You can use an Internet search engine to find numerous resources for helping students and adults learn about financial literacy (FinLit).  One FinLit definition comes from Investopedia – “it is the education and understanding of various financial areas, including topics related to money, investing and personal finance.”

With this knowledge the individual now has a skill set where they can make informed choices with their financial assets.

As mentioned above, personal financial planning is a component of FinLit.  What do you do to determine your financial goals and put a roadmap in place to reach those financial goals? How do we make effective decisions with our financial assets?

One of my goals in my practice is to educate my clients. I know we cover various topics in our meetings and telephone conversations, but I’ve learned that some people feel uncomfortable about asking questions they perceive as too simple. Don’t we all?

From my standpoint, there isn’t a question that should go unasked. I want you to be comfortable with what we recommend.  I appreciate the opportunity to assist in achieving your financial goals and want to answer whatever questions arise.

Below are some details on the type of investment vehicles we talk about and use in developing the investment portfolio for a client’s account.

Many investors are familiar with the terms, stocks and bonds.  Stocks are a way to embody a form of ownership in a publicly-traded corporation and a claim on part of the corporation’s earnings and assets.  Many corporations pay dividends, providing the investor with an income stream.  Bonds come in many flavors from numerous entities (government, corporate, etc.).  The purchase of a bond is the investor lending that entity money with the objective to receive interest from that entity.  The frequency of interest payments can vary based on the type of bond it is.  Both of these types of investments have risks and the value can rise and fall.  With stocks and bonds there’s a risk that the company flounders and the investment goes to zero.

This leads to a brief conversation on diversification of assets. The saying, “don’t put all your eggs in one basket” certainly applies here.  This method doesn’t eliminate risk, but can help spread out chance of a large number of holdings taking a market drop at the same time.  When working with a client I evaluate the different holdings that I oversee, along with considering the taxable and tax-qualified accounts, such as 401(k) and IRAs, with which I may not have direct dealings. This way I can gauge the overall portfolio’s asset variety and taxation implications.

Some of the vehicles which help with diversification are mutual funds and exchange-traded funds (ETF).  There are numerous mutual funds to choose from in addition to management styles of the mutual fund.  You’ve probably heard or read about Passive and Active management of mutual funds.  I believe there can be a time and place for both, so we can discuss the pros and cons as the opportunity presents itself.

Lately, ETFs are becoming quite popular. Many have very low expenses and allow you to rapidly diversify.  Some are designed to mimic broad areas of the market, such as the S&P 500 Index. Others mirror an index that’s industry-specific, such as banking, health care, energy, or housing.

Again, these securities can rise or fall in value.

There are many other types of investment products on the market, such as real estate investment trusts (REITs), oil and gas programs and privately-traded investments.  These have targeted use and may not work for every portfolio.  Additionally, financial planning topics I discuss with many clients involve life insurance, disability income, and charitable giving.  Many of these involve working with other professional advisors (CPAs, Attorneys, etc.) to coordinate the implementation in the overall plan.  I’ll be happy to answer any questions you have on these subjects.

Every situation is different, but key financial principles lead us as we develop your roadmap together.  As I’m sure you’re aware, financial literacy is important for us in achieving our goals and dreams.  I’m here to help in that endeavor.