Thursday, November 20, 2014
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

Prepare portfolio with eye toward future

sievers column sig

By
From page C2 | March 02, 2014 |

Too often financial news purports to be about the future but is really just an account of the past. As a result, many investors project what has already happened onto an imagined future.

Consider a different way to frame this situation.

Investors, influenced by media focused on short-term events, will tend to focus most of their attention on what has happened in financial markets in the past month, week, day or even hour. When stocks have fallen heavily in price, for instance, this is routinely reported as, “More bad news for investors today . . . .” In fact, unless you plan to liquidate your portfolio that particular day, it is unlikely to be bad news at all.

The media could just as easily say, “Stocks went on sale today, as falling prices offered investors higher expected returns . . . .” If you are a long-term investor, the key issue is how your portfolio performs from now on, not what happened yesterday.

Investing is, and should be, about the future, not the past. Since the future is unknown, we should strive to manage the uncertainty by diversifying across stocks, sectors, asset classes and countries. While diversification does not eliminate the risk of market loss, to do otherwise is to take unnecessary risk.

The financial media errs also when it assumes the future is the same for everyone. In reality, our futures diverge depending on our age, family circumstances, jobs, incomes and other factors. Individual concerns vary widely from paying education costs to caring for aging parents to changing careers.

Just as financial objectives are different, so too the investment strategies for each of us vary. Some will want a strategy that delivers regular income; others will be more focused on capital growth. Some will be risk takers, others risk-averse.

It should be evident that if the future looms differently for each of us, risk is not just one thing. It is not just the volatility of the market day to day or a simple statistical metric that can be measured. Risk can be felt differently depending on your age, your dependents, the industry you work in, the country you live in, the currency you consume in and your accumulated assets and liabilities.

This is why you should evaluate the uncertain future not just from the level of the overall market, but from your individual needs. That is the role of a qualified financial adviser: to help connect each individual’s circumstances and needs to their goals and to help the individual make sound financial decisions.

We cannot control the future. We may try to quantify risks, but risks can vary greatly depending on the individual. In any case, there are other uncertainties that cannot be analyzed in terms of mathematical probabilities.

One possible response to future uncertainty is to speculate on a single possible outcome. The risk in taking that approach, apart from getting it wrong, is that we can end up acting on stale news or paying a premium to take advantage of news that is already in the price of a given security.

Another response is to stay highly diversified and to use the information in market prices to stay focused on dimensions of expected return.

This latter response doesn’t require speculation, forecasts or second-guessing the market. It just requires an understanding of what we can and cannot control. So while we can’t control the future, we can control the structure of our portfolios, we can ensure we are broadly diversified, we can manage fees and taxes, and we can regularly rebalance to ensure the risk allocation stays within our chosen parameters.

The future is unknowable, and how it unfolds has differing implications for each of us, depending on our circumstances and needs. While we cannot prepare the future for our portfolios, we can still strive to prepare our portfolios for the future.

Mark Sievers, president of Epsilon Financial Group, is a certified financial planner with a master’s in business administration from the University of California, Berkeley. Contact him at mark@wealthmatters.com.

LEAVE A COMMENT

Discussion | No comments

The Daily Republic does not necessarily condone the comments here, nor does it review every post. Read our full policy

.

Solano News

 
Solano cheerleaders travel to NYC for holiday parade

By Susan Winlow | From Page: A1 | Gallery

Let’s honor veterans throughout year

By Mayrene Bates | From Page: A2

 
 
Suisun City Hall critic takes town to task over residential ‘junkyard’

By Ian Thompson | From Page: A3Comments are off for this post

 
Lawyers outline strategy in Fairfield homicide case

By Jess Sullivan | From Page: A3

 
NAACP chapter to conduct officer elections

By Susan Winlow | From Page: A4

 
 
Sport Chalet offers underwater photos with Santa

By Susan Hiland | From Page: B5

Nut Tree to donate vintage barn doors to ReStore

By Susan Winlow | From Page: B5

 
Weather for Nov. 20, 2014

By Daily Republic | From Page: B10

Fairfield police log: Nov. 18, 2014

By Susan Hiland | From Page: A10

 
Suisun City police log: Nov. 18, 2014

By Susan Hiland | From Page: A10, 5 Comments

.

