Consistent Practices of Accomplished Investors
I remember on day one of a three-day winter climb in the White Mountains of New Hampshire my Whisper Lite stove, the only option for heating our freeze-dried food, malfunctioned. While I weighed the options of feeding the caloric crave with yet more frozen trail bars, or raw, freeze-dried dinners, a gracious and more prepared camper restored my defunctive apparatus with the required spare parts in minutes, before his meal was cooked, with a smile! Returning home, I immediately purchased a second stove and full repair kit, and repeatedly disassembled and reassembled it. Knowledge is useful in the adventures of life, and often critical, especially in the world of investing. Consider the consistent practices of many professionals as you strive to become a better investor yourself:
Understand the underlying security options available to you. Common and preferred stocks, bonds, managed futures, REIT’s, MLP’s, and cash equivalents each possess distinct characteristics, risks and potential, and behavior patterns in specific market environments. Gain a basic knowledge of both the favorable and unfavorable conditions for each asset class.
Understand the account types available to you. Direct mutual funds, brokerage accounts, company retirement plans, traditional and Roth IRA’s, and dividend reinvestment plans are common account types. Each has peculiar characteristics and varying qualifications and expenses. Discover the combination of these which best aligns with your financial plan and can offer the most comprehensive long-term tax benefits.
Have a specific “BUY” strategy and stick to it. Building an investment portfolio requires investing, so get to it! Dollar-cost average long-term investment programs, especially in the early years. Never miss an employer-matched contribution. Follow strict parameters when making single purchases. Do not attempt to catch a falling knife by purchasing a cratering stock, avoid ‘doubling down’ on a losing position, and don’t feel rushed or pressured to buy. Courageously add to winning positions.
Maintain an exit plan on all trades at the time of purchase, and honor it. Run with your winning trades, but dump losers with ruthless expediency! Maintain stop-loss orders on all non-forever holdings privately; avoid entering a stop-loss order as a pending trade with your broker. Know the conditions in which you will sell a given holding.
Diversify your investment portfolio across various industries and asset classes. In the mountains it is said, “cotton kills”, but in the financial world it is said, “concentration can kill”!
Favor capital-efficient, dividend-paying businesses in leading industries, and automatically reinvest all distributions. Limit speculations in both size and frequency.
Seek to become a methodical wealth producer by consistently making wise investment decisions with tested investing techniques. Think about it, and blessings on your efforts!
Shaun
“Rule #1 is never lose money. Rule #2 is never forget rule #1.” ~Warren Buffet
“Give a portion to seven, and even to eight, for you know not what disaster may happen on earth.” ~Ecclesiastes 11:2
“Know well the condition of your flocks, and give attention to your herds.” ~Proverbs 27:23
The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial.
All investing involves risk including the possible loss of principle. No strategy ensures success or protects against loss. Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company.
Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. Investors should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not insure a profit and does not protect against loss in declining markets.
Asset allocation does not ensure a profit or protect against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
https://www.fivestarprofessional.com/spotlights/90982
Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2012/2022 Five Star Wealth Managers.