Keeping Your Resolve

Stay the course
in 2006.

As I write this, it looks as if the Standard & Poor’s 500 Stock Index will finish 2005 up by around 5 percent; the bond market has had an even less productive year. Heading into 2006, you could be thinking of seeking higher returns by taking bigger risks—perhaps greater than would be appropriate.

Even if you aren’t among those who normally make New Year’s resolutions—and keep them—this may be a time when it’s even more important to stay the course and live prudently. With that in mind, the following resolutions may be helpful as we sail into 2006.

The Rules

Allocate your assets among bonds, stocks, money market instruments, and funds in proportions that reflect the amount of risk necessary to achieve your goals, rather than just because you are at a certain age or spending level. All-purpose model portfolios’ asset allocations may indicate how various investment strategists feel about the near-term attractiveness of stocks and bonds, but they have nothing to do with your particular investment goals and risk tolerance.

Have realistic expectations. The years of exceptional annual returns for stocks, on the average, appear to be a memory now. Annual returns below the long-term average of about 10 percent seem more likely in the foreseeable future.

Keep your eye on the long term. Stocks and bonds—and the funds that own them—are long-term investments, requiring patience and the ability to ride out market volatility. If you keep in mind that you’re going to hold your investments for the next twenty years, you won’t be so tempted to check their performance on the Internet every twenty minutes.

Maximize your net returns by holding down (a) excessive commissions when buying or selling individual securities and (b) excessive expenses when investing in mutual funds. Recent research in the Journal of Financial Planning reiterates that funds with low turnover and long-term capital gains belong in taxable accounts; funds with large amounts of short-term gains distributions should be placed in retirement accounts, such as IRAs, 401(k)s, or other tax-deferred accounts.

When investing for income, resist the temptation of chasing high yields. Higher yields are generally associated with higher risk, and with some investments, what appears to be yield may actually be a return of capital.

Don’t forget bond funds. Tax-exempt state or local government bonds or municipal bond funds, whose yields are usually lower than those of taxable issues of comparable credit quality and maturity, may pay you more than you’d have left after taxes when investing in the comparable taxable securities.

Accept that there is no shortcut when it comes to selecting mutual funds or other securities . Data indicating superior past performance don’t assure you of superior future performance. Neither do the five-star ratings for risk-adjusted performance calculated by Morningstar, Value Line, and the other rating agencies. Whether you make them or an adviser makes them for you, all investments—funds, stocks, bonds, everything—have to be studied to determine their suitability.

You’re Not in it Alone

Let us help you keep your New Year’s resolutions in mind through the year.

There’s no doubt about it, taking care of your financial well-being is hard work, as hard as that vow to take fifteen pounds off this year. That’s where a wealth manager comes in, someone who is pledged to oversee your fiscal health and keep you on the right track—to keep those resolutions foremost in his mind, throughout the year.

That’s the role we play here at Bernhardt Wealth Management. We can help your finances stay on the straight and narrow, for 2006 and beyond. For more information on what we can do for you, contact Bernhardt Wealth Management at or give us a call at (703) 356-4380. You can also email me directly at

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