what is investment management? investment planning, and best investment strategies
For. Many investors, figuring, out where they should put their money is a tough question and it gets even more complicated when you bring risk into the conversation, so, here's five guidelines, to help you make investing, decisions number. One don't. Risk money you can't afford to lose when. You're first investing, and you don't have a savings buffer or if you're saving for something really important, like a deposit, on a house, don't, put that money into risky, investments, be patient, with those investments, look, for high-quality bonds, blue, chip stocks and preferred stocks they'll, give you an income, from interest or dividends, and have less chance of losing value number. Two risk, money you can't afford to lose, overtime. Your, income will grow your, savings, will increase your, investments, will gain in value and you will gain investing, experience, when. This happens, you'll, be better able to handle, losing some of your savings this. Is why some investors, preach increasing. Your exposure to risk as you get older, this. Reverse, glideslope, model, has been shown in some studies to increase returns, better, than, other investing, strategies. Number. Three time. Is on your side until. It isn't. Contrary. To the reverse glide slope proponents, some, advisors, argue that as you age you, have less time to make up for mistakes, so, they suggest you lower your exposure to risk as you age so. How, do you resolve these, conflicting, pieces of advice make. Sure you preserve the core, of your savings, with low-risk, investments. But, don't take your foot off the accelerator with, your other investments. You. Won't cash in everything the day after you retire so. You will, still, have time to generate gains, even, in retirement, number. Four be, cautious, when borrowing, money to invest, never. Put all of your money at risk with loans this, is true when trading on margin shorting. Stocks or investing, in real estate make. Sure you calculate, what a default, would mean to you and never, put all of your savings at risk and number. Five limit. Speculation. Many. Advisors will tell you to stay far away from super, high risk investments, like options, derivatives, penny stocks foreign, exchange, and cryptocurrencies. But. If you insist on taking on this level of risk there's, no reason, why you can't put 5%, or less of your portfolio, into these super high risk categories, just make, sure you're okay with losing that money in the. End the, final barometer, of your investing, strategy, should be your gun if you can sleep well at night then, you've made the right decisions, just, make sure you check back overtime and alter, your strategy, to match your changing reality. You. Every. Investor, wants to maximize their returns but, how to do that isn't so easy defining. Your goals and developing, a strategy is the, way to move forward with confidence start. By clearly, defining your goals in two. Years do you want to have enough for a down payment on a house or you, have a new baby and you want to have enough to pay for college whatever, it is set, a date and write it down next. Look. Into the different, strategic approaches, to investing and see, which one's appeal to you you, can choose between active, and passive investing. Or a combination. Of the two with. Passive, investing, you default to what's going on in the market through low-cost ETFs, you'll, never do better or worse than the market at large but at least you're in and history. Has shown that over time that, just tracking the market can be the best investment of all it's the, ultimate in, set-and-forget. Active. Investing, is choosing, specific, investments. Rebalancing. Your portfolio and.
Optimizing. Your tax and there, are a number of active, investment strategies, including. Value. Investing, where, you buy an investment that you believe will increase in value over time and Holden. The godfather. Of value investing is Warren Buffett in. 1981. Share of his company, cost two hundred and eighty dollars it's, now selling for over three hundred thousand buying. And holding that company, has been a sounded, strategy, for their shareholders. For. Retirees, investing. For income, is a common strategy this. Means that the money you put to work will pay an income it, might, be dividend, from Starks, interest, on bonds or payments, from an annuity. Social. Impact or sustainable. Investing, is, a strategy, where you only invest, in companies or assets, that align with your values or, payback. To causes at you Caravan, growth. Or momentum. Investing, tends, to be the preferred, strategy of younger, and professional. Investors, growth. Investing, is all about, beating the market like investing. Heavily in tech stocks in the early part of this decade. Small. Cap investing, is a higher, risk potentially. Higher return strategy, where, you invest in smaller companies, they don't have much more volatile, stock, swings a. Subset. Of all of these strategies is the idea of dollar, cost averaging, when. You buy can have a huge impact on future returns, dollar. Cost averaging, means, that you buy into your investment, over time sometimes, the prices up sometimes. Down but, over time you're buying the average and the. Most simple strategy, of all starting. As early as you can and adding, funds as often, as you can preferably. Through automatic deposits, every month, whatever. Strategy, you choose be, sure to keep your money working for you always, look to the long-term and look to minimize fees and before you know it you'll, be reaching your goals and setting nuanced. You. Improving. Your investment, acumen is a significant. Step towards, building yourself a more, solid financial base and a, more solid financial base means, that you can explore, different options for yourself that. Sounds great but how and, why, let's. Start with the why it's. Easy to think of life as a linear path and foremost, it is you. Work your job hopefully, get a job that pays more hopefully. Put some money away after bills are paid and hopefully. Grow it but. When you're an investor, you, increase, the options you have for income, and wealth building outside, of that linear path when. You have assets that work for you like real estate bonds, a business of your own or stock, then, the income, or growth that they bring can, present, you with options. Don't. Think of your money or assets as a number, or size the bigger the better think. Of your money as a tool, that, can help you change the path that you're on and explore, other options, in life maybe.
