Portfolio Management

Risk tolerance is a large part of project management. You can define risk tolerance to determine if you’ll accept potentially higher payoff with short-term volatility or maintain safer investments with a lower payoff. Most portfolios should include a diverse mix of assets to balance risk-reward with security and stability, so that even if high-risk investments end up a loss, you’re still on track to meet savings goals. Managing this sort of investment is difficult and time-consuming without a portfolio manager, but relatively simple for a professional financial advisor.

When a portfolio goes off-track from its goal, it must be rebalanced. This can include reinvestment, divestment, or a number of other strategies intended to steer the portfolio back on course. For example, if a stock is no longer providing the yearly returns needed, it could be sold and a new investment purchased. Of course, you’ll also have to decide on a rebalancing strategy, such as whether rebalancing is maintained on a single large portfolio account or spread across multiple – but your financial advisor will help with that too. Rebalancing might also look like reducing risk. Let’s say you want a balanced portfolio to minimize risk for retirement investments. The portfolio is currently almost 60% stocks, which means more risk than originally set by the goal. The financial advisor would rebalance the portfolio by selling the risk-generating stock and acquiring safer bonds instead until the balance returned to 50/50.

Choosing an investment account is sometimes as complex as investing. Whether you’re investing in retirement, saving funds for children, investing in education, or simply investing, your account should match your goals. At the same time, nearly every investment option has multiple choices for investment account. You can choose a standard brokerage account, but retirement savings plans can go into numerous account options such as IRA, Roth IRA, SEP IRA, Simple IRA, etc. Education accounts offer options like ESA and 529. Navigating these account options can be difficult without insight into what they mean and the market. Your financial advisor will help you choose. Eventually, you may be recommended to switch to a different type of account to maximize savings and long-term investment.

In an ideal world, you keep as much of what you earn as possible. Your financial advisor will devise a savings strategy complete with investment account type, annuities, and other strategies to reduce your total tax bill over time. Taxes can make or break returns, so it’s crucial that you watch what you owe and how to reduce it.