Ben DeHaan is the President of Lighthouse Financial Planners, a fee only investment firm in Buckhead Atlanta. He is also the Chief Investment Officer of DeHaan and Co. Financial Partners, Inc. DeHaan caught up with us recently to share some of the insight he’ll be sharing as a speaker for our How to Invest in 2010 event.
Q: What are some of the top mistakes you see investors making, and what advice do you give on how to avoid these mistakes?
A: A lot of times people just don’t complete the financial plans that their financial planners tell them to complete. The other issue which is a close second is that people don’t have a strategic plan on how to get out of the market. Some have a buy and hold strategy but we advise clients to put a bottom line limit on their portfolios of when to get out. We’re trying to get people to take a 5 to 10 percent loss rather than riding down to a 30 percent loss.
Q: Can you talk about how people at different stages of their life should be evaluating potential investments for risk level?
A: I would say probably between the ages of 20 to 30 years old, what we call the pre-accumulation phase, that more risk is easier to take because the time horizon is so long. Once you go into the heavy spending phase, from 30 to 60 years old, during that time we would advocate people have a little less risk and put a tremendous amount of at least a year’s worth of cash in CDs or money market accounts and then after either in stocks or mutual funds. Save first and grow second.
Q: What’s the best investment for educations savings right now? 529? Gift to Minor? Other option?
My opinion is the Roth IRA, but it depends on how much money a person wants to contribute. With a Roth, you can access the money the same way for educational accounts, tax-deferred. If you don’t use the Roth you can keep it and use it for retirement. The child would have to declare it on the Free Application for Federal Student Aid whenever they apply for college, but since it’s titled as a retirement account, the Roth doesn’t hurt chances for aid as much as a specific education fund would like a 529 would.