It's Changed careers start. A business or a side hustle give, more to causes, that you believe in or take, care of the finances of the people you love so. How, do you get from where you are today to, this place where you have options like these now. There's, no grand plan guidebook. Or flow chart to follow but, there are basics, first. Acknowledge. That your relationship, with money is a lifelong. Journey and, that they'll always be surprises, which, is why having a base of liquid, assets can truly help, next. It's, critical, to adopt a growth, mindset, make. It a fundamental part, of what you think about how. Can you exponentially. Increase, your assets this, is the more linear way through, a salary, and savings, this. Growth mindset, can manifest itself in many ways, begin. By prioritizing. Saving, and growing your money over spending it then, be, curious about growth opportunities, and optimize. Your behavior. And habits to keep on building if. This is all sounding too hard it doesn't, have to be the, biggest failing, in most personal, finance efforts is that they focus on the what like, things, to do or learn and not, the fundamental. Haverhill, changes, needed, to get from point A to point Z remember. There's, plenty of letters in the alphabet between, a and Z so, just focus on the next thing be it big or small. You. Risk. Is something all investors. Need to keep an eye on taking. On too much risk can mean losing money and losing, sleep from stressful, nights of worry but. Taking on too little risk leaves, little opportunity, to grow your savings, getting. Your risk balance right is important. And in order to get it right you, need to know what different, things you can invest in so. Here are investment, opportunities, ranging, from low, risk low, chance of capital loss and low chance of high returns to. High risk higher, chance, of capital loss and higher, chance, of large gains at. The bottom are savings accounts this would be safe but as we all know offer very. Low interest rates next. Up the ladder are high quality bonds, they're, essentially, loans you make to a government, or a business for which you get paid interest, bonds. Are rated by independent. Third parties so the risk is relatively, easy to see an investment. Grade bonds those with high ratings are very safe. And pay reasonable, interest rates now, to stocks these. Are considered higher risk because they're tied to the fortunes, of an underlying company, and it's, hard to predict the fortunes of a company when they're constantly, under pressure from competition, regulation.
And Customer, preferences. Stock. Prices can be volatile, and unpredictable, and, generally. The smaller the company, the, more risky, the stock is to hold up. A notch from their adjunct, ones these. Are lower quality bonds, they pay high interest rates but the underlying companies. Are often struggling so, there's a real chance that the company will go bankrupt and you'll lose some or all, of your investment. Next. Up is real estate many, people consider real estate low risk but, the problem with investing in real estate is, that, it's an investment that is leveraged, which, means that you only put in a small amount of money and borrow, the rest if the, market goes up you can make terrific returns, but, if the market goes down you'll. Earn more money than what you can get by selling the property and selling, a house takes time and money, when. The housing market goes, down real, estate investors, can be destroyed which, brings us to other high, risk leveraged, Timorese months these. Include, buying stock on margin, which is borrowed money, shorting, a stock betting. That it will go down and some, stock options these. Are all super, high risk investments, where you can lose all the money you've invested, and more. Mutual. Funds and exchange-traded funds, can consist of any and all of these asset classes you. Can find stock bond, or diversified, ETFs, that are a mix of both these. Are excellent, vehicles, for finding the exact risk profile, you're looking for in a single investment. So. Hone in on the asset classes that match your personal risk tolerance just make sure not to take on more than you can handle so that you can get a good night's sleep. You. When, you're trying to grow your savings you always have to have one eye on the future and to, help you get where you want to be it's important, to set goals and these. Goals will, change over time let's. Talk about that for a second when. You see the ads for financial, institutions they, talk a lot about retirement. But, if you're young retirements, hard to imagine you, still have to pay off your student loans, buy a house start a family you've got a lot of things to do before you can think about retirement, this. Demonstrates, that you need to set goals that are appropriate, to your life stage and the, two most important, issues that you need to look at our age, and income, let's, look at age first the. Younger you are the more financial, issues you'll have ahead of you they usually go in this order student. Loans car marriage, home family, retirement, all, of these life events are expensive, and for, most of them you need to save