Most people want to be healthier and many people want to be wealthier. Sadly, it's not that easy. As humans we are creatures of habit. Making permanent changes in our financial behavior is surprisingly difficult. Why? Because until we understand why we make negative choices regarding our investments and our relationship to money, the results will be the same. God’s word says, “Wisdom is a shelter as money is a shelter, but the advantage of knowledge is this: Wisdom preserves those who have it” (Ecclesiastes 7:12 NIV).
The key to achieving success with your investments is to pursue wisdom as your guiding light. Below are ten strategies to help you grow sound financial wisdom and jump-start your investment strategy.
1. Realize entertainment news is not advice. Financial media is in the entertainment business. Be aware, their message can compromise your long-term focus and discipline, leading you to make poor investment decisions.
2. Stop searching for tomorrow’s new star money manager. There are no managers that consistently out-perform the market.
3. Invest based on your plan, not a forecast—whether it is yours or anyone else's. Recognize while the urge to form an opinion will never go away, you choose whether or not to act on it. No one can repeatedly predict the future.
4. Keep a long-term perspective and appropriately consider the investment horizon. Keeping your financial goals in mind, your portfolio should be aligned with the amount of risk you can accept in order to achieve the return you desire.
5. Continue to invest new capital. Work your plan because it is time in the market—and not timing the market that will help you achieve your goals.
6. Adhere to your plan and continue to rebalance. Buy low and sell high instead of chasing the “hot” investment promising big returns.
7. Diversify your portfolio rather than focusing on a few securities or asset classes. True diversification allows you to own the total market.
8. Make sure your portfolio aligns with your goals and objectives. Goals often change over time, so a periodic review of your plan will help identify any needed changes.
9. Identify your emotional triggers to manage your emotions. Realize that greed and fear should be eliminated in order to achieve your long-term financial goals. Managing your emotions is important in accomplishing your long term goals.
10. Maintain reasonable expenses by understanding management costs and expenses will minimize net returns. Ask for full disclosure of all fees, such as trading, brokerage and manger fees.
Managing your investments with wisdom allows you, the investor to have a long-term mindset without making irrational decisions that will sabotage the perfect financial plan. Utilizing sound investment principles along with personal discipline also affords you the opportunity to minimize your risk while receiving the return you desire.
Many of the individuals who seek my help as a financial coach share with me; an obstacle they face is a lack of confidence in managing investments. If you find this true in your situation, you too will benefit from having a “Financial Coach” to keep you on track and help you reach your desired future goals. The situation is similar to a successful athlete who relies upon a coach or trainer to help them reach their goals. Therefore, choosing the right team to help you navigate through the numerous choices is imperative to your family’s future success.
Paul shares in 2 Timothy 4:7-8 the importance of fighting the good fight, finishing the race and keeping the faith. These are the requirements to receive the "crown of righteousness." Our management of money is a test of our faith. Who we serve and what we serve must align with one another as our financial affairs become part of a greater purpose; to glorify God’s kingdom through our faith. May you be blessed with wisdom and faith as you plan and grow a strong financial future.
Guy Hatcher: The Legacy Guy® – is passionate about helping families plan their legacy. His book, Your Future Reflection: How to Leave a Legacy Beyond Money, is available at amazon.com. Follow him on twitter @guyhatcher or contact him at www.guyhatcher.com.
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Publication date: December 5, 2014