We know how important it is to save for retirement, but at the same time, it’s important to enjoy life now. In this episode, we’ll walk you through how to set up a framework for your investment strategy.
Short Youtube Recap: https://youtu.be/LRcH7hwbUYY
You’ll learn how important your behavior is to your investment success, how to think through your asset allocation choices and finally how to select the investments themselves.
What is your investment approach? How you make decisions with your investments can make or break your investment success. You may think that your returns are solely based upon which investments you choose, but the reality is that your investment behavior figures into your returns much more than any specific investment that you choose.
Think about last March. What was your reaction to that volatile market? Did you buy, sell, or do nothing? Even though it’s challenging to know how to react in those moments, in a volatile market every move you make counts.
The dominant determinant of long-term, real-life financial outcomes isn’t investment performance; it’s investor behavior. –Around The Year with Nick Murray
The second driver to success in investing is your asset allocation. Asset allocation is simply the measure of how your portfolio is dispersed. How much do you have invested in stock and bonds? What percentage of your stocks are US-based? What percentage are international? Asset allocation also takes into account whether your stocks are large-cap, small-cap, etc. Your asset allocation is an important part of realizing your investment returns.
It’s important to have an independent mindset to help you pick your stocks. You don’t want to just follow the pack and do what everyone else is doing. There are several key areas that help us choose stocks at Financial Symmetry. The areas are ethical company culture, low costs, evidence-based, tax-efficient, and whether it is repeatable. We continually ask questions about the investments we choose. And if we don’t like the answers, we don’t invest in those companies.
What is your investment plan? Think about the strategy that you have used to make decisions about investing. An investment plan includes more than investments, it encompasses behavior and asset allocation. If you don’t have one consider working with a fee-only financial advisor. Having an investment plan could be the difference between a successful retirement and an uncertain one. What is your investment strategy? Try taking the quiz in our blog post to determine your investment composure.