so. You need a plan to address each of them separately and where possible concurrently. Set. Goals for each as they arise if you, have loans or need to take out a loan make, sure you set the payment, term so there within your means if, you're trying to save like, for a down payment on a home try. To jumpstart, your savings by keeping the money in a higher interest, savings account, also. Look, to piggyback on tax-free, retirement accounts. Some, of these accounts allow you to use a limited, amount of money for a first home purchase but. Make sure you don't get too far ahead of yourself be. Realistic, about what these goals really, mean, maximizing. Your retirement savings to get the maximum, company match doesn't. Make sense if you're paying down high interest debt deal. With one issue at a time if you, get too far ahead you leave the run short of cash or you'll get penalized, for having to take money out of your retirement account to fund unresolved, financial, issues and here's. Where we run into the second issue income. Always. Make sure you have enough income to move on to your next goal and remember. It's not how much you make but, whether you can live within your means that's. The key to financial health beware. Of lifestyle, inflation, spend. Less than you earn and prioritize. Saving, and growing your money which. Brings us to a focus you should always have in mind to help you reach your goals, increasing. Your savings, always. Be on the lookout for ways to put more money towards, your goals by either reducing. Your expenses, or increasing. Your income or both. So. Be, reasonable, with your goals make, sure they match where you are in your life don't get too far ahead of yourself and if, everything falls into place you'll, make it to retirement with a nice pile of savings. You. The, most famous investor, in the world Warren Buffett is very, public, about how he develops. His investment, acumen he, reads for six hours a day, Buffett's. Been investing, at the top of his game for over 60, years, and yet, he still acknowledges.
That Constant. Learning is the key to his success now. We, may not all have that sort of time so, it's important, to ask yourself this question what, does, developing. Investment, acumen mean to you it. May mean that you want to understand, more of the lingo or to. Read your retirement, account statements, without getting a headache or, to be able to make decisions that you're comfortable with or, even just challenge, your know-it-all neighbor, and their sure thing stock tips, all. Of these are outcomes, of developing, your investment, acumen but your lifelong, goals should, remain intact number. One practice. Healthy habits, spend. Less than you earn stay. Away from high interest debt like credit cards, and save. And grow the money you have this. Is true for people just starting out at the low end of the income scale as well, as those at the apex, of their earning yes number. Two build, a system that works for you it may, be a combination of, online tools plus occasional, advice it could be joining an investment, club or it could be outsourcing, everything. But, managing, your managers, and 3. Learn. The rhythm of money they'll. Always be, good years and bad years and the, more you know the, better you're, able to take advantage of, market changes. Investing. Is a lifelong, journey, if acumen. Is still something being built by an 88, year old with 90 billion dollars then. It's certainly something that we all need to work on over time but. It doesn't have to be work there. Are opportunities, every, day to build your investment, acumen by adopting, an investment, mindset, which, inherently, is curiosity. How, does money flow through the economy who are the current winners and what sectors seem to be lagging it. Doesn't sound like fun dinner party conversation but it can be also, if you're, a part of a family or a couple make. Developing, your investment, acumen a shared goal watch, videos together bring, conversations, around to topics that can help you advance you Gulzar ideas know. This there, is no silver bullet, no one book or cost that will magically develop. Your investment, acumen or change, your behavior make. A commitment, to develop, your investment, acumen today and for. Life. You. Risk. Is something most, people try to avoid we'd, rather be safe than take, a risk and get hurt that's why we wear seatbelts and wear sunscreen to, reduce risk but. In investing, risk, is different, it's not entirely a bad thing for. Sure no one wants to take a risk and lose money but, if you don't take a risk your investments, will not gain value which, is the odd paradox of investing, taking. A risk offers, you the potential, to increase the value of your investments. Sometimes, by quite a bit on one. Hand risk, implies, that there's a chance you can lose money on the other it means that you can make substantial, gains nothing, ventured nothing gained as the adage goes so, risk is a double-edged, sword for example, a US government bond, is considered, low risk because, it it's never failed to pay back its bondholders, it's, a safe investment but in exchange for their safety it offers, very low returns, stocks.
