My Investment Strategy

by Krantcents · 21 comments

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My investment strategy is pretty simple!  I do not try to time the market or look for the perfect time to buy or sell.  I keep it simple and it works very well.  I did not bail when the market was diving for the bottom in 2008. As we all know, the stock market is volatile and a sound investment strategy is needed.   Now that I told you about all the things I do not do, I will now share what I do.

Background

As a little background, I have been investing for more than forty (40) years.  I wish I could say, I just read this somewhere and used it successfully.  It would be more believable.  Actually, I started investing and thought I should do it on a regular basis because that is how I put money into savings.  In the early seventies, I set up a payroll deduction to put money into savings for those pesky annual expenses such as real estate taxes, property and life insurance.

Adjusting My Strategy

Recently, I made some changes in my 403B to save money on fees.  When I signed up for my 403B, I thought there was only an annual custodian fee.  To my surprise, there were additional fees.  I made some changes so I could get rid of those onerous fees.  My choice required me to identify a specific date for investment.  Previously, my contribution was received anywhere from a few days after pay day to as much as two weeks later.  So much for consistency by my employer (school district)!

My new arrangement requires me to specify a date to purchase shares in a mutual fund.  Each month, I will add to my investment in a mutual fund.  Investing on the same day regardless how the market is doing is better than any other choice except for investing using perfect timing.  .  Onvesting (Schwab) says an investor with perfect timing (investing on the best day) did slightly better!  Regular investing is almost as good as trying to figure out the best possible day to invest each month.

Timing vs. Dollar Cost Averaging

Timing the market is difficult in a good market never mind a more volatile market.  Buying into the market with a set amount each month is easier than trying to pick the ideal time.  “Dollar cost averaging prevents procrastination, minimizes regret and avoids market timing.”  I focus on my long term investment goals and asset allocation rather than a quick profit.  Instead I set up an Automatic Investment plan for my contributions invested in mutual funds.

Nervous Thinking Is Out

I try to take the emotion out of investing!  I am no different from anybody else; I react to the ups and downs of the market.  I just do not let those ups and downs cause me to react emotionally.  I know the market can swing as much as 10-20% and I am okay with it.  Each month, I am investing in the up and down market for the long run.  If you cannot tolerate these swings, you probably should not be in the market.

Control Issues

For many years, I put the majority of my investments in real estate because I felt I had more control.  Many people would disagree with me!  After all, I had fifty-five (55) leases and anything can happen.  So much is outside of my control, but you can control your risk.  In some ways it is similar to a diverse portfolio or mutual fund, all the stocks usually do not go down in unison.  Rental property is much more a business than investment anyway and I control my risk through good screening.  Asset allocation and diversity are the best ways to reduce your risk.

Final Thoughts

My success with my strategy is due to sticking with a consistent contribution every month in good and bad times.  Annually, I check my asset allocation and diversity to make sure it meets my long term objective. The interesting thing about investing is everyone has a story about a winner or loser.  If my strategy did not work for me, I would be the first one to scrap it.  So set up your payroll deduction and start investing on a regular basis.  You too can have a winning strategy.  That was my investment strategy!

Photo by:  stefan ercshwedner

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