ncome from Investments 101, and operations that employ the Planning, Leading, Organizing, and Controlling skills introduced in Freshman Management. Here are some things to keep in mind while you season your experience with patience and marinate your investment process with discipline: * A viable Investment Program begins with the private development of an investment. The first step is to identify personal goals and objectives and a timeframe for achieving goals. The end result should be a near autopilot, long-term and increasing, retirement income. Asset Allocation is used to structure the portfolio so that it operates in a goal direct way. The final plan must be flexible in design, based on reasonable expectations, simple in structure and operation, and easy to control.
* Use a "cost based" Asset Allocation Model. Although most of the investment world operates on a Market Value basis for everything from performance analysis to Asset Allocation and Diversification decision modeling, you will improve your long-term results and stay within your allocation and diversification guidelines better by using a system based of Working Capital. This highly unknown Asset Allocation "model" takes the hype out of daily stock market reporting and keeps the income investor's focus on relevant statistics.
* Control your emotions, among other things. It is clear that fear and greed are two that require the most control over the investment environment ... especially in these days of a reckless media, Internet empowered scam merchants, high-speed information gathering / processing, and cheap personalized trading capabilities. Love and hate need to be treated so well, but there are fewer out-of-body effect on them. Only strictly disciplined decision makers to apply for your Investment Management position ... and you may not be the ideal candidate. Investment Management is an ongoing responsibility, not an occasional weekend and evening calls.
* Avoid hindsightful analysis, and ignorant (or sell) criticism. It is painfully comical how hindsight has taken over our society ... in sports, finance, politics and the professions, everywhere ... all you hear is second guessing and finger pointing. Nobody is willing to take responsibility for their own actions, and all are willing to sue who coulda ', woulda' or shoulda 'prevented whatever happened. Investors can not afford to be Little League CRYBABIES. Make one of the three basic decisions (which are?) And do not look back. No person or program can predict the future, and your portfolio requires management today. Playing field for investment game is uncertainty.
* Establishment of a profit-taking target for every security you purchase. The purpose of investing is to earn more money than you could in a guaranteed, non-negotiable instruments. This great money making expectation comes with an assumption of a certain kind of risk ... there are several, and its "inside" in all investments. In equities, there is a reasonable profit target and take less if you can get it quickly. With income investments, never say no to a profit equal to one year's income, or 10% if you like round numbers. There are always new investment opportunities and there is no such thing as a bad result ... or a good loss.
* Study Market Value numbers at intelligent intervals. Frequent examination is stressful and unproductive. There are no averages or indices that compare with a properly diversified investment portfolio, particularly if your Equity options have been screened for quality and income. Investing is a long term endeavor, and neither Shock (sic) Market symbols or current yields operate on a calendar schedule. Look at market peaks and valleys over a longer period, particularly "cycles" ... and separate your analysis by class.
* Avoid what the audience does and cloud investment products. Consumers buy products; Investors buy securities. The audience is driven by the very emotions you must learn to manage. Stay focused on your plan, analyze your annual income and trading statistics. Buy and hold creates more real tax problems than real millionaires, and gimmicks and fads last just slightly longer than spring fashion. Always buy good stuff on bad news and sell into good news announcements.
* Do not try to save the world with your investment decisions. Never limit your investment opportunities artificially. Votes work better when it comes to changing your world, and companies should not be the target of your political hate ... get rid of incumbents, state and local, until there are changes in tax laws, social security, tort law, environmental issues, etc. In the meantime, invest with your head not your heart. Activities in a capitalist society is ...
* Remember that you need income to pay bills, and that your cost of living in retirement will be higher than you think. If you insist on some income from every Equity security you ever own, and beat-to-bank income from income, you will get two important things: An annually increasing cash flow that will rise at a rate greater than most normal inflation and a higher quality investment portfolio for better long-term investment performance. (If you use a price based Asset Allocation model with at least 30% invested in income and no open end Mutual Funds or Index ETFs.) Never settle for small short-term yields or get hooked on them that are unsustainably high.
* Investing is not a competitive event, ever. You do not need to beat the market. You have to perform a set of personal objectives. Not even your twin's portfolio should be the same as yours. The faster you drive, the less likely it is that you will succeed eventually. Important risks, foolproof gimmicks, and exotic computer programs occasion more failures than successes. Remember the Investment gods? They created shares and bonds ... only stocks and bonds!
* Avoid Unrealized gains, Embrace Volatility, increase annual income, and remember that all key investment moments are only visible in rear view mirrors. The majority of unrealized gains become Schedule D realized losses. As today, there has never been a correction (Rally) that have not succumbed to the next Rally (correction). Only an increasing income level can beat back inflation ... a bigger market value number just does not make it.
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