INSIDE FINANCE:
Time For A Check Up


By Robert M. Jaffe, MBA, AAMS
January 24, 2005

You visit your doctor for an annual physical. You bring the car in for periodic maintenance. What about your investments? Are they on automatic pilot or do you pore over them and fret every time the financial "noisemakers" appear on television? Neither is a very good idea. But as the New Year begins, it's time for a financial checkup. So take a hard look at your year-end investment statements and review them with these six questions in mind.

1. How did my portfolio perform last year?
2. Did it compare favorably to the appropriate benchmarks (indices)?
3. Have there been any changes in my life that would require changes in strategy?
4. Am I on track to meet the goals I have set for my family and myself?
5. What can I afford to invest this year and is it enough to attain my objectives?
6. Is my portfolio still in synch with my original Investment Policy Statement?

These are pretty basic questions, but the answers will give you a sense of what steps you may need to take if you're not on track, and if you are, then you'll sleep soundly. Here are some thoughts to ponder in answering these questions.

1. One year's performance is meaningful, but the long-term is what counts. Take, for example, April 2000-March 2003, a dismal market. Yet, placed in the context of 10 years - 1995-2004, and it's a very different story. Your time horizon makes all the difference.

2. If your investments performed in line with their benchmarks, hopefully beating them, you're in clover. If they consistently under performed, better take a look at those mutual funds, stocks or bonds.

3. Was there a death in the family, divorce, heavy medical expenses, a new baby, college expenses you hadn't counted on? These kinds of life changes may indicate the need for changes in your strategy.

4. Goals, short and long-term…that's what investing should be all about. It's not a specific rate of return that you should seek, but simply, are your investments keeping you in "a comfort zone" to reach those goals?

5. This is a tough one, for if you aren't socking away enough to build for the future goals you have established, then you may either have to rethink the goals or reevaluate your current lifestyle in order to save more.

6. What's an Investment Policy Statement? Oops…if you don't have one there's a problem. Simply stated, an IPS is the basis for your investment strategy in terms of expected return, risk level, asset allocation and projected time horizon. Put down the newspaper and call your financial advisor now.

That's it for today. I trust these observations may be helpful in your planning and you'll pass your checkup with flying colors.

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INSIDE FINANCE will appear regularly, addressing financial matters of interest to our readers. Any questions? Email bob@cfsias.com

Registered Representative, Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member NASD/SIPC. Cambridge and CFS are not affiliated.

The preceding article is for informational purposes only and should not be used as the primary basis for an investment decision. Indices mentioned are unmanaged and cannot be invested into directly. Past performance does not guarantee future results. All examples given are hypothetical and do not reflect actual investments. The views expressed in this article are those of the author and are not necessarily those of Cambridge. Bob Jaffe is Managing Director of CFS Investment Advisory Services, LLC in Totowa and has been a Clifton resident since 1984. Active in community affairs, Bob is Past Board Chairman of the North Jersey Regional Chamber of Commerce and a member of its foundation board. He serves as a commissioner on the Clifton Rent Leveling Board and the Committee for Individuals with Disabilities. He is Vice President of the Clifton Rotary Club. Representatives of Cambridge do not offer tax or legal advice. Consult a professional for your personal situation.