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The Winchester Mystery House in San Jose, California was built without an architect or any plans over the lifetime of its owner, Sarah Winchester. The result included stairs that lead to the ceiling, and a doorway that opens to a two-story drop! The overall effect is quite eerie, and investing without a plan may result in similar mishaps.

First, it is important to build on a solid foundation. Prior to renovating my grandmother’s house, the grandfather clock in the corner of the kitchen always had a slight lean to it. As we removed the linoleum, we discovered the floorboards were rotted from water damage. It would not have taken much for the floor to simply collapse. An emergency fund provides the foundation for a good financial plan. It helps you weather the unexpected storms of life. We recommend a minimum of 3-6 months expenses set aside in a savings or money market account.

After your emergency fund is established, it is important to determine your reason for investing. The Cambridge Dictionary says to “invest” is “to put money or effort into something to make a profit or achieve a result”. So, you must have a goal in mind. Do you want a comfortable retirement? Do you want to provide college tuition for your children? Do you want to have a second home on the lake/beach/mountains? A structure is built with a purpose in mind (for example, a home or an office), and investing should also be done with intent.

Once the goal has been decided, your timeframe must be considered. The number to remember is “five”. Will your funds be needed to meet your goal in less than five years? If the answer is yes, consider saving the necessary dollars in an interest-bearing account rather than investing. The volatility of the stock market and any potential losses would have a significant impact on meeting a near-term goal. If the funds are not needed for more than five years, you may consider investing since you have a longer time to ride out any market downturns.

Referencing our building analogy again, two people may both decide to build a home, but how that is achieved and the end result will look different because each individual is unique. Investing is no different. Your investment portfolio should be constructed with both your risk capacity (the amount of risk you must take to meet your goal) and risk tolerance (the amount of risk that allows you to sleep at night) in mind.
At Bridgeworth, we believe “One-Size-Fits-None”. Once you have decided that investing may be right for you, the flowchart above may help, your Bridgeworth advisor can assist in constructing a portfolio that matches your individual goal-, timeframe, and risk preferences, and will help to give you peace of mind that the end-result will not be reached haphazardly, but with a well-thought plan.

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The information and material presented in this commentary are for general information only and do not specifically address individual investment objectives, financial situations or the particular needs of any specific person who may receive this commentary. Investing in any security or investment strategies discussed herein may not be suitable for you, and you may want to consult a financial advisor. Nothing in this material constitutes individual investment, legal or tax advice. Investments involve risk and an investor may incur either profits or losses. Past performance should not be taken as an indication or guarantee of future performance.

Investing in stock includes numerous specific risks including the fluctuation of dividend, loss of principal, and potential liquidity of the investment in a falling market.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio.  Diversification does not ensure against market risk.

Bridgeworth is now a part of Savant Wealth Management as of 11/30/2023. Savant Wealth Management (“Savant”) is an SEC registered investment adviser headquartered in Rockford, Illinois.