On The other hand a higher risk because their value fluctuates with, the fortunes of the underlying company, which can go up and down significantly over, time so. How much of these riskier, investments, should you take on well, that, depends on who you are and where you are in life if you're, young single, or experienced, at investing, then you can take on more risky investments, you'll, have more time and experience, to make up for any mistakes you make if, you're nearing retirement have. Never invested, before I'll have a family to support, then you should avoid taking on too much risk but. Even if you can take on more risk how, much risk should you take on this. Depends, entirely, on your own personal, tolerance, for risk if you, can't sleep at night because you fear losing money, which, is something that can definitely happen then. You should certainly not take on two mantras make. Sure you frequently, re-evaluate, your risk tolerance this. Is especially, important. If some of your investments, go down if you, feel sick when an investment goes down then you may need to find a less risky investment, but, remember that if the entire market, is going down it's, often better to hold on to your investments, and write it out over. The long-term markets, usually recover, from their big drops so, brace yourself and try, and ride out market downturns as you. Get more experienced. And more comfortable, with market moves you can take on more risk but, don't take on more risk just be the market is hot risk. Is entirely, about you not, the market, so. Take the time to understand, how much, risk you can take on build, a portfolio, that reflects, that tolerance and revisit. Both your portfolio, and the risk as often as you can. You. There's. An old joke on Wall Street we take your money and our experience, and turn it into our money and your experience, the. Days of having to blindly, trust a Wall street-type are thankfully, over I'm not saying that people are more straight are all bad but, there are other ways that you can get into investing, they.
Vary Depending on how much effort you want to put in, options. Range from doing it or yourself to, giving full control, to someone else to make investing, decisions for you so, let's look at the different ways you can invest and see which one might be right for you first. Let's, look at the hands-off, way to invest if you're, new to investing or don't have the time or inclination to, do it you might want someone else to make your investing, decisions for you this, is generally, done through a financial planner or an investment advisor if. You want an advisor make sure of a few things, ensure. Your advisor has industry, certification. But more importantly, make, sure he or she is a fiduciary, which, means they're mandated, to put your needs above everything, else and in. Order to know what's best for you the advisor must ask a pile of know your client, questions if they don't don't, use them and finally. Make sure you know whether you want to give your advisor discretion. Of your accounts, discretion. Means that, they are allowed to buy and sell investments without, your permission, make. Sure you trust your advisor a hundred, percent before you give them discretion. This. Full-service option is terrific for people who want to invest but don't want the burden of managing their investments, just. Know that this service cost money and studies. Have shown that experts, have a hard time beating the market and once, fees are taken into account it's even harder, to beat the market on the. Opposite, end is the do-it-yourself. Option if you have the time and inclination this, is a terrific choice the, costs, of this option are low but the drawback is that it takes time and effort to make sure you're doing the right thing there. Are lots of websites like investopedia. That have terrific, free, information, to help you learn how to invest but. There's always a risk of making mistakes when you first start out investing, in stocks bonds or real estate, in. Between these options, are the so-called Robo, advisors, these, are digital investing. Platform, require a little bit of work but automate, your investing, once you get started these. Are really just automated. Advisors most, are geared towards, stocks bonds and funds and have, phased that a lower than a human advisor they. Can be a good middle ground between, the DIY option and a full-service advisor, in. The end you can move from one option to another there's no reason why you can't start with an advisor move, to a robo and then take control of your investments, once you're confident it's. Your, money take. The time to learn do, your research find. What works for you now build. Your confidence and over time your, best path forward will become clear. You. Opportunity. Cost like, compound, interest and dental hygiene is something. That should be taught at a very early age at it's, very core, is the idea that something needs to be given up in order to achieve something else like, when you sacrifice your time in order to buy things for example let's, say I want to buy a new couch for 650, dollars and I earn 45, dollars an hour that's, 14, hours I need to work to pay for it is, that couch really, worth 2 days of my working life given, all the other things I could buy but. That examples, way too simple, most, people have bills to pay and only a small part of their salary aside, for household purchases, so. Let's say in my budget that's 10% that. Means now I have to work a hundred and forty hours to get that couch almost, a whole month. Another. Element of opportunity, cost is that by committing, my time and money to that couch I need, to forego, other household. Purchases, and only, buy the new mattress I need after the, couch is fully paid for but. I mean who really buys, things one at a time that's what credit cards are for right so. Let's say I put the couch on my credit card for which I'm paying the US average 13, percent interest so, that's an extra, two hours that I need to work to cover that, the.
