Lauren Garner is Vice President of Demand Generation and Partnerships at Ascent Funding. With specialized finance and lending expertise, she focuses on financial management, strategic partnerships, improving financial literacy and fostering sustainable lending growth.
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In her own financial life, she follows the same expert advice she gives to her clients: develop an efficient, simple and sustainable strategy for choosing successful long-term investments.
To pursue long-term gains, she decides where to invest her money:
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Align your investments with your investment goals
Investing can serve a variety of purposes, depending on different stages of life and your financial goals. The first step is to ask yourself why you are investing and which investments are more likely to deliver the results you want.
“I start by making sure any investment aligns with my long-term financial goals, whether that be retirement savings, education funds or a down payment on real estate,” Garner said.
Spread your money out so you don’t lose it all at once
Smart investors avoid investing too much in one security, sector or stock to mitigate and spread out losses during market turmoil. This is the financial armor of diversification and the cardinal rule of taking risks to make money.
“We diversify our investments across different asset classes, including stocks, bonds and real estate, to manage risk and volatility,” Garner said.
Big rewards require big risks — how much can you tolerate?
Risk and return are one of the fundamental concepts of investing. Safe bets rarely yield spectacular returns. Depending on your age, goals, income, family situation and countless other personal, professional and financial factors, you should carry out a risk assessment before making any investment.
“I judge my own tolerance for risk,” Garner says. “When I’m younger, I’m willing to take on more risk to get a higher return, but as I get closer to retirement, I become more conservative.”
Do your homework as your teacher says.
When considering any investment, Garner never makes a decision before doing thorough, tedious but necessary research.
“I thoroughly research company financials, industry trends and analyst reports,” she says. “For mutual funds and ETFs, I evaluate the fund manager’s experience and track record.”
Perhaps most importantly, she always understands the hidden costs that can chip away at your long-term benefits until they take a big chunk out of your savings.
“Scrutinize expense ratios and other fees,” she says, “because they can eat into your earnings over time.”
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Watch for warning signs and act on them when you notice them
Narrowing down your list of future winners becomes much easier if you know what not to invest in, and for Garner, that includes pretty much anything that’s overly complicated.
“If I don’t understand it, I won’t invest in it,” she says.
Second, Garner knows there are no guaranteed returns, so he avoids anything that comes with promises he feels he can’t keep.
“If it sounds too good to be true, it probably isn’t,” she said.
Another red flag is a lack of transparency, and secrecy gets her fired. “Companies that don’t share information readily raise concerns.”
Hitting the “Buy” button is just the beginning — TLC for your portfolio lasts forever
Many people mistake “long-term investing” for “set it and forget it,” but ignoring it and letting yourself go into autopilot complacency is a recipe for failure. Without the work of ongoing portfolio analysis and maintenance, at least some of the effort you put into selecting the right investments will be wasted.
“I review my portfolio at least annually, but more frequently if market conditions change significantly,” Garner said.
She also regularly rebalances her investments to ensure they are within her desired ratios and percentages.
“We adjust our asset allocation periodically to maintain our desired risk levels,” she said.
The final step in Garner’s portfolio preservation protocol is year-end tax-loss harvesting, which allows her to abandon underperforming investments while minimizing her obligations to the IRS.
“I am strategically selling investments that are losing money to offset gains and reduce my tax burden,” she said.
Know when to switch
Long-term investing doesn’t necessarily mean buying and holding forever. Knowing how to choose long-term investments is a skill that will stay with you forever, even as your financial goals and life circumstances change.
“Major life events may require a shift in strategy,” Garner said.
One of the most obvious signs that it’s time for change is the presence of chronically underperforming employees.
“If your investments are consistently lagging behind their benchmarks and peers, it may be time to move on to something else,” she said.
Most commonly, investments change as you age, as you approach retirement and have less time to make up for lost investments. “As you get older, your tolerance for risk may change,” Garner says. “And that will require you to make adjustments to your portfolio.”
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This article originally appeared on GOBankingRates.com: I’m a Financial Expert: Here’s How I Choose Long-Term Investments
