By Douglas Goldstein, CFP®

The chance of actualizing your financial goals is greatly increased when you choose suitable investments. Depending on your objectives and time frame, some investment vehicles may be more appropriate than others.

To achieve long-term growth (i.e., funding your young children’s future education or your retirement), stocks or stock funds might be wise choices. Historically, stocks are the investment class that has increased in value. If your financial goal is far away, you have the time to weather any bumps or downturns the market might make, and still be able to reach your target. While the recent volatility in the market has scared away many investors, traditionally stocks were the investment vehicles with the highest returns. That being said, past performance is no guarantee of future returns.

In order to meet your short-term goals (i.e., going on vacation, preparing a simcha, or buying a large-ticket item), consider certificates of deposit in a bank (CDs) or money-market mutual funds. Often, these investments are considered suitable for people who will need their cash soon, as well as for those who require stability of principal.

If your goal is to earn investment income (to supplement other income), consider investing in bonds, preferred stocks, or bond mutual funds. Though interest rates may seem low these days compared to their historic norms, fixed-income investments are considered more predictable than shares, and can be especially appropriate investment vehicles for retirees.

To minimize taxes, consider investing in tax-advantaged investments. Work-related retirement accounts (such as bituach minahalim or an American IRA, if appropriate) serve to encourage investing by reducing or eliminating the tax bite out of your profits. Tax-deferred money can grow at a faster rate than would be possible if taxes were eating away at it. Though there are many conditions on these types of accounts, which you should review with a professional tax adviser, you will normally redeem these savings at retirement.

Having your funds allocated in the most suitable investment vehicles is not a guarantee that your fiscal goals will be met. But, boarding the proper vehicle is the first step towards reaching your destination. All roads may lead to Rome, but the journey is more pleasant by limousine than pedaling uphill on an old bicycle.

Douglas Goldstein, CFP®, is the director of Profile Investment Services. He is a licensed financial professional both in the U.S. and Israel. He offers securities through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, NFA, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company. His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered at: www.profile-financial.com (02) 624-2788 or (03) 524-0942.

By Douglas Goldstein, CFP®

While not losing money on an investment seems like a good plan, making money on an investment is even better. But how do you know whether your return is a good one, or if you could do better elsewhere? The definition of a “good return” varies, depending on the purpose and type of the investment. Figuring out your return is not as simple as one might assume.

For example, if you begin with a $1000 investment that grows to $2000, your return is $1000, or 100%. However, if your investment grows to $1500, your return is only 50%. Yet, you cannot compare the above two investments and declare that the first one is better. This is because you need to keep in mind the length of time you held each investment. When comparing returns on investments held for different lengths of time, you need to determine the annualized return. If you purchased stock A for $15 and sold it for $20, your rate of return would differ significantly depending on how long you owned the stock. If you only owned it for one year, stock A can be considered a winner, returning 33% annually. However, if stock A sat in your portfolio for five years, its return would be considered a more modest 6%, since the profit is spread out over a five-year period.

Growth + Dividends
The total return on a stock is the sum of its dividends plus how much you would gain/lose if it were sold. Some stocks may pay high dividends (normally paid on a quarterly basis), but the principal hardly changes. Others may be the opposite. In any event, though, you must look at both the price change and the dividend to determine whether you did well.

Buying a stock is not like purchasing an item in a store: you can’t get your money back if you don’t like its performance. Therefore, before purchasing a stock (or any financial instrument), research it thoroughly and make sure that what you buy is appropriate.

Douglas Goldstein, CFP®, is the director of Profile Investment Services. He is a licensed financial professional both in the U.S. and Israel. He offers securities through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, NFA, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company. His book, Building Wealth in Israel, is available in bookstores, on the web, or can be ordered at: www.profile-financial.com (02) 624-2788 or (03) 524-0942.

By Douglas Goldstein, CFP®

Do you think all your financial woes will disappear when you retire because you have a pension? If so, you need to pay better attention to your annual pension reports. This is because your anticipated pension is only a fraction of your current income. If you are having a hard time making ends meet on your current salary, imagine how much more difficult it may be on a fixed salary that may be significantly smaller than today’s paycheck.

Don’t assume that bituach leumi will make it all better. While it is nice to get a guaranteed pension from the government, the amount rarely spells the difference between starvation and chicken for dinner. Bituach leumi payments should be considered as a supplement to your pension, not as the backbone of your retirement income. While the government payout increases the longer you’ve been in the workforce, typically the incremental differences don’t make a vast difference in cash flow.

Another reason why you can’t necessarily count on your pension to provide all of your retirement needs is that your anticipated pension assumes you’ll stay at your current job from now until retirement. That’s a long time, and who can predict your boss’ mood or the economy’s health. If you lose your job and you have an extended job search, your payments to your pension fund will stop, and your future pension payments will be lowered, due to less money coming into the fund. Also consider what would happen if your health forces you to retire earlier than expected and disability payments aren’t forthcoming? This, too, might affect your pension’s size at retirement.

While planning is important, one of the basic assumptions of a long-term plan is that it must be flexible enough to allow for the unexpected. A good plan takes into account the possibility that things won’t follow your expectations. Having an emergency fund that has three to six months’ worth of living expenses is prudent because it limits the negative impact emergency bills have on your budget and financial plan as a whole. A quality financial plan helps you meet your goals and deal with any bumps along the way with a steady hand and full wallet.

Douglas Goldstein, CFP®, is the director of Profile Investment Services. He is a licensed financial professional both in the U.S. and Israel. He offers securities through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, NFA, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company. His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered at: www.profile-financial.com (02) 624-2788 or (03) 524-0942.