True Nature of opportunity, costs really kicks in with quite a radical idea what. If I don't buy the couch at all and take, that six hundred and fifty dollars and put it into savings or even better invest, in and that's, the true sense of financial opportunity, cost prioritize. Investing, and growing money over, spending it that. Couch money invested, it's standard, market returns could, be worth more than $1300, in ten years and it's. Not just about savings, and investing if you're. Committed to giving to charity don't, make it additive. See, where you can cut expenses, and give that away, being. Honest with yourself and with how you allocate your money is critically. Important, you. Can't say you save money by renting if you're not putting the difference between your rent and total, cost of ownership of a home into. Your savings and investments. Opportunity. Cost is a simple, concept in theory but one that can be enormous, ly powerful, in practice so. The next time you're assessing something from a monetary, perspective add the, opportunity. Cost lens and see if your valuation, changes, and remember. As Warren, Buffett says unless you can figure out how to make money while you sleep you'll, work until you die that's, the ultimate in opportunity, cost. You. If, you're like many people your money has spread over several different accounts you, might have your paycheck, deposited, to a bank but your credit card might be with another bank and your, investments, and retirement, accounts with a completely, different company. Keeping. Track of your money can be a headache but, if you want to make the most of your money you should keep your eye on your money no matter where it is now. Moving all of your money to one institution, may look like a practical, solution it. Will certainly simplify. Your life but, this may not be the best idea, instead. You, should look at ways to digitally. Link your accounts, this, can be done quite easily through, account aggregators, who pull data on all of your accounts and show them to you on one account screen, every. Country has different tools to do this do. An online search for digital. Money management or personal. Financial management tools, and check, out the reviews of these services, in your area these. Services, should allow you to see all of your deposit, accounts credit cards retirement. Accounts and loans in one place not. Only that you'll, often get other add-on, services, that can help you manage your finances, but, read the fine print to ensure that they're not reselling, your data, these. Tools can help you with budgeting, debt management cash, flow and net worth calculations. And can be a huge, help guiding you towards your goals if. You need to pay down debt these tools can help prioritize which, debt to pay down first if you're, trying to save money these, tools can help you build a budget and if, you have multiple investment. Accounts you'll be better able to track how they're doing compare, their performance and, assess, their returns, here's. A to do for you if you've, been working for a while it's possible, that you have multiple, retirement, accounts through your jobs or an account that you set up long ago with good intentions, make.
A List of your investment, accounts and see how they're performing and consider, consolidating, them, to minimize your face, what. You want to be able to determine, in each account is how much you've contributed how. Much you've paid in fees how. The investments. Have performed each, year and the, current balanced. Investment. Statements can be hard to read so, call the provider and have them find those data points for you if you can't determine them you self. Technology. Has come a long way and can help you get great insights, into your money the. First step is to aggregate your accounts in one place the, next step is to utilize personal. Financial management tools they'll, go a long way to help you reach your financial goals. You. You, may think that budgets, are for people living paycheck-to-paycheck, and if that's not you then they don't apply but. You would be wrong as your. Financial life grows in complexity, budgets, become more important, not less why, well. If you're feeling confident, about your financial situation there's. A chance that you'll start to live with an abundance, mindset which, can lead to lifestyle. Inflation, here's, a clue if you're, not paying off your high interest debt like credit cards in full, each month and putting. Some money aside then. You need a better budget or a better way to track and control your spending the. Best solution, may be a combination of things here's. A good place to start. Visualize. Your overall, money picture, make. Update, and track your financial, goals, automate. Key tasks, like loan repayments and auto deposits, into your savings and investment, accounts. Some. Banks and credit unions have, digital, money management, tools built into their products that, let you set and