The Empowered Investor
Winning Investing & Planning Principles
Investing doesn’t need to be complicated to be successful. Like most people’s favorite comfort food, the basic ingredients are universal. After that, there’s no limit to what you might add to your recipe for financial security.
We believe that investment noise is the greatest obstacle most investors face and the most essential investment skill you can develop is the ability to recognize and tune out four sources of investment noise: the media, experts, friends & family, and yourself.
An investment philosophy is a set of principles or guidelines to steer the decision-making process and stipulate how your money will be managed across both good and challenging times.
In relatively efficient markets, even the experts can’t know what future pricing will be. So, trading based on forecasts and predictions is a coin flip, at best; the outcome is based on luck vs. skill.
Countless performance-chasing parades have come and gone, with one thing in common: By trying to concentrate in a hot trend once it’s already popular, you’re riding a massive wave that could subside at any time.
Even if you start out with a well-diversified portfolio, you’re far more likely to lose your way if you have no big-picture plan to guide your cohesive course.
How do you protect against an invisible enemy like behavioural bias? Four lines of defense can help: education, process, time, and objective advice.
Having a retirement plan and investment plan is key to preparing for long-term financial security. Additional components factor in as well, including debt management, risk management, tax planning, and estate planning.
To appreciate evidence-based investing, it helps to look at its historical roots, planted more than a half-century ago, and incorporated into its early solutions: index and passive asset-class investment strategies.
The magic behind diversification is found in a financial measure known as correlation, or the degree to which two asset classes move in similar patterns.
Index-based or passive asset class funds focus on how to reduce the costs and frictions involved in capturing the market’s generous expected returns over time.
By mixing and matching factor-based asset classes into a personalized portfolio, you can pursue higher expected returns while managing the investment risks involved.
Becoming an empowered investor is as much about identifying what financial serenity means to you as it is about understanding the mechanics of investing.