At long last, summer is almost here - which may mean it’s time to put together your traveling plans. Still, while you and your family may enjoy going a summertime trip, there’s one part of your life that should not go on vacation - and that’s your investment portfolio.
So, what can you do to help your investments keep on working all year long, year in and year out? Here are a few suggestions:
◆ Don’t chase after hot investments. Many times, you will hear about a hot investment, usually a stock. However, by the time you hear about such an investment, it may already be cooling off. Even more importantly, it might not have been appropriate for your needs - and any investment that has either “flamed out” or wasn’t right for you in the first place will not be a “hard worker” in your portfolio.
◆ Monitor “lazy” investments. Under the right circumstances, just about any investment could be of value to you. However, under different scenarios, those same investments may not be doing as much for you. To cite one example, when interest rates are at historic lows, as has been the case recently, and your portfolio contains a relatively large amount of short-term fixed-rate vehicles whose interest payments don’t even keep up with inflation, they could be considered “lazy” investments.
◆ Look for the “multi-taskers.” In most aspects of life, “multi-taskers” are valuable - and it’s the same in the investment world. Can you find a particular type of investment that may be able to achieve multiple goals at the same time? Consider dividend-paying stocks. If you need the income to supplement your cash flow, you can cash the dividend checks. And since some companies tend to increase their dividends, your investment in these stocks can serve as a source of potential for rising income, helping keep you ahead of inflation. Furthermore, if you don’t actually need the dividends to support your income stream, you can reinvest them to increase your ownership stake - a method of building your overall wealth. Finally, many dividend-paying stocks also offer significant growth potential. Keep in mind, though, that there are no guarantees, because companies can lower or discontinue their dividends at any time. And, as you know, stocks are subject to market risk, including the potential loss of principal invested.