Ten tips for investing from the Chartered Financial Analysts Institute, culled from the annals of rock and roll.
10. "Hotel California," The Eagles (1977)
"We are programmed to receive. You can check out any time you like, But you can never leave."
Carefully review your liquidity. If a fund requires manager approval for redemption, you should understand that in a difficult environment, the manager may decline your request. Speak with your advisor about the balance between earning extra income and maintaining necessary liquidity.
9. "Taxman," The Beatles (1966)
"(If you drive a car, car) I'll tax the street (If you try to sit, sit) I'll tax your seat
Consider the effect of taxes on withdrawals. It may make sense to draw from your after-tax accounts rather than tax-deferred accounts. Note that one tax issue you can control is when to buy or sell assets.
8. "Lady Madonna," The Beatles (1968)
"Lady Madonna, children at your feet, Wonder how you manage to make ends meet. Who finds the money when you pay the rent? Did you think that money was heaven sent?"
Plan, plan, and then plan again. Committing yourself to a realistic investment plan requires understanding your resources and obligations as well as the essential attributes of your future desired lifestyle.
7. "Stairway to Heaven," Led Zeppelin (1970)
"There's a lady who's sure All that glitters is gold And she's buying a stairway to heaven."
Don't be dazzled by fancy new investment products. If you cannot understand the description in the prospectus, consider not making the investment.
6. "Takin' Care of Business," Bachman Turner Overdrive (1973)
"If it were easy as fishin', You could be a musician, If you could make sounds loud or mellow Get a second-hand guitar Chances are you'll go far If you get in with the right bunch of fellows"
Get help. Investing successfully is hard. For that reason, many investors engage an investment advisor to show them a prudent path. You should feel comfortable discussing all your financial concerns with your advisor.
5. "Sympathy for the Devil," Rolling Stones (1968)
"But what's puzzling you Is the nature of my game, um mean it, get down
(woo woo, woo woo)"
How do you know if your advisor has a clean record? Through its Member Firm/Registrant Info Service, the Investment Industry Regulatory Organization of Canada (IIROC) offers investors the opportunity to access the public information available on its Member firms and their registered employees.
4. "When I'm Sixty-Four," The Beatles (1967)
"Will you still need me Will you still feed me When I'm 64."
Be suspicious of promises and projections, especially over longer modeling periods. You should plan on being able to meet your goals even if some projected income fails to materialize.
3. "My Generation," The Who (1965)
"I hope I die before I get old (talkin' 'bout my generation)"
Longevity risk (i.e., outliving your money) is a serious issue. For example, the second-to-die life expectancy of a husband or wife, even where one individual is in poor health, can greatly exceed the longevity estimates for the husband or wife when considered individually.
2. "Dream On," Aerosmith (1973)
"Everybody's got their dues in life to pay"
Watch expenses. Research suggests that investors should focus on products with low fees. Index funds tend to outperform actively managed funds.
1. "Teach Your Children," Crosby, Stills, Nash & Young (1970)
"You who are on the road Must have a code that you can live by"
Consider retaining a financial advisor who is dedicated to your interests.