How Do I Know Which Investment Options are Right for Me?

How Do I Know Which Investment Options are Right for Me?

Early in 2023, we started a series of letters called “Questions You Were Afraid to Ask”. Every few weeks, we’ve looked at a common question that many investors have but felt uncomfortable asking.

To refresh your memory, here are the topics we’ve covered:

As you’ve learned, when it comes to investing there’s a lot to know, consider, and choose from. And while choice is always a good thing, many investors often come to us with their heads spinning because they’re not sure where to start, what to do, or which option to choose. They all come with some variation of the same question, and that’s the question we’re going to answer right now.

How Do I Know Which Investment Options are Right for Me?

When it comes to this question, we have good news and bad news. The bad news is that there is no one-size-fits-all answer. The good news is that there is no one-size-fits-all answer. Yep, you read that right.

To illustrate what we mean, think about your clothing for a moment. Do you buy one-size-fits-all attire? Of course no — and there’s a reason for that. One-size-fits-all rarely flatters or fits everyone. To put it simply, it doesn’t work for every person and every lifestyle.

Investing is much the same. There is no one-size-fits-all. No single “best” option. Only what’s best for you — based in your wants, your needs, your nature.

This may seem obvious, but it’s critical all the same. That’s because as an investor, you will often hear the media say otherwise. You will hear people claim that the Dow is more important than the S&P (or vice versa). That stocks are better than bonds, or bonds are safer than stocks. That passive is better than active (or vice versa), or that ETFs are always better than mutual funds — or the reverse.

As you know, it’s just not that simple.

In our recent letters, we’ve answered six questions many investors are afraid to ask. Below we have six more for you to consider. Six questions you must not be afraid to ask. Questions only you can answer.

Those questions are: Who, What, When, Where, Why, and How.

Who are you? Are you cautious by nature or a risk-taker? Are you a family-oriented person or more of a lone wolf? An adventurer or a caretaker? Someone with a few simple wants or big, bold dreams? Or — as many people tend to be — are you a mixture of all these things? Our Risk Tolerance form tries to help you answer some of these questions.

What kind of lifestyle do you want? Simple or extravagant? Always trying new things or staying in your comfort zone? A lifestyle focused on work and personal accomplishment or one focused on family and community? Or, again, a mixture of these things, depending on what stage you’re at in life?

When will you need money the most? Do you need it soon because you’re buying a new home or starting a new business? Or will you need it later when you’re about to retire?

Where do you see yourself in ten years? Or twenty? Life is all about change and growth. That means you need to ensure you’re investing for long-term growth to reach your long-term goals.

Why do you need to invest? To send your kids to college? To retire? To see the world? To give to charitable causes? To feel like you always have a safety net?

How will you pay for retirement? This is key. Regardless of your other goals, there’s probably going to come a time when you want to stop working. But you can’t just pick a day and not show up at work. Retirement creates a massive lifestyle change, one that will be quite upsetting to your finances if you don’t prepare for it.

It’s these questions that will help determine the right investment options for you — the types of assets you invest in, how much risk you take on, whether your portfolio is simple or complex, active versus passive — and so forth.

So here’s our suggestion: Take some time to think about these questions. Then, when you’re ready, reach out to our office to discuss your level of risk tolerance and investment plan. Together we can create — or update — a plan that’s customized to you, your needs, and your goals. No one-size-fits-all advice; you’ll get a bespoke plan every time.

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We hope you’re enjoying learning a bit more about how investing works and that we’ve been able to answer some questions you may have pondered over the years. Most of all, we hope you can use this information as a springboard to ask more questions down the road. After all…

When it comes to investing, the only bad question is the one left unasked!