Colm Moore, managing director of Moore Wealth Management illustrates the importance of having sound investment strategies. With the new year right around the corner, millions of Americans will set resolutions to improve their financial wellbeing. He is a proponent of passive investing, which he says leads to the best returns at the lowest cost. Moore’s first piece of advice for potential investors is clear: prioritize paying off existing high-interest loans.
With so many unknowns in the economy right now, having that financial cushion has never been more important than it is today. Moore’s advice is to have enough reserves on hand to sustain your organization for three to six months. This acts as a safety net for you when life brings those unexpected moments. Jason Hollands, an investment expert at Evelyn Partners, deepens these observations and drives home the importance of mutual funds. He further elaborates on the different management styles tied to each of them.
The Advantages of Passive Investing
Colm Moore is a passionate evangelist for the merits of passive investing. This strategy involves less trading and is accompanied by lower active management fees. He states, “We believe in the merits of passive investing.” Plus, this strategy reduces expenses by 99 percent. It allows investors to benefit from long-term market movements, without the pressure of constant trading.
Moore goes on to describe how eliminating profiting from trading and transaction costs can have a radical impact on total returns. He challenges investors to look beyond short-term volatility and invest in sustainable, long-term growth. As he succinctly puts it, “The best days always follow the worst days.” This philosophy is the reason why it’s so important to remain invested during market corrections and bear markets as opposed to allowing fear to take over.
“Taking trading and transaction costs out of the equation can have a big impact on what your return is going to be.” – Colm Moore, managing director of Moore Wealth Management.
Additionally, Moore warns that the biggest blunder is pulling out investments during economic downturns. He cautions that these efforts usually result in municipalities foregoing their share of the recovery that always comes after busts. “It is always about time in the market rather than timing the market,” he asserts, reinforcing the value of a long-term perspective.
Understanding Mutual Funds and Active Management
Jason Hollands gives some excellent background and perspective on mutual funds, which are professionally run investment vehicles designed to earn the highest return on investment. This method is known as active management. Hollands agrees it can be beneficial, but says for newcomers it’s important to go into these investments with their eyes open.
He explains, “One really big mistake a lot of beginners make is that they read about a particular area, it’s exciting … and they can very quickly race down the route of buying a fund before thinking about whether it is sensible for them.” This powerful sentiment only adds to the imperative of completing due diligence and adopting a strategy before making investments.
Given current market volatility, Hollands strongly advocates for taking a medium to long-term view when investing. He argues that the time horizon for making such investments shouldn’t be dictated by short-term budgetary requirements. “The last thing you want to do is put your money in and, along comes a difficult year, and suddenly you lose 20% of your money at the very point you need to use it,” he cautions.
The Importance of Diversification
Similarly, both Moore and Hollands highlight the importance of diversifying an investment portfolio. This is a time-tested approach designed to limit risk. By avoiding the trap of putting all their eggs in one basket, investors can more effectively ride the peaks and valleys of the market. Moore stresses diversification’s ability to reduce losses in times of downturns and increasing overall stability.
Moore encourages investors to keep a level head in uncertainty. He stresses the importance of having a diversified portfolio to provide calm in a storm. This is simply because investors panic less when they feel protected by diversification within multiple market sectors and asset classes.
Hollands agrees with this point, emphasizing the need for robust planning when making decisions about where to invest. Investors should consider their financial goals, risk tolerance, and time horizon before committing capital to ensure alignment with their overall financial strategy.
“Investing truly is something that needs to be medium to long term in nature because prices fluctuate.” – Jason Hollands, investment expert at Evelyn Partners.
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