All about investing
Investment Strategy
Your investment strategy is a key part of your financial plan but it’s the servant, not the master, of that plan. To focus only on investment returns means ignoring about 90% of the value and purpose of a financial plan, namely:
1. To have something to stick to;
2. To know you’re ultimately safe;
3. To stop you doing anything daft.
Investment Diversification
Investment diversification refers to the spreading of funds across various investments.
When you spread your funds across different companies, industries, risk profiles, asset classes and even geographic locations, you are spreading (or diversifying) your investment.
Investment Planning
To make a strong investment plan, you first need to know why you are investing. Are you investing so you can have a comfortable retirement? Or perhaps you want to have security in where you live and don’t want to rent anymore. Having a clear ‘why’ will help you stay focused and motivated.
Investment Risk
Risk is a devilishly slippery and complex concept. One person’s “risky” is another’s “risk-less”. And, of course, what’s risky today may not be tomorrow. It’s always a matter of context. I like Elroy Dimson’s thought: “Risk means more things can happen than will happen.” And Howard Marks’ inversion: “Even though many things can happen, only one will.
An Investment Policy Statement
A successful long-term investment strategy is necessarily goal-focused and planning-driven. It is arrived at by answering three key questions: Who is this money for? What is this money for? When, and at what rate, will this money need to be withdrawn?