Investment Strategies for Success
Below is a good article on some of the basic foundation principles to help you achieve your financial success. I agree with his comments such as "Delay gratification, Start early, & Stay out of debt" - tough to take action on these, but all are essential. The article below is titled
"Principles to Ensure a Fantastic Financial Finish".
Here's a list of other Investment Strategies and Ideas.
Accumulating a $1,000,000 Net Worth
Should you Buy and Hold?
Multiple Streams of Income
Financial Success System
Principles
to Ensure a Fantastic Financial Finish
Most people
want to get to the end of their lives and be able to live comfortably, take
care of themselves and leave something for their children. These are admirable
goals and very achievable – especially if you have a good plan! While I am not
giving specific financial advice, these are the principles I live by and
believe can bring anyone to a fantastic financial finish! As always, check with
a financial consultant before taking action.
Aggressive
in the Beginning, Conservative in the End.
The way finances work long-term is that you want to maximize your returns when
you are young, while tolerating more risk because over the long-term you will
recoup any losses you may incur because of the risk. This is why when you are
young you can get more aggressive. You have more time to let your returns
accumulate. However, the older you get, the more you want to be transitioning
into more conservative, capital-protecting investments. This way short-term
market fluctuations won’t affect your day to day living situation. I
personally, at 33 years of age, have my investments in very aggressive stocks
and mutual funds. I may be down 10 percent one year but up 80 percent the next.
Over time the investment make more gains than losses. I have 30 years before I
need to be more conservative. As I get older I will shift into stocks and
mutual funds that may only give me 7-20 percent a year but will assure me of
less risk. This idea lets me get as much as I can while I am young and can
afford risk, so that when I am old I can draw a lower percentage off of a
bigger net dollar amount.
Use
Insurance.
I am not an insurance salesman, but I could be! When my dad died when I was 4
years old, he was making $89,000 a year (In 1970). That’s pretty good! He had
$30,000 of life insurance. That’s pretty bad! For a very nominal fee, he could
have protected his family and left them with a couple of million dollars to
maintain their current lifestyle. For many, you will want insurance to protect
your assets you will be passing on to your loved ones. Don’t let the government
get too much! Find a good insurance agent and they will help you out. Also,
make sure you have all the right kinds of insurance: Life, health, disability
etc. All of these tragedies can drain your long-term financial health.
Use a
broker.
The brokerage business is going through a radical transition with the onset of
the Internet and that is good. It will make them sharpen up a bit, drop their
fees and offer more in return. For a while I was anti broker but now I have
come full circle and realize that it is good to have somebody watching your
investments for you. Just be sure to tell them that you want them to be
proactive with your account and communicate with you regularly. This way you
get the benefit of their expertise. If you want to keep an online brokerage and
trade stocks, that’s okay. Give your self a little to play with and leave the
rest to the professionals.
Start
Early.
Even if you can only put $10 a month away, do it. The law of compounding
interest is simply amazing. If you put it away early on, at least you give
yourself something that is growing. And if you have kids, consider giving them
a head start by putting some away for them. The 20 years it grows before they
take it over will mean a lot to them.
Be
disciplined.
There are primarily two ways to be disciplined if you want to have a fantastic
financial finish: Disciplined in controlling your spending and disciplined in
saving or investing. This means that you commit to spending less than you earn.
Add it all up. Are you spending less than you earn? Or are you going deeper
into debt? Also, are you putting something away each month? You may think that
you don’t have enough to put away. Even if you can only put away $10 a month,
you should be saving and investing.
Stay
Out of Debt.
Debt is an absolute killer. It will kill your future, it will kill your balance
sheet, and it will kill your emotional health. If you can live absolutely debt
free, I would advise it. Most people should only have a house debt. “But I
wouldn’t have the car I want!” you say. The question I would ask is “Do you
want one of the cars you want now, with a debt coming due every month and
causing pressure, or would you like to buy any car (or two or three) you want
later on out of the interest your investments are throwing off – and pay cash,
with no debt?”
Delay
Gratification.
This is the key to staying out of debt and to accumulating what you will need
later on to maintain the lifestyle you desire. You have heard the old saying,
“A penny saved is a penny earned.” Well the truth is that a penny saved, and
invested for a number of years is more like ten pennies earned! Don’t get me
wrong, I don’t mean to live life as a pauper. In fact, when I get a big check
or extra income, I give ten percent away to charity, spend ten percent on
things my family would like (in other words we splurge), and the rest we save
and invest. This allows us some “extras” but causes us to delay gratification
that we could otherwise have if we spent the other 80%. In the end, I will be
glad that I invested that money.
Read
up.
I would encourage you to learn about money and how it works. Even if it doesn’t
particularly interest you, you need to know how it works in order to manage
your affairs. Know the basics of saving, investing, interest rates, stocks,
mutual funds, and the power of compound interest. If I had to pick a beginner
magazine that is well written and very good information, I would suggest to you
Smart Money, published by The Wall Street Journal. Pick one up at the newsstand
and then you can subscribe from there.
In closing,
let me say that I think anyone can have a fantastic financial finish! It is
simply a matter of applying these principles over the long-term and watching
your money grow. Every now and then you read an article about someone who never
made more than $15,000 a year and yet left an estate of millions. Get behind
the scenes and you find that they saved, invested, and watched their spending.
Here’s to
your Fantastic Financial Finish!
Chris Widener
is a popular speaker and writer as well as the President of Made for Success
and Extraordinary Leaders, two companies helping individuals and organizations
turn their potential into performance, succeed in every area of their lives and
achieve their dreams. Join subscribers in over 100 countries around the world!
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Copyright 2002 Made for Success. Used by permission. All rights reserved
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