One of the most pressing issues in the fight against elder abuse is financial exploitation of seniors. It can start something like this: You’re 72 years old; you’ve planned your retirement a certain way; and that plan isn’t taking hold as envisioned- maybe your granddaughter needed emergency surgery that you contributed to; your 401k tanked with the bust of the internet or housing markets; or a flailing economy got the better of your twilight years. It can happen to anyone.
But have no fear! You’ve just been approached with an investment opportunity by a [sometimes trusted] financial advisor that can change everything!!
Well, you’re right about one thing… it can change everything- and probably will…just not for the better.
The scenario just described is happening to seniors at alarming rates. Across the country seniors are realizing their nest egg isn’t carrying them as far as they would like, nor will it provide inheritance for their children and grandchildren- making them ripe for abuse. It’s easy in that situation to think one investment or an advisor’s advice can get you out of your hole and into a comfortable retirement. Not so fast.
The most important aspect of portfolio management is asset allocation. In 1990, The Nobel Memorial Prize in Economic Sciences was awarded to an economist who discovered that over 90% of a portfolio’s performance is based on choosing the correct proportions of various assets rather than stock picking or market timing, which in turn minimizes risk and maximizes returns most effectively; a theory known today as Modern Portfolio Theory (MPT).
Over the years many people have thought that an age to bond ratio; i.e., your age mirrors the percentage of bonds your portfolio holds- is an appropriate measure to determine whether a portfolio’s assets are properly allocated under the MPT. For example, if you are 80 years old then your portfolio should reflect an 80% bond allocation. If you realize your current asset allocation doesn’t reflect an age:bond ratio, and you’re in or entering retirement, you’re at risk.
The point to remember is that if you feel your savings is inadequate to provide the lifestyle you desire, or the inheritance you anticipated, then take extreme caution before making ANY type of investment. Advice from a fee-for-services financial advisor regarding an investment and/or your portfolio’s allocation is preferable, as those individuals are not in the business of selling financial products.
At the end of the day- that investment opportunity you thought could change everything may not only do just that- it could leave you in ruins.
For any questions or inquiries please visit aidikofflaw.com or call (800) 981-5932.
Jeff Aidikoff is an elder abuse attorney in Beverly Hills, CA. He can be reached at (800) 981-5932 or [email protected]