US / World

Analyst: No ‘fiscal cliff’ when tax hikes end

By The Associated Press | From Page: A1

 
Tuition hikes tentatively approved in California

By The Associated Press | From Page: A1, 1 Comment

Police: Gunman killed after shooting at FSU

By The Associated Press | From Page: A1 | Gallery

 
Obama to announce immigration action Thursday

By The Associated Press | From Page: A1, 32 Comments

Cuban couple keeps rodents called hutias as pets

By The Associated Press | From Page: A2, 1 Comment

 
Self-driving cars: safer, but what of their morals

By The Associated Press | From Page: A4, 2 Comments

5 children in San Jose home with barricade man

By The Associated Press | From Page: A4

 
Berkeley OKs plan for gas-pump climate change labels

By The Associated Press | From Page: A4

First of 3 storms douses fields, delays flights

By The Associated Press | From Page: A4

 
Right-to-die advocate’s video out after death

By The Associated Press | From Page: A5, 4 Comments

Early statin use may give long-term heart benefits

By The Associated Press | From Page: A5

 
Health system reveals hospital gown to cover rears

By The Associated Press | From Page: A5, 1 Comment

Police: Man crawled into sunken car, saved baby

By The Associated Press | From Page: A5, 3 Comments

 
CDC chief drops worst-case Ebola estimate

By The Associated Press | From Page: A5

Vets’ moms to Congress: Boost suicide prevention

By The Associated Press | From Page: A5, 1 Comment

 
Buffalo area hit with epic snow – with more coming

By The Associated Press | From Page: A5, 1 Comment

US airstrike hits al-Qaida-held town in Syria

By The Associated Press | From Page: A6

 
Hotel charges couple for negative review of it

By The Associated Press | From Page: A6

New US ambassador has tough job in Moscow

By The Associated Press | From Page: A6

 
Military leader becomes Burkina Faso prime minster

By The Associated Press | From Page: A6, 1 Comment

CERN scientists discover 2 new subatomic particles

By The Associated Press | From Page: A6

 
Kerry in diplomatic overdrive on Iran nuclear deal

By The Associated Press | From Page: A6

N. Korea threatens to beef up military capability

By The Associated Press | From Page: A6

 
Colombian girl’s dad had her swallow cocaine caps

By The Associated Press | From Page: A6, 1 Comment

New Kurdish offensive targets Islamic State group

By The Associated Press | From Page: A6

 
.

Opinion

 
Gambling on Proposition 47

By Kelvin Wade | From Page: A7, 2 Comments

How and why the GOP won

By Jennifer Rubin | From Page: A7, 11 Comments

 
.

Living

Today in History: Nov. 20, 2014

By The Associated Press | From Page: A2

 
Community Calendar: Nov. 20, 2014

By Susan Hiland | From Page: A2

My lady’s mother doesn’t like me and wants me to move out

By Kathy Mitchell and Marcy Sugar | From Page: A9

 
Horoscopes: Nov. 20, 2014

By Holiday Mathis | From Page: A9

.

Entertainment

TVGrid

By Daily Republic Syndicated Content | From Page: B4

 
Library honoring Billy Joel with pop music prize

By The Associated Press | From Page: B4

Motown singer Jimmy Ruffin dies at age 78

By The Associated Press | From Page: B4

 
Multiple fractures for Bono in NY bicycle accident

By The Associated Press | From Page: B4

Auction of Presley items set for January

By The Associated Press | From Page: B4

 
.

Sports

 
Brooks apologizes to 49ers for harsh words

By The Associated Press | From Page: B1

Chiefs look to avoid letdown vs. winless Raiders

By The Associated Press | From Page: B1

 
Carrie, Rogers out for Raiders with injuries

By The Associated Press | From Page: B1

Butler and A’s finalize $30 million, 3-year deal

By The Associated Press | From Page: B1

 
Rudy Gay happy to be with Sacramento Kings

By The Associated Press | From Page: B2

Union, NFL at odds over personal conduct policy

By The Associated Press | From Page: B2

 
NBA suspends Hornets’ Jeffery Taylor 24 games

By The Associated Press | From Page: B2

Stanton signs record $325M deal at news conference

By The Associated Press | From Page: B2

 
Nothing settled going into LPGA Tour finale

By The Associated Press | From Page: B2

 
Collins, NBA’s 1st openly gay player, to retire

By The Associated Press | From Page: B2

NFL fines Lynch $50,000 for not speaking to media

By The Associated Press | From Page: B2

 
NASCAR’s Kurt Busch meets with investigators

By The Associated Press | From Page: B2

.

Business

Showdown looms between US gov’t, air bag maker

By The Associated Press | From Page: B5

 
Obama picks NTSB member as new auto safety chief

By The Associated Press | From Page: B5

JetBlue to add bag fees on cheapest tickets

By The Associated Press | From Page: B5, 1 Comment

 
US stocks drift lower after release of Fed minutes

By The Associated Press | From Page: B5

Automakers debut key models at L.A. Auto Show

By The Associated Press | From Page: B5

 
Yahoo replaces Google as Firefox’s default search

By The Associated Press | From Page: B5

.

Obituaries

.

Comics

Get Fuzzy

By Daily Republic Syndicated Content | From Page: A8

 
Baby Blues

By Daily Republic Syndicated Content | From Page: A8

Zits

By Daily Republic Syndicated Content | From Page: A8

 
Rose is Rose

By Daily Republic Syndicated Content | From Page: A8

Pickles

By Daily Republic Syndicated Content | From Page: A8

 
For Better or Worse

By Daily Republic Syndicated Content | From Page: A8

Blondie

By Daily Republic Syndicated Content | From Page: A8

 
Frank and Ernest

By Daily Republic Syndicated Content | From Page: A8

Peanuts

By Daily Republic Syndicated Content | From Page: A8

 
Baldo

By Daily Republic Syndicated Content | From Page: A8

Wizard of Id

By Daily Republic Syndicated Content | From Page: A8

 
Garfield

By Daily Republic Syndicated Content | From Page: A8

Sally Forth

By Daily Republic Syndicated Content | From Page: A8

 
B.C.

By Daily Republic Syndicated Content | From Page: A8

Dilbert

By Daily Republic Syndicated Content | From Page: A8

 
Beetle Bailey

By Daily Republic Syndicated Content | From Page: A8

Bridge

By Daily Republic Syndicated Content | From Page: A9

 
Word Sleuth

By Daily Republic Syndicated Content | From Page: A9

Sudoku

By Daily Republic Syndicated Content | From Page: A9

 
Crossword

By Daily Republic Syndicated Content | From Page: A9

Cryptoquote

By Daily Republic Syndicated Content | From Page: A9