Israel and the United States who helps people open investment accounts in the
Join Jerusalem Post Premium Plus now for just $5 and upgrade your experience with an ads-free website and exclusive content. Click here>>