Money cash Shekels currency 521.
(photo credit: Reuters)
With Hanukka approaching, 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.
single 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 and small companies, representing growth and value.
Your bond portfolio should have non-US-dollar bonds as well as a small
percentage of high-yield and emerging-market bonds. This will help create a
portfolio with lower volatility, and the smoother ride potentially can even help
increase returns as the portfolio can compound at a greater rate if there are no
With the US 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 to 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
Buy low and sell high. That is the holy grail of
investing. All too often I see portfolios that haven’t been touched in
Earlier this week I had multiple meetings with two
One hadn’t touched his portfolio since 1998, and the other was
a couple that was so busy with their aliya process, that they said they would
deal with their portfolio later. Well they made aliya in 1995 and apparently
“later” arrived in December 2012! What was an appropriate investment allocation
for a 30- year-old is going to be different for someone who is
Additionally, due to market movements, your allocation may be way too
aggressive or conservative than you originally wanted. 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
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
them 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
That is to make enough money to help achieve our goals of
marrying off children or paying for our retirement, just to name a couple. Most
investors should have portfolios that have nothing to do with beating the
market, focusing instead on meeting their goals and needs.
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 with
savings. Investing is nice and highly recommended, but without savings, it’s
going to be an uphill battle to be able to pay for the goals that you set
Part of the Hanukka story is about the Greeks wanting to
secularize the Jewish people.
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
is a licensed financial adviser in Israel and the United States who helps people
with US investment accounts.