track, against budgets goals and debt reduction, then. There's online tools like you need a budget search. For digital money management or personal. Financial management tools, for your country, one. Thing to look for is that when you get a product for free usually. Your data is the value exchange make. Sure they're not reselling, your data or using it in any way that's without your concern and if. Online tools aren't your thing Excel. Or an old fashioned pen and paper could be right for you, there. Are two key dimensions, to consider when you're building your budget first. Benchmarks. Look, at the average, of what people in your area are paying and how expenses. Are allocated, in the, US the, Bureau of Labor Statistics publishes. These benchmarks, and they're used by groups like status, money as the base of comparison. Second. Categories. Make, sure all of your expenses are captured, under easily, understood, headlines you. May ask how does this play into building, investment acumen, well. Unless, you're already independently. Wealthy with the nest egg that will see you through to your death then, you need to keep adding to your investments, and the only way to do that is to save and put those savings to work through investing, the. Key. To spend less than you earn now. A budget, can tell you what to do but it won't change your behavior only you can do that set. Yourself up for success with realistic. Goals and a commitment, to long-term success. Whether. You're earning thirty thousand, three hundred thousand, or three million dollars a year prioritize. Your future, self by keeping, your spending, well under what you earn. You. Sometimes. In life you're a passenger like on an airplane but. When it comes to your money no matter how many experts you may work with you, must be a co-pilot, so, it's critical, to work with the right people here's. A process, to ensure you're getting the best help that you can and it, starts, with a list of questions about. You. Have. You articulated, your goals clearly have. You clarified, your complete, financial picture in terms of income and expenses, assets, and liabilities, have. You identified what's important, to you in an advisor is it someone to hold your hand or do it all for you or chat with you once a year what. Did the financial areas, where you need the most help right now is.
It Someone to help with growing your investments, an investment, advisor or, to help you across your financial, picture a certified. Financial planner, do. You need someone who understands, real estate or trusts, or insurance, and how. Do you prefer to pay for help a percentage. Of your investments, this is an assets, under management model. A flat, fee or an hourly fee by. Answering these questions you're. More likely to end up with the right advisor and advice now. When, it comes to selecting an advisor here's, what you do draw. Up a shortlist of advisors from recommendations. And your own research and check their credentials, an advisor. Should be a fiduciary, who puts your best interest, ahead of theirs, build. A long list of questions to ask your shortlist imagine. You're interviewing, someone to hire at work it's, your job to determine if they're the right fit it's, not their job to sell, you on their services, ask. Them, what. Are your credentials and how long have you held them, describe. Your average client and how much time do you spend with them, what's. Your investment, philosophy, what's. Your fee structure, and who. Manages, your money then, pick. Your top two to three advisors to meet in person or video chat, chemistry. Is so important. With your money anyone. Who makes you feel intimidated or overwhelmed, is not for you when. You finally select your advisor make, sure you establish yourself, as a client who is very, involved in their finance, set, clear goals together and make, a plan for engagement, now, this, process isn't legal or financial advice, but, it should help to establish you firmly as a co-pilot when it comes to working with advisors, to help you with your financial life. You. If, you want to know how your investments, are doing all you need to do is look at your account statements, right well. If you like me those, statements, can be super, confusing, and it isn't easy to figure out what's going on so, here's a few tips about how to read your statement first. You're, going to want to figure out how much money you've made a lost, unfortunately. This information, can be surprisingly. Hard to find if, you, find a loan in your statement that says change, in account value this, is a good bit of information it will tell you how much your account has grown or shrunk the. Problem, with this information is it includes, all the money you've deposited or withdrawn, from your account so, it doesn't, just show performance. Instead. You can look at the line that says change, in value of investments, this. Measures, the net increase or decrease in, the investments, that you're holding the.
