Review of the 10 Most Common Financial Planning, Investing and Insurance Questions – Part 3!

We are on our third installment of looking at the 10 most common financial planning, investing and insurance questions to see if they really make sense (cents?).  I hope the previous 2 articles (Click here if you missed them for Part 1 or Part 2) have at least gotten you thinking about the advice you hear out there on a regular basis.  At KAB Financial Solutions we are trying to let you hear a different voice and get some clear direction on your financial and insurance decisions.

With that in mind, let’s get started with our 3rd question!

Again, to give credit where credit is due, I have gotten these questions from the site of (see the full article here)

3. “Do you know how much of your portfolio should be allocated to stock funds and how much to fixed-income?”
Their Answer: “This is the most basic investment issue in putting together a portfolio, and it’s a critical part of the work we do with every client. Your answer to this will have an enormous impact on the results you get – and probably also on how you feel about your investments.”

My Answer
This is actually a great question to consider and ask, but should not be one of the first three that gets asked. First let’s consider the question then, when is the appropriate time to ask it.

For starters, the allocation of your portfolio is extremely important to get correct.  Not only do you need to have the right mix between stocks (which is where you are the partial owner of a company) and bonds (which is where you get to be the lender, like the bank when you take out a home mortgage except here, you get to collect the interest and money back – usually), but you also need to have as many other kinds of investment types (or asset classes) in your portfolio as well.  Diversification is key and having many different kinds of asset classes (i.e. real estate, market neutral positions, commodities and many others – contact me for more details and explanations disclaimer: not all asset classes may be right for you!) can help you spread the risk you are willing to take.  We also look at insurance as an additional asset class that can further help you lower risk in your overall portfolio.

Second, we want to look at when we should be considering this question.  As I mentioned, it is not one of the first questions we should be asking.  We first want to consider if you are properly set up to handle putting money in the market at all.  Many people I meet in the middle-income ranges want to jump into the market to get those “big rates of return”.  The challenge is they do not have anything in place to protect them for when the market turns down and then they lose that hard-earned money. (It will go down just like it goes up!  Will you be able to handle it when it does?)  Looking first at your overall protection and liquid savings is more important.

I believe that you should not be putting any money in the market that you cannot afford to lose.  If you do not have a minimum of 3-6 months of your gross annual income (the bigger number on your paycheck before they take out all the withholding and taxes) saved or in process of getting there, then you are not in a position to be taking any risk (investing in the market) with your money.  (If you are spending more or even the same amount as what you are earning – called negative cash flow – then you should consider stopping your retirement plan contributions even if you are still getting a match. Use these dollars to get started saving in a liquid account like savings or checking.  Contact me with questions on this.) I know that may sound conservative, but it can be a winning strategy when life throws you a curve ball.  If we are going to plan to win, we have to be prepared for whatever life may throw at us at any moment. Don’t you agree?

If this is making sense to you, contact us today and set up your no cost 30 minute meeting to get started building your financial model efficiently and correctly!

Please feel free to add your comments below.  I would love to hear your thoughts of agreement or disagreement on this topic.

Stay tuned for the next question to analyze – Do you know how much money you’ll need in savings when you retire?

Kurt A. Berry is a financial advisor with KAB Financial Solutions in Loves Park/Rockford, IL. He specializes in helping families maximize their financial situations utilizing strategies involving life insurance, disability insurance, auto/home insurance, savings and checking accounts, CD’s, IRA’s, Roth IRA’s, retirement plans, stocks, bonds, mutual funds, fixed and variable annuities, real estate, debt management, college planning and more. Contact us to get started.

* I am licensed to offer insurance in: IL, IN, WI and securities in: IL, IN, WI. I cannot communicate with, nor respond to, requests from people who reside in states where I am not licensed to conduct insurance and/or securities business.


About Kurt A Berry

Helping middle income families utilize insurance, savings and investments to overcome debt, meet college expenses and still retire on time with options.
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2 Responses to Review of the 10 Most Common Financial Planning, Investing and Insurance Questions – Part 3!

  1. Pingback: Backwards Thinking. Don’t know where to begin? « Flawless Destiny

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