Broker Check

950 John Daly Boulevard
Suite 380
Daly City, CA 94015

Tax Advice, Inc.

(650) 756-3000

 

10 Principals of Investing

The idea of investing in the stock market frightens a lot of people.  And nothing engenders more fear than the thought of a stock market "crash."

Few people realize that it may be possible to make your investments less vulnerable to the cyclical ups and downs that keep many from investing in the market.

In helping families and small businesses to pursue financial goals, our advisors base their advice in the following 10 Princples of Investing:

  1. Self-discipline, not income level, determines your ability to save money.          Think about it: If a family with an income of $50,000 a year saves $500 a month, they may have the same opportunity for long-term wealth accumulation as a family with an annual income of $500,000 that saves the same amount.

  2. If your conservative investments don't outpace inflation, then your investments may not actually be conservative.                                                                                    Say the word "risk" to many people and their knee-jerk response is fear.  Instead of recognizing that there are levels of risk associated with levels of reward, they view risk as an all-or-nothing proposition. With this mind-set, either you invest and accept the risk of possibly losing money, or you put your money in conservative instruments and potentially reduce the risk.  But this simplistic view of risk fails to account for the fact that conservative instruments can carry a higher level or risk because of the lower yields generally associated with them and because of their exposure to inflation.  In most cases, these are the real risks on which you should be focusing.

  3. Don't try to "time" the stock market; those who do so usually fail.        Historically, there have always been bull and bear market cycles as well as major upheavals which dramatically affect market prices temporarily.  But history indicates that the market has always recovered and that patience, rather than time, typically prevails. Furthermore, if you are waiting for the "perfect" time to invest, chances are you will never invest at all.  That's because there are always debts to pay and luxuries to buy, and if you wait until all of these temptations and obligations are out of the way, you will find yourself far removed from your financial goals.

  4. Your investments should be part of an overall strategy designed to your specific financial objectives.                                                                                              Most people think that investing is a series of reactions to day-to-day events. Nothing could be further from the truth.  Investing should be a deliberate process, with set goals, where success is measured in years, not days or weeks.  College funds, retirement programs and other investment plans all require specific strategies which working together, forms a coherent, efficient financial plan.

  5. Growth of assets over the long-term usually requires some equity investments, which can be volatile.                                                                                                        The percentage of equities in your portfolio should be compatible with your tolerance for risk.  We all drive at different speeds.  If you were a passenger in a race car with a professional driver, you might be tempted to panic and leap from the vehicle - obviously, a dangerous decision.  It is similarly risky to choose an investment whose fluctuations will tempt you to sell it at the wrong time.

  6. Efficient portfolios are properly diversified, both within and among the basic asset categories.                                                                                                 Diversification is another way of saying, "Don't put all your eggs in one basket."

  7. Many successful investors are patient, long-term investors.                        Investing for the long-term is the one way to take full advantage of the twin miracles of time and compounding.  Over time, compounded interest and dividends are tools that make a well-conceived investment plan work.  The tragedy is that many investors, those who fail to understand this concept, lose patience and move out of investments before time and compounding have had the chance to work.

  8. Investing should be as systematic as paying a monthly bill.                                  Pay yourself first.  By treating your investment plan as a monthly bill (taking the first $50, $100, or $500 from your paycheck and making sure you invest it each month), you instill investment discipline.  This type of systematic investing, known as dollar-cost averaging, also permits you to seek capitalization on market cycles and potentially come out as a winner in the end.

  9. You should take a holistic approach to your financial life, recognizing that tax strategies, insurance needs, and investment goals are interrelated.                  Using your completed 1040 tax form as a guide, you can develop a comprehensive financial program.

  10. You should find a knowledgeable tax and financial professional you can trust.  A.) Investments are subject to market risks including the potential loss of principal invested.                                                                                                                                   B.) Asset allocation does not assure or guarantee better performance and cannot eliminate the risk of investment losses.                                                                                 C.) Dollar-cost averaging does not assure a profit and does not protect against loss in declining markets.  Such a plan involves continuous investment in securities regardless of the fluctuation of price levels of such securities.  An investor should consider his or her financial ability to continue his or her purchases through periods of low price levels.

The views and opinions presented in this page are those of John Lazar and not of H.D. Vest Financial Services® or its subsidiaries.