09-27-2018 Columns

Understanding risk tolerance is essential for investment success To succeed as an investor, you might think you need to know about the economy, interest rates and the fundamentals of companies in which you’d like to invest. And all these things are indeed important. But it’s most essential to know yourself. Specifically, you need to know how much risk you are willing to tolerate to achieve your goals. Of course, you’ve lived with yourself your entire life, so you probably have a pretty good idea of your likes and dislikes and what makes you comfortable or uncomfortable. But investing can be a different story. Initially, you may believe you have a high tolerance for risk, but if the financial markets drop sharply, and you see that you’ve sustained some sizable losses (at least on paper – you haven’t really “lost” anything until you sell investments for less than what you paid for them), how will you feel? If you find yourself constantly fretting over these losses, perhaps even losing sleep over them, you might realize your risk tolerance is not as high as you thought. In this case, you may need to scale back the part of your portfolio devoted to growth in favor of a more balanced approach. On the other hand, if you believe yourself to have a low risk tolerance, and you start off investing in a conservative manner, you may indeed minimize short-term losses – but you also might find yourself frustrated over the slow growth of your portfolio. So you may decide that being highly risk-averse carries its own risk – the risk of not making enough progress to achieve your long-term financial goals. To reduce this risk, you may need to tilt your portfolio somewhat toward more growth opportunities. In short, you may have to invest for a while before you truly understand your response to risk. But even then, don’t get too locked in to one approach – because your risk tolerance may evolve over time. When you are first starting out in your career, and for many years after, you are probably investing primarily to accumulate assets for retirement. Consequently, you may need to include a relatively high proportion of growth-oriented vehicles, such as stocks, in your portfolio. While stock prices will always fluctuate, you will have many years, perhaps decades, to overcome short-term losses, so you can possibly afford to take on a greater risk level in exchange for the potentially higher returns offered by stocks and stock-based investments. However, things can change once you reach retirement. At this stage of your life, your overall investment focus may shift from accumulation to income. This means you will need to start selling some investments to boost your cash flow – and you won’t want to sell when prices are down. (Remember the first rule of investing: “Buy low and sell high.”) To help avoid these “fire sales,” you may want to adjust your investment mix by adding more income-producing vehicles and reducing your holdings in growth-oriented ones. By doing so, you will be lowering your overall risk level. Keep in mind, though, that even in retirement, you will need some exposure to growth investments to help you stay ahead of inflation. Become familiar with your own risk tolerance – it can play a big role in your investment decisions. This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

September is National Life Insurance Awareness Month September is National Life Insurance Awareness Month and a great time to reflect on the importance of an industry most of us spend very little time ever thinking about. Taking a few simple steps to protect our loved ones in the event of a tragedy can make all the difference, but did you know the life insurance industry is also a critical component of Michigan’s economy? Life insurers generate roughly 44,000 Michigan jobs, and invest approximately $133 billion in our state’s economy. That investment helps fund and finance small businesses, new jobs, and critical services statewide. It even provides $4 billion in mortgage loans on farm, residential, and commercial properties in Michigan, helping state residents find places to live, plant, work, and grow our economy! Of course, when most of us think of life insurance, we think of the more direct benefits it provides families during the most difficult times life can throw at us. On that count, life insurers put $14 billion each year into the hands of Michigan beneficiaries. Here in Michigan, life insurers are regulated by the Department of Insurance and Financial Services. The Department has launched the Life Insurance Annuity Search Service, or LIAS, and announced just last month that it’s helped connect Michiganders with more than $6 million in benefits they did not know they were eligible to receive. It can be intimidating putting your family’s financial affairs in order, but it’s a journey worth undertaking. Please feel free to reach out to my office at 517-373-1403 or by emailing kimlasata@house.mi.gov if you have any questions about this important industry, or state services and consumer protections put in place to make sure it works best for you!

Childhood Cancer Month Last Tuesday, I had the great opportunity to host a roundtable with Cancer Families United. September is Childhood Cancer Month and this timely roundtable gave us the chance to discuss the progress we’ve made in the last number of years on helping families struggling with this painful diagnoses. Just this year, we saw Childhood Cancer STAR Act signed into law. This bipartisan bill authorizes millions in grants to support the National Childhood Cancer Registry and bolster research and treatment efforts for pediatric cancer. This followed on the heels of my 21st Century Cures Act becoming law. Cures provides billions in funding for innovative health care research and safely speeds up the approvals for potential life-saving drugs and devices. More work remains but we’re making progress each and every day. To learn more about this and other important legislative issues, please visit my website: upton.house.gov or call my offices in Kalamazoo (269-385-0039), St. Joseph/Benton Harbor (269-982-1986), or Washington, D.C. (202-225-3761).

Keeping teens off drugs Thousands of children and young adults have returned to school or college this fall which sometimes leaves parents to wonder if their child will be pressured into using alcohol or other drugs. Unfortunately, research shows that it is likely that your child will be exposed to illicit drugs and alcohol between the ages of 12 -17, but that doesn’t mean they will use them. Parents play a crucial role in their child’s decision not to use drugs and they are the most important influence in their kids’ lives. Two-thirds of youth ages 12-17 say losing their parents’ respect and pride is one of the main reasons they do not smoke, drink or use drugs. There is no single warning sign for teen drug use, but some possible signs include: changes in friends, declining grades, increased secrecy, increased use of incense, room deodorant, or perfume, changes in conversations with friends (using coded language), change in clothing choices, increase in borrowing money, evidence of drug paraphernalia such as pipes, rolling papers, etc., evidence of use of inhalant products, such as hairspray, nail polish, correction fluid, common household products, and missing prescription drugs – especially narcotics and mood stabilizers. Keeping the lines of communication open, being informed and setting guidelines are some of the best forms of prevention available. Engaging your child in discussions about friends, activities, classes, etc. is very important as is being able to listen to what they are saying without being critical or judgmental. For more information, call the Health Department at (269) 926-7121 or visit www.bchdmi.org.