5 Steps to Build a Prudent “Investment Philosophy”
18 Questions Blog Series
At von Borstel & Associates, we ask our clients 18 critical questions. The answers to these questions determine how we partner with each client and manage their wealth. This week we’re talking about 5 steps to build a prudent investment philosophy!
Follow along with us through the 18 Questions Blog Series. You may be surprised by what you discover about yourself and your financial plan!
#12 – 5 Steps to Build a Prudent “Investment Philosophy”
So, why is it wise to have a prudent investment philosophy?
Ask yourself this, “Do I want to maximize the probability of success?” If you answered no, then disregard the following. If, however, you’re interested in learning a key to financial nirvana, the following steps will guide you on your quest.
So, what are these steps I mentioned?
1. Build a long-term financial plan that includes the following.
- Emergency fund needs
- Short-term cash needs
- Long-term cash flow needs
2. Identify your risk tolerance.
- What is risk tolerance?
- How does it affect future performance and fluctuation in the portfolio?
- Do you and your investment advisor agree about risk tolerance in application and definition?
3. Identify your needs at retirement.
- When do you want to retire?
- What amount do you need at retirement?
- How much are you putting away?
- How hard is your money working?
4. Select a fact-based portfolio structure.
- Based on academics
- Conversely, don’t base it on:
– Trying to predict the market
– Outsmarting the market
– Timing the market
5. Build your portfolio.
- Based on your risk tolerance
- Based on your needs at retirement
- Allowing for an emergency fund
- Allowing for short-term cash flow needs (less than five years)
However, if the steps above do not get us to our desired goal, we have five choices:
-
Retire Later
-
Retire on Less
-
Invest More
-
Invest for More Return
-
Do Nothing (This is a losing strategy!)
With all this information under your belt, you’re ready to build a financially successful portfolio and life.
So, let’s go build your future!
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Investment advisory services offered through von Borstel & Associates, Inc., an SEC Registered Investment Advisor.
