Investments | Understand How Your Money is Invested | Florida Law Blog

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Understand How Your Money is Invested

Written by Jordan W. Jacob, Esq.

April 28, 2020
Ari and friends holds up a financial chart

If you already have one or more retirement or brokerage accounts, or just inherited any type of investment account from a deceased spouse or family member, now is the time to get connected to how your money is invested.

While you may rely on a broker or financial planner to handle your investment and retirement accounts, it is crucial to have your own understanding about what you are investing in and how your investments align with your plans for the future.

When you do not know what you have invested and do not make active choices about how your financial resources are being used, there will mostly likely be serious consequences.

Pro Tip: You are going to take a loss at some point if you have money invested in the stock market. However, you can avoid similar future losses with the right mindset and willingness to better understand your investments.

Consider the following story about my childhood friend’s grandmother, “Nan.”  After Nan died, her retirement and investment accounts went directly to her daughter (my friend’s mother), due to the estate planning that Nan had set up. No court intervention. No conflict. Great!

After inheriting the retirement and brokerage accounts, Nan’s daughter asked her close friend to advise her (he wasn’t a licensed or educated financial advisor) and ended up re-allocating her investments. She then paid minimal attention and just let them stay as they were for four more years.  Finally, after the recent events surrounding the coronavirus outbreak, and at my suggestion, my friend and her siblings convinced their mother to look at the accounts.

When the family looked into the brokerage account, they were mortified to find that the value had actually decreased over the years from around $250,000 to just $60,000!  Even though the investments should have been gaining with the bull market we had over the last three years, the money was not properly re-allocated with the changing markets after the grandmother died. Similarly, when the family took a look at the retirement account, they found a loss of over $25,000.

Nan’s daughter was mostly invested in high-growth exchange-traded funds (ETFs), which may have been the right choice when she was building her retirement fund, but is probably not be the right choice given that she retires next year and will need to start making withdrawals to replace her income. If Nan’s daughter does not get her money into safer investments now, her children (including my friend) could end up needing to support her for the rest of her life.

So, why am I sharing this story with you?

Because now is the time for you to get connected to your investments, even if they are handled through a broker or financial advisor. Now is the time to truly understand what you have and use it wisely.

Ari dives into a book to learn

Educate Yourself

If you or your parents have a retirement account, and you are not intimately connected to how your assets are being invested, it is time to get more involved.

Log in to your retirement account or pull your last statement and look. Many brokerages select investment funds for their clients’ portfolios based on rates of growth. They will offer investment options based on a few tiers of growth and risk, and very often you have no idea what your assets are actually invested in.

Labels like “slow-growth” or “conservative” or “high-growth” or “income” are not enough to tell you exactly where your money is invested. What you want to do now is look at your statement. Your statement should contain the names of the funds chosen for you and you can go from there to do your research. Look up each of the funds using any of the sites recommended by Money Crashers to see what you are investing in, and whether you understand these companies, believe in their future growth, and want to stay invested there.

If your investments are tied to an index, like the S&P, are you willing to keep betting on its growth? If not, now may be the time to make a shift. It is possible that you have some losses right now, so you will have to decide if you want to lock in and limit those losses (and potentially trade some future gains even) to get more connected to what you are investing in now.

Go through this process with your parents, too. The money they have invested in the stock market is part of your overall family wealth. If the money is not there to support them through their senior years, that financial responsibility will eventually fall to you and/or your siblings. Having these conversations with your parents now can be difficult, but it is important. If you need help with this, please let me know, and I can support you as you raise these issues with them.

Ari and a friend have a conversation of ideas

Do not just listen, understand what you are being told

If you have a broker you work with, call them now, and ask to get on a video conference. Then, have them help you review each investment, why it is been chosen, and whether there may be better or other options for you or your parents.

Here is the key: make sure you understand it, and do not hang up the phone until you do. If your broker is using words you do not understand, or jargon, keep asking questions until you do understand.

If you need a referral to an advisor or want me to sit down with you to help you look at what you have, contact me today.

With everything that is happening in the world—and with the volatility of the stock market and our current reality —knowing your options is vital to preserving the life and legacy your parents have worked to build. If you need help figuring out how to best preserve these assets, I am here and ready to support you.

This article and its author do not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk, including the possible loss of principal.

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