5 Ways to 1-Up Your Investment Strategy

5 Ways to 1-Up Your Investment Strategy
February 2nd, 2007 by 1mil [^]

Nothing like a weekend break to get your juices flowing about your stock strategies for Monday. So to help out my fellow Weekend Warriors, I’ve constructed a list of 5 investment improving strategies that have helpd me keep my game on point. So if you’re ready, check out my 1-up to give you the umph you need for your financial touchdown.

Set Financial Goals
Why do you want to invest your money? To save for retirement, a child’s education, a house, a vacation, or all of the above? Before you can create an investment plan, you need to know what you want to do with your money—and when you’ll need it. Setting Milestones for yourself and your finances help you gauge your (lack of) progress within your time horizon. Unless you’ve set your sights on a financial goal how you can tell if your strategy is working. (Do you have a strategy? Is it working?) Spending the extra time every week or two to reflect on the weaknesses of your portfolio will help you maintain a disciplined strategy which is key to having a strong portfolio!
Review and Rebalance your Portfolio annually or when life events happen.
A piggy back off of step 1, at least once a year it is a good idea to review the overall (lack of) performance of your portfolio and decide if it’s time to reallocate your assets into markets with better returns. Tack on to this a review of your overall finances. Are you in a financial position to support your goals, or is it time to retract some of your debt that keeps offsetting your gains? Looking at your portfolio in symphony with your finances (preferably well before tax season, say September or October), is an effective strategy to keep your gains and develop foundations for new ones. However, some things my come up in your life that may alter the face of your portfolio — a marriage, death, birth, inheritance. When these types of events happen fix your portfolio accordingly
Never rely solely on an analyst/advisor’s recommendation
There are a plethora of consultants who are more than ready to channel your money to their preferred resources, but don’t be so quick to take their every word for its weight in gold until you’ve done your own research. Take their ideas into careful consideration, and if the numbers and the data make sense get a second and third opinion. No matter the source or the reference always make the effort to know how your money could be impacted.
Invest in Companies you are familiar with
Personally I won’t favor investing in any company that I am not familiar with, either I have used their products and am familiar with their services, or I’ve done my research, read what people had to say, and contacted individuals in the company firsthand to get an idea of what they’re about. In some cases, if they have a local office or facility, I’d even ask for a tour. Since the true value of a business isn’t always found right square in the numbers, anything that I can do to familiarize myself with them, their goals, products/service, or people, helps me to make my investment decisions.
Mind Your Taxes
What’s the point of having high returns if capital gains taxes are eating up all your profit? One of the most important things you can do to minimize the impact of taxes on your investments is to tuck as much money (from tax-inefficient accounts, e.g. accounts with high capital gains) as you can into tax-advantaged investment accounts (401k,401b,IRA,Roth IRA,etc.). Tax-efficient (low capital gains) should go to your taxable accounts, where there are several strategies to offset taxes ( HifO, Loss Harvesting, Redemption Fees, source Vanguard)