“It’s not how much money you make but how much you keep.”
- Set your goals
- Choose your asset mix
- Choose your investments
- Track your progress
- Repeat step one
Setting your goals includes your time horizon, your starting point, your expected result, your risk acceptance and your expected growth forecast.
Choosing your asset mix includes not only what part stock vs. bonds but what kind of stocks and bonds. For bonds the choices may include government, corporate, short term, long term, taxable or tax free as well as other factors. For equities it may include large and small, U.S. and international and different types of companies (i.e. utilities vs. technology).
Choosing your investments should focus on the investments’ characters related to the above mix along with the concept of keeping costs low.
Tracking your progress is not a once a year exercise, it is an all the time exercise.