#10 is HERE!

Download our Ebook Here to get the first 9 principles!!

Financial science and experience show that our investment efforts are best directed toward areas where we can make a difference and away from things we can’t control. We can’t control movements in the market. We can’t control news or financial headlines. No one can reliably forecast the market’s direction or predict which stock or investment manager will outperform.

But each of us can control how much risk we take. We can diversify those risks across different assets, companies, sectors, and countries. We do have a say in the fees we pay. We can influence transaction costs. And we can exercise discipline when our emotional impulses threaten to blow us off-course.

These principles are difficult for most people, because we are programmed to think that if we pay closer attention to the day-to-day noise, we will get better results. Ultimately, we are pushed toward fads that the financial marketing industry decides are sellable, which require us to constantly tinker with our portfolios. The financial media emphasis is often on the excitement induced by constant activity and chasing past returns, rather than on the desired end result.

So what can we control?

  1. Risk – Identify an acceptable level of risk for an acceptable return. We use Riskalyze cutting-edge technology to identify risk tolerance and align your portfolio with your investment goals and expectations. Run stress tests and understand what your risk tolerance means for your portfolio over time.
  2. Expenses – Every investor has a say in the fees they pay. Think of the costs as a percentage of your return that you give away. If you’re invested in a fund that returns 5%, but charges a 1% expense ratio, then you lose 20% of your return to fees.
  3. Diversify your portfolio – Diversification improves the odds of holding the best performers, and by holding a globally diversified portfolio, investors are positioned to capture returns wherever they occur.
  4. Minimize the taxes you pay – High turnover strategies can leave you with a big tax bill in the spring. Efficiency in investing is a controllable way to save tax dollars.
  5. Discipline – It never feels good to watch the markets go down, but it’s also part of being an investor. No one can accurately time the highs and lows. Avoid the temptation to make changes to your portfolio in response to ever-changing market conditions.

A financial advisor can create a plan tailored to your personal financial needs while helping you focus on actions that add value. An evaluation of the risk and fees in your portfolio is a perfect first step toward a significantly better investment experience. Contact us if you’d like a free assessment of expenses and risk in your current portfolio.