Iris Wealth Advisory, A Registered Investment Advisor Firm
Two powerful factors that drive the business cycles and market volatility are fear and greed. Those are also the factors that affect the performance of your investments. It is practically impossible to avoid those factors.
Successful financial planning takes these factors into consideration and investments are placed in such a way that you could have a soft landing in the roughest of markets.
Your age to financial independence, risk tolerance, ability to manage cash flows will affect the performance of your investments over the long term.
It is for a company or an individual managing
Whether it is for a company or an individual managing cash flows, it is an important task that will determine the amount and type of risk that can be taken. If cash flows are not well managed, you will be forced to sell at an in opportune time making it difficult for you to recover the losses. Failure/loss is not fatal if proper risk management is in place and a long-term plan to manage cash flows in a viable way exists. Historically, markets have done well in the long term despite extreme short-term swings. It is imprudent to not use the long-term growth possible in capital markets due to the fear of volatility. Fear of the unknown can be over come by proper cash flow planning and not putting all eggs into one basket.
Periodical readjustment of your investments from one bucket to another (short term, medium term, long term) will help you over prolonged time periods as you can benefit from the compounding possible while managing risk. Seeking a return that is appropriate for the risk taken is an age-old technique in capital markets. Historically this method has worked over large time periods because of the exponential growth possible due to small changes in returns over prolonged periods of time.
It is a continuous process to study the markets and adjust your investments based on your customized preferences due to your risk tolerance and comfort level. A seasoned financial adviser that works with multiple investment managers will stay on top of analytics part of various short term, medium term and long-term investment strategies to seek risk adjusted alpha for you and customize the portfolio drawing from the experience and variety of multiple investment managers.
With compounding dramatic effects are possible
With compounding dramatic effects are possible, even with a small difference in performance attained consistently due to tax efficiency, multi asset strategy or multi bucket strategy. These effects will have a huge impact on your nest egg over time.
There are plenty of arguments and debate about which method is best. What works best is the method you chose based on evaluating all the options available and risk controls in place. With so much complexity involved, it is best to work with professionals whose interests are aligned with yours with a long term view.