As you evaluate the efficacy of your investments with an independent professional, it’s important to revisit two key principles—asset allocation and diversification. Any long-term investment plan will most likely have to weather market “ups” and “downs.” Softer markets often create opportunities for purchasing shares at lower prices, and through dollar cost averaging, you may be able to average a lower cost per share over time.

Maintaining a regular investment program and balancing your portfolio to account for a comfortable risk level are important to the overall success of your financial strategies.

Asset Allocation and Diversification

The main objective of asset allocation is to match the investment characteristics of the various asset categories (equities, bonds, cash, etc.,) to the most important aspects of your personal investment profile—that is, your risk tolerance, your return and liquidity needs, and your time horizon. Asset categories generally react differently to economic fluctuations. Strong Valley financial advisors have the experience and specialized tools to help you analyze your individual risk tolerance.

If you have assembled an unplanned investment medley, you may be unaware of the extent to which your investments are (or are not) consistent with your objectives. Since various investment categories have unique characteristics, they rarely rise or fall at the same time. Consequently, combining different asset classes can help reduce risk and improve a portfolio’s overall return. While there is no set formula for asset allocation, guidelines can help you accomplish certain goals (for example, the need for growth in order to offset the erosion of purchasing power caused by inflation).

Diversification is an investment strategy used to manage risk for your overall portfolio, using techniques such as mixing your holdings to include a variety of stocks (small-cap, mid-cap, and large-cap), mutual funds, international investments, bonds (short- and long-term), and cash. By varying your investments, diversification attempts to minimize the effects a decline in a single holding may have on your entire portfolio.

Dollar Cost Averaging

To maintain a regular investment program, many investors make dollar cost averaging an integral part of their overall savings plan. Using this systematic investing technique, an investor buys more shares when prices are low, and fewer shares when prices are high. This may result in a lower average cost per share than if you were to purchase a constant number of shares at the same periodic intervals or make a single investment.

Dollar cost averaging cannot guarantee a profit or a lower cost per share, nor can it protect against a loss. However, it is a strategy that reinforces the discipline of regular investing and offers a systematic alternative to “market timing.” In order to take full advantage of dollar cost averaging, you need to consider your ability to continue purchases through periods of low price levels.

Expertise from a Professional

Periods of falling prices are a natural part of investing, as are strong market intervals. It is important to regularly review your portfolio with your financial advisor to help ensure your investing strategies remain aligned with your financial objectives.

You might also consider Strong Valley’s comprehensive wealth management services to craft a clear long-term vision and solution for managing every aspect of your financial life, freeing you to focus on living life to the fullest today and free from worry about tomorrow.

_{*Neither Asset Allocation nor Diversification guarantees a profit or protects against a loss.} 

Successful money management requires ongoing reviews. Each year, you should pull all your records together and take a close look at your entire financial picture. Here are six steps that can help you put your financial affairs in order so you can build a strong foundation:

1. Analyze Your Cash Flow

In your budget, does your income equal or exceed the amount you put into savings and fixed or variable expenses? If it exceeds the amount, by how much? The amount of income that exceeds what you saved or spent is called positive cash flow. If your expenses exceed your income, you have negative cash flow. If your cash flow is negative, it may be time to reorganize and minimize any unnecessary expenses in your budget.

2. Provide Money for Special Goals

For every financial goal you establish, you need to address the projected cost, the amount of time until your goal is to be realized (time horizon), and your funding method (e.g., a scheduled savings plan, liquidating some assets, or taking a loan).

You should plan your goals on three tiers. On the first tier, you have an emergency fund of at least three months of income. On the second tier, you may have a special goal and may, for example, establish a savings plan for your children’s weddings or educational expenses. Finally, on the third tier are more flexible goals such as purchasing an automobile, renovating your house, and planning a vacation.

3. Enrich Your Retirement

Are you going to have enough money when you retire? Pensions and Social Security may not provide enough income to maintain your current lifestyle during your retirement years. Therefore, review your retirement needs and plan a disciplined savings program for your retirement.

4. Minimize Income Taxes

Many taxpayers reduce their taxes by taking advantage of tax deductions. Most are familiar with common deductions (e.g., mortgage interest, contributions to retirement plans, and donations to charities). In addition to tax deductions, however, there may be other ways of reducing your income tax bite. For example, under appropriate circumstances, losses or expenses from previous years may be carried over to the next tax year.

5. Manage Unexpected Risks

You are probably well aware that life sometimes throws us unexpected “curve balls”—that is, unforeseen risks. Suddenly and unexpectedly, your potential risk may become a financial loss (e.g., you become disabled without income or an untimely death causes financial hardship for your family). As a result, many have made insurance the cornerstone of their overall finances because it offers protection that can help cover unforeseen potential liabilities and risks.

