INSIDE FINANCE
Risky(?) Business

By Robert M. Jaffe, MBA, AAMS
November 4, 2005

Just as the recent Halloween celebration offered up "tricks or treats", so do the financial markets. October, traditionally a down market month, proved once again that history repeats itself. The Dow lost 1.19% for the month, and both the NASDAQ and S&P 500 followed suit with negative 1.46% and 1.80% respectively. All three major indices, as of this writing, are in negative territory year-to-date (The Wall Street Journal, 11/03/05).

In my last column, "Youth Must Be Served", 10/28/05, I discussed risk- taking and my belief that, as a general rule, younger investors with time on their side can afford to take greater risks than investors close to retirement. By the same token, much depends upon an individual's tolerance for risk (and their bank accounts). I serve clients in their 70's who are comfortable being invested entirely in equities and much younger ones who sleep more soundly hoping they can cushion volatility in their portfolios by including fixed income securities.

In essence, risk means that more things can happen than necessarily will happen. The consequences of being wrong can be devastating. Take, for example, the billions that were lost as the technology bubble burst in April, 2000. Cliché - "Don't put all your eggs in one basket." Our clients were protected to a great degree because our firm did not jump on the bandwagon, but held to our philosophy of broad diversification.

There are innumerable investment opportunities available to allow you to diversify your holdings. Don't be content with owning only that with which you're comfortable. Speak with your financial advisor about alternative investments such as Emerging Markets, equities and debt, REITS (real estate investment trusts), gold, perhaps even hedge funds. The old saw of risk/reward holds true. Any investment in the financial markets involves a certain measure of risk. The key is to be paid for taking that risk. By diversifying your investments keyed to both your time horizon and level of risk tolerance, over time, you should be able to achieve your objectives through a program designed to produce the highest return with the least amount of risk for that desired return.

In a future column I will address various approaches, as I state in my ad in this journal, to "help you achieve the investment goals you value most, while avoiding any unnecessary financial risks." The main thing to keep in mind is that a well conceived investment strategy is one that will let you sleep at night and wake up with your portfolio working for you.

Please Email bob@cfsias.com with your questions.

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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.