What should your investment planning look like?

Graphic design image of a hand holding cash having arrows pointing to different circles that say "high-yield savings accounts", "IRAs", "401[k]", and "Certificates of Deposit" with the words, "A wide range of investments can help you avoid putting all of your eggs in one basket." - TAB Bank

by Michael Palmer, COO

Investment planning is a crucial consideration for everyone. The benefits of investing are universal, and everyone who can set aside some money from each paycheck should definitely prioritize doing so. Let's look at how to build an investment strategy that makes sense for your personal goals, feelings about risk and reward and many other factors.

The importance of personal choice

There's no one single investment strategy that is right for everyone. The complexities of the markets for stocks, bonds, funds and other vehicles, the availability of both closely managed investment funds and their index fund (which follow specific, preset rules) counterparts, and differing priorities around potential gains and losses all play a part.

Of course, stocks, bonds and securities are far from the only investment vehicles to potentially use. Everything from the 401(k) offered by many employers to private investment tools like IRAs and options offered by financial institutions, like certificates of deposit and high-yield savings should be considered. The most important thing on the individual level is to choose an approach that offers a realistic path toward the potential for growth and balances appetite for risk with the consequences of losses on more volatile investments.

An investment strategy should have defined goals and processes, Investopedia pointed out. Is your goal to realize relatively short-term gains within a decade, save for retirement, have money on hand to pay for your new baby's college education or something else entirely? Determining your goals can help you work backward to determine the best mix of investments for your needs. 

Making informed decisions

A strong understanding of any and every investment is vital to reduce unnecessary risk and make logical, reasonable decisions. When you don't have a thoughtful, reasonable decision process for making a specific investment or choosing one mix of investment vehicles over another, you're more likely to see less-than-ideal results. U.S. News & World Report suggested investing in businesses and industries that you understand. Otherwise, investing becomes more like a game of chance.

When it comes to managed funds, mutual funds and other investment options that rely on groups of stocks and bonds, make sure you understand the rationale behind specific funds and why they invest in certain securities and not others. These investment strategies may range from the very specific and inflexible rules set by index funds to the much more subjective approaches taken by some individual investment fund managers.

There are plenty of ways to gather the information needed to make informed investments. Although often technical and dry, funds should provide upfront disclosure about how they use your money, and it's certainly worth the time to review that material. For individual stocks, consider the company, their industry, the overall economy, past performance and similar factors. This process can be time-consuming but also rewarding, as you need to carefully consider each and every stock.

A broad selection of investments

A wide range of investments can help you avoid putting all of your eggs in one basket. As you look for potential investment options, don't ignore the unique balance of security and guaranteed returns offered by CDs. These vehicles have their principal guaranteed by the Federal Insurance Deposit Corporation, which means your money is secure even in a worst-case scenario. CDs lock up funds for a predetermined period of time, but also provide a much stronger return than traditional savings accounts.

You should also consider high-yield savings accounts. While this account doesn't provide blockbuster returns, its rate is far superior to that of a standard savings account, offers the least risk possible and keeps your funds fully liquid.

To learn more about how TAB Bank's competitive offerings can fit into your investment planning, get in touch with us today.

About the Author

Michael Palmer

As TAB Bank’s Chief Operating Officer, Mike oversees the operational and customer support teams that assist TAB’s clients with their deposit relationships with the bank. Additionally, his teams securely process all the bank’s electronic funds transfers, apply for invoice specific payments across the factoring portfolio, and process thousands of lockbox and other checks per week.<br><br>Mike is a Certified Regulatory Compliance Manager. Prior to his experience at TAB Bank, he spent 13 years at Wells Fargo, the last ten being spent in regulatory compliance roles focusing on international BSA/AML compliance as well as mortgage and consumer lending regulations. Mike holds a Bachelor of Science degrees in Finance and Marketing from Utah State University and a Master of Business Administration from Brigham Young University. He is a graduate from the Graduate School of Banking at the University of Wisconsin –Madison where he completed courses necessary to achieve the Executive Leadership Certificate from the Wisconsin School of Business.

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