Investing for Your Financial Independence

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Certified Financial Planner Board of Standards, Inc.

Jul 17, 2012, 10:00 ET

Consumer Advocate Offers Advice for Financially Sound and Pragmatic Investing

WASHINGTON, July 17, 2012 /PRNewswire-USNewswire/ -- Financial insecurity has reached record levels as more Americans sacrifice long-term financial goals to pay for today's necessities. According to Certified Financial Planner Board of Standards, Inc. Consumer Advocate Eleanor Blayney, CFP®, consumers can reclaim their long-term financial security by following a smart, pragmatic approach to investing.

"Today many Americans lack the financial resources to exercise a full range of choice over how they live," says Blayney. "Aspirations of owning a home, providing for a family, and retiring comfortably are being hampered by today's financial necessities. By prudently investing now, one can open up the future to the possibilities the American Dream promises."

Creating an investment strategy as part of a financial plan is one of the 12 steps in CFP Board's year-long "12 for '12 Approach to Financial Confidence." Blayney recommends that consumers consider six key points when making an investment plan.

Invest in what you understand: Venturing into unfamiliar investment areas or exotic, complicated derivatives can be a prescription for failure. Start simple by creating cash reserves first for tomorrow's needs. As you become a more experienced investor with a larger portfolio and your time horizon gets longer, you can then add more complex and risky investments.
Be prepared for losses: Losses are a necessary part of investing: without some downside, there can be no upside and, therefore, no possibility of creating a better future. For example, when you play it safe by choosing only cash or fixed income investments and avoid equities, you lose to inflation and diminished wealth in the long-term.
"Not enough" is no excuse. Start now. Start anyway: The time to invest is now. Even if it's only a small amount, every dollar put towards meeting your future needs helps. Start small by looking at what you're spending your money on every day and cutting out one or two small expenses. Take the money you save and start investing. The earlier you begin, the less you need to invest to meet any given future goal. (This is due to the power of compound interest. For an even more powerful device, put that compound interest into a tax-deferred investment vehicle).
Build flexibility into your investment plan: The future is inherently uncertain, so it's important to hedge your bets and position your investments with a variety of economic possibilities in mind. Whether interest rates move up or down, the Eurozone disbands, or the Republicans take the Senate in November, there should be enough diversification in your portfolio so that some of your investments come out ahead.
Don't simply follow the leaders: Yesterday's successful strategy usually becomes today's loser. Investing in the latest hot sector or stock (think Facebook), just because everyone else is, is a bit like following others straight into enemy fire. It's a good way to lose big. Be a contrarian investor – it pays to think differently from what everyone else is doing.
Ask for outside help: Consumers can use the steady hand of experienced professionals – those who by training and experience can look through the fear and greed that often hinders people when making decisions about money – to plan their investments. Look for a CFP® professional to help you with an investment plan, as well as to assist you with the ongoing management and assessment of your investments.

"Investing involves first looking at the financial realities of today – at one's cash flow, debt, and exposure to risk and then considering the possibilities for the future: a secure and healthy retirement, education for children, and a satisfying legacy for family and community," says Blayney. "The critical planning link between the two, between today's facts and tomorrow's goals, is investing. Let a CFP® professional help you invest for the future you aspire to achieve."

12 for '12 APPROACH TO FINANCIAL CONFIDENCE

In January, CFP Board launched a new initiative called "12 for '12 Approach to Financial Confidence" where all the components and steps for successful personal financial management are presented, one each month throughout the year including: establishing realistic goals, tax planning, emergency and risk management, investing, retirement, debt management, and estate planning.

ABOUT CFP BOARD
The mission of Certified Financial Planner Board of Standards, Inc. is to benefit the public by granting the CFP® certification and upholding it as the recognized standard of excellence for competent and ethical personal financial planning. The Board of Directors, in furthering CFP Board's mission, acts on behalf of the public, CFP® professionals and other stakeholders. CFP Board owns the certification marks CFP®, Certified Financial Planner™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements. CFP Board currently authorizes more than 66,000 individuals to use these marks in the U.S.

SOURCE Certified Financial Planner Board of Standards, Inc.