The stock market has been erratic all throughout 2018—breaking record highs and also recording some of the lowest numbers in years. Even with the tumultuous year, more people now compared to a few years ago are making investments or at least thinking about it, especially millennials. They are also more conscious about exactly what group of investing to partake in.
In 2015, Morgan Stanley conducted a “Sustainable Signals” report with that age group and found only 28 percent were “very interested” in sustainable investing—investments that consider environmental, social and governance (ESG) factors and their impact. Morgan Stanley conducted the same survey two years later and this time 86 percent of millennials were “interested” in sustainable investing, including 38 percent who were “very interested.”
South Jersey Biz spoke with John Torrence from Masso Torrence Wealth Management to get his take on why more people are investing, what steps and precautions to take for both inexperienced and longtime investors, and why everyone should understand the risks involved with investing.
“I believe people are more focused on their investments today than in the past for a variety of reasons,” Torrence says. “Primarily, people are aware that unlike our parents, we will not have a pension from our employer to rely on in retirement. People are also aware of the limitations of our Social Security system and the likelihood it will not exist in its current form for much longer. Given these facts, people understand that they are responsible for funding their retirement and are taking ownership of that challenge, especially as they near middle age.”
For those investing for the first time, Torrence suggests they set aside three to six months of living expenses in a liquid, interest-bearing account.
“Once that is established, prioritizing their goals will dictate the type of investments they pursue along with their risk tolerance and time horizons,” he explains. “Putting money into a company 401(k) or establishing an IRA should be the initial investment most young people make to take advantage of compounding growth.
“A sound financial plan and a prudent investment strategy are critical components in achieving financial success. Having a well-defined plan in place allows you to take the emotion and distraction of financial noise out of your decision-making process. Preserving and growing your wealth, attaining a desired rate-of-return, countering the effects of inflation/taxes and employing sophisticated income distribution strategies—these are the hallmarks of an effective investment strategy.”
Before making any kind of investment, Torrence says it’s important to understand the risks involved. “Risk is the key metric in any investment,” he says. “Investors are constantly bombarded with the latest can’t miss investment such as Bitcoin, cannabis stocks, etc. But understanding the risk involved with any investment is critical. Any investment should not be viewed as a stand-alone but in the context of how it fits into one’s overall investment strategy.”
Additionally, as we head toward the end of the year, Torrence says now is the time to review everything regarding your financial plan and open accounts in case anything needs to be addressed in the new year.
“The end of the year is a good time to review tax minimization tactics such as tax loss selling, funding retirement accounts, charitable giving, etc.,” he says. “Now is a good time to take a look at where you are relative to your overall financial plan and any funding shortfalls that need to be addressed in 2019, such as increasing retirement, paying down debt, additional college funding and considering long-term care, to name a few.”
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Published (and copyrighted) in South Jersey Biz, Volume 8, Issue 10 (October 2018).
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