A well-defined investing strategy is one of the cornerstones of a successful financial life. While investing techniques vary widely, all good strategies are built on the same foundation. Balance. Schwabcore Management offers two main investing strategies. The approaches are different, but built upon 6 core principles that you should keep in mind.
Understanding the principles of solid investment.
Successful investments comes not in hoping for the best, but in knowing how you will handle the worst. Always have it in mind that nobody really knows whats going to happen next. Some things can be predicted; most things cant. Since nobody really knows what is going to happen in the future, your plan must accommodate for the fact that the investment markets will experience some unexpected downturns every now and then; (a circle known as boom and burst). This is where diversification comes in.
Interestingly, it is possible to assemble some lower-risk investment combinations that give pretty much the same returns over time as higher-risk ones. Schwabcore strategies offer portfolios that combine assets and funds in various combinations in order to reduce volatility and risk while still achieving attractive medium to long-term returns.
Your investment plan must have easy-to-understand, clear-cut rules. There must be no room for differing interpretations. You must be able to make your investing decisions quickly and with confidence. This means reducing your decision making to numerical guidelines as much as possible. A strategy that calls for a significant investment in small company stocks is not as helpful as one that calls for 30% of your portfolio to be invested in small company holds.
As much as possible, your strategy should not only tell you what to invest in, but also how much to invest and when to buy or exit. Schwabcore can help you to know exactly where you stand and what you need to do to stay on course via regular updates and direct contact with your Asset Manager.
Your investment plan must reflect your current financial limitations. Your plan should prevent you from taking risks you cant financially afford. Every day, people who mistakenly thought it will never happen to them often discover just how wrong they were. Investing in the stock market is not a game where gains and losses are just the means of keeping score. Money is not an abstract commodity. For most of us, it represents years of work, hopes, and dreams. Its unexpected loss can be devastating.
Smart investors make sure they strategies to be debt-free while building emergency capital, two top priorities. Only then are you financially strong enough to bear the risk of loss that is an ever-present reality in the stock market. Other than your Tax/Insurance contributions, we encourage you to not invest any discretionary funds in the stock and bond markets until your debt and savings goals are fully met.
Your investment plan must keep you within your emotional comfort zone. Your investing plan should prevent you from taking risks that rob you of your peace. Consider the four investment temperaments profiled. The amount of risk you take should be consistent with your temperament. You should not adopt a strategy that takes you past your good-nights sleep level! If you do, you will tend to bail out at the worst possible time. A useful investing strategy needs to reflect both your investing personality and current season of life.
Your investment plan must be realistic concerning the level of return you can reasonably expect. We receive many requests asking us to recommend safe investments that will guarantee returns of 25% or more. If by safe they mean theres no chance of the value of the investment depreciating, then we do not know of any investments like that. Investments that are safe in that sense pay less than 20%.
The reason most investments offer a higher rate of return is because it has to, in order to reward investors for accepting a higher level of risk. Schwabcores goal is to help you incur the least risk possible that will still get you to your financial destination safely. In order to let clients, know ahead of time what expectations are reasonable; your asset manager will keep you informed in advance of (what is obtainable, specifically in such) market.
Your investment plan must allow you to begin investing in small amounts so that you can get started right away and take full advantage of the tremendous power of compound interest. EXAMPLE: Consider the story of Mark and Maggie: Mark saved 600 in a Fixed Asset Investment each year between ages 8-18, then never added to it again; a total of 6,600. Maggie waited to start saving until she was out of college at age 26. She put 2,000 per year into a Fixed Asset Investment for 40 years; a total of 80,000. Both earned the same 10% rate of return.
Who would you expect to have the larger retirement fund at age sixty-five? Surprisingly, Mark is the winner: his fund has grown to more than 1,078,000, an amount that is 162 times more than what he put in as a child. Marks earlier start, even with much smaller amounts and for far fewer years, was too much for Maggie to overcome, thanks to the tremendous power of compounding.
Thats why its important to start investing as early as possible, and to add to your program regularly. Feeding your account regularly via an automatic investment program is a great idea, as even a small regular investment can grow into a substantial sum over many years. Every euro pound or dollar makes a difference.
Schwabcore Management is an investment organisation (that is) focused on secure tax free investments that procure a higher return. With tremendous experience garnered over the years, we know how to create unique products based upon sound contracts that protect our clients capital and make wealth above market conditions returns.