These five steps will help you focus on the important issues that affect your finances. If you faithfully keep track of your progress in these important areas, you may be able to both afford your future and finance your dreams.

As Charles Dickens tells us in his celebrated Christmas fable*, the self-defeating ways we behave financially are rooted in the past. Digging them out is the best way to fix what’s wrong.

The first step in changing problematic financial behavior is to become open to admitting that improving how you act is important, and then seriously contemplating making the change. Ebenezer Scrooge in A Christmas Carol took that step when he heeded a warning from the ghost of Jacob Marley.

The Ghost of Christmas Past

The next step in financial transformation is the most difficult and requires the most courage. It is revisiting the events in our lives where our strongly held delusions were formed. Scrooge initially resisted this step. Yet his guide, the Ghost of Christmas Past, gently turned him toward the past.

Looking clearly at entrenched financial delusions isn't easy. Many people want to focus instead on learning more about how to save, invest or spend wisely. Yet dwelling on present-day concerns, before visiting the past, is often ineffective.

What’s needed most for transformation is emotional intelligence, which you cannot learn academically or all by yourself. You learn the lessons emotionally, experientially, and in community. Just as Scrooge found a guide in the Ghost of Christmas Past, people wanting to gain emotional intelligence require the assistance of a financial coach or therapist. This is a journey you cannot take alone.

Once you take that difficult but transformational journey into the past, you can begin to see reality with new clarity. Once you gain emotional intelligence, you have the opportunity to replace faulty beliefs with accurate cognitive information. This is the time for learning about budgeting, debt reduction, investments and other financial skills.

Scrooge's guide, the Ghost of Christmas Present, helped him negotiate the current day and obtain this knowledge. Our real-world guides may include accountants, attorneys, financial planners, educational books and workshops.

When you gain accurate financial knowledge, you are ready to look toward the future to see where previous delusions potentially were taking you. Like the vision that the Ghost of Christmas Future unveils before Scrooge, the scene is often harsh. However, because of your preparation, you have the capacity and tools to enter the action phase.

Take Control of Your Money

Now you can begin to create a future that is consciously and deliberately planned. You can start to take control of your money rather than your money controlling you. Your guide can be your financial advisor.

Many try to shortcut the transformation process by starting with looking at the future. Sadly, without first taking the critical steps of viewing the past and learning the present, you often lose heart. This is why resolutions for financial change tend to fail, not because the goal is bad or unattainable, but because you are unprepared to go into action.

Giving the gift of a financial transformation is not possible. It is a gift that you can only receive. This Christmas and New Year, perhaps it's time for you to receive yours.

*refers to A Christmas Carol by Charles Dickens, 1843

As the end of the year approaches, it's an opportune time to review your financial status and make strategic decisions that can impact your financial well-being in the coming year. Implementing certain financial moves before the year ends can potentially save you money, optimize your taxes, and set a solid foundation for the future.

Here are the top five financial tips you should consider before the calendar flips:

1. Maximize Retirement Contributions

Contributing to retirement accounts, such as 401(k)s, IRAs, or Roth IRAs, before the year ends can bring several advantages. Firstly, it allows you to take advantage of tax-deferred or tax-free growth. Maxing out your contributions can reduce your taxable income for the year, potentially lowering your tax bill.

Moreover, funding these accounts to the maximum extent possible sets the stage for a more financially secure retirement. The power of compound interest means that the earlier you invest, the more time your money has to grow.

Don't miss the opportunity to contribute as much as you can before the year concludes.

2. Review and Adjust Investment Portfolios

A thorough review of your investment portfolio is crucial as the year ends. Assess whether your investments are aligned with your financial goals and risk tolerance.

Consider rebalancing your portfolio to maintain your desired asset allocation. Rebalancing involves selling some overperforming assets and reinvesting in underperforming ones to realign with your original strategy. This move not only mitigates risk but also positions your investments for potential growth in the upcoming year.

3. Utilize Flexible Spending Accounts and Health Savings Accounts

Check your balances in FSAs and HSAs, as these accounts often have "use-it-or-lose-it" policies for funds not utilized by the end of the year. Consider using these funds for eligible medical expenses, as they can provide substantial tax advantages.

Some FSAs might have a grace period or allow a carryover of a limited amount of funds, but it's essential to understand the specific rules governing your accounts.

4. Review Insurance Coverage and Estate Planning

Evaluate your insurance policies, including health, life, and property insurance, to ensure they still meet your needs. Life changes and evolving circumstances may necessitate adjustments to coverage levels or beneficiaries. Additionally, review and update your estate planning documents, such as wills and trusts, to reflect any changes in your life or financial situation.

5. Get a Professional’s Perspective

Consider consulting with a certified financial advisor to tailor these strategies to your specific circumstances and goals. By making proactive financial decisions with a professional, you can pave the way for a more secure and prosperous financial journey in the year ahead.