Key Word here is holding. If you, sell a position, for a profit this line will no longer reflect that gain so, what do you do first. Of all you need to figure out the dollar value, of your gains or losses to. Do this take, the change, in account value and subtract. The money you added to your account and add, the money that you took out this. Will give you the dollar value of all the gains you've made for the time period of your statement this, is the best indicator of how you've done so far this year next. Look, to the change in account value this. Will tell you how you're currently doing but. Dig down a little deeper look, at the current performance, of, your individual, holdings, look, for the unrealized. Capital gains, or losses for each holding, and compare, their performance this. Is where you make decisions, about whether you should cash in some winners ditch, some losers or add, to the positions, of high-fliers, you. Should also note, that most, statements, only go back to the beginning of the current year once, December 31 rolls around they reset, I'd strongly. Suggest, you make your own spreadsheet, to keep track of long term performance, finally. You, need to look at fees fees. Eat away at your gains so you need to keep track of them some. Fees are obvious like trading, fees and they appear on your statements, but, if you hold the fund fees. Are usually completely, hidden, they're taken straight, out of your holdings and almost never appear on your statement make. Sure you go to the fee calculator, sites that FINRA in the US or OSC in Canada you might be shocked to see how much money you're losing in fees so. Make sure you do the extra, work to keep track of your performance, it will pay off in the long run. You. If, you're trying to grow your savings, you need to make sure that you're on target to reach your goals here's. Some ways to help you do this first. Of all make, sure you know what your goals are let's. Start with your short-term goals these, should be all about your most pressing, issues like saving, for deposit on a house for example these. Should have a specific. Dollar amount attached to them for. This focus, on increasing the money you have in your investment accounts and keep, track of the change in account value line in your investment accounts this. Growth will come from a combination of, cash that you put into the accounts and gains, that you've made on your investments, when, you hit your target celebrate. And start, the process again with the new goal, your. Medium-term. Goals should be geared towards bigger, picture, wealth targets, this, is where you need to go through all your financial statements, and start, keeping track of all your cash investments. And assets if for. Example you. Use your investment, money to put a down payment on a house you, haven't lost money yes. Your investment account will shrink but, now you own a part of an asset a house so. Don't just look at your investment, in bank accounts, in fact keep, a spreadsheet of your net worth add. Up your cash investments. And assets and then subtract, your debts this, is your net worth try. To update it at least at the end of each quarter and, set. A midterm, goal of how much your net worth should be at the end of every year and make, sure you check how you've done against that goal, finally. Your long term goals I'm, not a huge fan of setting, a savings, goal for retirement for many people it's so far away and so difficult to imagine that setting a specific goal becomes extremely. Difficult I like, to say save as much as humanly possible saving. For retirement is, a specific. Task in most, countries there. Are tax advantage. Retirement, accounts if you can divert some of your money into those accounts then you are saving for the long term again.
Your, Goal shouldn't be some giant. Retirement, number instead. Try to target an increase, in the size of your contributions. Every year if for. Example you can set a goal of increasing your contributions, by 10%, every year then, you'll be doubling, your contributions. Every 7 years or so before, you know it you'll be well on your way to saving, a sizable chunk of money for retirement, so. Do your best to keep track of your cash investments. And debt if you do you'll, be able to target and track your progress against. All of your goals. You. So, how, are your investments, doing if they're, growing then you're doing a good job but. Could you be doing even better that's a good question to ask yourself, gauging. How well you're doing depends, on two things first. It depends on how much risk you've taken risk. Is what creates potential, for significant, gains so, you need to set your expectations based, on the amount of risk you've taken on if you. Take on little, risk you shouldn't expect to generate tremendous. Growth in your investments, at, the same time if you don't take on much risk you shouldn't expect your portfolio, to lose much value either by. Not taking on much risk you lower your chances of getting hit by an economic downturn. Secondly. It depends, on how well the overall market, is doing, if. You, hold a lot of bonds you shouldn't, expect outsized, gains when the economy is in good shape but, if things turn negative, you shouldn't expect to lose much either. Conversely. If you have a lot of stock in your portfolio, expect. Good returns when the market is positive, and expects, sizable losses when the market turns down, your. Expectations. Should be tempered, by what's going on in the overall, economy if your, country is battling, through a recession, you shouldn't, expect significant. Gains or any, at all, once. You set your expectations. You can then check to see how well you're doing and you, can do this by looking at benchmarks. Most. Industries, markets, and countries have their own benchmarks, all you, need to do is go out and match your expected, return against. A benchmark, that matches the holdings in your portfolio, take. Your stock holdings for example if you, hold a lot of large US blue chip companies, then, you should benchmark, your stock performance against. The S&P 500. Index if your, tech-heavy then, benchmark, against the Nasdaq. Finally. Index, that best fits each segment of your portfolio, and measure, your performance against them or. If you hold a unique or exotic, ETF, or mutual fund that has no comparable, benchmark, find, a competitive, atf, or mutual fund and benchmark, against us if, you.
Have A 50/50. Portfolio of, US corporate bonds and US blue chips and the indices, for each are up four and ten percent respectively, expect. A 7%, gain in your own portfolio if your, gains are above that you're, doing well congratulations. So. Make, sure you, understand, the risk that you've taken on and set, reasonable, expectations. Then, find. Good benchmarks. And measure your performance against. Them only. Then will, you know how well you or your advisor are really, doing. You.